As repossessions soar – they are up 71% on last year – and millions of homeowners see the market value of their properties fall well below what they owe to the banks, the New Labour government washes its hands of the growing housing crisis.
In fact, the state-owned Northern Rock is leading the way in throwing people out of their homes, repossessing 50% more properties than the industry average. By the end of September, the state-owned lender had seized 4,201 homes, up from 2,215 at the end of last year.
Yesterday, Dai Davies, the independent MP for Blaenau Gwent, asked ministers to take possession of Northern Rock and Bradford & Bingley homes where borrowers have defaulted. The response was brutal and to the point. He was told: "Northern Rock and Bradford & Bingley are run at arm's length from the Government, on commercial principles."
The treatment meted out to former chef Karl Clark, who suffers from severe arthritis, tells you all you want to know about Northern Rock. Housebound and unable to work, he said: "I've done everything I could to keep up with my repayments, sometimes I did without medication so I could pay for my mortgage. I've tried everything to reason with them. I've been upfront from the start and told them I had money troubles because I could no longer work. I've sent copies of doctors' notes to prove I can't work."
He used his savings to pay the mortgage, but they soon ran out. Karl told his local paper: "My wife works part-time, but the money just isn't enough. I used to call Northern Rock and arrange payment deals, but then just a couple of weeks later they were seemingly forgotten about and I'd have to go through the same process again. I've got a wife and daughter and they shouldn't have to go through this. It seems that Northern Rock have been eager to kick me out of the house. Everything seems to have been fast-tracked. I got a letter from them saying they were going to take me to court. Usually this takes a few weeks, but in my case it was a few days."
As unemployment rises relentlessly in the recession, the number of people who won’t be able to pay their mortgages is sure to soar. Many have also borrowed against what was increased equity in their property. Now, as house prices fall, if they lose their homes, they will still almost certainly owe more than the current market price of the property (if it can be sold, that is). They will be homeless and in huge debt to the banks at the same time. This is simply unacceptable.
New Labour’s indifference is all the more brutal because the state has shown that it possesses enormous powers (if not the answers) when comes to the financial crash. Commitments totalling £500 billion have been made to the banks’ bail-out. Local authorities or housing associations could, for example, be given the powers and resources to buy up homes under repossession orders and rent them back to the occupants. Of course, the Brown government has no intention of doing this.
Instead, the government is pressing on with more state-funded home-ownership schemes, even though banks have stopped lending to anyone who doesn’t have a substantial deposit. Developers have stopped building and housing associations who work in partnership with private companies cannot possibly meet their targets; associations will also face increasing financial difficulties as a result of unsold properties and unused land.
Dai Davies asks: “What is the benefit to taxpayers of keeping these banks alive, if they cannot be directed to helping people in dire housing difficulty?” Quite so. The mortgage crisis is soluble. Existing mortgage debt could be cancelled and future payments determined by a formula based on the cost of new building and ability to pay, to be agreed through the democratic process. Empty homes could be requisitioned to house the homeless. Ridding ourselves of New Labour and the business state it presides over will enable us to carry these policies into practice.
Paul Feldman
AWTW communications editor
For revolutionary solutions to create a sustainable, not-for-profit economy in place of global capital alongside a real democracy based on People’s Assemblies. Visit our web site at www.aworldtowin.net
Showing posts with label repossessions. Show all posts
Showing posts with label repossessions. Show all posts
Wednesday, October 29, 2008
Friday, October 17, 2008
Time to cut the losses
In the last week, stock markets the world over have been showing the classic signs of bipolar disorder, but in the most concentrated form. Euphoric, manic, hysterical highs followed by the deepest depression. Much of it, say some of the commentators, is internally generated, the result of speculators feeding off each other’s panic.
But as everyone else knows, there are clear external causes. The soaring highs are the direct result of a renewed series of injections, by governments and central banks, of credit – the same stuff that the world’s financial system became addicted to and wholly dependent on during the “long boom”. It doesn’t help. Yesterday, the two largest Swiss banks UBS and Credit Suisse were obliged to seek new capital in a further attempt to prevent them turning into non-banks, ceasing to exist, becoming, as Monty Python had it, dead parrots. When the Swiss banks fall, there’s nowhere safe left for your money.
The stock market lows – a five-year retreat reached in the UK and back to the 1980s in Japan – are the result of an avalanche of indications that the recession is not only with us, but will last for years. Giant corporations are bankrupt, jobs falling off a cliff, house prices dropping like a stone. Even the price of oil has fallen back, as the speculators move their money elsewhere. China, which has powered the global economy, is cutting back and shutting down factories.
The Brown-led government, which has taken on the role of street-level pushers, are looking to raise the money that they are guaranteeing to the banks by issuing more debt to the investment markets. But there’s a limit to what can be raised. The rest will come from an assault on government spending, public services, the elimination of the legal guarantee for public sector pensions, and last but not least, any measures to deal with climate change – irrespective of Miliband the Younger’s pronouncement on an 80% emissions reduction by 2050.
Early signs of the brutal reality that will result came from the news that under Brown and Darling’s control, Northern Rock has been foreclosing, repossessing and evicting at double the rate of the rest of the industry. So much for the benefits of “nationalisation”.
Brown knows that the bankers’ bail-out won’t stop the rot, so he’s promoting a restructuring of the world’s economy, along the lines of the Bretton Woods arrangements that laid the basis for the post-war recovery and the boom years. The Financial Times says this is premature, adding:
“Lest we forget, Mr Brown himself was in charge of the IMF’s ministerial steering committee for a large part of the past decade and yet signally failed to implement the ideas he is parading. During this time, it was repeatedly explained to him that every early warning system devised by the finest minds in international economics, including those at the fund, either predicts crises that never arrive or misses those that do.” The paper of business is correct. The basis for restoring stability after a decade and a half of the Great Depression wasn’t Keynes’s proposals, but the massive destruction of surplus productive capacity and human lives during the second world war.
A much easier, less destructive way out of the mess would be to cut the losses, admit the capitalist system is bankrupt and make the transition to a new kind of economy altogether. One based on not-for-profit production, social ownership, self-management, planned production for need, distributed via an intelligent market informed by democratic processes and expressed preferences. That’s what we will be discussing tomorrow at the Stand Up for Your Rights festival. Be there!
Gerry Gold
Economics editor
But as everyone else knows, there are clear external causes. The soaring highs are the direct result of a renewed series of injections, by governments and central banks, of credit – the same stuff that the world’s financial system became addicted to and wholly dependent on during the “long boom”. It doesn’t help. Yesterday, the two largest Swiss banks UBS and Credit Suisse were obliged to seek new capital in a further attempt to prevent them turning into non-banks, ceasing to exist, becoming, as Monty Python had it, dead parrots. When the Swiss banks fall, there’s nowhere safe left for your money.
The stock market lows – a five-year retreat reached in the UK and back to the 1980s in Japan – are the result of an avalanche of indications that the recession is not only with us, but will last for years. Giant corporations are bankrupt, jobs falling off a cliff, house prices dropping like a stone. Even the price of oil has fallen back, as the speculators move their money elsewhere. China, which has powered the global economy, is cutting back and shutting down factories.
The Brown-led government, which has taken on the role of street-level pushers, are looking to raise the money that they are guaranteeing to the banks by issuing more debt to the investment markets. But there’s a limit to what can be raised. The rest will come from an assault on government spending, public services, the elimination of the legal guarantee for public sector pensions, and last but not least, any measures to deal with climate change – irrespective of Miliband the Younger’s pronouncement on an 80% emissions reduction by 2050.
Early signs of the brutal reality that will result came from the news that under Brown and Darling’s control, Northern Rock has been foreclosing, repossessing and evicting at double the rate of the rest of the industry. So much for the benefits of “nationalisation”.
Brown knows that the bankers’ bail-out won’t stop the rot, so he’s promoting a restructuring of the world’s economy, along the lines of the Bretton Woods arrangements that laid the basis for the post-war recovery and the boom years. The Financial Times says this is premature, adding:
“Lest we forget, Mr Brown himself was in charge of the IMF’s ministerial steering committee for a large part of the past decade and yet signally failed to implement the ideas he is parading. During this time, it was repeatedly explained to him that every early warning system devised by the finest minds in international economics, including those at the fund, either predicts crises that never arrive or misses those that do.” The paper of business is correct. The basis for restoring stability after a decade and a half of the Great Depression wasn’t Keynes’s proposals, but the massive destruction of surplus productive capacity and human lives during the second world war.
A much easier, less destructive way out of the mess would be to cut the losses, admit the capitalist system is bankrupt and make the transition to a new kind of economy altogether. One based on not-for-profit production, social ownership, self-management, planned production for need, distributed via an intelligent market informed by democratic processes and expressed preferences. That’s what we will be discussing tomorrow at the Stand Up for Your Rights festival. Be there!
Gerry Gold
Economics editor
Friday, June 27, 2008
The rich cash in
Shares in General Motors have fallen to the lowest level for over half a century, a sure sign of the deepening global recession. Just as stark in the world of fantasy finance is the one-third decline in the value attributed to Countrywide, the country’s largest mortgage lender, since it was merged with the Bank of America in January.
The indications for the UK economy are just as dire. Mortgage approvals are 56% down on a year ago, and repayment costs are spiralling. Michael Hume, an economist at Lehman Brothers investment bank, says the statistics paint a "very worrying picture of how the credit crunch is unfolding", adding that a US-style housing slump looks "increasingly likely". American banks in May repossessed twice as many homes as they did a year and prices have plummeted.
HBOS, the parent of Bank of Scotland and Halifax, Britain's largest mortgage lenders, keeps revising its estimates. It now expects British house prices to fall 9% in 2008. But Jeremy Leach, of the British Property Opportunities Fund, expects it to be more like 20%. Meanwhile the gamblers in the world of derivatives are betting that Britain's housing downturn won’t bottom out until 2011 by which time average prices will have fallen by around 30% from their peak last August.
Jeremy Leaf, of the Royal Institution of Chartered Surveyors warns: "The property industry will not be the only casualty in the fall-out from the credit crunch, with the high street and purveyors of a range of household goods, including furniture and white goods, also feeling the pinch. Construction workers such as plumbers and bricklayers will start to see employment opportunities dry up as the pace of housing transactions continues to abate."
And it’s no better in the commercial market, with warnings of falls in prime property rents in 2008/09 of 15 to 35% per cent. It’s no wonder that the world’s richest people have been selling their property investments and transferring their wealth to the emerging markets where opportunities for speculative investments can still be found. The World Wealth Report, compiled by Merrill Lynch and Capgemini, underscores how the world’s rich have managed to avoid the heavy losses that have hit the banking business and continue to reap disproportionate benefits from expansion in the global economy.
The report says that the wealth of the world’s high net worth individuals (HNWIs) increased 9.4% to $40.7 trillion (that’s 12 zeros) in 2007, adding: “The number of HNWIs in the world increased 6% in 2007 to 10.1 million, the number of ultra high net worth individuals increased by 8.8%, and for the first time in the history of the report, the average assets held by HNWIs exceeded US$4 million.”
While the obscenely rich cash in, the rest of us have nowhere else to go in this crisis of capitalism’s making. We need different solutions which point towards a society based on equality and not exploitation. Markets in land and property should be ended, joining the credit markets which have been effectively closed for almost a year. For-profit, shareholder-owned banks should be turned into mutual funds. The land should be taken over by community land trusts. Community-based not-for-profit control and participation will be needed to decide how best to use scarce resources to meet the needs of the majority.
Gerry Gold
Economics editor
The indications for the UK economy are just as dire. Mortgage approvals are 56% down on a year ago, and repayment costs are spiralling. Michael Hume, an economist at Lehman Brothers investment bank, says the statistics paint a "very worrying picture of how the credit crunch is unfolding", adding that a US-style housing slump looks "increasingly likely". American banks in May repossessed twice as many homes as they did a year and prices have plummeted.
HBOS, the parent of Bank of Scotland and Halifax, Britain's largest mortgage lenders, keeps revising its estimates. It now expects British house prices to fall 9% in 2008. But Jeremy Leach, of the British Property Opportunities Fund, expects it to be more like 20%. Meanwhile the gamblers in the world of derivatives are betting that Britain's housing downturn won’t bottom out until 2011 by which time average prices will have fallen by around 30% from their peak last August.
Jeremy Leaf, of the Royal Institution of Chartered Surveyors warns: "The property industry will not be the only casualty in the fall-out from the credit crunch, with the high street and purveyors of a range of household goods, including furniture and white goods, also feeling the pinch. Construction workers such as plumbers and bricklayers will start to see employment opportunities dry up as the pace of housing transactions continues to abate."
And it’s no better in the commercial market, with warnings of falls in prime property rents in 2008/09 of 15 to 35% per cent. It’s no wonder that the world’s richest people have been selling their property investments and transferring their wealth to the emerging markets where opportunities for speculative investments can still be found. The World Wealth Report, compiled by Merrill Lynch and Capgemini, underscores how the world’s rich have managed to avoid the heavy losses that have hit the banking business and continue to reap disproportionate benefits from expansion in the global economy.
The report says that the wealth of the world’s high net worth individuals (HNWIs) increased 9.4% to $40.7 trillion (that’s 12 zeros) in 2007, adding: “The number of HNWIs in the world increased 6% in 2007 to 10.1 million, the number of ultra high net worth individuals increased by 8.8%, and for the first time in the history of the report, the average assets held by HNWIs exceeded US$4 million.”
While the obscenely rich cash in, the rest of us have nowhere else to go in this crisis of capitalism’s making. We need different solutions which point towards a society based on equality and not exploitation. Markets in land and property should be ended, joining the credit markets which have been effectively closed for almost a year. For-profit, shareholder-owned banks should be turned into mutual funds. The land should be taken over by community land trusts. Community-based not-for-profit control and participation will be needed to decide how best to use scarce resources to meet the needs of the majority.
Gerry Gold
Economics editor
Friday, May 02, 2008
A global car crash
Any lingering doubts about the trend towards recession were swept away last night as the world’s vehicle makers announced their April results. Falling off a cliff would sum it up. General Motors sales fell 23%, Ford 19%, and Chrysler nearly 30%. And to make matters worse for the manufacturers, the effect of spiralling fuel prices has shifted sales from high-profit trucks and gas-guzzling SUVs to more fuel-efficient but less profitable models. The idea that a US recession wouldn’t affect the rest of the world also took a beating as Toyota dropped 5% and Nissan 2%.
The latest figures on US manufacturing confirm that the American economy overall is contracting, with employment dropping sharply to its lowest level since May 2003. Despite the distribution of $110 billion in tax rebates intended as a stimulation package, these figures are certain to deepen and accelerate the impact on US consumers, already hit by house repossessions. These jumped by 23% in the first quarter and are more than double the level of the year before. One in every 194 households received a notice of default, auction sale or bank repossession in January, February and March. Rising fuel and food prices are also taking their toll on household spending.
To say that these are unprecedented times is an understatement. Last year GM was the 5th largest of the global corporations ranked by revenue. It made a loss of nearly $2 billion on sales of $207.3 billion. Toyota was the 6th and DaimlerChrysler the 8th largest. Ford was 12th in the list. It made a massive loss of $12.6 billion on sales of $160.1 billion. So the impact on of a slump in their sales will be felt throughout the global economy.
For the UK, latest projections from the National Institute of Economic and Social Research show consumer spending growth falling from 3.1% last year to just 1.2% - the slowest rate since 1992 when Britain was emerging from recession. "The UK economy has perhaps reached its most precarious position in over a decade because of global financial market developments," NIESR says. "Private consumption will slow to a crawl this year and next."
Before the car makers’ shock results, commentators had been playing alphabet soup with the economy trying to guess whether the recession will be brief, giving a V-shaped curve to growth, a double-dip W, a longer U-shape, or (though the BBC ignored it on Newsnight) a long L. All of these options assume that there’s a bottom. In reality, the global capitalist economy is headed for the biggest wave of destruction of productive capacity in history.
This prospect has reinforced the loss of confidence in governments to deal with basic questions, let alone the economic crisis, as seen in New Labour’s disastrous local election results. Avoiding the horrific consequences of a prolonged recession leading to slump requires bold political action well beyond the capacity of parties like New Labour. The objective has to be to end the anarchy of the market and capitalist production for profit in favour of a sustainable, co-operative system that is motivated by meeting people's needs.
Gerry Gold
Economics editor
The latest figures on US manufacturing confirm that the American economy overall is contracting, with employment dropping sharply to its lowest level since May 2003. Despite the distribution of $110 billion in tax rebates intended as a stimulation package, these figures are certain to deepen and accelerate the impact on US consumers, already hit by house repossessions. These jumped by 23% in the first quarter and are more than double the level of the year before. One in every 194 households received a notice of default, auction sale or bank repossession in January, February and March. Rising fuel and food prices are also taking their toll on household spending.
To say that these are unprecedented times is an understatement. Last year GM was the 5th largest of the global corporations ranked by revenue. It made a loss of nearly $2 billion on sales of $207.3 billion. Toyota was the 6th and DaimlerChrysler the 8th largest. Ford was 12th in the list. It made a massive loss of $12.6 billion on sales of $160.1 billion. So the impact on of a slump in their sales will be felt throughout the global economy.
For the UK, latest projections from the National Institute of Economic and Social Research show consumer spending growth falling from 3.1% last year to just 1.2% - the slowest rate since 1992 when Britain was emerging from recession. "The UK economy has perhaps reached its most precarious position in over a decade because of global financial market developments," NIESR says. "Private consumption will slow to a crawl this year and next."
Before the car makers’ shock results, commentators had been playing alphabet soup with the economy trying to guess whether the recession will be brief, giving a V-shaped curve to growth, a double-dip W, a longer U-shape, or (though the BBC ignored it on Newsnight) a long L. All of these options assume that there’s a bottom. In reality, the global capitalist economy is headed for the biggest wave of destruction of productive capacity in history.
This prospect has reinforced the loss of confidence in governments to deal with basic questions, let alone the economic crisis, as seen in New Labour’s disastrous local election results. Avoiding the horrific consequences of a prolonged recession leading to slump requires bold political action well beyond the capacity of parties like New Labour. The objective has to be to end the anarchy of the market and capitalist production for profit in favour of a sustainable, co-operative system that is motivated by meeting people's needs.
Gerry Gold
Economics editor
Wednesday, April 09, 2008
Housing market misery
The morbid concern over the sharp fall in house prices in March not only expresses middle-class obsession with property values. It is also graphically illustrates how the market economy in housing results in gross distortions. In human misery terms, it means growing numbers of repossessions, more homelessness, overcrowding, extortionate rents and children denied the space to grow up or do their homework.
In places like London, most new households can’t afford a place to live for love or money while the number of homeless households living in temporary accommodation in England has almost doubled since 1997 to reach almost 90,000. More than 70% of these households are families with children – meaning the problem affects almost 125,000 children, says the campaign group Shelter. House prices have risen by 156% since Labour came to power in 1997; during the same period incomes have gone up by 35%. The average house price is now nearly 11 times average earnings. Not surprisingly, mortgage repossessions rose 65% last year to 17,000 homes. This is plainly the result of the laws of the jungle – sorry, laws of supply and demand in a capitalist market economy.
There has always some kind of a housing crisis in Britain, despite the fact that it is one of the richest countries in the world. Yet it has been exacerbated by the actions of successive governments, who have imposed naked market forces where once the state played a moderating role. For a long post-war period, local authorities built millions of homes for rent, enabling most new households to find somewhere to live. Rents in the private sector were controlled. The quality of housing was not always great, but the system provided access to an affordable roof over your head.
The rot set in with the Thatcher governments from 1979-1997, which pursued open monetarist policies and set out to break the power of local councils. They were compelled to sell their best housing stock and denied the chance to use the proceeds to replace the two million homes that were disposed of. Councils now build no homes whatsoever. The great “property-owning democracy” illusion began. With other routes closed off, people were driven into so-called home-ownership, whereby the bank/building society remains the actual owner. Prices crashed in the early 1990s and hundreds of thousands of people lost their homes as interest rates soared.
The Tories encouraged housing associations to build new homes for rent. The market-driven financing of these homes proved so expensive that the rents themselves became unaffordable for anyone who wasn’t receiving state benefits. So they were turned into ghettos of the unemployed and then made targets for experiments in dealing with “anti-social behaviour”. New Labour has gone further by using large parts of its housing budget to subsidise home ownership schemes instead of building for rent. These “shared ownership” homes have also become largely unaffordable, selling for as much as £300,000 in London and taking up huge proportions of average earners’ incomes.
More than 130 years ago, Frederick Engels wrote about the “so-called housing shortage, which plays such a great role in the press nowadays” and asked rhetorically: “How is the housing question to be solved then? In present-day society just as any other social question is solved: by the gradual economic adjustment of supply and demand, a solution which ever reproduces the question itself anew and therefore is no solution.”
Today’s housing crisis is testimony to the power of Engels’ analysis. The market’s “solutions” to the crisis are unacceptable. We need to devise a new plan for housing which should embrace public ownership of land, social ownership of housing finance, a halt to repossessions, conversion of mortgages into affordable rent, the requisition of empty properties (especially offices in the City of London now lying vacant) and a sustainable building programme agreed by local communities.
Paul Feldman
AWTW communications editor
In places like London, most new households can’t afford a place to live for love or money while the number of homeless households living in temporary accommodation in England has almost doubled since 1997 to reach almost 90,000. More than 70% of these households are families with children – meaning the problem affects almost 125,000 children, says the campaign group Shelter. House prices have risen by 156% since Labour came to power in 1997; during the same period incomes have gone up by 35%. The average house price is now nearly 11 times average earnings. Not surprisingly, mortgage repossessions rose 65% last year to 17,000 homes. This is plainly the result of the laws of the jungle – sorry, laws of supply and demand in a capitalist market economy.
There has always some kind of a housing crisis in Britain, despite the fact that it is one of the richest countries in the world. Yet it has been exacerbated by the actions of successive governments, who have imposed naked market forces where once the state played a moderating role. For a long post-war period, local authorities built millions of homes for rent, enabling most new households to find somewhere to live. Rents in the private sector were controlled. The quality of housing was not always great, but the system provided access to an affordable roof over your head.
The rot set in with the Thatcher governments from 1979-1997, which pursued open monetarist policies and set out to break the power of local councils. They were compelled to sell their best housing stock and denied the chance to use the proceeds to replace the two million homes that were disposed of. Councils now build no homes whatsoever. The great “property-owning democracy” illusion began. With other routes closed off, people were driven into so-called home-ownership, whereby the bank/building society remains the actual owner. Prices crashed in the early 1990s and hundreds of thousands of people lost their homes as interest rates soared.
The Tories encouraged housing associations to build new homes for rent. The market-driven financing of these homes proved so expensive that the rents themselves became unaffordable for anyone who wasn’t receiving state benefits. So they were turned into ghettos of the unemployed and then made targets for experiments in dealing with “anti-social behaviour”. New Labour has gone further by using large parts of its housing budget to subsidise home ownership schemes instead of building for rent. These “shared ownership” homes have also become largely unaffordable, selling for as much as £300,000 in London and taking up huge proportions of average earners’ incomes.
More than 130 years ago, Frederick Engels wrote about the “so-called housing shortage, which plays such a great role in the press nowadays” and asked rhetorically: “How is the housing question to be solved then? In present-day society just as any other social question is solved: by the gradual economic adjustment of supply and demand, a solution which ever reproduces the question itself anew and therefore is no solution.”
Today’s housing crisis is testimony to the power of Engels’ analysis. The market’s “solutions” to the crisis are unacceptable. We need to devise a new plan for housing which should embrace public ownership of land, social ownership of housing finance, a halt to repossessions, conversion of mortgages into affordable rent, the requisition of empty properties (especially offices in the City of London now lying vacant) and a sustainable building programme agreed by local communities.
Paul Feldman
AWTW communications editor
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