The sharp rise in house prices is breaking the dream of millions of families : to own a home. One of the peculiarities of this crisis has been, precisely, that housing has not stopped rising in much of the developed world, while families faced greater job uncertainty. The consequences of this ‘broken dream’ could end up being paid by the governments in power that face an increase in criticism for the difficulty of accessing a house.
It is a phenomenon that the pandemic has given wings to , they point out from the Bloomberg agency . And it’s not just about buyers, rents are skyrocketing in many cities too. The result is that the perennial problem of housing costs has turned into one of acute housing inequality, and an entire generation is at risk of being left behind.
“We are witnessing how a pater of society is being excluded from parts of our city because they can no longer afford the apartments,” says Berlin Mayor Michael Mueller. “That is the case in London, in Paris, in Rome and now, unfortunately, increasingly in Berlin.”
That exclusion is rapidly turning housing into a new political watershed, one with unpredictable repercussions. German union leader Ver.di explains that rents today are the equivalent of the price of bread in the 21st century, the historic trigger for social unrest.
Ideas that don’t quite work
Politicians are promoting all kinds of ideas to solve the problem, from rent caps to excise taxes on property owners, nationalizing private property or converting empty offices into housing. Nowhere is there evidence of an easy or sustainable solution.
In South Korea, President Moon Jae-in’s party suffered a painful defeat in this year’s mayoral election after failing to face a 90% increase in the median price of flats in Seoul since taking office. position in May 2017.
Accessing a home is increasingly difficult
On the other hand, China has tightened restrictions on the real estate sector this year and there is speculation about the creation of a property tax . The cost of an apartment in Shenzhen, China’s answer to Silicon Valley, equaled 43.5 times the median salary of a resident in July, a disparity that helps explain President Xi Jinping’s drive for “common prosperity . “
In Canada, Prime Minister Justin Trudeau has promised a two-year ban on purchases by foreign investors if he is re-elected to reduce buying pressure.
The pandemic has fueled the global property market’s upward trend to new records in the past 18 months. A confluence of factors explains this trend: ultra-low interest rates , a housing shortage , changes in household spending and fewer homes for sale. While that’s a boon to existing homeowners, it is increasingly difficult for prospective buyers to enter the homeowners world.
What we are witnessing is “an important event that should not be ignored,” said Don Layton, former CEO of US mortgage giant Freddie Mac, in a comment to the Joint Center for Housing Studies at Harvard University.
In the United States, where nominal home prices are more than 30% above their previous peaks in the mid-2000s, government policies aimed at improving affordability and promoting home ownership continue to stimulate prices, leaving new buyers adrift. In Europe and the US, each new generation suffers more to own a home.
The result, both in the US and elsewhere in the world, is a widening generation gap between baby boomers, who are statistically more likely to own a home, and millennials and Generation Z , who are seeing their dreams of buying one are fading.
Real estate debt grows
Existing real estate debt may be sowing the seeds of the next economic crisis if loan costs start to rise. Niraj Shah of Bloomberg Economics has compiled a set of countries most threatened by a housing bubble and says the risk indicators are “intermittent warnings” with an intensity not seen since the run-up to the 2008 financial crisis.
In seeking solutions, governments should try to avoid penalizing renters or homeowners. It is not an easy task, since finding the right policy that does not interfere with the market and that at the same time helps tenants and landlords seems almost an impossible mission.
Sweden’s government collapsed in June after proposing changes that seek to abandon traditional rent controls, to allow market forces to dictate prices. Although Sweden has been implementing rent controls for years, its market is not doing well either. Swedes have to wait even years to access a rental of these conditions.
In Berlin, a court struck down an attempt to control rent increases. The activists have collected enough signatures to force a referendum on the expropriation of homes from large private owners. The motion will be put to a vote on September 26. The city government announced on Friday that it would buy about 15,000 apartments from two large corporate owners for 2.46 billion euros to expand the offering.
Anthony Breach of the Center for Cities think tank has even argued for a link between housing and the UK Brexit vote in 2016. Housing inequality, he concluded, is “disrupting our politics.” As these stories from around the world show, that’s a recipe for turmoil.