Horace Camp: The three-market model

This article follows directly from my last one on housing. I do not usually like to return to the same subject so quickly, but I feel I must because the message has not yet reached the ears of those who most need to hear it. The Housing Committee continues to speak about building more homes and about affordability, but it refuses to face up to the flaw that sits at the centre of our system. Until it does, progress will be marginal at best, and many more families will drift further away from the possibility of a secure home in their own island.

Guernsey does have a housing shortage, and no one can deny it, but the deeper problem lies in the way we allocate the homes we already have and the ones that are planned for the future. If the allocation rules are wrong then building alone cannot fix the shortage, and indeed it can make matters worse by inflating prices further. The mistake was made two Assemblies ago when the Population Management Law was changed. That change was driven by two forces both pulling in the same direction. Industry argued that restrictions on key workers were making it difficult to recruit. At the same time the States, as the island’s largest employer, was struggling to fill posts in health, education and law enforcement. Between them they pressed for reform and they got it.

Before that reform there was a safeguard. Key workers could live in the local market, but the homes they could occupy were linked to their salaries through the TRP rating. Higher earners were pushed towards higher value houses, which kept their spending power away from the lower end of the market. That safeguard had the important effect of tying the bottom of the local market to local salaries. It meant that a young couple with ordinary incomes could still hope to buy a modest home without being outbid by someone with far greater earning power.

The new law swept that safeguard aside. Key workers were now free to buy any local market home. The result was as predictable as it was damaging. A teacher or nurse or senior officer with a larger salary was able to outbid an island couple for the same modest house. Many of those houses were then extended or redeveloped into something far more expensive, pushing them permanently out of reach. Prices moved sharply upward. The protective buffer was gone.

The States had solved its own recruitment problem, and industry was satisfied too, but the price was paid by locals who were pushed not just to the edges of the housing market but in many cases right off it altogether. Some have been pushed out of the island of their birth. That was not understood at the time and even now I am not sure it is fully appreciated by those who carried the law through.

I want to make one thing clear. This is not resentment towards outsiders. It is not a complaint about the value of nurses or teachers or police officers who come here to serve. They are needed and they contribute. But it is a recognition that government solved its problem by passing the cost on to islanders, and it did so without stopping to think.

We must stop pretending that Guernsey has one housing market. It has three. What we need now is for the Housing Committee and the Home Committee to work together, to accept that reality, and to regulate accordingly.

The first market is the open market. This has always been and will always be the preserve of the champagne and Bentley brigade. If more billionaires wish to move here then more houses can be built for them and no harm is done to the rest of us. The open market takes care of itself.

The second market is the key worker market. This is where most new houses should be built, because it is the States that drives this demand. Every extra nurse or social worker or teacher is another household in need of accommodation. The demand is created by government and so the supply should also be provided by government. Medium-priced homes, deliberately designed and built for key workers, would ease the pressure on the rest of the system.

The third market is the local market. This is the foundation stone of our community and it should be reserved primarily for locals, both for ownership and for rental. It does not need vast expansion. Once restored to its proper purpose it will only need modest growth to keep pace with the population. Its role is to provide stability. It should give young families and long-established islanders the chance to buy a modest home, to live securely, and to stay in the place where they were born.

This is what allocation reform means. It does not involve throwing anyone out of their house. It works through natural turnover. Most key workers are transient, and within eight or 10 years many will be gone. If their homes recycle back into a local market that is truly local, the balance will be restored over time.

Other places have already recognised this need. Jersey has long protected its entitled market. Singapore carefully controls foreign access to housing so that Singaporeans are never crowded out. Iceland and the Faroes have acted to protect locals when outside demand pushed up prices. Even in the United States, with a land mass that could swallow Guernsey a thousand times over, they saw the need to create reservations for their indigenous people. I am not suggesting that locals should be corralled into anything like that, but the principle is clear. Even a nation that prides itself on openness has accepted that without protection its original people could be swept aside. If it is necessary in a country so vast, how much more necessary is it on an island as small and fragile as ours.

Guernsey stands out for having dismantled its protections and then expressing surprise when locals were left at the bottom of the heap.

The sad thing is that this was not inevitable. The system might have worked had the States realised what it was doing and put in compensating measures. But that did not happen. The law was changed to make recruitment easier and the consequences for locals were overlooked.

Now we are living with the results. Couples who might once have afforded a small home cannot compete. Families who already own cannot trade up without ruinous borrowing. Too many rent at unsustainable levels. Children stay at home into their thirties. More and more young islanders leave because they see no path forward.

This is why building alone is not enough, shortage and allocation have to be tackled together. If we build without reform we are simply fuelling a housing boom that helps those already ahead and leaves everyone else further behind. The ladder rises higher, the first rung is pulled further away, and locals are left on the ground.

So yes, houses must be built but they must be built within a structure with the local market restored to locals. The key worker market should be the focus of new building, reflecting the growth of the public sector which drives our population growth. And the open market can continue to look after the wealthy without troubling the rest of us. The three-market model is not radical it is simply honest.

Some will call this defeatist. They will say locals should work harder, get better jobs, and climb higher. Some will, and good luck to them, but on average locals will cluster at the lower end of the salary scale. Key workers, brought in precisely for their qualifications, will sit in the middle. The champagne and Bentley brigade will remain at the top. That is not an insult to locals and it is not bitterness towards newcomers. It is simply the shape of our economy.

We can either resent it or we can be pragmatic. The States appear to have chosen this model as the way forward. If so then locals must accept that we are no longer cock of the walk in our own island. Those days have gone. The question is whether we can accept the new order and shape it in a way that still protects us.

If nothing changes then locals will continue to be priced out, pushed aside and, too often, forced to leave. If we face reality then we can protect enough of the local market to ensure that Guernsey remains a home for its own people as well as a workplace for imported talent and a playground for the champagne and Bentley brigade.

I write this not out of resentment but out of love. I love this island and I love its people. I want my children and grandchildren to live here, not just visit in summer. I want young families to feel they can build their lives here, not that their only choice is to go elsewhere. I want locals to believe this island is still theirs.

The Population Management Law was changed two Assemblies ago with good intentions. It solved one problem but created another and this Assembly must admit that mistake and correct it as part of its housing strategy. Without that honesty everything else will be window dressing.

If the States continue to build a system that locks locals out, they should not be surprised when locals leave. And if locals leave then Guernsey is diminished, because without its people Guernsey ceases to be Guernsey.