Housing crisis is not just down to supply
ISLAND leaders might be waking up to the magnitude of Guernsey’s housing cost crisis, but they seem locked into the same old ideas that got us to where we are. Thinking at the top sees housing as a supply problem and is ignoring other important factors.
People buying houses who will not actually occupy them clearly has an upward effect on house prices. This is a significant factor, but there are bigger ones.
A principle that most have been taught, but few seem to remember, is that too much money chasing something pushes the price up. The trend has been clear over many decades. House prices are limited mainly by how much debt competing purchasers can raise.
There is a constant stream of potential first-time buyers circling around the estate agents, with figures on a piece of paper adding up to a ceiling price for a house or flat. For most the largest contributing figure will be the amount of debt offered by a mortgage provider.
Estate agents and mortgage providers do wonderfully well. To expect any restraining influence by them is to deny human nature. In Guernsey there are no effective limits to process of law helping mortgage providers claim back an outstanding mortgage if circumstances turn bad.
Legal protection is preferentially wrapped around mortgage providers. There is insufficient hazard to help a sense of responsibility in those pouring out massive quantities of debt.
There are many possibilities for government actions that would have moderating influence on housing costs. Some of the more obvious are listed below.
n Limit the call on mortgage bonds to the actual property and nothing else, as in the USA.
n Protect the proportion of property value not provided by a mortgage from claims related to a mortgage.
n Find a way to severely discourage ‘buy to let’ mortgages.
n Make taxation more effective to discourage ‘buy to speculate’.
n Limit the stockpiling of building permissions.
n Stop using taxpayers' money to persuade non-islanders to take up residence here.
n Censure States departments and States-controlled entities that have no effective plan to reduce off-island recruitment.
Of course there are difficulties in meaningful government action. A fundamental problem is the direct conflict of interests between the haves and the have-nots. Helping one harms the other.
There are more house-owner haves on the electoral register than have-nots. Many States members and their pals have varying levels of interests in property.
Any action involving legislation means getting past the Crown Officers. Perhaps the largest obstruction is our leaders’ obsession with growth, no matter the harm.
Building of houses and apartments needs to be matched with concerted effort to curtail the drivers of immigration, which have wrecked historic efforts to make housing more affordable.
Unless our leaders can think deeper the States could well pay for, subsidise, or instigate, the building of lots of houses and not help the longer term housing problem at all.
HENRY LANCASTER
Elsinore
Ville es Pies
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