More sense and sensibility needed to tackle housing issues
IT is a truth universally acknowledged, that a single family in possession of a good mortgage must be in want of a house. Thus a Jane Austen novel on the property market could have begun.
Sadly today there are plenty of families wanting a house, especially with affordability at near-record levels, but few can get hold of a mortgage.
Austen knew a thing or two about property, or at least the importance of owning it. Her novels had a great deal to do with its acquisition.
Although her preferred route to ownership was largely through marriage, she would have understood about financing a property purchase through a mortgage as her life coincided with the advent of the building society movement.
Austen understood that social status played a major role in owning or aspiring to own property. Above all perhaps, she understood that an individual’s or family’s financial circumstances played a pivotal role in determining where and how one lived – and how one was seen to live. She certainly knew the value of a fine location and the benefits that well-proportioned rooms and good natural light bestowed upon occupants.
This understanding seems as apt today as it was when Jane Austen was alive in the late 18th and early 19th centuries. The desire to house one’s self and/or one’s family comfortably, and the pleasure that a well-designed house gives to its owner – both socially and materially – seem largely unaltered.
But two things have changed. Residential property no longer just demonstrates wealth but creates it, and thus makes it even more desirable. Also, the demutualisation of the building societies and their takeover by banks, together with the ongoing credit crisis, is threatening the way we must think about owning property.
In 2011, this means that, unless the Government and the banks take urgent steps to reverse the situation, for the first time in more than 200 years it will only be those who are already affluent who can realistically afford to buy property.
The mutual building societies were a fine and noble idea that worked for borrower and lender alike. With nothing broken it is hard to see why they needed mending. But the change in legislation in 1986 that allowed demutualisation altered all that.
Most mutuals were highly risk-averse and those that didn’t succumb to bank takeovers have weathered the recent financial storm well. After all, it was demutualised banks and just a few risk-embracing mutuals that had to be rescued by the taxpayer. This makes recent calls for the remutualisation of building societies and the revival of this excellent British tradition seem sensible.
The remutualisation of Northern Rock could be a start. Without the need to pay dividends to shareholders obsessed with their short-term interests it would once again be free to add choice and diversity to an increasingly narrow market.
Financial mutuals traditionally also have strong track records in backing local charities and providing support to voluntary organisations.
A recast Northern Rock could continue this important civic role in the community it serves. This may all sound rather like Mr Cameron’s Big Society. But in the case of the building society movement history speaks for itself.
Building societies were created to allow their members to buy property. Banks were created to make money for their shareholders.
Building societies were prudent and fiscally responsible. Banks clearly haven’t been and are a perfect example of pride coming before a fall.
To extract themselves from the trouble they are in the banks are now prejudiced against the very people the building societies were formed to assist. Jane Austen could have written a book about it.