Housing Two: Owning

 Your home as ‘fictitious’ capital

In more recent times the opportunities to ‘make money from money’, so to speak, have expanded for the ordinary person.  For example, the 1980 Housing Act introduced by the Thatcher government in the UK gave council house tenants the legal right to buy their council homes at a discounted price. This combined with the introduction of mortgage interest relief significantly impacted on the property market and widened popular participation in it. Around the time of the First World War three-quarters of the UK population rented their homes; by the early 2000s the situation had reversed with over 70 percent of the population nominally owning their homes – although the percentage has since declined due to the increasing difficulty of would-be first time buyers to get on the housing ladder. 

While rising house prices might put the idea of owning a home beyond the reach of some would-be first time buyers it is, paradoxically precisely these rising house prices that makes the idea of buying a house such a financially attractive proposition. While houses prices as a multiple of average earnings fell during the late 19th century (which explains why rented accommodation was such a widespread phenomenon in the early 20th century Britain), that trend has reversed in the late 20th and early 21st centuries, boosted by the relative stagnation in wages. The benefit of owning a home, steadily appreciating in value, instead of paying ‘dead money’ for some over-priced rental property is all too obvious.

A few people with the financial resources to engage in the ‘buy to let’ business might find themselves in the position where they can comfortably live off the rents of their tenants. However, for the vast majority who have purchased a home, renting it out is simply not an option.  Even taking in lodgers would be impractical in many cases.

Consequently, most homeowners continue to depend absolutely on some form of paid work since, with home-ownership, comes financial commitments such as mortgage repayments. True, you might manage to sell your home and realise a capital gain (particularly if the property market is booming) but you still have to find somewhere else to live. It is this makes the idea of treating one´s home as (fictitious) ‘capital’ – as some commentators do – somewhat problematic.  You cannot be without a home since it is a basic human need (unlike other forms of fictitious capital). 

If you do sell your house at a time when house prices are rising then you have the problem of having to pay more for some other house you may subsequently wish to purchase. On the other hand, as well as going up, prices can also come down as occasionally happens after a property boom. Having to sell your property in a slump could very well plunge you into dire financial difficulties that you may never recover from, financially speaking.

The above qualifications notwithstanding, it is nevertheless the case that a fairly large percentage of the working class do indeed engage in the speculative buying and selling of property at some point in their lives.  Normally, the primary means of purchasing a property is via a loan (mortgage) from a bank.  Bank loans (in this case for consumption as opposed to the production of commodities) is, as we saw, a classic example of fictitious capital. 

In the past, at least in the UK, it was building societies (or ‘mutuals’ controlled by their members) that had a virtual monopoly in the issuance of mortgages. This changed in a big way in the 1980s with banks entering the mortgage market and offering a variety of different mortgages to suit different customers. Mortgage loans as a percentage of total bank loans has subsequently grown very significantly. 

These are ‘secured’ loans inasmuch as your home serves as collateral , meaning that if you fail to keep up with your mortgage repayments the bank can take possession of your home. The same is true of auto loans.  However, there are also various kinds of unsecured loans where collateral is not required such as personal loans, student loans and credit cards. These are riskier from the standpoint of the lender and for that reason sometimes attract a higher rate of interest. With the growth in the both the volume and diversity of consumer debt the exposure of working people to the machinations of fictitious capital has increased greatly in recent years.  

However, when we are talking about fictitious capital what more likely springs to mind is not so much our monthly mortgage repayments or our credit card bills but an institution like the stock market. Most ordinary people would have little, if any, direct experience of dabbling in the buying and selling of shares. Essentially the stock market is the domain of the wealthy private investor or else (and to an increasing extent), institutional investors. However, what happens here is in principle no different from what happens when you place a bet on a horse in your local betting shop after having studied its ‘form’.  

It is speculative gambling but on a vastly larger scale, of course. The stupendous wealth that can be made on the stock market rams home the point, again and again, that it is not through hard work that one can become incredibly wealthy. This breeds a kind of cynicism towards work born out of the belief that what is officially supposed to motivate us to work is precisely the lure of money.  If we go along with that belief, how could we not feel cynical, when we see fortunes being made by others who don’t have to lift a finger to do that? When we struggle to pay the bills on the meagre wages we earn it is perhaps understandable that some might feel resentment.

Sometimes, this can be misconstrued as ‘envy’. However, the ‘politics of envy’, as it is called, is an ideological snare and a trap for the unwary. To ‘envy’ someone is to covet what they have and, indeed, to want to become like them (and hence to perpetuate the very system they benefit from). However, it is structurally impossible, not to say nonsensical, for the majority in a capitalist society to come to find themselves in the same economic position of the minority of being able to live off the unearned income that this majority, after all, provides them with. It is not envy that this majority should feel but, rather, outrage.

ROBIN COX