Since the UK’s ‘freedom day’ on the 19th of July 2021, those residing in the UK are becoming increasingly reacquainted with a lifestyle that they once considered a fundamentally stable normality. The daily slog of COVID briefings, statistics and superfluous analysis about COVID-19’s radically transformative long term impacts are, in many people’s eyes, now part of a bygone era. 

Weird as it may be considering the increasingly rampant number of daily cases and deaths, it feels as though the memory of COVID-19, and the unprecedented transformation of life that came with it, has begun its gradual decline into what will eventually be a distant memory upon which we may ruminate. Yet, in the analysis of COVID-19’s future consequences, a topic of utmost importance has been overlooked; how the ensuing economic crisis is reflecting a growing trend of the financial industry utilising crises as a means to entrench and accelerate the financialisation of housing. 

To better understand what this means, why it is important and how it is happening, one must look to the past. Since the 1980s, housing has transformed from a social good into an asset, underpinned by self-serving financial governance, unregulated banking and foreign investment. These changes, or its financialisation – the increasing role of financial actors, markets and institutions in economies – has already created a system which facilitated the destructive 2008 subprime mortgage financial crisis, alongside intense gentrification, extortionate housing costs and declining living standards. Now, with the incipient economic downturn from the pandemic, we risk witnessing these issues exacerbate as we edge perilously close to a new landscape of global corporate landlordism.

In the UK, the story begins in 1979 with Thatcher’s Right to Buy scheme, where those renting state-owned council houses could buy their homes well below market value, marking a huge step in the government relinquishing their responsibility for housing. As Right to Buy allowed the working and middle classes to buy their council homes en masse, a speculative feedback loop of house buying, inflating prices and increasing borrowing to buy more houses pushed prices up ever higher. Consequently, in the mind’s eye of UK society, housing transformed from a home, an indispensable public good for all, into a supposedly low-risk asset class that could make you rich.

The average price of a house tripled in the following decade, making homeowners far wealthier. In 1989, unfortunately, the music stopped. The housing market had crashed. Suddenly, the properties bought through Right to Buy were sold to wealthy investors intending to profit in the increasingly expensive rental market. For politicians, the crash was terrible for votes, for business interests and, for the many property owning politicians, themselves. From then on, a slew of policies, first from the government and then the Bank of England, were enforced to ensure that housing – unlike other investments – never lost value. 

After 1989, interest rates were continuously cut to encourage people to borrow money so that they could buy houses. Meanwhile, new, increasingly risky mortgage-based financial instruments boomed, allowing the global financial services industry to make trillions on the housing market; unimaginably more than the underlying value of the assets that were being traded on capital markets. Accompanying these were hugely risky low-to-zero deposit mortgages, meaning people who could not afford homes bought them anyway, ensuring that capital kept flowing into the system.

Concurrently, the responsibility for house building shifted, beginning to lay squarely on private property developers. Their chief aim was profit, which meant fewer, more expensive homes were built, increasing housing’s scarcity and its value with it. The combined effect of these changes was that housing became more expensive and the financial industry became totally enmeshed with the industry. Regardless of if it was financially viable for most debtors, more houses were continuously purchased through the financial sector dishing out unpayable mortgages; mortgages which could then be packaged into housing securities and traded for huge profits on capital markets. This culminated in the 2008 subprime mortgage crisis, all the while skyrocketing the price of a house by an absurd average of 1145%.

Goodmove, Average UK house prices 1980-2050 

It cannot be understated just how bad this shift has been for people in the UK. The financial crisis in 2008, a situation created from increasingly risky strategies in the financial industry’s mortgage securities trading, obliterated people’s pensions, investments and saved income in general. The austerity policies that followed 2008 made matters worse by stagnating wages and increasing unemployment. Yet, by continuing to prop up property prices throughout the 2008 crash, stagnating wages from the crisis and the austerity policies that followed has meant that communities – particularly black working class communities – have been unable to keep up with escalating rent prices. Communities like Brixton and many more like it, once hubs of black culture, have had their inhabitants priced out. 

Despite this system being perceptibly broken, so perilously destructive that the UK is failing to meet the human right to adequate housing according to the UN, it is a totally intentional element of the UK economy. After 1989 and 2008, the Bank of England utilised quantitative easing (printing money) to buy government bonds (debt) in order to prevent the significant reduction in asset prices normally expected in economic turmoil. This, alongside continually low interest rates, has made sure the returns on investments into government bonds are low and mortgage repayments are less expensive, propping up property prices by incentivising investors to buy houses.

The consequent demand for London’s housing as an investment has allowed 13% of the city’s homes to sit unoccupied, the same city where 170,000 people are currently homeless. Putting that into perspective, London’s homeless population is now significantly greater than the population of Oxford. Now, property markets in cities like Manchester are experiencing the same destructive trends. Despite social housing being in huge demand, their being rented at half of local market rates has meant its production has been decimated; they are just not profitable to property developers and councils do not receive the funding to build and maintain them as they used to. The affordable rent housing that has compensated for social housing’s decline is also far less affordable – being leased at 80% of the already overpriced market rates – ensuring continued growth in gentrification and homelessness.

And here we are now, at the tailend of a pandemic and at the beginning of what will likely be another economic crisis. In 1989 and 2008, what was economic hardship for most was an opportunity for investors. An opportunity fostered by expansionary monetary policy which protected investor interests through quantitative easing and interest rate cuts. However, well-documented evidence from 1989 to 2008 has shown that such policy increases gentrification and homelessness while making houses inaccessible to first-time buyers. The low interest rates and unprecedented quantitative easing during the pandemic suggests this process is being enforced yet again. It therefore stands to reason that the final step of this cycle, booming house prices, gentrification and homelessness, will once again grip the UK.

Although, on the horizon, an even more insidious development is firmly in view. Since 2008, buying up ‘distressed’ real estate – distressed meaning on the verge of foreclosure or in serious need of repair – has become the hottest new investment opportunity. Some of the largest investment firms like Blackstone Group have been diving head-first into the opportunity, purchasing swathes of cheap, distressed property in times of economic hardship, with the aim of making some repairs to sell or re-let for much higher prices once the economy settles down. The worsening gentrification, homelessness and poverty as a direct consequence of this investment is of little concern to Blackstone’s 3.5 billion dollars of profit made by doing this. 

In the context of COVID-19, the lockdowns during the pandemic have caused some people in the UK to lose their entire income, while the rest lost a reasonably sized (and sometimes essential) proportion of it. This has left rental debt stacking up and, should enough rent go unpaid, and homelessness cascades out of control, a wave of small-scale private landlords may foreclose on their homes as they become unable to pay off their mortgages. In preparation for this, Blackstone has set aside 10 billion dollars to buy property in Europe while Lloyds Banking Group is preparing to purchase 50,000 UK homes. It will be these distressed properties, likely situated in the most impoverished areas, that Blackstone, Lloyds or other corporations will target. It appears we are awaiting a wave of  gentrification, rent/housing price growth and homelessnes like never before.

The actions of firms like Blackstone, alongside monetary policy that intentionally props up property prices has become the playbook for all financial crises. Worryingly, this has presented a novel situation where firms like Blackstone or banks like Lloyds could become global corporate landlords, displacing the traditional independent landlord or medium sized real estate company. If this comes to fruition, it is worth considering how quick evictions may become when your protests are met with a soulless investment firm. Or, if the price of housing and rent is determined by a small number of corporations in the financial sector, how likely is it that they will endlessly gentrify the UK until every area has a price range so expensive it drives out every renter who cannot afford to be extorted.

Protections must be given to at-risk tenants to prevent this. However, viewing the overall problem in the longer term, fixing such a multifaceted issue is much more complex. What is clear is that housing must be pulled away from capital markets as much as possible. This means doing away with the incessant need of growth in the housing market. One method of doing so should be increasing the supply of affordable housing through environmentally considerate property development. Just bringing distressed property into public ownership could help to massively increase the UK’s social housing stock and stem the growth in property prices. The regulations on financial services that were expected after 2008 must be made now. Otherwise, we leave ourselves hopelessly prone to another catastrophic economic crisis from the unleashed profiteering of the financial industry.

By allowing a minute part of the population to profit handsomely at the cost of working people without repercussions, as occurred in 2008, we continue to forget the mistakes of the past and leave ourselves ever more vulnerable to the consequences of insatiable greed. These changes are not impossible, there is just not enough pressure on governments to regulate financial institutions. Thankfully, there has been a flowering of tenants unions across the UK and US. It is these organisations across the globe that have shone a glimmer of hope on our chances of altering the system.

In Berlin, local tenant unions lay at the core of setting up the referendum which voted to expropriate the homes owned by corporate landlords to stop the incessant growth in rent prices. If we do not act as those in Berlin have, collectively organising with tenants unions to hold policymakers and financiers to account, we will fail to desist from the incessant focus on maintaining unsustainable growth in the housing market. 

These policy decisions and jargon-laden financial services may seem conceptually distant from our daily lives. However, it is the exceedingly profit-first mentality in the backdrop of crises like the pandemic that may further propel us into a society where our landlord is an algorithm coded by J.P Morgan. It is in such a society where the home has lost its value. From a place of family, togetherness and safety, transformed into nothing but a dollar sign for the largest financial actors to profit from. It is a reflection of the hollow value that money plays in our society. A reflection which shows how the interests of the vast majority to live happy, well-supported lives are less than negligible against the profits for a very wealthy few. 

Underneath our daily reality, a battle is raging. A battle between your average renter/homeowner against corporations in the financial sector over how we live, who lives where and for how much. It is in times of crisis such as now, when getting through the day, the week or the month is the insurmountable challenge, that these cataclysmic changes happen silently to our detriment. As of now, this battle is being lost. It is time we paid attention.

Change lies within us. Collectively, we hold the power to turn the house back into a home.

Isaac Levin is a final year politics undergraduate at the University of Manchester, head of research for the structural racism team at The Peterloo Institute and a volunteer journalist for Greater Manchester Housing Action. He tweets at @IsaacLevS.