Land and Work

Land and Work

Across the globe people wish to own their own homes, yet in London, one of  the worlds most powerful economies this is for many a dream. Thirty years ago the purchase of a property was feasible for most, but now it is not. The central question that this text seeks to answer is why in the heart of the a thriving business centre workers find it impossible to own a home. To understand how this problem can be solved we need to understand how it occurred.

In the jungles of the amazon before the arrival of Europeans land had no value – only work created wealth. The forest existed as a pool for anyone to use and work was the creator of value. The development of the colonies showed the true relation between work and land. In the United States the colonists spread out to the west where land was cheap or free. Since anyone could sieze land from the native americans there was very little value. Once all the land was taken the value of labour began to be only part of the production cost. A man working on good land could earn more than one working poor land. As a result there ocurred a relation between land and work. That was that the value of work was set by the productivity of the lowest value of land.

With the development of the cities in the period following the industrial revolution people did not have the vote and many lived in company owned properties. As society developed workers started to work as free agents moving between employers. These people wanted to buy land. The key determinant was not the availability of building land since that was freely available on the edge of cities. The problem was buying land close to places of employment or in good locations near to shops and places of entertainment.

After the second world war the government was faced with the challenge of ever growing cities. As a result it was determined that a Green Belt should be placed around cities to create a pleasant environment. The effect was to increase the value of land. Subsequent changes to the development regulations for the development of brownfield or Metropolitan Open Land further restricted the availabilty of building land, leading to further problems with availabilty of land. The problem of rising property prices developed slowly, however the events of 1979 – 2007 were to have a crucial effect.

In 1979 the Conservatives came to power, and decided to stimulate the property market. A key measure that the took was to introduce the Assured Shorthold Tenancy. This led to the development of a rental market. Under normal circumstances additional demand would have led to the development of large housing estates on the edge of towns as occurred in the 1960’s in areas without green belt restrictions. In London, however there was no such land and landlords started to purchase properties that would have been available for owner occupation. The economy was strong for 10 years from 1997 – 2007 and there was little new build. As a result of this property prices rose inexorably over the period. The effect of this was to encourage banks to offer large multiples of salary on mortgages as the view that properties would continue to rise in value became prevalent. Eventually the banks came to realise that there was a risk in this process and they refused to lend to each other until this risk was clarified. The outcome was that high multiple mortgages disappeared and it became impossible for ordinary workers to buy property. The cheapest houses were valued at £150,000 to £200,000 and on a 3-4 x multiple of income this required a salary of £50,000 per annum which was unachievable for most. Furthermore those who did earn this often had variable elements in their income which makes them ineligible for mortgages. The effect of this meant that those earning £40,000 or below found it difficult to get on the property ladder without parental support. This has led to a significant degrading of the life of London workers who have little security of tenure and are faced with ever rising rents.

The solution to the problem is to allow building on Metropolitan Open Land. The problem is that if we continue to simply allow the sale of land we will create the same problem again. What is needed is the creation of a new class of housing where the land is rented and the property is owned by an owner occupier. This will free people from the landlords and give them affordable security. It will also generate revenue. This revenue must be shared within the borough in which it sits equally amongst all, since there will be a loss of capital value for those who own property. This would release a huge pool of wealth and encourage enthusiastic and hard working people to London. It would also allow families to stay in the city. We are fortunate to live in a society where this can be achieved through the ballot box, and that is where the change will be implemented. Only through the politicisation of that generation that is losing out will the problem ever be resolved. Once the solution is clear the votes of the dispossed will be the engine of change.

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