Clodagh Memery; Centre for Housing Research and Urban Studies
Moira Munro; School of Planning and Housing, Heriot-Watt
University
Ruth Madigan; Department of Sociology, University of Glasgow
Kenneth Gibb; Centre for Housing Research and Urban Studies
Revised paper presented at the Economic Beliefs and Behaviour Conference, London; 31st August - 1st September 1995 This project is supported by the ESRC
Owner-occupation achieved particular salience as a cornerstone of the Thatcherite policy agenda in the 1980s. The adoption of the rhetoric of self-reliance, the investment returns from a reliable hedge against inflation, allied to a rolling-back of the welfare state, in which there was a greater expectation that housing solutions should be found outside the aegis of the state, were obvious elements of the push towards owner-occupation. At another level, the determination to decrease public expenditure, especially that undertaken by the relatively less controllable local government was consistent with a desire to reduce the power-base of local government through the reduction of the empire of council housing. (Forrest and Murie, 1991; Stoker, 1991)
This was manifested most directly in the popular measure of the right to buy (RTB), which enabled council tenants to buy their houses at a discount that increased depending on the number of years which they had spent as tenants (Forrest and Murie, 1990). As well as the estimated transfer of one and a half million houses that resulted from the RTB policy, there was also a drastic reduction in the amount local authorities were permitted to borrow for new house building in the local authority sector, (Willcox, 1994). Although by the end of the decade funding for the housing association movement had been increased and they were expected to fill some part of the housing role from which local authorities became explicitly debarred (ratified in the Housing Act 1988 which stated that local authorities should become enablers of housing provision in their area, rather than direct providers). Owner-occupation has been growing throughout this century and especially rapidly in the last 15 years (Forrest, Hamnett, Williams, 1990). The particularly rapid growth of the tenure since 1980 would, however, look less dramatic once RTB sales are removed from the statistics.
For those seeking to set up home in the 1980s options other than owning became harder to access as tenure choice between renting and owning was increasingly becoming a one way choice. According to Saunders (1990) it was no longer that owner-occupation would simply be chosen over renting because it was financially advantageous or because the housing on offer was what was wanted, owner-occupation became to be seen as a tenure that expressed independence, a sense of achievement and of standing on one s own feet . In the context of an inherently unstable asset market massaged by generous subsidy through MIRAS and the large increases in (untaxed) real capital values, this feeling of independence was arguably misplaced. However, the ideology remained a strong part of British perceptions of and discussions about owner-occupation reflected in government white papers (see Cm 214, Cm242 and Cm2901).
The huge owner-occupied sector of the 1980s was particularly vulnerable to the unstable economic climate of the late 1980s (over 40 per cent of personal wealth is tied to owner-occupied housing). The boom of 1987-1989 was underpinned by a combination of several factors. Most significant of these was the deregulation of the financial institutions from the mid-1980s, which ended the quantity-rationing of mortgages and allowed banks to compete equally with building societies which led to a rapid increase in the volume of loans, doubling between 1980 and 1990, and growing availability of high proportion mortgages, (up to 100 per cent) and high loan to income ratios. At the same time there was a strong growth in incomes, itself a driving force behind increased demand for home ownership, and tax cuts were simultaneously increasing personal disposable income and expenditure. Domestic rates were abolished in the financial year of 1988/89 in England (the poll tax/community charge being introduced in 1990 and in the case of Scotland in 1989) which suddenly made housing, particularly at the upper end of the market, appear more affordable. After Black Monday, October 1987, interest rates fell to a new low of 7.5 per cent and finally the Chancellor of the Exchequer in the budget of 1988 announced an ending of the double MIRAS to cohabitees, but delayed implementation until Autumn 1988, which caused a rush on the market (Maclennan and Gibb, 1993). These factors created an unsustainable boom which Forrest and Murie (1994) summarise:
an overheated, over-indebted, hypermobile housing market rapidly degenerated towards a gridlock of immobile households adjusting to very different expectations of home ownership. (p. 55)
The down-turn, when it came was severe, resulting from a rapid increase in interest rates from 9.5 per cent in May 1988 to 15.4 per cent in 1990, a marked rise in unemployment and the development of a general economic recession (Forrest and Murie, 1994). Economic problems were exacerbated by the general over-exposure to mortgage debt. In the 1980s the variable mortgage rate endowment policy was the most prominent mortgage product. The general use in Britain of variable rates meant a greater sensitivity to interest rates, while the popular endowment policies meant that people were not making any inroads on their outstanding debt. House prices fell, not only in real but for the first time in generations also in nominal terms.
Since the late 1960s, house prices have increased at an average rate of about 2.5 per cent per annum in real terms. By the beginning of 1990, house prices in real terms were 2.3 times higher than twenty years before (Fleming and Nellis, 1991). The rate of increase has been very uneven through time, characterised by three major booms and slumps. The boom of the late 1980s was marked by very rapid house price inflation followed by price falls.
Figure 1 illustrates the national trend in house prices since 1983. But there were also strong regional differences in this pattern (Hamnett, 1989). Figures 2(a) and 2(b) compare price trends in the regions containing our two case study areas, which indicate that while in the south-west both the peak of the second quarter of 1989 and the subsequent fall were more pronounced than the UK average. According to MacRae and Bell (1994) prices in Scotland have not generally fallen in nominal terms remaining broadly constant. Referring to figure 2(a), house prices in Scotland were steadily rising in 1989 and continued to do so until 1994/1995 were a levelling off in prices is evident as the Scottish market begins to slowdown. Figure 2(b) presents a more detailed illustration of such price movements.
At the time of writing (November 1995) the housing market slump still appears deeply entrenched. It has become part of the conventional wisdom in discussions of economic policy that consumers are profoundly depressed by the state of the housing market and that this is at the root of the seemingly intractable difficulties of improving the state of the economy or engineering a consumption-led boom. According to Maclennan and Gibb (1993)
"The housing slump prolongs recession because it prevents confidence spreading, it limits growth and turnover in related markets and leaves between one and two years unsold supply on the market." (p.10)
This extended slump can be argued to have affected the image of owner-occupation radically. Previously considered to be an infallible investment - secure as bricks and mortar - people are now losing money on housing and finding it very hard to sell their houses even at low prices. Widespread difficulty in the housing market now exists, including negative equity, whereby the market value of the mortgaged property is worth less than the outstanding mortgage thus inhibiting mobility (Forrest et al,1994; Dorling 1993; Gentle, Cornford and Dorling, 1994). Also there has been a substantial growth in the number of people in arrears with their mortgage and an increase in the number of houses which have been repossessed by the lending institutions (Willcox and Ford, 1992; Ford 1994). Since the recession of 1989 over 300,000 homes have been repossessed and in the year ending March 1995, the average level of arrears for a repossession was 5,497 pounds. (Ford and Kempson, 1995). The extent of repossessions and arrears since 1981 is shown in table one , with both peaking between 1991 and 1992. The problem of repossession and arrears continues to persist at high levels and currently repossessions average 1,000 homes a week in the UK.
In this context, including the promotion of home ownership by the government and other interested parties, followed by the boom and slump of the late 1980s, and the beginnings of the erosion of subsidy to the home owner, a central aim of this research project is to produce solid empirical evidence on the ways in which housing market choices are made. Our particular focus is on the way in which such choices are shaped by objective circumstances interacting with economic beliefs and how the relationship between characteristics, beliefs and behaviour alters with changing housing market and economic conditions.
In order to meet these aims, the research method combines qualitative and quantitative work in two contrasting cities of the UK. This enables comparisons to be made across the activities of individuals operating in distinctively different markets. This paper first contextualises the case study areas through examination of recent trends in the housing market. Analysis of the qualitative survey is presented in the second section focusing on the perceptions and reactions of owners towards housing as an investment and role of the government. The third section provides a brief overview of the ways in which the media has presented the recent changes in the housing market. This paper reports work in progress as the quantitative survey results are not yet available and the qualitative work remains to be amplified further by speaking to some recent first time buyers.
Figures 1, 2a and 2b have shown the movement of house prices in the UK and also the regional differences between Scotland and the south-west. In order to put the research work in both cities into context it should first be made clear why the two markets in question have behaved so differently. According to Maclennan (1994) the dominance of public sector council housing in Scotland meant that a higher percentage of people were protected from exposure to the highly inflated economy of the late 1980s and the resultant interest rate rises imposed by the government to control it. When recession followed it was less likely to effect the smaller Scottish housing market. Home owners across the south of England (including the south-west) experienced large increases in their monthly mortgage repayments, which meant particular hardship to those who had stretched themselves financially when becoming home owners. Also when the recession struck, it was the southern regions which suffered greatly from rising unemployment particularly amongst white collar workers, including many home owners. In Scotland although unemployment did rise, the larger council sector meant that a greater proportion of people were protected through living in council property. Further, because house prices had never been so high in Scotland as in the south, fewer people had taken on high-multiplier mortgages. The housing market therefore remained tight whilst prices in the south plummeted.
There is some limited data available for Glasgow and Bristol alone (only since 1992). The Halifax in their quarterly bulletin present statistics for the average price of a semi-detached house in various cities in the UK. In the Glasgow context, due to the historical nature of its housing stock and the development of housing, the semi-detached house is not a good representation of an average dwelling. Nonetheless prices for such properties have tended to remain stable over the past three years, although demonstrating seasonal oscillations. In Bristol, such a statistic has more relevance and demonstrates the extent of the problems remaining in the Bristol housing market. Prices for such properties in Bristol continue to fall and between the 2nd quarter of 1994 and the same of 1995, prices for the average semi-detached property fell by 7.1 per cent.
Current anti-inflationary policy has been based around the single club of interest rates that, as we already indicated, have had such an impact on the housing market. Moreover it is a national policy that does not discriminate between very different regional housing markets causing the slump has had different consequences across the country. By October 1992 it was estimated that the levels of unsecured mortgage debt in Britain amongst 1988-1991 buyers was most concentrated in the East Midlands, East Anglia, Greater London, Outer Metropolitan, Outer South East and the South West (Gentle et al 1994). Negative equity and continuing loss of value on property is common place in Bristol. It is difficult to measure negative equity and Gentle et al (1994) estimate that by October 1991 fourteen per cent of buyers in 1988-1991 were in negative equity in the south west region (which includes Bristol). The average size of their debt was 4,098 pounds. By October 1992, negative equity had reached 26 per cent of recent buyers averaging 4,347 pounds. In contrast average prices across Scotland have been rising steadily since 1987, but 1995 is proving a more difficult year for the Scottish market, and figures from the Halifax (3rd Quarter, 1995) indicated some price slippage, but this may be seasonal. Negative equity is still rare in Scotland.
In Glasgow, although there is still activity in the market, and estate agents do tend to discuss the market in positive terms, turnover can be slow and there are signs that prices are being lowered and offers under the fixed price are increasingly common. Homeowners who have bought over the past five years, may not profit from their sale. According to the Glasgow Solicitors Property Centre (a consortium of solicitors involved in house sales who according to their own figures hold over 25 per cent of the market) there have been price falls in the upper end of the market, indicating price falls of 6.3 per cent among semi-detached houses to 1995. In contrast, the first time buyer market is believed to be relatively buoyant with a price increase of 1.5 per cent (The Herald, 03/05/1995).
Although the UK housing market was relatively stable in 1994, the Halifax and the Nationwide building societies now believe that house prices are falling once again and expect prices to remain fragile next year. The willingness of leading financial institutions to express such a pessimistic view, in contradiction to their market/professional interests, is itself testament to a profound change occurring in the housing market. The Halifax in their report for the second quarter of 1995 state that house prices have fallen by 1.9 per cent over the past twelve months and that the market is now so weak that it is uncertain whether there will even be a small recovery in 1996. The Nationwide believe this figure to be in the region of 2.9 per cent and see the only hope for recovery in the market being based on the expected growth in incomes next year, calling on the government for direct measures to get the housing market moving such as targeting assistance to first time buyers. While both the Halifax and Nationwide provide a useful source of house price information there is a problem of reliability when transaction volumes are low, as the average house prices are calculated using the transactions in each quarter and in some areas transactions may be particularly low.
Bristol and Glasgow have had contrasting experience of home ownership reflecting geographical economic factors and the nature and tenure of the housing stock in both cities. Therefore when analysing the interviews the greatly different nature of home ownership in the two cities must be kept in mind in both historical and recent terms.
A sample of thirty eight households has been drawn from Bristol and Glasgow, which will be supplemented by interviews with first time buyers (i.e. those who have bought since April 1994, for the very first time). The sample consists of active traders in the housing market: identified as those trying to sell their homes and consequently are attempting to buy a new home, or move to alternative accommodation. The sample was drawn on a geographical basis: i.e. areas in each of the cities were chosen which represented a cross-section of the housing market in terms of price and house type.
The three main areas chosen to be surveyed in Glasgow were first the tenemental areas of the western and southern areas of the city. These are pre-1919 flatted properties and in this sample tended to be one-bedroomed (although they can be up to three-bedroom) and were typically first time buyer property. Second, the newer suburbs to the eastern outskirts of the city were also surveyed. Third, older and more expensive suburban housing was identified. Of the twenty participants in the Glasgow sample, nine were moving out of flatted accommodation, typically the tenement flat.
The areas surveyed in Bristol can be also divided into three sections. The first of these was the north-east suburb of Bradley Stoke, consisting of housing built since 1987, which is highly varied in terms of size, styles and prices. Second, housing of the late 1970s at Stoke Gifford was surveyed, consisting of low-mid price family housing and finally traditional Victorian terraced and semi-detached housing in the northern and southern city locations of Montpelier, Bishopston and Totterdown. First time buyers in Bristol in the 1980s, commonly bought a small house in a suburban setting, typically with easy access to the motorway.
The samples in Bristol and Glasgow are broadly comparable in terms of age and stages in their housing careers. The occupations of those interviewed reflect the labour markets of the cities. Glasgow is a post-industrial city, dominated up to the middle of this century by heavy industry whilst Bristol is a smaller city, very much service-oriented and also highly developed as a regional media centre. Therefore the Glasgow sample contains a slightly higher proportion of blue-collar workers than the Bristol sample, and incomes in Bristol appear to be somewhat greater overall.
Because of the concentration on individuals who were active in the housing market, our interviewees tend to be in their twenties and early thirties, most commonly about to make the move from the first property that they have purchased to a larger home generally for family reasons. Even so there is a scattering of more established households in our sample. The differences between the samples can be explained in relation to the differing conditions in the two housing markets; those selling in Bristol tended to be under more direct pressure to move, relating to job change and family growth. In the Glasgow context while there are those who are making the move also because of lack of space in their current homes, there are more unpressured moves and quite a few lateral moves.
Search diaries were left with a section of our participants to record the weekly occurrences in the process of trying to sell the property and/or also in the buying of a new home. On analysis of these diaries it will be possible to explore their market strategies, the relationship between the agents involved in the process, and how the final decision are made in the housing market by our participants.
Finally a series of attitudinal questions on housing, government policies, the welfare state, and credit were left with the interviewees for completion. These statements came mainly from the British Social Attitudes surveys of recent years and response to each statement was given on the 5-point scale.
The topics covered in the interviews reflect the key themes of our qualitative research, which are:
The intention in this paper is to present the views voiced by the respondents in Bristol and Glasgow, focusing particularly on the last theme.
An important element of the Conservative government s commitment to owner-occupation came in association with the drive to create popular capitalism with a particular emphasis on creating a property owning democracy . More than anything else, investment in bricks and mortar appeared to guarantee the broad public access to money-making on a significant scale. A particularly salient issue to be addressed, therefore, is the current attitude of those in the housing market to housing as an investment. The experience of recent years would be expected to have dented confidence in this long standing belief.
Our interviewees, especially in Bristol but often also in Glasgow, distance themselves from the idea that they ever sought to make money on housing. The emphasis that housing is chiefly a home is reiterated by many respondents:
Interviewer: Are you glad you moved in here?
Mr. Black: Oh yeah. Oh yeah definitely. I mean other than the cash, but we didn t move in to .. I think a lot of people move in to make money on their place. We moved in for a home, and we ve had a good four years so .. you can t have it all can you?
(Mr. Black and his young family are moving out of Bristol due to job relocation, and having bought their house in 1990 are now selling at a loss of over 13,000 pounds which should be covered by the 15,000 pounds that was put down on the house initially.)
Some interviewees did speak of housing as something to make money on in the past, not always admitting that they tried to do this themselves, but they now perceive the situation as having changed:
Interviewer: Did you think when you bought this property that you were getting in on something...
Mr. Pitt: ... yeah, we probably did at the time, thinking, I mean we re in at the beginning, and there was a lot of .. press coverage at the time, .. so we thought we probably would have made a shrewd purchase. But I think they just built too many really. I think that's the problem..... But .. no I think we we thought that we were going to buy into something quite good. So ..
Interviewer: Do you see housing now as an investment or as providing a roof over your head?
Mr. Pitt: .. yeah I mean I think it's .. not not really an investment no, not .. not now, not for the foreseeable future. I mean it would just, it would .. you'd be buying a house for it to be our home, nothing more, nothing less really. If it gained all well and good. But even if it shot up in value, I I wouldn't have thought we'd be too keen to sell. If we liked it there as our home.
(Mr. Pitt remortgaged his property in Bristol when he divorced and as a result is in negative equity (3,000 pounds); he is selling as he is about to re-marry.)
Interviewer: Do you see your home as an investment or do you think of it as a home?
Mrs. Duffy: No not now, you just do it to have a decent home and a standard of living....It used to be, it used to an investment didn t it?...
Mr. Duffy: That's how everybody used to think. I think I'll buy a house as a good investment. Nowadays.....
Mrs. Duffy: Now it's just a case of having somewhere to live, somewhere nice.
Mr. Duffy: Somewhere to live yeah, I think, I think that's what it is.
(The Duffys of Bristol sold their flat that was bought in 1987 with a 5,000 pounds return from the sale, and moved to a house in the immediate locality)
Some interviewees go even further, and seek to contest the idea that there was ever any money to really be made from trading in the housing market, in effect that the paper gains made from housing were an illusion:
Interviewer: And would you still see housing as an investment for the future, or do you think it's your home? A roof over your head?
Mr. Robb: I don't think we when we bought this place, I don't think, we don't see it as an investment, we never have done and that hasn t changed.
Mrs. Robb: I mean you need somewhere to live basically. And if you make a bit of money out of it, well fair enough, but I mean, even if we'd made money out of this house, we'd only spend it on the next one. So you'd never actually make the money. And you sit in your house saying, oh this is worth 80,000 pounds and we only paid 60. But it's not worth 80,000 pounds if you don't sell it. You haven't made the money unless you sell it, buy something cheaper and put the money in the bank. It's only paper. It's only on paper. Really isn't it?
Mr. Robb: You know, you could remortgage.
Mrs. Robb: Yeah you could remortgage, and realise the capital, but then you're going to pay on the interest aren't you? (laughs)
(The Robbs are selling their modern home in Bristol for approximately 36,000 pounds, bought in early 1989 for 50,000 pounds. The negative equity has been paid back through an inheritance.)
However, ultimately, there was still a notion of investment for our respondents, but it was typically more as a long-term consideration, not a speculative, short-term possibility (though as would be expected the balance was different for respondents in Glasgow and Bristol). For many respondents the purchase of a house was still seen as enabling the acquisition of an asset for their own old age or to help their children:
Interviewer:Do you see housing as an investment for the future?
Mr. Stevens: I see it as being put to stay (laughs) Oh, no I suppose it is it obviously is an investment, but I think I would look on it more as an investment for like I've got two children from my previous marriage, and my fiancee's three children from her previous marriage. So I think I look on it as being helping them with their future, I don't .. my personal experience has been that I've never bought property, sold it and made thousands of pounds off it that you can sort of stick in your back pocket and go, oh that was a great bit of business there. So primarily it's somewhere to rest my head at the end of the day, in the long term it's it's the children's future.
(Mr. Stevens (40s) sold his one-bedroom flat in Glasgow for 42,000 pounds, having bought it for 37,000 pounds in 1990 and was building a new house in the countryside with his fiancee at the time of interview. )
Interviewer:Do you see it as an investment for the future, or as your home or both?
Mrs. Patak: An investment I suppose is always there. Because that's why you're doing it up isn't it? So you can you know sell it and make a profit on it. But for this one, well I suppose it is an investment for the future, but .. now I mean it's our home, we're not thinking about moving on, making money on it, and it's, I would think it was not an investment for us, but our wee boy's future.
(Mrs. Patak of Glasgow moved within her locality to a larger tenement flat and gained 6,000 pounds on sale of her house, which was used as the deposit on her new home.)
Mrs. Logan: When all s said and done, if you ve been there 25 years, you ve got your house, your property, you ve got something to pass on.... and when you grow old, you know, you ve got something to leave the kids. So that when they start off, and when they get married they ve got a house between them either to sell or to help buy their own house... I think at the end of the day, if you hang in there then you might see the profits (laughs).
(Mrs. Logan has three children and bought her house in Bradley Stoke, Bristol in 1989 and is now selling for a loss of at least 2,000 pounds.)
The above extracts demonstrate that home owners are not buying in order to make a profitable speculative move in the market. Although it is obviously very difficult to do this in a struggling housing market, we need to ask to what extent is there a long-term, structural shift in expectations in the housing market? In one sense, this could only be judged in the light of behaviour in the housing market if house prices began to rise rapidly again, would those who have suffered in the housing market recession quickly adopt a more speculative approach to trading in the housing market? If expectations in the housing market are to alter purchasing behaviour of home owners and potential home owners, because housing is no longer considered as the hedge against inflation , there may be no reason to believe that house prices can rapidly rise in the manner that they have done in the past.
Some of those surveyed had already bought their new home, particularly in the Glasgow sample. Respondents were asked whether they worried about their next home maintaining its value and future saleability. In the Glasgow sample, there is evidence that while the next house will be purchased mainly for its consumption aspects, this does not mean that the future prospects for re-sale have not been considered. Ms. Stitt bought a large Victorian house for 56,000 pounds in Cambuslang, an area in Glasgow dominated by public sector housing, although considerable renovation was required, this was not done for a short term gain. But there is still some uncertainty in her mind about the investment potential of the property that she has bought, reflecting the current doubts in the Glasgow market.
Ms. Stitt: Well primarily it's my home. secondary .. with this particular house it it hopefully will be an investment. .. if the you know things change with the Government in sort of five to ten years time you maybe want to move or have to move, it could be it's not been an investment. You know lots of people have lost money on property.
Mr. and Mrs. Hendry sold their tenement flat, clearing about 5,000 pounds, to move into a three bedroom house in the same area. In contrast to Ms. Stitt it was clear in discussion with the Hendrys that they were most convinced that once the repairs had been done to the new home, it would increase in value and be an investment.
Mr. Hendry: ...it would [be an investment] for me we got we got the house for 56,500 pounds and if the roof's done and the internal like heating and everything, it would go now for 67, so really once again, we get the heating it em next month at the house, so once the roof's done we'd go for 67 and we got it for 56 so right away it's an investment.
In Bristol home owners want to avoid the problems of falling house values if possible and the concern is not to be caught out in the housing market again. The following comments illustrate this, as home owners speak about the concerns they have over the next property they will purchase;
Ms. Blake: Well it would be an older one, a three bedroom, and .. something that perhaps we can you know has got potential for us to do up a bit. You know and make some money on the next one would be quite nice. (laughs)
(Ms. Blake and her partner are selling their modern three bedroom house in Bradley Stoke because they have moved to London for work reasons. They are c.8,000 pounds in negative equity)
Mrs. Robb: The biggest we can buy .. for the least money. (laughs) Three or four bed detached. , and I'm certainly not going to spend as much as I can afford to spend. I'm not going to get caught, and I'm well we re going to put a big deposit down.
(The Robbs, as before)
For current traders, even where their own house price has fallen, it is possible that they could interpret their situation in a positive way as they will be able to take advantage of the much lower house prices when buying. It was striking that the sample had very little consciousness of being in a position either to drive a very hard bargain or to find something very cheap. Lack of confidence in the market means that they are still worrying about future losses and/or difficulties in selling their new home. Only one couple in Bristol, who had just bought a large Victorian house, referred to the fact that the purchase price was low and it was very unlikely that the value could fall further. Their ability to reason in this manner may be influenced by the fact that they have been able to move relatively easy, selling their own home immediately and at a profit.
Mrs. Day:.......... with this house as well, you know, this is sort of rock bottom price .. and em.. I know we can't lose on it but it's a bit unlikely that it could fall below what it's worth now. And I think people are used to now being very careful. Whereas before they didn't sort of necessarily need to be. I think that's probably the difference. But I think it's still a good investment. If you're careful. (laughs)
(The Days, have sold in their Victorian house at a 14,000 pounds profit and bought a similar but larger property in the same area, for 118,000 pounds. Renovations need to be carried out.)
We were also interested to analyse how people evaluate government policy and whether they are blamed for the current housing problems. This has very direct political implications. Respondents do criticise the government outright and strongly feel that the government has turned against the home owner but there are those who feel that the government cannot take the entire blame because at the end of the day they made the final decision to buy and should take responsibility for their actions. Noticeably this tends to come from the Bristol respondents, reflecting, perhaps, a greater commitment to the self help ethos of conservatism.
Mrs. Robb:but I don't think the Government has particularly helped. I do feel that, I I'm not saying it s the Government's fault, because I had the choice to buy or not, but they did encourage people to buy, and then it seems to me that they have moved away from this home ownership thing and they're stinging for all they can, without doing anything to help.
(Mrs. Robb as before, Bristol)
Some respondents feel that they have been harmed by circumstances beyond their control, feeling that they made the best decision in the light of knowledge at the time. They were aware that interest rates can move, that family circumstances may change but question how they could have foreseen the overall position of owner occupiers would alter so greatly.
Mrs. Logan: Well I thought we'd covered it pretty well. Really. I mean we're both, we're both intelligent ... we didn't rush into it., we did try and anticipate mortgage ups and downs and what we would have to pay and what would happen, you know we tried to look into the future, about having the children....but obviously we didn't anticipate this.
(Mrs. Logan as before, Bristol)
The fact that owner-occupiers have become the majority in the population as a whole and particularly so amongst middle-class, middle England, seemed to suggest that the Conservatives would have particular difficulty in acting to reduce the relatively favourable conditions enjoyed by owners. In academic terms successive studies have confirmed that whether subsidy was measured from a consumption or an investment perspective, owner-occupiers tended to benefit more than relatively poorer tenants and, worse, within owner-occupation it was a regressive subsidy that disproportionately favoured richer ow ners (Duke of Edinburgh Inquiry, 1991 and Hills, 1991). Ultimately, the strong desire to find tax-cuts required strict public expenditure control. Clearly, some very hard political trade-offs had to be made by the government. As a result owner-occupiers have seen some of their subsidy support eroded needed to both calm the housing market and reduce the escalating costs of MIRAS.
Although the government had to tackle the specific public spending problems in the owner-occupied sector, the main tool used during the inflationary period of unsustainable price rises, was to raise interest rates. The objective of reducing house price inflation below the general level of inflation is certainly the correct macroeconomic objective. However, the limited scope to attack the structural sources of asset market volatility and the dependence on interest rates as the main policy instrument has not resolved longer term problems (Maclennan, 1994). Furthermore the simultaneous recession and collapse in consumer/housing market confidence has left alienated home owners feeling betrayed by their government.
A significant change has been the reduction of MIRAS support, phased over two years, reducing the rate of income tax which offsets the mortgage cost. In many ways this might be argued to be numerically rather a small change for most owners. Tax relief has long been limited to the first 30,000 pounds of any mortgage and tax relief at higher than basic rates of tax was also abolished in 1989. The falls in interest rates have reduced mortgage repayments so that all these factors combined result in a relatively small monetary impact for most people arising from the successive reductions of 5 per cent off the rate at which tax relief can be claimed. Of course if interest rates were to rise, the MIRAS would once again increase in importance. Through the research it has become clear that home owners perceive MIRAS as most important, a reward for choosing to buy their own home, even though they know that currently MIRAS make a relatively small difference in their monthly repayments.
A question therefore to be pursued in this research is the extent to which buyers feel betrayed or misled by the Conservatives in their changing treatment of owner-occupation and on analysis respondents do tend to particularly stress the change to the MIRAS and also emphasis how the rules of home ownership have changed since they entered the tenure.
Ms. Stitt: It's an absolute .. it's a joke. They encourage people, specially people like myself to buy council houses, and then take away interest rate from them. It's fine if they're going to cut personal tax .. did you see that happen? And whether or not we'll do without MIRAS at all, it certainly wouldn't surprise me. And it you know you talk people into doing something or you, ... not talk them, make it advantageous so it as it looks a very good deal, and then they pull the rug out from under your feet. I'm sure there's a lot of people that are in a much worse situation than .. you know I'm in. And that have no way of getting out. Eh, you know... reading reports in the sort of you know national newspapers about people who have become unemployed and didn't have any insurance or whatever and have been losing their homes. I mean..... that was, that's dreadful. I think it's just going to get worse...
(Ms. Stitt is selling a one bedroom conversion in Glasgow and is trying to cover the price that she paid for it five years ago.)
Interviewer: Do you think that the government could do more for home owners? Are you happy with the way you are treated as a home owner?
Ms. McPherson: (laughs) No....I think they should put the MIRAS back up again actually instead of bringing it up em down I think they should be getting it back up, and I don't think taxing your life insurance premiums helps home owners, because that's another 5 per cent on top of what you're already paying, all these little things start to add up, and I think... they should put the MIRAS back up and em I think not so much here but in England they have got a huge problem with negative equity and I think I think the government is going to have to address that because there's so many more repossessions. I mean to a certain extent it's happened to me, in that I'm now selling this for less than I bought it for .....
(Ms. McPherson has been trying to sell her warehouse conversion in Glasgow for nearly two years now, bought for 34,500 pounds she is trying to sell for about 32,000 pounds offering buyers the incentive of 1,000 pounds cashback.)
Mrs Robb: I do feel a bit let down by the Government. I don't think they've done anything to help home owners after encouraging so many people. I mean really we're relatively lucky: we've still got a house, we've kept the mortgage up to date, we've paid off the negative equity. You know really we're laughing compared to some people, but I do feel quite bitter that they sort of sold this idea that home ownership is this ideal you should aspire to, and then they get everybody to buy a house and then they change the they move the goal posts........but then governments always do that. (laughs) ...
(Mrs. Robb as before; Bristol)
Mr. Taylor: I think basically they have forgotten about homeowners and all the trouble that people have been through, and it just seems to pile the pressure upon pressure with VAT on things and tax on this, tax on that....They're basically cutting the throats of the people that voted them into office which is what they're going to pay the price for anyway in the next election.
(Mr. Taylor is selling his house in Bristol for approximately 45,000 pounds at a loss of 10,000 pounds but he and his wife are not in negative equity as their initial deposit should cover the loss.)
It is also apparent that the evidence of the support that home-owners had enjoyed, produces a conflict for some with the ideology of owner-occupiers as self-sufficient and self-reliant:
Mr. Martin: ....I feel that it's been fairly, a fairly radical swing by the Government that the, I don t expect big handouts from the government anyway.........but whether it is right to give us that sort of tax relief, I don t know. But I quite like it (laughs).
(Mr. Martin sold his house in Bristol at a loss of 5,000 pounds in value, having bought it in 1990, but due to the size of the deposit he is not in negative equity. He and his wife have now bought a larger property on the outskirts of Bristol.)
So how have these opinions of the respondents towards the government and the housing market been developed? Obviously personal experience of home ownership shapes beliefs and perceptions and home owners interviewed tended to be well-informed about interest rates, MIRAS, changing rules in social security etc. Individuals gather and assess information through the media also. The language and position that the media adopts with regard to the housing market, may have an affect on the shaping of individual beliefs. Consequently a record has been kept of the representations of the housing market in the media, so that we could explore the relationship between media presentations and beliefs.
Although we have been monitoring media coverage of housing and the housing market, we have not attempted a complete record as this would be a full research project in itself. The work we have done has proved useful to make concrete some key elements of the presentation of the housing market over the last year and to trace elements of that coverage which has had resonance for our respondents. Media comment on the housing market has tended to emphasise the negative consequences of the downturn and much anecdotal evidence has been given a high profile. For instance, a comparison with media housing stories from 1987 - 1990 would be more likely to describe the success story of rising house prices and wealth accumulation prospects.
Looking back on media coverage since October 1994, it is noticeable that there was an upsurge in the level of coverage in December, following the budget in which Kenneth Clarke, Chancellor for the Exchequer, announced the reduction in income support for mortgage interest payments for those who qualify for income support (usually as a result of job loss). Homeowners who take out mortgages after October 1995 will receive no help with their mortgage repayments for the first nine months with an expectation that people will instead find a private insurance to cover the gap. This was reported in an extremely negative manner:
Mortgage move rekindles fear of repossession crisis
(The Guardian, 3/12/94)
Insurance sharks go for mortgage victims.
(The Sunday Times: 4/12/94)
The focus by the media on the housing market, with its attacks on the harmful or ineffective actions of the government continued in January when a barrage of negative articles on the condition of the housing market appeared across the press.
More plunged into Negative Equity (The Observer, 15/1/95)
Lenders warn of crisis(The Guardian 18/1/95)
New crisis hits house market, Tories blamed for mortgage slump (The Guardian 21/1/95)
First Time Buyers switch off housing market
(Financial Times 31/1/95)
If this didn t make for bad enough reading for current and indeed potential home owners, such comment was backed by continuing emphasis on the search for the elusive feelgood factor. Key articles reminded the public that although the economy was supposedly recovering from the recession, the population at large continued to fail to recognise any improved prosperity, and consumer confidence remained weak. Explanations were sought particularly in the changes in the labour market (so-called flexible working) leading to lower wages, poorer conditions and greater insecurity.
Stress hits the feel good factor (The Independent, 24/11/94)
Low Inflation makes Britain feel so bad (The Sunday Times, 8/1/95)
and similarly
The feel bad factor is spreading (The Guardian, 19/1/95)
As Spring is the traditional time for people to enter the housing market such coverage over Christmas and the New Year would hardly be an encouragement for those tentatively considering it.
Monitoring press coverage through the summer of 1995, there seems no indication of any reduced emphasis by the media on the fragile nature of today s housing market. It is noticeable that both the press and television give substantial coverage to the monthly meetings of the Chancellor and the Governor of the Bank of England. Discourse before each meeting on the prospects of interest rate rises are normally accompanied by a feature on yet another homeowner on the point of repossession rather than, say, comment on the state of British industry. The aftermath of the meeting and the release of the minutes all receive a level of coverage substantially greater than occurred previously when these meetings were private.
The newspaper coverage is paralleled by articles and comment in news and documentary television and radio programmes. A potent example was the influential Panorama programme Home Truths (22/5/95), which was broadcast at the time that the interviews were being carried out in Bristol. This was an investigation of the problems in the owner-occupied market. Bradley Stoke in Bristol, was chosen as their case study where building only began in 1986. Panorama focused on some of very worst cases, interviewing those with the highest levels of negative equity, those who had taken the shared equity option and now could not buy their way out, and home owners facing re-possession. The programme was advertised for a week quoting expert views that house prices would fall for the next 25 years. The immediate impact of such coverage upon those spoken to in Bristol (both in the estate and elsewhere) was striking. For those most directly affected such programmes are seen to be very damaging and cause perhaps unnecessary levels of unease among home owners.
The media have heightened coverage on the housing market as it is seen as yet another great disaster for which this government and indeed the previous Conservative governments must take responsibility. The language used in such presentations, fear , insecurity , sharks , crisis , stress , feel bad etc. appears entrenched and can therefore feed into the way in which people perceived and describe home ownership.
The government seems to be aware of the damage that the continuing recession in housing is causing to them, being further exacerbated by high - profile media attention. Eventually the Prime Minister tried to wash his hands of the crisis in home ownership (noticeably just a week after the broadcasting of the Panorama programme) stating that it was to blame on the Thatcher administration, which was not well received.
Fury as Major Blames Homes Loss on Thatcher Years, (The Guardian 2/6/95)
As the political fortunes of the Conservative party are fragile, threatened back-bench Tory MPs have recently openly expressed their worries as to the detrimental effects that the continuing housing market slump will have on their re-election chances, particularly for those in the more notorious negative equity and house value loss zones. In a recent survey of 100 Conservative MPs, none believed that current housing market policies were helping the party s prospect of re-election (Roof Briefing, August 1995). Backbenchers are eager to see something done to improve conditions in the housing market, no doubt allied with fears for their own political future:
Backbenchers want to prop up housing (The Financial Times, 16/6/95)
Tory MPs hope for home comfort (The Guardian, 3/8/95)
There is no fundamental reason why the coverage should be quite so universally negative. Some elements of the house-selling industry are attempting to counterbalance the negative coverage. For instance, Savills, in their Spring/Summer Residential Research Bulletin (1995) criticise the media by saying
The current outbreak of extreme depression in the media regarding the future of the housing market is ill-informed an in some cases, entirely misplaced .
They point out that there are some markets which are beginning to rise, and also argue that the current low level of transactions is an indicator of low confidence, and lay some blame on the media by saying how the latest tranche of confidence-suppressing media comment will do nothing to change this... . While it is possible to disagree with these conclusions about the current state of the housing market, this at least indicates that it is possible to construct a case which contrasts with the now conventional gloomy picture, which has dominated media coverage. Little reference is made to the fact that currently for first time buyers in particular, house prices are low, as are interest rates, and therefore the affordability of housing has improved. Lack of interest by potential first time buyers may reflect the lack of employment security and poor expectations of income growth rather than perceived problems with owner-occupation.
This paper has discussed the ideology of home ownership against the changing policy context since the 1980s up to the present. It has also demonstrated the nature of house price movements over this time and the effect that this has had on the two cities under study. Evidence was cited from the qualitative work regarding the respondents attitudes towards housing as an investment, the role of government in housing and indeed the role that the individual homeowner also plays.
Our research is continuing to analyse the issues over which attitudes differ between the two groups. In the Bristol sample, the trauma of falling house prices which has led to inability to sell and further problems of negative equity for some, has created a group of home owners who are now cautious, sometimes bitter and above all remarkably well informed about the housing market and associated issues, such as interest rates and government policy. Even against this background those surveyed in Bristol are still committed to owner-occupation, though they are no longer inclined to view home ownership as a means of profit and question its investment value. Home ownership is now described in terms of acquiring somewhere to live and the respondents emphasise the consumption use of property. In common with the Glasgow sample, the Bristol sample describe their home as an investment for the future, only in the sense of it being for their children s benefit.
In Bristol our respondents appear to be ambivalent about the role of government in home ownership. On one hand, part of the orthodoxy of home ownership is that people should be self-reliant and take responsibility for their own affairs and not expect government to protect individuals from the market. On the other hand, as housing is one of the most basic needs and government is widely expected to take responsibility for the basic welfare and security of its people. The political repercussions of the collapse of the housing market in Bristol and the continuing stagnation of prices will be explored in the re-interviews and the quantitative household survey.
Home ownership is still a relatively newer phenomenon in Glasgow; many home buyers come direct from a tradition of renting a council house. A feature of home ownership in the 1980s in England was the increased phenomenon of remortgaging the home, withdrawing equity etc. In Glasgow as home ownership was new to many owners, fewer had the scope or the financial sophistication to enter such arrangements. As a consequence home owners in Glasgow were more cautious in their borrowing, as in the rest of Scotland. However we do not believe this should be interpreted as a triumph for the canny Scots , merely that the Scottish housing market has, so far, been relatively fortunate enjoying the benefits of different lending practices as a result of lower incomes and expectations of income growth. It would be wrong to assume that Scottish homebuyers are inherently different and would never respond to house price booms in a similar way to buyers elsewhere in the country. On the whole the Glaswegian respondents were more likely to take a more paternalist, interventionist view of the role of the government. They are aware of the incentives that the government laid down for the individual to become a home owner and now express anger at the change in policy. The home owners in Glasgow may not have suffered the trauma of price falls of Bristol, but thinking in terms of their own experience there are those who see their position as home owners as being weakened and made less secure.
Few people in the Glasgow sample have any direct experience of negative equity (for themselves or their friends) but are aware of its existence through the media and consider it a predominantly southern phenomenon, not something that they have to worry about for themselves. Though it is now evident that the Glasgow market has slowed down in the past twelve months and sales can be difficult and take time. Prices achieved for properties may only cover the costs of moving. Problems among the Glasgow respondents tend to arise from the lack of continued expansion in home ownership rather than a general fall in prices. The people who are adversely affected are those who bought cheap properties (often people who were themselves new to home ownership, having grown-up in council properties) in the more run down areas which have remained marginal to owner-occupation, or areas in which there is still remains a high proportion of council housing. There is also some indication that there is difficulty selling small modern city flats, which may be a particular concern for the owners, especially when the builders continue to discount the units that still remained unsold.
Follow-up interviews are taking place to investigate the progress of the participant in the housing market after a six month period and the household survey fieldwork commenced in October 1995. So far, only a small part of our agenda has been explored but work so far has suggested a wide range of issues which we will be exploring in greater detail:
All these issues are to be investigated in relation to individual experiences and in their broader local housing market context. The housing market, because of its recent instability is proving to provide a fascinating case study of the way people react when expectations are not fulfilled and the way in which the perception of uncertainty and instability affects real world choices. It is hoped that we will be able to draw some wider lessons for the links between expectations and behaviour in complex situations.
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