Brenda West, a 69-year-old retired widow, lost her home in Myakka City, Florida, to Hurricane Ian. She cares full time for her daughter, who has multiple sclerosis. Now, if she wants somewhere to live long term, she will have to contend with soaring rents and unattainable mortgages: symptoms of the global cost-of-living crisis. After a short stay in a run-down Bradenton motel, Brenda says: “I don't know where I'm going. My resources [are] about to run out.”
For millions of ordinary people around the world, it won’t take a hurricane to put them on the streets. Skyrocketing interest rates are raising the prospect of default for mortgage holders, while a shortage of affordable housing, and stagnant wages are making it ever-more difficult for working people to keep a roof over their heads.
But this nightmare is a dream for the super rich (at least until the housing bubble bursts)! The value of the global real estate market grew to a record USD 3.69 trillion in 2021. Luxury property in particular is booming, as ‘super-prime’ real estate barons help wealthy clients snap up palatial properties at record prices, all while hardship and precarity are on the rise.
A major housing crisis afflicts the richest country on earth, the USA. The country is 3.8m housing units short of expected population growth, and in 310 metropolitan areas nationwide, there are serious issues with the housing supply, driven by rising house prices. This all started before the pandemic. In 2019, Los Angeles needed 400,000 additional homes; Miami, almost 200,000; and Washington 150,000.
And things are getting worse. The Federal Reserve’s attempt to control inflation by raising interest rates has resulted in base mortgage rates rocketing above 6 percent nationwide. On top of that, rents over the last two years have risen faster than any other time in the past decade, accelerating in the last two years.
Jennifer Fei, 48, interviewed in the local press, explained that her monthly rent in Utah was roughly $1,300 seven years ago. “Over the years, there have always been increases — $100 here, $50 there,” she said. But when she signed her lease for 2020 to 2021, it went up by $150. This year, it shot up by $410, Now, her rent sits at just below $2,000 a month. This is now the starting price for a two-bedroom apartment in the same neighbourhood: “most are $2,500 to $3,000 a month,” said Fei.
And it will rise further still. Moody’s Analytics forecasts a nationwide rent growth rate of 5-7 percent by May 2023.
Throughout the USA, the situation has been exacerbated by a rise in purchases by investor groups. They’ve been buying and flipping residential properties in huge numbers, pocketing the profits, turning them into rentals (at very high rates) and deepening the housing crisis.
“They can waive inspection contingencies, purchase in cash and close in five days,” said Rafael Perez, a realtor in Sherman Heights, San Diego. “Those are things that an owner-occupier buyer does not generally have the ability to do.” According to the Washington Post, large corporate investors are grabbing nearly 1 in 7 homes sold in America’s metropolitan areas.
One of these property vultures, Wedgewood Inc., which has bought and resold hundreds of homes in the Bay Area and Southern California, was recently accused of unlawfully evicting tenants from homes it purchased at foreclosure auctions, agreeing to a $3.5 million settlement over these claims.
This is all feeding a level of homlessness that, in urban centres, is totally overwhelming shelters and state relief efforts. In LA alone, the homeless population is almost 70,000, with open-air shanty towns rubbing elbows with some of the most luxurious properties in the country – occupied by heads of executives and celebrities.
Corruption and swindling
Reactionary housing policy and government corruption have widened an existing wound. As the dust settles on the first round of the Brazilian elections, millions of people endure conditions of squalor. Even before the COVID-19 pandemic, Brazil had a dire problem with homelessness and informal accommodation, with the number of favelas doubling in the last two decades.
In 2019, it was estimated that there is a deficit of 5.8 million homes in all of Brazil. And between March 2020 and May 2022, over 125,000 people were evicted, including 20,000 elderly people, 21,000 children and 75,000 women.
In the last two years, under the administration of Jair Bolsonaro, the federal housing programme’s budget was slashed to its lowest level since 2012. At the same time as cutting away the few pillars of support for the poorest, Bolsonaro and his kin are having a field day on the property market.
An investigation by the Brazilian media group UOL suggests that between 1990 and 2022, the Bolsonaro family snapped up 107 properties, including a mansion in rural São Paulo, which was purchased for 2.67m reais ($525,000) by Bolsonaro’s brother-in-law.
Half of these properties were purchased cash in hand, a practice that allows the sales to pass without legal scrutiny. Bolsonaro’s son, Flávio, was allegedly involved in the cash payment of 638,000 reais for two flats in Rio de Janeiro’s beachside Copacabana neighbourhood.
The Bolsonaro family has long been accused of involvement in an illegal racket known as rachadinha, involving the embezzlement of employees’ wages. And this kind of corruption is only the tip of the iceberg.
The dirty dealings by these reactionary, corrupt hypocrites are especially insulting after President Bolsonaro oversaw four years of attacks on living standards, privatisation of state assets, and general immiseration of the poorest in Brazil.
The Republic of Ireland is another country where the recent crisis has only made a bad situation even worse. Ireland faces a chronic housing shortage. At the beginning of August, there were just 716 homes available to rent in the entire country, compared to a population of 5.1m people. The cost of accommodation across the board has also gone up by over 12 percent compared to last year.
This has resulted in long, snaking queues outside of properties with open viewings, with one viral video showing more than 100 people lining up to look at a single house in Drumcondra, Dublin.
Young people, both studying and working, are in an especially hopeless situation. Recently, a student at Maynooth University made headlines when she was informed by her landlord that, not only would she have to share her room with another tenant, but also her bed, half of which her landlord plans to rent out for €25 a night. Clearly, dignity and privacy are becoming luxuries under capitalism today.
The opportunities for abuse and fraud are manifold in this situation. It has been reported that attempts to defraud students of their deposits for nonexistent properties have risen by 30 percent. Interviewed by Sky News, Detective Superintendent Michael Cryan, of the Garda [Police] National Economic Crime Bureau, said:
"They [renters] are also seeing it as a one-time offer. They see a listing on social media, it says you must take it today, and there's a sense of urgency. Then think 'if I don't take it, I'll lose it.’”
This kind of swindling recalls crooked real estate agents flogging empty swampland as premium property in 1920s America. The result in Ireland today is that desperate young people are left out of pocket, and out of luck.
‘An icy fear’
As ever, the special crisis of British capitalism, overseen by some of the most hapless and incompetent representatives of the ruling class, means the situation is especially acute.
UK house prices have risen by 20 percent since the start of the pandemic, and are now at a record high, both in absolute terms and relative to earnings. This has significantly contributed to British household debt reaching 133.9 percent of disposable income on average.
Recent attempts by the Bank of England to stabilise inflation by raising interest rates, coupled with the catastrophic impact of Prime Minister Liz Truss and Chancellor Kwasi Kwarteng’s ‘mini-budget’, sent the British economy into a tailspin and rocked the government bond market, causing mortgages lenders to temporarily withdraw.
When they returned, it was with an average interest rate of 6 percent, up from 4.74 percent on the day of the budget announcement. This is the highest level since December 2008, in the immediate aftermath of the global financial crisis.
This caused havoc for thousands of people in the process of securing their first homes, after years of scrimping and saving, with many losing huge amounts of money overnight and ending up trapped in buying chains. Heather Tang, a librarian, 34, was in the process of moving her family from London to Cheshire, having already sold their last property, when the sale collapsed.
“We haven’t agreed [on] anything, so I just don’t know what we’re going to do. I’m seeing people being offered 6% to 10% [interest rates],” Tang said. “I know house prices are coming down but they’re not coming down that fast, and in the meantime we’re kind of homeless because we still have to sell our house.”
Working and middle-class families already paying mortgages face the prospect of their repayments going up significantly. There are 600,000 fixed-rate mortgage deals due to expire in the second half of 2022, and 1.8m next year, according to UK Finance. Assuming a 6 percent rate, the average household on a two-year deal would see their monthly repayments increase by over 70 percent, from £863 to £1,490.
“People were worried about the energy crisis and how they were going to heat their homes, but this is a different type of fear,” said Michael McLaughlin, a mortgage broker in the North of Ireland. “Now it’s ‘Are we going to have roofs over our heads?’ They just feel totally powerless.”
“It’s like an icy fear, the speed at which this has happened compared with [the housing market crash in] 2008. The collapse has been seismic and so quick.”
The housing bubble in Britain is overdue for bursting and there are signs that the time is nigh. People could soon face a situation of negative equity, where their repayments are unaffordable, but falling housing prices leave them unable to cover the cost of their mortgages by selling up.
This raises the spectre of a wave of defaults, and even middle-class homeowners suddenly finding themselves homeless, and severely indebted. At which point, wealthy buyers will benefit from the situation by gobbling up all the new property on the market for a song: pouring even more assets into their hands.
Of course, the exorbitant cost of securing a house represents an impossible pipe dream for the majority of working-class and poor people. But their other options are hardly attractive.
Council homes are increasingly hard to come by following years of underinvestment, made worse by a backlog of promised construction piling up during the pandemic. It is estimated that 32,000 home completions were lost during 2020, according to the report commissioned by the Local Government Association, with a mere 46 council homes built in Lewisham, South London, where 10,000 people are in need of accommodation.
This means that families on council housing waiting lists in the capital are often sent as much as 85 miles away to places like Cambridgeshire, totally uprooting them from their friends and communities.
Meanwhile, wealthy developers exploit every available loophole to avoid their obligations to building affordable housing. For instance, the two richest people in the UK, Hinduja brothers (with a combined fortune of £28.5bn), recently won approval to develop the Old War Office near Downing Street into luxury flats and a five-star hotel.
Under British law, they should have been obliged to build 98 ‘affordable’ flats as part of the £1.2bn development. But the Tory-controlled Westminster Council agreed to let the development go ahead without building any affordable housing, as this would “not be economically feasible.”
The Hinduja brothers should then have been obliged to pay around £40m into an affordable housing scheme. But the council’s “viability” consultant agreed that a £10m contribution was not only sufficient, but “generous!”
While the Tories look out for property moguls and slash council budgets, millions of ordinary people are at the mercy of the private rental sector. The market has been subject to high inflation for years, driven in large part by a lack of supply.
A study has found that the number of homes available for rent has fallen by 40 percent since 2019, while average rent has risen by 8.9 percent in the past year. This is the product of a vicious circle, where the attraction of high profits leads buy-to-let investors to swallow up a huge chunk of available homes.
And now, with the cost of living crisis hitting energy and mortgage repayments, there is an abiding fear that landlords are about to dump the losses on their tenants. The charity Crisis estimates that the number of households at risk of homelessness from landlords wanting to sell or re-let their property doubled in the first quarter of 2022, up by 116 percent on the previous year. And this number will only go in one direction.
At the other end of the scale, the so-called super-prime, ultra-high-end property market in London is booming, driven by international oligarchs, elites and celebrities taking advantage of the weak pound to secure British properties outright: either as second (or third, or fourth) homes, or as lucrative investments.
Ousted British Prime Minister Boris Johnson once said: “London is to the billionaire as the jungles of Sumatra are to the orangutan. We are their natural habitat.”
And the uber-wealthy are settling back into their glittering urban jungle following the lifting of pandemic travel restrictions. According to the estate agent Knight Frank, there were 155 sales above £10m in the capital in the year up to April 2022 – the highest in six years. Mayfair estate agent Gary Hersham says his phone is ringing off the hook with billionaires looking to drop tens of millions on a luxury London property. And the level of wealth he is dealing with is like nothing seen before.
“You have to understand, in the ‘70s and ‘80s, somebody worth £10m or £20m was phenomenally rich,” said Hersham. “Today, it’s a pittance, absolutely nothing.”
This forces the super-prime property market to stay ahead of the curve to match their customers’ extravagant tastes. Luxury interior designer Graham Harris recently masterminded a £125m mansion on Belgrave Square for Russian oligarch Mikhail Fridman (who has now been sanctioned following the invasion of Ukraine). Harris gives a glimpse into a lifestyle that is inconceivable for ordinary people:
“If I were to say to you that refrigerated bathroom cabinets were becoming standard now, you might look at me and think I’m a little crazy. But if you’ve got your Crème de la Mer tubs of moisturising cream at £150 a pop, where are you going to keep them?”
That’s quite a quandary, our heart goes out to his poor clients!
Another super-prime property broker, known only as the ‘Secret Agent’, gave an illuminating interview for Bloomberg, explaining that his clients are “operating in a private jetstream, floating above [the cost-of-living crisis]… I don’t think their wealth has been significantly affected.”
While mere mortals are standing in queues to view two-bed properties, these high-end buyers close sales from thousands of miles away:
“After COVID, I sold a house in Kensington, via WhatsApp video… They didn’t see the house, they Google Maps-ed it, they bought it for £16m.”
The interviewer suggested to the Secret Agent that the cost-of-living crisis has been great news for him and his colleagues: “because of the weakness of the pound but also because of inflation, people are thinking… having a blue chip property could be considered a good idea?”
To which the Secret Agent (rather sheepishly) replied:
“You’re making it sound like you want this to happen, a cost of living crisis so I can sell another house!”
Well, the facts speak for themselves. Little wonder this bloated parasite hasn’t the guts to show his face, or use his own name.
Here we see the reality of the madness of capitalism.
The masses struggle to pay for somewhere warm to sleep at night; they are forced to sacrifice the bulk of income on rent and mortgage repayments; and risk being turfed out on the streets by a crisis they did nor cause and have no control over. Meanwhile, the ultra-rich are living in the lap of luxury. Their decadent lifestyle is not only in stark contrast but directly proportional to the increasing misery facing the rest of us.
Every human being deserves the basic dignity and security of a home, but capitalism cannot guarantee even this minimum requirement. This is becoming a major factor in the growing class anger in society. Young people in particular feel totally hopeless about their prospects of ever securing a home in which to raise their own families, and this is feeding their political radicalisation.
Housing is a basic social need. Only an insane society would allow it to be exploited by profiteers. The Marxists say these bloodsuckers should have their wealth and assets expropriated under democratic, workers’ control, so that we can invest in a massive programme of house building, and guarantee every single person the security of a roof over their heads. This would be a foundation stone of a genuinely human existence.