The British Journal of Sociology 2010 Volume 61 Issue 2

No place called home: the causes and social consequences of the UK housing ‘bubble’
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John Bone and Karen O’Reilly

Abstract This paper examines the key causes and social consequences of the much debated UK ‘housing bubble’ and its aftermath from a multidimensional sociological approach, as opposed to the economic perspective of many popular discussions. This is a phenomenon that has affected numerous economies in the first decade of the new millennium. The discussion is based on a comprehensive study that includes exhaustive analysis of secondary data, content and debate in the mass media and academia, primary data gathered from the monitoring of weblogs and forums debating housing issues, and case histories of individuals experiencing housing difficulties during this period. This paper is intended to provide a broad overview of the key findings and preliminary analysis of this ongoing study, and is informed by a perspective which considers secure and affordable housing to be an essential foundation of stable and cohesive societies, with its absence contributing to a range of social ills that negatively impact on both individual and collective well being. Overall, it is argued that we must return to viewing decent, affordable housing as an essential social resource, that provides the bedrock of stable individual, family and community life, while recognizing that its increasing treatment as a purely economic asset is a key contributor to our so-called ‘broken society’. Keywords: Housing bubble; credit crunch; buy to let; broken society; marketization; social justice; well being

Homes are the building blocks of our communities. They affect our health, our wealth, and our opportunities for happiness. (Department for Communities and Local Government. (DCLG Housing Green Paper, July 2007) Introduction It is fairly evident that one of the most significant socio-economic events of the first decade of the twenty–first century has been the housing market volatility
Bone (School of Social Sciences, University of Aberdeen) and O’Reilly (Department of Social Sciences, Loughborough University) (Corresponding author email: j.bone@adbn.ac.uk) © London School of Economics and Political Science 2010 ISSN 0007-1315 print/1468-4446 online. Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA on behalf of the LSE. DOI: 10.1111/j.1468-4446.2010.01311.x

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that, as a central feature of the credit boom and bust of this period, has rocked economies across the developed world. NEVER before have real house prices risen so fast, for so long, in so many countries. . . . According to estimates by The Economist, the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries’ combined GDPs. Not only does this dwarf any previous house-price boom, it is larger than the global stockmarket bubble in the late 1990s (an increase over five years of 80% of GDP) or America’s stockmarket bubble in the late 1920s (55% of GDP). In other words, it looks like the biggest bubble in history. (Economist, 16 July 2005) What has been exceptional about this particular period of housing market instability, beyond its scale and ubiquity, is that its causes and consequences can be understood as being one feature of a wider climate of instability and excess that has its roots in the (re)marketization of economy and society, and the deregulation of financial markets, that emerged in the late 1970s. It is now clear that this economic sea-change, from the managed, redistributive social capitalism of the postwar era, has produced growing income and wealth inequalities, burgeoning indebtedness, and increasingly insecure work, as well as general economic and, crucially, housing market volatility, particularly in the nations, such as the UK and USA, who wholeheartedly embraced it (Elliott and Atkinson 2008; Harvey 2007). Public policy, particularly but not exclusively in the UK and USA, in housing as in most other areas of economy and society, continues to be dominated by a neo-classical economic orthodoxy – a dusted down variant of nineteenth century laissez faire – which has informed and provided the theoretical legitimation for this neoliberal socio-economic shift. This economic model, imparted to several generations of economics graduates, continues to constitute an almost unassailable common sense for the majority of our politicians, officials and policymakers and has at its core several almost ‘sacred’ assumptions – that free markets most efficiently price and allocate resources and risk, operate competitively, reflect the outcome of the free choices of rational actors, tend towards equilibrium, and produce economically optimal outcomes – all of which have been at the very least been called into serious question long before the recent crisis (Keen 2001; Ormerod 1994). As is argued below, the divisive, destabilizing and risk-inducing effects of neoliberalism as they have impacted upon financial, labour and, in this case, housing markets have seriously undermined the conditions that support well being, social cohesion, family formation and, potentially, social and political stability. With respect to the housing market, specifically, it is our view that runaway inflation, property speculation, and the cultural, legislative and financial arrangements that have fostered these developments, have made a major
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contribution to a broad range of social problems, undermining the UK government’s asserted aims across a range of crucial policy areas.

Methods In exploring the issues surrounding the housing bubble phenomenon, debate and writings in the press, financial journals, government documents and academic literature were collated and analysed as a means of coming to some understanding of the causes and consequences of global hyper inflation in housing markets around the world, as well as charting the particular effects within the UK. A broad-based and intensive study was also undertaken over a three year period, involving email, telephone and face to face interviews, content analysis of responses to a BBC forum (‘Have your Say’) and observation of three other weblogs (PricedOut.org.uk, HousePriceCrash.co.uk and First Rung.com). A dedicated website was also set up with a view to gaining contacts and case histories. This included a call for email interviews, with links to the site being posted on the weblogs. This generated 46 analysable and in-depth email interview responses, 2 of which we also piloted as telephone interviews and 2 as face to face interviews. The monitoring of weblogs has also generated literally hundreds of brief, but analysable, responses. The research is currently ongoing tracing developments in the housing market; notably the effects of the credit crunch. Overall, from the variety of these sources we have been able to build a picture of both the way in which various features of the global financial system, and the cultural climate it has engendered, have coalesced to produce volatility in the UK housing markets, with a range of social and personal consequences across a number of dimensions.

The causes of the boom Until around the latter half of 2007, the accepted wisdom amongst leading economists and disseminated in the UK press and mass media was that the house price boom that began in the early years of the decade was simply a consequence of increased demand for housing that was outstripping supply; a particularly vigorous upturn in the UK’s cyclical property market (Barker 2004; Hamnett 1999). Various factors were cited as having contributed to an upsurge in demand, such as a rise in divorce and individuals choosing to live alone, increased immigration, as a well as a lack of housing supply due to slow rates of building, scarcity of land and a sclerotic planning system. It has become increasingly evident, however, at least since the advent of the credit crunch,
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Table I: Household growth, house prices and general inflation Year of census 1981 1991 2001 2006 UK households millions (ONS) 20.18 22.39 24.13 25.28* % Change – 11% 8% 5% Average GBP house price (Nationwide) (Q.4) 23,798 53,635 92,533 172,065 % Change – 125% 73% 86% General inflation (BOE) – 78% 29% 14%

Note: * Household numbers for 2006 are projected.

that such a straightforward explanation is wholly unsatisfactory. Even aside from what we now know about the nature of housing finance during this period – more of which below – there are other very obvious reasons for questioning such an analysis.According to the Nationwide (2009), house prices in the UK rose by an average of 198 per cent between 1997 and 2007, well beyond their long term trend and a rise that is very hard to account for by simply referring to demographic shifts. As illustrated in Table I, while there has been continuous household growth in the UK, over recent decades this has been relatively stable at roughly around 10 per cent per decade. As above, however, this does not adequately account for the exponential increase in house prices, particularly between 2001 and 2006. Moreover, as is discussed below, while there was some mismatch between household formation, demand and housebuilding during the boom years that may have contributed to rising prices in some areas, particularly in London, the South East and Wales, this could not explain the level of price increases throughout the UK as a whole (Wilcox 2005). We would also expect that house prices should increase broadly in line with general inflation. As Table I also indicates, house prices through the 1980s rose by roughly one and a half times the rate of general inflation, rising to two and a half times in the 1990s. In the first half of the 2000s, however, the rate of house price inflation was just over six times the level of general inflation. Overall, these figures taken together support the view that something other than ‘normal’ growth, population pressures and so on has been driving UK house prices in recent years, a notion supported by the recognition that the housing boom occurred simultaneously across a range of nations despite widely varying demographic characteristics (Economist, 16 July 2005).

Liquidity: interest rates, competition and ‘securitization’ It has now become accepted wisdom that the activities of the financial and banking sector played a central role in generating housing market volatility, in tandem with instability across the economy generally. This view is consistent
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with a weight of informed opinion that views the housing bubble as just one of a sequence of asset bubbles, rooted in neoliberal economic management and the associated deregulation and growing power of the financial sector (Harvey 2007; Hutton 1995; Stiglitz 2003; Hamnett 2009). On this point, it is fairly clear that one of the key factors that influence people’s decision to purchase a home is the price and availability of credit. Interest rates globally have been historically low for most of the last decade, while a number of commentators have cited this as a cause of rising house prices, given the effects on affordability (Wilcox 2005; Cameron, Muellbauer and Murphy 2006). In fact, it now seems clear that this argument holds considerable merit. In the wake of the collapsing of a previous bubble, the so-called ‘dot com’ boom, there was a fear that the fallout from crumbling stock markets would feed through to the wider economies – particularly although not exclusively in the UK and USA – reducing the consumption that has been increasingly relied upon to drive economic activity. This reliance on consumption had been increasing within these ‘service’ economies as manufacturing was in decline (Hutton 2002; Stiglitz 2003). The response to this threat to consumption on both sides of the Atlantic was to lower interest rates – known as the ‘Greenspan put’ in the USA and followed by the Bank of England – to stimulate borrowing and spending to sustain consumption and, thus, economic activity. Thus, ‘. . . cuts in interest rates sanctioned by the Fed and the Bank of England led to property prices rising rapidly in both the USA and the UK’ (Elliott and Atkinson 2008: 131). Rather than having experienced a housing boom per se, the latter can be understood as being merely one manifestation of the global credit boom, where runaway price increases have occurred across various asset classes (Bank of England 2008). Further features of the deregulation of the banking and financial sector have also played a key role in producing the ‘housing boom’. The 1981 move that allowed banks and building societies to compete in each other’s terrain, with reduced reserve requirements, greatly increased competition and lending in the mortgage market. This resulted in more lenders offering more ‘attractive’ packages on easier terms, pushing up property prices (Zacchaeus 2000 Trust 2005; Hamnett 2009). Moreover, . . . as property prices rose, lenders became even more and more confident in their lending – advancing ever higher proportions of the value of homes at ever greater multiples of borrowers’ income. (Hutton 1995: 72) As is clear, this quotation refers to the 1980s housing boom, rather than the recent one. However, the factors that influenced the 1980s housing market, and which led to the subsequent crash of the early 1990s, had developed even further at the beginning of the new century, and had been further ‘enhanced’ by the expansion of another major ‘derivative’ of deregulation; mortgage securitization (Hamnett 2009). While there are various complex levels of this
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process, put simply, through the combined efforts of mortgage lenders and the financial markets, mortgages, rather than being merely granted and held by the originators of the loans, were parcelled up into now infamous mortgage backed securities (MBS) and collateralized debt obligations (CDOs) and sold to investors and financial institutions. The idea was that the risk of lending would be spread amongst a larger number of actors, providing new areas for investment and profit, while more funds would be available for lending. The simple effects of this process, however, were twofold. Firstly, the original lenders could relieve themselves of much of the risk of making loans, leading to falling lending standards and, secondly, more lending could take place as loans could be recycled providing capital for further loans (Mints 2007). The problem of this system, however, first came to light with the US sub-prime fallout and the Northern Rock crisis, as lax lending inevitably entailed that many of these mortgages were much more risky than anyone envisaged, including the rating agencies who were charged with evaluating them, and many more debtors than anticipated defaulted. None the less, as we are now acutely aware, for a time, securitization was a crucial factor in the competition to lend as much as possible to as many as possible (National Audit Office 2009). As Figure I illustrates house price increases in the UK were accompanied by a significant rise in mortgage lending. In qualification, undoubtedly the direction of cause and effect might be debated, in that it might be argued that mortgage lenders were merely responding to changing market conditions. However, even if one were to accept this view, what seems certain is that house prices could not have risen so far without what has, in retrospect, been widely acknowledged as being a period of excessive and risky credit expansion in the mortgage market (Hamnett 2009).

Figure I: UK House prices and mortgage lending (2000–2008)

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Buy-to-let: homes as properties/investments The proliferation of mortgage lenders, increasing competition and enhanced availability of credit also led lenders to develop new products in their efforts to secure and extend market share (Hamnett 2009). One of these products, the ‘buy-to-let’ mortgage, was aimed at encouraging ordinary investors to become amateur landlords. It must be noted that the emergence of buy-to-let – an example of what Harvey (2007: 31) calls ‘the carrot of individualized entrepreneurship’ – was supported by successive UK governments’ housing policy, that sought to expand the private rented sector – just as it had sought to reduce the social rented sector (through ‘right to buy’) – as a further plank of the marketization of society. Private sector tenants, who had previously enjoyed relatively secure tenancies and rent controls (deemed to have been necessary checks on unscrupulous landlords in the postwar era) found these securities being radically eroded.The introduction of the Assured Shorthold Tenancy (first introduced in the UK Housing Act of 1988 year and revised in the 1996 Act), enabled landlords to grant a tenancy for a guaranteed period restricted to six months, whereupon the tenancy, including the level of rent, could be renegotiated. Before the 1990s, it was often difficult to regain possession of a property once it was let out. So, if someone wanted to take a position on house prices by buying and selling over a short space of time or, alternatively, to purchase a desired property with the expectation of them or other members of their family living in it at a later date, they were well advised to keep the property empty. Now it is easy to regain vacant possession, so this encourages shortterm letting until the owner wishes to live in or dispose of the property. (Ball 2006: 3) To some extent, as above, these changes might be viewed as providing a charter for property speculation, where investors could buy properties, place a tenant in them to cover loan repayments for a short period (in some cases many didn’t bother), only to resell the property some months or years later for a quick profit in a rising market (Elliott and Atkinson 2008). Moreover, with the odds stacked in favour of landlords, and the risks thus reduced, it was perhaps understandable that lenders regarded the ‘amateur’ private rental sector as a potentially lucrative area for extended lending and profit growth. The provisions of the AST also meant that lenders could offer these mortgages unburdened by the concern that repossession might also involve the obstacle of a secure sitting tenant. In fact, lenders regularly stipulated that buy-to-let loans would only be granted on properties where the tenancy was for 12 months or less. Further strengthening the investor’s hand, in relation to first time buyers, the UK government has allowed fairly generous tax concessions on buyto-let, allowing what have largely been private investments to be treated as
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businesses, where the cost of the investment (interest on mortgage payments) could be offset against rental income for tax purposes. The buy-to-let boom, which is currently doing so much damage, was also government inspired. Mortgage interest tax relief was abolished for firsttime buyers, and handed to buy-to-let landlords. Now, if you buy a house to live in, you have to pay the interest on your mortgage out of your own after-tax earnings; but if you buy a house to rent out, the interest on your mortgage is tax deductible. In other words, the very people who cannot afford to buy homes are subsidising, through their taxes, the mortgages of the people who can. Often these houses are left empty, as investments. (McWhirter 2007) ‘Buy-to-let owners [have] a financial advantage over those trying to buy their first home, pushing prices even higher – further out of reach. Why does the government still offer tax incentives to those who buy simply to rent? (Paul Diggory, President of the Chartered Institute of Housing, BBC ‘Money Box’ 23 June 2007) Around one million BTL mortgages have been granted since these products were introduced in 1996, while it is also suggested that many more landlords have also entered the market with cash purchases and through undeclared standard mortgages or mortgage equity withdrawal (see the gap between Gross Mortgage Lending and Lending for House Purchase in Figure I). Many have turned to housing investment to boost relatively stagnant occupational incomes and due to a lack of faith in private/occupational pension schemes and other forms of investment. It must be noted that some of these amateur investors will themselves be among those caught out by the property downturn. Overall, however, we would argue that one of the major effects of this trend has been that risk and insecurity experienced by one generation, due to market liberalization, has been shifted to the next generation and the less well heeled, through raising the price of a home beyond the means of most first time buyers, and through renting out these properties to the same on highly insecure terms. At the end of the 1980s, around 40% of 20–24 year olds and roughly 66% of 25–29 year olds were already owner occupiers. Now only 20% and 50% of these age groups respectively purchase. This is a considerable social change, with tens of thousands of the current generation of younger people opting (our italics) to rent instead of owning. (Ball 2006) As above, research by property economist Professor Michael Ball, conducted for the Association of Residential Landlords (ARLA – see web sources listing), appears to attribute a marked decrease in first time owner occupiers and the deferment of house purchase to a change in choices that private landlords are responding to. However, we would argue that this appears to be
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at the very least a somewhat implausible conclusion by contrast to the more compelling explanation that younger people are simply being forced to rent as they have been priced out of the market by investors competing predominantly for first time buyer properties. . . . the myth that BTL investors offer a professional service to the priced out first time buyer is simply nonsense. If a tenant could afford to pay the BTL investors mortgage then he or she could afford to buy independently. BTL thrived on basic attrition – buy ahead of the first time buyer pack then attempt to rent back to this group. (Holmes, Chief Executive, First Rung 2008) ‘An unresponsive market?’ The OFT is concerned that the market for home building is not working well and there appears to be significant consumer detriment in the form of low supply response to sustained rising prices, low levels of quality and a lack of innovation. (Office of Fair Trading 2007) Amongst other factors that may have influenced house prices during the boom, there is the perception that housebuilders did not adequately respond to increased demand and subsequent price rises in terms of increasing supply. This, amongst other issues, prompted an investigation of the house building industry by the UK Office of Fair Trading (2007). As illustrated in Figure II, while house prices rose dramatically between 1997 and 2007, private sector completions per annum rose by around 25 per cent, prior to declining as the market peaked. New building during this period was also heavily skewed towards, in particular, two bedroom city flats rather than much needed family homes (ONS 2008a). It may also be noted that, as the market began to decline, many builders introduced ‘incentives’ (cash backs, ‘discounts’ and so on) that, might be
Figure II: UK House prices and housing completions (1997–2007)

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viewed as involving the offering of de facto price cuts while maintaining above market level ‘headline’ prices. Perhaps the most unsettling development in this regard is the rise in deferred payment schemes. Thus, in a moribund market, rather than a price reduction, an ‘interest free loan’ for a proportion of the purchase price is offered, that must be paid back to the lender after a given period (usually 5–10 years) (Northedge 2008). What is most concerning about this development is that many first time buyers may run into serious financial difficulties when, already paying high mortgages, they are called upon to repay the extra loan, particularly as there is no guarantee that prices will have risen sufficiently to fund additional payments. Overall, this could be perceived as vendors offering a necessary price cut in a difficult market, merely to request its return at a later date. The UK government’s decision to offer financial assistance towards similar first time buyer schemes, rather than assisting aspiring home owners, may be seen to be effectively subsidising aspirational pricing practices while storing up future trouble for those who take up such offers (Northedge 2008).

Inequality According to the most common measure, the Gini coefficient, income inequality in 2005–06 has reached its highest level since 2001–02, and is once again statistically significantly higher than that which the Labour government inherited. (Brewer et al. 2007) The Labour government, at least until the credit crunch began to bite, made much play of being ‘relaxed’ about growing inequality, so long as those at the bottom attain a very basic level of income (Elliott and Atkinson 2008). However, as is addressed below, in our view this perspective seriously underestimates the serious psychological and social consequences of burgeoning relative wealth and poverty (Wilkinson 2005; Wilkinson and Pickett 2009). Moreover, the housing market, as it currently operates, can be seen to be both a reflection of and key catalyst for growing social and economic inequality in the UK. Put simply, the purchasing power of the wealthy inevitably drives up the cost of housing; a situation that is exacerbated by second home ownership and, more particularly, buy-to-let investment. This generates a good deal of social closure and social polarization as well as an upward redistribution of wealth. Thus, the ‘housing poor’ are denied access to a limited but essential commodity by the ‘housing wealthy’ unless they are willing to pay increasingly onerous rents, or become increasingly indebted to meet inflated prices (Zacchaeus 2000 Trust 2005). In sum, we consider the housing boom, rather than being a product of ‘economic fundamentals’, to be a creation of global economic factors – principally an abundance of historically cheap and accessible credit – together
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with a variety of national factors, such as changing housing legislation, growing labour market insecurity, stagnant earnings and inadequate pension provision, as well as a deregulated financial sector and growing inequality of wealth and income. Taken together, these various factors coalesced to fuel a speculative bubble in the UK property market, assisted by a national culture where market fundamentalism has been lionized to the detriment of the society as a whole.

The social consequences of inflated house prices The social consequences of the housing boom have been manifest and serious, undermining the stability, security and, indeed, ‘fairness’ of UK society on a number of crucial areas, as housing has come to be seen as an investment vehicle and key driver of consumption rather than as a secure place to live within a stable community. In addition, government policy on housing and intervention in the market – having broadly facilitated this redefinition of housing – has brought with it a range of unintended or unacknowledged consequences (Harvey 2007). In effect, government support for speculative investment and high house prices has appeared to act in direct contradiction to the broad thrust of its own housing policy and its much vaunted aims in several other crucial areas, such as the creation of an open, fair ‘opportunity society’, an emphasis on education and work as a route to success and upward social mobility, as well as the centrality of stable families and communities to the ‘good society’.

The ‘priced out’ In 2004 the ratio of lower quartile house prices to lower quartile earnings was 6.3, by 2007 it had deteriorated to 7.25, its worst ever position . . . irrespective of which measure of affordability is chosen, all show a significant deterioration in recent years, and all indicate significant pressure on first time buyers.(National Housing Planning and Advice Unit (NHPAU) 2008) As above, the most obvious group affected by the ‘boom’ has been first time buyers. According to the various indices, this group has become an endangered species, having been effectively displaced by investors at the lower end of the market during the boom years and continuing to be priced out across much of the country (NHPAU 2008). The estimated number of first time buyers fell from 532 thousand in 2002 to 320 thousand in 2005; a 40 per cent drop and a 25 year low (Halifax 2006). This occurred as the average income multiple required to buy the average home, a key measure of affordability, rose from 2.7 to 5.4 between 1995 and 2005, moving significantly higher in some areas as the ‘bubble’ peaked (Wilcox 2005). Moreover, our research indicates that the
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negative effects of unaffordable housing are not restricted to those on lower incomes, but are causing great difficulties for a significant cohort of degreelevel-educated young professionals, including some of well above average earnings, whose life chances are now radically diminished in comparison to their equivalents of previous generations.As is identified below, this has potentially serious implications for the well-being and the stability of families and communities, as well as political implications where a generation of young British adults consider that their prospects of accessing a normal life trajectory in our society have been irretrievably damaged, leading to a burgeoning undercurrent of despondency, frustration and anger amongst this group. Exacerbating such feelings of disenfranchizement is the perception that, with the growing disjuncture between house prices and earnings, lifestyle, ‘opportunity’ and life chances have become increasingly dependent on property ownership as opposed to occupation and education. For some, predominantly the skilled and well-educated, concluding that there is little opportunity to realise their ambitions in the UK has driven them to look beyond our shores as the only option available for achieving their aspirations. This may make some sense of the fact that our much discussed immigration over the last few years has been accompanied by record levels of emigration (ONS 2008b; Sriskandarajah and Drew 2006). Being honest and hardworking doesn’t pay when you have no opportunity of taking part. Society has disenfranchized me even now I have a career as a lecturer in Higher Education (but still vastly underpaid). The youth of today are going to be in for a bit of a shock in later life. China, India and the old Eastern Bloc have much cheaper labour rates and will take almost every last manufacturing and service job there is. Companies do not have any sympathy for local or national economies and go where the labour is cheapest. Unemployment faced with these cheap imports will and could cripple us back to the Victorian age. My only hope is that I can stay employed, save some money and buy a house at the bottom of what I hope is the biggest crash in history. (Subject AV) A work colleague bought her house around five years ago with her partner (a solicitor), but the mortgage payments alone take up over half their combined wages every month, and I’m also glad I’m not in that position. The simplicity of my parents’ situation in the late seventies – work hard, get a good job, own your own home and make it somewhere to be proud of – now seems totally out of reach. (Subject LS) . . . probably will ultimately emigrate & work abroad, have done so for periods in the past and thinking about doing this in the next 1–3 years on a more permanent basis. (Subject EM)
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Europe (apart from the language problem) offers so much more in affordability and standard of living then does the UK. I would not be surprised to see many others leaving the UK to live abroad. (Subject DB) The above merely provides a few examples of the widespread discontent, particularly amongst younger people, that is being generated by historically high house prices and thus the gap between rhetoric and realization (Harvey 2007). None the less, these consequences, while serious, reach much further than feelings of injustice, frustrated ambitions and aspiration. Housing and the family UK government ministers, and indeed their counterparts amongst the leading political parties, have repeatedly asserted that the integrity and stability of family life is sacrosanct and central to the stability and health of communities and the nation as a whole. Thus, a good deal of political rhetoric and policy has the avowed aim of supporting this institution. None the less, current market driven housing policy has precisely the effect of seriously undermining families as well as the communities that support them. Rapidly rising prices and debt commitments could well have associated social effects, for example on the age of having a first child, which are so far largely un-researched. There have certainly been personal disasters for several million households who have found themselves over-extended by the long-term debt. (Zacchaeus 2000 Trust – Memorandum to the Prime Minister – May 2005) In the first instance, as above, young people being priced out of the market has the obvious effect of making it more difficult for couples to form households and, hence, start families in the first place (NHPAU 2008). This relationship between postponed parenthood and housing is also recognized in the Institute of Public Policy Research (IPPR) report ‘Population Politics’ (Dixon and Margo 2006). Here, it is suggested that, ‘(a)s people delay family formation they are often less likely to aspire to home ownership’ (2006: 103). However, we would argue that it is largely cost barriers to home ownership, and a lack of suitable, secure alternatives, that are deterring family formation, particularly amongst young professionals. The increased cost of suitable housing also almost inevitably entails that family sizes will be more restricted than might otherwise be the case. Rampant inflation has also ensured that the ‘steps’ on the property ladder have widened, making it difficult for existing homeowners with expanding families to access suitable homes. We do not plan to have any children, in part due to the expense of living. We cannot afford a mortgage AND children. (Subject JE)
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I worry about my friends, they all live at home, we all have student loans and we have no stake in society (particularly the bricks and mortar bit) and exist only to pay the pensions of older generations. The current house price system is effectively a population control policy too. It seems no one is bothered that debt is the new slavery, since the ones who vote have a vested interest in keeping house building down, to protect the views from their windows, the equity in their homes, and to force us to work harder and harder to pay taxes and live. It seems all the family houses are owned by the single elderly, the professional couple or the inheritee; the families with young children are squashed up in flats. It’s as if we’re returning to Victorian Britain again. (Subject H) At the age of 37 we are not on the property ladder and have little prospect of getting on the ladder. Academic pay is low and we live in an area of high house prices. We can’t move as my son would have to move school so we currently live in a council house. House prices are a huge issue in our lives. We can’t have other children because we haven’t got the space. If we bought a house for more space we would be so stretched financially that we couldn’t afford to have more children. (Subject JA) Housing affordability issues also place other pressures on family life. It is clear that mortgages are increasingly assessed on the basis of dual earnings and at increasingly high multiples of income, adding additional impetus for increased working in our already long hours culture (Bunting 2004). This being the case, evidently, if both parents are required to work longer hours, perhaps also taking second jobs to meet onerous mortgage payments, then there is little time left for parenting and family life (Watts 2008; Bunting 2004; Dex 2003). This not only places a strain on marriages and partnerships, and on relations between parents and children, but also undermines the parental investment in the socialization of the next generation that is essential to raising healthy, confident and socially responsible citizens (TUC 2004). From an economic perspective, the burden of mortgage debt also restricts the consumption that our service economy relies upon, which then is inevitably accomplished through the incurring of debt that places a further stress on families. Even for those who have been ‘winners’ in the housing boom, the net effect has done little more than provide an illusion of increased wealth, while the notional increase in the price of the family home has supported and encouraged further borrowing that may expose families to increased financial risk in future. The Consumer Credit Counselling Service says that it is not just those on lower incomes that are being hit by higher borrowing costs. Many middle class families are also struggling to make ends meet because of the strain huge mortgage payments place on the monthly budget. (Francis 2007)
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Overall, if family life, albeit in its various forms, is the bedrock of a society then secure, adequate and affordable housing is a prerequisite for its stability.

What’s wrong with (private) renting? . . . not since the golden age of the Edwardians, when 90 percent of all housing was rented, has the private rented sector looked so attractive to private investors. (Association of Residential Letting Agents (ARLA) 2008) For reasons that will be made clear below, the issue of family and community stability has a bearing on another feature of housing policy; the cultivation of an expanded private rented sector as part of the housing mix. Private renting in nations such as Germany is often cited as an alternative to owner occupation that might be emulated in the UK to resolve our own housing difficulties. This view is reflected in a recent report on the sector, provided by the Centre for Housing Policy at the University of York, which advocates the expansion of the private rented sector as a plank of government housing policy (Rugg and Rhodes 2008). It must be conceded that the revival of the sector since the late 1980s has provided some more flexible accommodation for young adults in transition and for students, particularly in response to the expansion of higher education (Ball 2006; Smith 2008). However, as above, we would suggest that such an approach to Britain’s housing difficulties is misconceived, due to the fundamental differences between UK and other European private rental markets. As Ball notes, ‘(m)any other countries, including most of Europe, have highly regulated rental markets, with rent controls, legal precedents and security of tenure. Therefore, growth of buy-to-let in the UK is a relatively unique phenomenon worldwide’ (Ball 2006: 5). In addition, and again in contrast to nations like Germany, UK renting operates within a very different culture, and has long been associated with poor housing and an exploitative relationship between landlords and tenants, not least of all during the ‘golden age’ referred to above. In fact, it was largely the recognition of the great social and political problems produced by landlordism, and a laissez faire approach to housing, that led to the regulation of private tenancies and a move towards social/state provision in the mid twentieth century (Gauldie 1974; Lawless and Brown 1986). Conversely, the deregulation of the private rented sector, together with the demise of social housing, appears to be reversing this process, resurrecting the spectre of past ills, to the extent that private renting can be no more considered a suitable form of housing for families than was the case in the pre-WWII era. In addition to the high cost and poor quality of much private rented housing in the UK, as noted above, a key issue is security of tenure (Shelter 2008). While renting on Shorthold Tenancies may be suitable for those who
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specifically require temporary accommodation, they present an impossible situation for families, given the realistic prospect of being constantly moved on by landlords seeking to realize gains in a speculation driven market. It could be suggested that this presents us with a potential ‘Cathy Come Home’1 scenario for the twenty-first century, while there is growing evidence of a transient lifestyle being forced upon many families within the UK. My partner and I are 30 and have two small children aged 3 and 1. We both have reasonably paid jobs, my partner is a carpenter and I am an agency nurse, but we cannot get onto the property ladder and have a secure home for our children. Our main reason for this, is that while in our twenties before having any responsibilities we decided to travel and work our way around Asia and Australia for 2 years, the best time of our lives! But since returning in 2003 we have certainly paid for it! Shortly after returning I fell pregnant with our daughter, so we thought then was the right time to buy a house, only to find house prices had trebled since we were away! So our only option left (other than getting a ridiculous mortgage 4 or 5 times our salaries!) has been to privately rent for 4 years, in that time we have been moved on 5 times due to people cashing in on their buy-to-lets, have been charge crazy fees by letting agents each time we have been forced to move. (Subject Z) While the above represents the most extreme situation in this regard, as experienced by our own respondents, it is clear that this is far from being an isolated case. The biggest problem facing tenants in private sector rented accommodation is the chronic lack of security. Six-month shorthold tenancies do not provide a stable home for vulnerable families. The National Association of Citizens Advice Bureaux found that the UK provides the least security of tenure for private-sector tenants of the six European countries that it studied. In Germany,51 per cent of people live in privately rented properties,mostly with unlimited contracts; in Spain, where 10 per cent of properties are privately rented, tenants have the right annually to extend contracts for up to five years. We are the only country with six-month shorthold tenancies (our italics). For vulnerable families, the consequences are desperate. A recent study of homelessness in Northamptonshire found that, in 2006, no fewer than 17 per cent, almost one in five, of homeless families housed by the local authority were made homeless because their shorthold tenancies had come to an end and had not been renewed. Councils have to pick up the pieces when that happens, as people are almost being evicted from private rented homes. A Shelter report, due to be published shortly, cites the survey of English housing for 2005–6, which found that 38 per cent or just over a third of
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people in private rented housing had been in their homes for less than a year. That is four times the level for social tenants, and a staggering seven times that for owner-occupiers. Only 5 per cent of owner-occupiers had moved within the past year compared with 38 per cent of tenants in privately rented property. There is massively greater insecurity for private tenants than for any other group. Behind those figures lies deep misery for many families. They are forced to live a nomadic existence in private rented housing. As a result, the children suffer constant disruption in their schooling and the parents sometimes have problems in keeping their jobs, and there is the social disruption of having constantly to move home. (Sally Keeble MP, debate on Private Rented Sector Housing, from Hansard, Column 482WH 23 April, 2008). As suggested, families under such conditions cannot provide a ‘secure base’ for themselves or, crucially, for the socialization of their children and, thus, government policies in the areas of education, law and order and so on are wholly incompatible with the current state of the private rented sector or its promotion as an alternative to (affordable) owner occupation or decent social housing. Moreover, given the above, Rugg and Rhodes’ claim that ‘(t)here is insufficient evidence that existing tenancy frameworks are problematic’ appears highly questionable at best (Rugg and Rhodes 2008: xiii). Housing and community A further effect of buy-to-let/private letting has been its effect on communities. It is clear that the ‘mobility’ imposed by insecure tenancies means that the social connections that define communities cannot flourish in areas where there are high concentrations of buy-to-let properties. This loosens connections between people, undermining the social capital that once stabilized community and society, promoted democratic engagement, and supported people’s feelings of belonging to something beyond themselves (Putnam 2000). Even if we embrace a postmodern conception of community, one that that unties its relationship to place, being moved on is fundamentally different to choosing to move on. Weakened ties and commitment to locality also make it less likely that individuals will maintain the infrastructure of their environment. Buy-to-let has caused the physical degradation of the area. Landlords don’t clean up the mess of old furniture and disused pizza cartons, and the students, many from wealthy backgrounds, contribute no council tax, says Lenton resident Maya Fletcher. . . . There’s no more feeding next door’s cat or taking in parcels. The government talks of cohesion and community. We’ve lost it, she says.
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If you want to see the damage buy-to-let is doing to a community, then come to Bath. We have a population of around 80,000 –20,000 of whom are now students. The effect has been devastating in some places. One area of 2/3 bedroom Victorian terraces has been almost entirely taken over by buy-tolet landlords, while the couples and young families who used to buy and settle in the houses are priced out of the market . . . Insanity! And (mostly absentee) landlords are profiting from the destruction of these communities. (Levene 2007) Aside from the issue of ‘studentification’2 and buy-to-let, other features of the current housing boom have had a negative effect on community and society in a wider sense. The polarization of different groups between high-end ‘residential’ and ‘low-rent’ housing, where the gap between the two has become increasingly unbridgeable, has opened up a cultural and social as well as economic chasm (Dorling et al. 2007). Thus, the social closure and division that is emerging as the housing poor become locked out of the more desirable areas is leading us towards a form of housing apartheid and ghettoization,with serious knock on effects in terms of educational, cultural difference and an expanding cycle of relative deprivation (Gregory 2009). Moreover, this trend is likely to be amplified by inheritance over time as housing wealth further widens the gap between rich and poor (NHPAU 2009). This is one of the reasons why government initiatives to tackle the UK’s contracting social mobility, by focusing on education and aspiration in isolation from wider structural inequalities, is wholly inadequate (Grice 2009). Contrary to government thinking on these matters, as noted above, difference and relative inequality matter a great deal, while this widening gap cannot be regarded as being distinct from many of the social ills that currently afflict UK society, and which are the focus of costly policy interventions (Wilkinson 2005; Wilkinson and Pickett 2009).

A bursting bubble It is clear that the UK housing bubble, as with others across the globe, had run out of steam by late 2007 and, while the extent and timing of any eventual correction is incalculable at present, past experience suggests that we will see prices in relation to earnings return to somewhere around their long-term trend at some point in the future. On the upside, a return to normal levels of affordability would go some way to assuaging some of the social issues described above. However, even where, as is likely, this occurs, the consequences in terms of negative equity, long term indebtedness and repossession may be endured by many of those who bought during the height of the boom for years to come. Perhaps the best way to restore stability would be for prices to be allowed to decline, with government intervention focused on assuaging the situation of owner occupiers (as opposed to investors) negatively affected by
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onerous housing costs and falling prices. However, at present, such a straightforward approach to the unwinding of the housing bubble seems unlikely. Housing policy This Government believes that everyone deserves a place they can be proud to call home, at a price they can afford. Homes are the building blocks of our communities. (Yvette Cooper, Ministerial Foreword to the Department for Communities and Local Government (DCLG) Housing Green Paper, ‘Homes for the Future’, July 2007) What are the right measures that you take to reward hard work, effort and responsible risk-taking? (Prime Minister, Gordon Brown, 13 October 2008) As well as there being a profound inconsistency between housing policy and other wider policy objectives, as implied above, there also appears to be a clear inconsistency with housing policy itself. On the one hand the government’s asserted aim is the assistance of first time buyers and the delivery of affordable housing for individuals and families (DCLG 2007). However, at the same time intervention appears clearly aimed at keeping prices high, whilst providing various means by which first time buyers can access unaffordable housing at great risk to themselves and their families. Thus, efforts are being focused on resisting an inevitable and necessary correction, while sustaining unrealistically high house prices and housing investment as a driver of the economy.This view is supported by the concern displayed by the Prime Minister and other key players during the economic crisis that mortgage lending be returned to ‘2007 levels’ (boom levels) as swiftly as possible, as well as the support for shared ownership and, as suggested, other ‘discount’ schemes (more on these below). This view is also sustained by the Prime Minister’s remarks that ‘the UK problem was not shortage of demand for homes at “the right prices” but a shortage of mortgages “at the right prices for people to buy” ’ (BBC News 13 October, 2008). Moreover, while the government has consulted various groups in the formation of policy, the prevailing view appears to have been informed by the property and financial sector; those most aligned to its narrow economic rather than wider social aims. Thus, the type of ‘assistance’ offered to first time buyers, rather than providing real assistance, tends to be consistent with the interests of those who directly benefit from high house prices. In short, government initiatives circumvent the very obvious fact that the best way to help first time buyers, those needing larger homes, and the longer term stability of the market and society, is for house prices to return to affordable and sustainable levels. Recognition of this logical inconsistency is also reflected in the fact that government initiatives on housing are overwhelmingly greeted with dismay, frustration and anger from first time buyers themselves (PricedOut.org.uk; House Price Crash.co.uk).
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People don’t trust or want shared equity – regardless of what the scheme is called. Let prices drift down to the point of affordability. Propping up the current market price levels, harms first time buyers. (PricedOut.org.uk) As above, first time buyers are clearly aware that what they need is cheaper housing, rather than cheaper, easier loans, shared ownership, ‘discount’ schemes and stamp duty breaks, all of which are quite rightly viewed as devices for sustaining inflated house prices. Overall, it might be suggested that the government’s apparent willingness to embrace the property lobby’s analysis and proposals on housing may be viewed within the context of its own mixed motivations on housing policy. On the one hand there appears to be a genuine desire to meet housing need, through new building and a (limited) expansion of social housing. Conversely, however, there also appears to be a political motivation to sustain currently inflated prices, presumably to retain ‘consumer confidence’ and a ‘feel good factor’ amongst homeowners, and in tacit recognition of the fact that housing has operated as a major conduit of the debt-fuelled, consumer led expansion that our economy has become increasingly reliant upon in recent decades. Further lobbying on housing has also come from private landlords and associated interests. However, in our view any move to expand this sector, in anything like its current form, would be both grossly unjust and socially regressive. While recognizing that there is space for a private rental market in the housing mix, to provide short-term housing to people in genuine voluntary transition, curbing the expansion of this sector is essential to ensuring that secure homes are available for individuals and young families at affordable levels. Moreover, the worrying trend for some private landlords to seek to expand their portfolios by exploiting existing homeowners during the current downturn, through dubious ‘sale and rent back schemes’, should be brought to a halt as quickly as possible.

Land tax? One possible solution to the increasing accumulation of residential property for investment purposes would be a tax on the value of residential land holdings. This would be simultaneously economically and socially advantageous, diverting capital from investment in unproductive assets while being socially progressive. Together with the retention or extension of current inheritance tax levels, albeit against the tide of a currently vocal lobby, this would deter the current return to landlordism, inequality and unearned hereditary privilege that appears to be emerging in the UK, as well as potentially tackling some of the remaining archaic vestiges of the latter (Zacchaeus 2000 Trust 2005; NHPAU 2009).
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Social housing While ideologically unfashionable at present, perhaps the most prudent use of government aid to those who cannot buy would be in the provision of good quality and secure social housing, a fact that, as noted above, the government now appears to recognize to some extent (DCLG 2007). There is little doubt that the social rented sector has a somewhat tarnished image in the UK. However, it might also be argued that such perceptions are based on the fact that what remains of the sector, of local authority housing at least, is largely the ‘rump’ that was not taken up under the ‘right to buy’ initiative. This overlooks the fact, however, that a good deal of social housing in the UK was highly successful, while a focus on revitalizing the sector would offer a more suitable and socially progressive alternative to any further expansion of private renting. Such a move could provide much needed employment in the construction sector as workers are being laid off by private builders, retaining skills and generating a genuine boost to the economy, while also beginning to address the UK’s housing crisis where market solutions have clearly failed. Greater synergy between the private and public sector in terms of housing provision could also prove beneficial. For example, a ‘right to sell’, in whole or part, to a local authority could address a number of the difficulties presented by the current housing market arrangements. This would allow families experiencing unemployment or other financial difficulties to stay in their homes, without recourse to the aforementioned risky ‘sale and rent back’ schemes, while potentially producing more mixed communities of both socially rented and private accommodation as a step back from the current trend towards increasing polarization (Gregory 2009). Conclusion It is clear that the main beneficiaries of the housing boom have been investors, the property industry and the financial sector (at least for a time). Conversely, for most of the home owning public the benefits of high house prices have been illusory, merely encouraging greater indebtedness, while being disastrous for recent entrants, ‘hard working families’ and the priced out. Moreover, the whole issue of housing affordability and the manner in which houses are utilized – in particular the use of homes as investment vehicles – raises fundamental economic, political and, indeed, social questions. In our view current policies aimed at supporting unaffordable house prices are socially and economically undesirable and morally indefensible, being far removed from the principles of ‘fair rules, fair chances, and a fair say for all’. It is also clear that current prices are ultimately unsustainable, having climbed significantly higher in relation to wages than in any other previous UK housing boom, and cannot remain at these levels without a return to sustained ‘risky’
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lending practices. At the time of writing, despite assertions to the contrary, it appears that this is precisely what the UK government is attempting to resurrect. From an economic perspective, less reliance on the housing market as a conduit for debt-fuelled expansion and consumption led growth would ultimately lead to greater economic stability and more productive investment Also, while the government appears concerned to ‘aid’ consumption by keeping prices high, would it not be more prudent as well as socially desirable if young families, who are likely to consume most, were able to access cheaper housing and, thus, retain more of their disposable income, rather than employing the housing market as a vehicle for transferring wealth and income to older homeowners who are more likely to salt it away for retirement? From a political perspective, policy makers, while focusing on the interests of existing homeowners and the property lobby, may be underestimating a growing groundswell of opinion amongst younger UK adults that is vehemently opposed to current housing policy. This growing disaffection appears to be currently expressed, thus far, in latent but strong anti-government sentiment. Fuelling this is the perception that the decoupling of wages and house prices has seen a collapse in the relationship between education, hard work and lifestyle, such that life chances appear more dependent on property ownership than talent, education and/or effort. As suggested, these type of arrangements in the housing market may be seen to provide the foundations for a form of ‘rentier society’, where a privileged minority and their offspring can live wholly from the efforts of others who have not been so fortunate in terms of the timing of house purchase or the caprice of inheritance. This crucially undermines any notion of an ‘opportunity society’, and represents a regression towards the social arrangements that engendered much frustration, despair, crime and social upheaval in the past. From a social perspective, as suggested, unchecked house price inflation has a severe negative effect on social cohesion. An increasing gulf between those who can afford to live in different areas has divided our society, socially, culturally and geographically, cultivating a fearful and resentful culture amongst the excluded in the poorest areas (Dorling et al. 2007). Also, the move towards private renting on current terms has produced areas of poor housing provision and a nomadic housing underclass, creating a situation where communities cannot flourish, families cannot put down roots and, thus, children are exposed to a precarious and unpredictable education and socialization process. While, as suggested, this sector has a role to play, in terms of both price and security of tenure it cannot in its current form be considered as a viable long term alternative to affordable owner occupation or social housing. Now is the time for the government to finally disentangle itself from this housing boom, and to distance itself from maintaining it, not to become
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complicit in the financial ruination of more young families. (PricedOut. org.uk) Finally, at a time when UK government ministers regularly bemoan the decline of family life, well-being and community, and the social stability that they support, should they be actively engaged in further undermining them in favour of the narrow, and largely unearned, interests of a highly influential and vocal minority who have imposed this instability on both economy and society? It is surely to the long-term benefit of society as a whole to address our housing crisis by, in the first instance, disincentivizing second and multiple home ownership – especially where it involves the use of housing as an investment vehicle – together with revitalizing social housing, as crucial first steps in supporting good quality affordable housing for all, whether owner occupied or rented, as a social good. The alternative is to pursue a market driven housing policy, aligned with an economy that depends on perpetual credit expansion, and that delivers economic instability, growing indebtedness, burgeoning inequality and social fracture. In short, it must be recognized that our current housing market is a key contributor to our so-called ‘broken society’. (Date accepted: February 2010)

Notes
1. 1966 BBC drama, written by Jeremy Sanford and directed by Ken Loach, which stimulated a national debate with respect to issues of poor housing and homelessness. 2. While the above relates some fairly negative comments regarding students, it is, none the less, also clear that the expansion of higher education has swelled their numbers and that they must be housed somewhere. In fact, student accommodation is presenting a problem for universities and students in many areas. However, relying on buy-to-let/private landlords as the solution, in addition to the impact on established communities, presents problems both for institutions and students themselves, as the high rents that are necessary to cover buyto-let mortgages place an additional burden on increasingly stretched student finances (Smith 2008).

Bibliography
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Barker, K. 2004 The Barker Review of Housing Supply (17 March) HM Treasury. Brewer, M., Goodman, A., Muriel, A. and Sibieta, L. 2007 Poverty & Inequality in the UK: 2007, IFS Briefing Note 73 Available at http://www.ifs.org.uk/bns/bn73.pdf (Accessed 5 November, 2008).
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Hamnett, C. 1999 Winners and Losers: Home Ownership in Modern Britain, Abingdon: Routledge. Hamnett, C. 2009 The Madness of Mortgage Lenders, Report for IPPR (May) Institute of Public Policy Research. Harvey, D. 2007 ‘Neoliberalism as Creative Destruction’, The Annals of the American Academy of Political and Social Science 610: 22–44. Holmes, P. 2008 ‘First Time Buyers Priced Out Due to Buy to Let Investors No Reason for CML Celebrations’, First Rung. Available at http://firstrung.co.uk/articles.asp? pageid=NEWS&articlekey=9115&cat=640-0 (Accessed 15 October, 2008). Hutton, W. 1995 The State We’re In, New York: Basic Books. Hutton, W. 2002 The World We’re In, New York: Basic Books. Keen, S. 2001 Debunking Economics, London: Zed Books. Lawless, P. and Brown, F. 1986 Urban Growth and Change in Britain, London: Harper and Row. Levene, T. 2007 ‘Nottingham’s Forest of Housing Despair’, the Guardian (Internet) 16 June. Available at http://www.guardian. co.uk/money/2007/jun/16/buyingtolet. communities (Accessed 19 September, 2008). McWhirter, I. 2007 ‘Paying the Social Cost of High-price Housing’. The Herald (Internet) 16 July. Available at http://www.theherald. co.uk/search/display.var.1546749.0.paying_ the_social_cost_of_highprice_housing.php (Accessed 16 September, 2008). Mints, V. 2007 ‘Securitization of Mortgage Loans as a Housing Finance System. To Be or Not to Be’, Housing Finance International. Available at http://findarticles. com/p/articles/mi_qa5441/is_200712/ai_ n2439420316 (Accessed 16 September 2008). National Audit Office (NAO) 2009 Report: HM Treasury: The Nationalization of Northern Rock. National Housing Policy and Advice Unit (NHPAU) 2008 Report: Affordability Still Matters.
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