If we stop allowing housing to be an investment vehicle it could serve society as it should. We’d all feel the benefit, says Rising Star Philip Graham
Housing is a political tool like no other. It ought to be an empowering scaffold for collective agency, but in the UK it is an ideologically-motivated drag on the economy – a delivery device for the debt drug. The short term debt finance model has given us misallocated space, commodified land, market inertia and distorting tax privileges on homes that should be traded as durable goods rather than speculated on as assets. As a result the places we design have become mere packaging for low cost lending on land that is overpriced, yet the industry still chases its own tail, imagining that building faster, cheaper, smaller could somehow sate the scarcity myth.
Ownership crisis
From Lehman Brothers to Brexit, eight years of under-discussed quantitative easing has lowered interest rates as intended but left a deficit of agency through ownership in its wake. In business, as in housing, short term debt has supplanted long term equity as the key to economic participation, meaning fewer people have any stake.
No wonder we have a national crisis of productivity: a ‘precariat class’ (Guy Standing) more reliant than ever before on dwindling wages for security – with their overspend on housing leaving little to invest in a business, further education, life events or second chances. Families are forced to tolerate lonely or distant spaces over which they have no agency and that are insufficient for homework, care-giving, visitors or pride. We have a tax system which appears to chastise high earners as opposed to the inheritors and property accumulators whose right to untaxed, unearned windfalls goes unremarked. Exemptions and thresholds work their distorting magic – manifest in our housing crisis – while productive endeavour is penalised.
Fractional ownership
Rented tenures with more security, as seen in Germany for example, can facilitate essential mobility to dynamic economies. In the same vein, leasehold underpins many of the emerging models for affordable co-ownership and community-led housing initiatives. It has generated centuries of stewardship and development partnering by distributing the risks and rewards of capital, thereby lowering the bar of market entry for leaseholders and small-time builders alike.
In the wake of policy adaptation to new platforms for sharing – cars (Drive Now), homes (AirBnB), lending (Funding Circle) and venture capital (Kick Starter) – the current leasehold consultation seems an early regulatory skirmish in coming questions of land policy. Already Land Value Tax has appeared in Liberal Democrat, Labour and Green manifestos this year and the question of continuing capital gains tax exemption on primary residents is gaining currency (Barker).
Scarcity meets abundance
Long-term equity provides an untapped abundance that is counter to the narrative of housing scarcity: the steady staircasing potential of residents’ income streams; income-seeking landowners; patient investors; risk-sharing designers; and willing, waiting communities. Not everybody sees a leveraged bet on cyclical house prices as a logical prerequisite to achieving agency over their own home and family stability. Not every landowner needs or even wants a lump sum land receipt in return for a capital and tax liability.
Patient financial participation by such actors places a value on the long-term social and fabric performance of the settlement, changing the design objectives from ‘aspirational’ to ‘appropriate’. As stakeholders in such a model, home occupiers gain meaningful agency; landowners acquire a level of stewardship; and architects become enablers from the point of project definition, not just at design briefing. Better still, the long view can generate revenue streams to the land owner that transcend the disposal receipts otherwise available by selling to a short-term debt-financed developer.
Our housing knot would be untied by a designer, of fairer fiscal policy, or a land finance model that serves stakeholder participants rather than shareholder investors. Architects can then readapt to designing homes that are generous, long lasting and appropriate for the people who live in them.
Philip Graham is one of the RIBA Journal’s Rising Stars. He is a partner at employee-owned Cullinan Studio and is a co-founder of cross-practice research collective Appropriate Housing with Levitt Bernstein and Pollard Thomas Edwards. His research work is part-funded by the RIBA’s Research Trust Awards.
RIBAJ Rising Stars is a scheme to reward up and coming construction professionals: To nominate someone or put yourself forward for RIBAJ Rising Stars 2017 click here