From Home-Owership to Ordoliberalism

The Plenary Address at Cambridge University in the 2004 European Network for Housing Research Conference was my penultimate. The paper can be downloaded from http://www2.ibf.uu.se/PERSON/jim/on_line/homewonership.pdf. It focused on home ownership in the  traditional sense that I had always pursued. Frank Castles carried out a superb analysis of correlating home ownership rates in OECD countries with welfare. He concluded that my thesis, presented in the International Journal of Urban and Housing Research (1980) was still valid, albeit with weaker correspondence with welfare. I agreed with this analysis as it reflected the impact of the new laissez-faire on both home ownership rates and on declining welfare expenditure, as well as the growing influence of the EU on housing policy, in a decidedly negative sense. As a result, I brought together a number of housing researchers for the countries involved – Denmark, The Netherlands, Switzerland, Austria and Germany. I took Sweden as the last country. In retrospect we now know that Sweden was the only EU country to survive the subprime mortgage crisis largely unharmed.

Peter Kemp and Stefan Kofner unexpectedly contributed with their own papers and a concluding article to fill the gap in my work, having read From Public Housing to the Social Market: rental policy strategies in a comparative perspective (Routledge, 1995, pp. 119-123 on the Mietspiegel). I got this from Hans Skifter Andersen et al, Housing Policy, Urban Renewal and Housing Policy in Germany (Bulletin 94, National Building Research Institute, Hirsholm, Denmark, 1992). The Bulletin was out of print already when Peter Kemp came to check my source, so he and Stefan jointly did the research and confirmed my argument, publishing it in Kemp, P.A. and Kofner, S. (2010) ‘Contrasting varieties of private renting: England and Germany’ International Journal of Housing Policy, 10(4), 379-398.

But it was the subprime mortgage crisis of 2008 that cast the spotlight on housing as a key force behind the recession that followed and that we are still not free of in 2014.  Neoliberalism and the Automobile Industry “drives” home the huge wastage of brand new cars by the millions rolling of assembly lines and being dumped in vast car-parks, as far as they eye can see.

The Delft 2012 European Network for Housing Research Conference call for papers puts it like this referring to the GFC – the Great Financial Crisis:

“Home ownership researchers live in interesting times.  In the decades before the Great Financial Crisis (GFC), home ownership sectors in most countries were expanding.  It is clear that drivers of this expansion contributed to the crisis, but since its onset the prospects for home ownership and home owners have radically changed.  Austerity packages, and the squeezing of government budgets have set a new context.  In many countries house prices have fallen  –  and in some there is  large over-supply  –  but with increasing unemployment and shrinking mortgage markets, the barriers facing entry into the sector have become more difficult.  In many countries the home ownership sector is decreasing in size.

Yet, home ownership continues to hold up many opportunities for individuals and economies.  Against the volatility of stock markets, real estate still offers many a relatively large and secure asset.  Its role in many people’s lives remains pivotal to their role in labour markets, for example by providing collateral supporting small business formation. Furthermore, in times of hardship, families have been pressured to draw upon their housing assets in various ways: from tapping equity to the reformation of multigenerational households. For governments seeking to develop new futures, home ownership also offers opportunities, for example as a vehicle for economic growth and a basis for new social models.

The aim of this conference is to bring researchers together to present and discuss papers on both the impacts of the GFC on home ownership as well as on the potential contribution of home ownership to the post-crisis world.”

No doubt it is as well to be optimistic when writing a conference call for papers, but I can’t help feeling that we are only in a mid-crisis world and that the GFC will repeat itself in the next recession. It will take only the trigger of the faulty design of the you-row – or as Göran Persson called it the evroo (he was wise enough in 2002 to understand that it was fundamentally flawed) – to plunge Europe back into deep recession. But Sweden was the only EU country not in the euro zone and it was this that saved us, keeping the SEK stable and even needing to keep interest rates very low to keep the exchange rate with the euro stable. The strength of the SEK – like that of the Swiss Franc – is produced by the structural weakness of the Euro. Countries in the Euro zone are not allowed to change their own interest rate, it is all set by the European Central Bank, that has to use other, less obvious, neoliberal, methods to keep the euro from crashing through the floor. Yet all of that is but a temporary juggling act.

Interest in the post on The Strength of Ordoliberalism (2)  was remarkable, with hundreds of visits (or “hits” as WordPress call them). It is as well that John Ward and his blog, with his extensive contacts in EU countries had an intuitive grasp of the nature of the Euro crisis: http://hat4uk.wordpress.com/2014/05/20/ten-days-in-may-a-confluence-flowing-to-disaster/, which only now, 4 days later, this spate of visits is coming to an end.

And the lesson has not been learned. Rising home ownership prices in lows-income housing are hailed as a blessing, now, just as it was in the 1990s and early 2000s, encouraging more borrowing to invest in housing, Governments responding to this by encouraging low-income earners to buy, by providing even more subsidies to facilitate those who want to flee private renting and buy at the bottom of the inflated market.

And so the boom-bust cycle continues at ever shorter intervals.

 

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