Have you tried turning it off and turning it on again?

I have some concerns.

Watching the news unfold everyday is an odd experience at the moment – it’s almost as if everyone has been locked inside for months with limited human contact, and has consequently gone insane. I also wonder if this is a temporary loss of collective sense, or part of something more structural.

I studied archaeology as an undergrad, and read extensively about how civilisations often behave just prior to collapse – this seems to largely involve rapidly devaluing their money supply, accelerating the degradation of the environment and then finally, just before the end plays out, they go on a spree of tearing down statues and coming up with new ritualistic chants, in a vain effort to appease the clearly very displeased Gods. Luckily, none of these things appear relevant today.

But as I say, I have some concerns.

The stark economic consequences of the lockdown are starting to surface. The news that the economy has now dropped by 25% in total this year at least made the news, even if it was only very briefly the lead item – and was shortly dropped behind further Orange Man Bad coverage (yes, we get it now: Orange Man Bad. Can we focus on something else for a bit?). But I don’t feel that it got the coverage it deserved. I still feel the BBC headline should have been:

BREAKING: HOLY F**K THE F**KING ECONOMY CONTRACTED BY A FIFTH IN A MONTH HOLY F**K!

…but whatever, I understand the BBC has other priorities at the moment.

My main concern is about the banks. Since the last financial crisis, gross debt has now more than doubled, in almost every financial sphere you could conceive of. The causes of the last financial crisis have not only not been addressed: they have actually grown in multitude.

For example, take derivatives, at the heart of the last financial crisis. The total amount of outstanding derivatives has increased fourfold since 2008, according to the BIS (https://www.bis.org/statistics/derstats.htm). This doesn’t meant that the risk has increased fourfold - risk in derivatives increases exponentially as a function of scale, as related to gross nominal value – so the total value of outstanding derivatives has increased fourfold, but the risk from derivatives has increased exponentially.

CDOs, which were behind the last crisis, have been replaced by CLOs – ie securitised loans to companies, rather than mortgages. Most banks use a Value at Risk (VaR) model to quantify their own risks, and from what I have seen these are completely unable to cope with what we’re going through – they may model, for example, that of the loans to ten companies in their CLO, 4 may go bust over a period of time.  But what they won’t have modelled is the odds of the 4 companies going bust at the same time – which is exactly the situation we are facing. Bye bye CLO.

This is why we just don’t have an economy which you can turn off and on again. I’d wager we’re probably currently in August 2007, in terms of the last GFC.

Debt will catch up with us in the end. There simply hasn’t been this debt ratio in history without a major reckoning – in fact, the debt we have as a country, as a civilisation, in fiscal terms, private terms, any measurement you pick - is completely unprecedented in human history. I am also not heartened by the rise of the MMT people – the modern monetary theorists (MMT stands for “Magic Money Tree”, haha etc) - who believe you can print as much money as you like to finance government spending, as it just creates a liability on the balance sheet of the country, and nets off against itself. This argument, previously enthusiastically pushed by economic maestro Robert Mugabe, has rapidly gained the upper hand in all sorts of economic circles, and does not bode well for the future.

 ______________________________________________________

Buy Food, Buy Gold, Bi-furcation

But what of house prices?

Well, oddly, I think house prices will increase in the short term, despite every other economic metric falling off a cliff. I have previously been consistently wrong on house prices, and I think that this is mainly down to my having viewed it through the wrong lens – I viewed the housing market as a classic equilibrium economic system, with supply and demand etc, and it’s not – it’s a complex system, with path dependencies.  

Interest rates for example are arguably more important in determining price levels than supply and demand: 

(https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2019/uk-house-prices-and-three-decades-of-decline-in-the-risk-free-real-interest-rate.pdf) 

...and these have dropped to 0.1%. Money is being pumped manically into the economy by the government. And just over half of the country have done ok economically speaking over the lockdown – those with fixed salaries and their own house have had fewer outgoings, with their income remaining the same, and the opportunity of a mortgage holiday. Banks are likely to be light on repossessing properties anyway, as this will harm their own fragile loan books, so a crash - normally driven by forced sales - will be put on ice as much as possible, if it does start to manifest itself.

Putting it brutally – those who have been completely wiped out economically tend to be people who have been hammered by our demonstrably unfair system already. None of this points to a short term housing collapse, widely anticipated by commentators.

So the short term could see an exacerbation of the trend of the past – namely what housing analyst Neal Hudson has termed bifurcation, ie those with housing assets getting better off on paper and those without assets getting much, much worse off. We could be in for one last hurrah, with the government attempting to pump one last blast of reflationary air into the dead corpse, until the whole rotting body explodes in a mess of flying organs.

And when the banks do go bust, it will be proportionally larger than the last time the banks went bust and had to be bailed out (which was proportionally larger than the previous time the banks went bust and had to be bailed out in 1998) – and will the public be happy about handing over a few trillion, again, to reflate the system? I have my doubts.

Perhaps it will be a moot point anyway – the sheer amount of money that will need to be injected to keep the system going simply won’t be feasible.

So recently we bought another chicken. Can't be too prepared.

We Wunt Be Druv

"And you may pook

And you may shove

But a Sussex pig:

He wunt be druv."

In a vain attempt to boost my readership and demonstrate how in touch with popular culture I am, I’ m going to shamelessly start this blog post with a reference to a couple that have been in the popular printing press recently, namely Prince Henry and Princess Mary Meghanmarkle (see? I keep in touch). Keen newspaper-enthusiasts will know that they are titled as the Duke and Duchess of Sussex (or, more informally: "the Sussexes of Sussex").

I grew up in Sussex. Although I am (according to a recent DNA test, non-court related) 98.4% Welsh genetically, my family have been in Sussex for around about a century now. In fact, in the Sussex village that I live in, I am now only two generations off being considered ‘local’. And if you grow up in Sussex, you will be aware of our county motto – also printed on bottles of our local brew, Harveys Beer:

“We wunt be druv”

In Sussex dialogue, this means “we won’t be driven” – in other words, you can’t tell us what to think.

I think there is something of this still in the Sussex character. I’ve no doubt that one of my heroes, Tom Paine, one of the inspirations behind the American revolution, had ideas forged by his Sussex background. He was from Lewes, and was, incidentally, arguably one of the three most famous people to come from the Lewes region (the other two being the puritan Anthony Stepley, a Lewes local who signed the death warrant for Charles I and played a part in banning mince pies, and journalist Piers Morgan, who comes from adjacent Newick. Scholars are currently divided over which of the two could be considered the biggest mood killer at parties).

Although they have only reportedly spent a total of 5.5 hours in Sussex, I like to think that something of this character has rubbed off on the Royal couple. Accordingly, I wish them well and I hope they enjoy Canada and competing in next year’s Celebrity Love Dancing Strictly on Ice.

One of the items to get the most coverage is the fact that the taxpayer ultimately underwrote the renovation of the house which they currently RENT. (Ed: See? I managed to segue seamlessly back to the housing market! Clever eh?) 

In this regard they are typical of their demographic: priced out of buying a palace of their own by sky-high asset prices, they are instead forced to rent their palace, unlike their baby-boomer Princely parents who obtained palaces whey they were comparatively cheap (ie approx. 1485). Is it any wonder they want to emigrate?

This is of course reflected throughout the wider housing market, right down to the hovels that us serfs live in, where house prices are through the roof, massively penalizing a generation, and setting the scene for the great Peasants' Revolt of 2024/5.

Now, despite being told consistently for years that my view is nonsense, and that high houses prices are actually down to a lack of supply, over and over again on this blog I have been ranting about the real cause: nothing to do with a lack of supply, but almost entirely down to low interest rates. I have been told repeatedly that I am wrong, in all sorts of different forums, by all sorts of different people (for example, see comments here: https://propertyindustryeye.com/we-dont-need-more-new-homes-to-solve-the-housing-crisis-claim/).

But I wunt be druv. And now - hurrah! - the Bank of England have published a paper more or less proving my point - saying that, if the main cause of rising prices was a lack of properties, then rents would also have increased sharply – but this has not happened.

And then, to quote:

“Nearly all of the rise in average house prices relative to incomes can be seen as a result of a sustained, dramatic, and consistently unexpected, decline in real interest rates. ”

I have already heard three separate housing experts on the radio say this is now the cause, and was all along, forgetting that almost no one outside my little tinfoil-hat wearing community thought this even six months ago.

I am admittedly consistently wrong about timings and predictions, but still: ta da! I win.

You can download the paper here, although it’s quicker to read my blogposts from 2013-2019 (and ignore the bits on timings and predictions – in economics, things always take longer to happen than you think, anyway – although when they do happen, they happen faster than you think they will):

https://www.bankofengland.co.uk/working-paper/2019/uk-house-prices-and-three-decades-of-decline-in-the-risk-free-real-interest-rate

Worryingly, the paper also states that: “...average house prices could plunge by one-fifth if there is an unexpected interest rate rise of 1 percentage point”. This indicates that they have only read half of my blog posts so far.

I’ll update you when they read the rest of my posts, and publish their next paper *Spoiler alert*: it’s going to be titled “Oh Sh*t we’re all going to hell in a handcart, economically speaking, aren’t we?”.

So just goes to show: make your own mind up, and don’t listen to what 99% of the economists and housing experts say on the meedja, because three years later they’ll change their minds, and claim that they didn’t think that at all anyway.

In other words: don’t be druv, bruv.

A Particularly Stressful Time of Year

So, who to vote for!

Gosh, it's all terribly exciting with the election and what-not.

For most people working in real estate, Christmas is a deadline rather than a religious festival. And the election makes it even more stressful in some ways, for those of us concerned that nothing is being done to address the crisis of housing provision in the UK and the related ridiculously distorted asset wealth distribution (or lack thereof). The consequences of this problem not being addressed, as I have covered (or rather, ranted about) in depth, are going to be potentially catastrophic.

Less than a quarter of people under the age of 35 are projected to own their own home at all, with the majority of that cohort currently destined to rent in perpetuity. The related questions this raises are of course well voiced (how will this cohort pay for retirement?) but will quickly be superseded: for Something Bad will happen before these longitudinal questions become relevant. And the longer the correction takes to come in the short term, the worse the Bad Thing will be.

There's a poster outside the office of the University that I teach part-time at, promoting general encouragement to seek help for mental health problems (I heartily agree on seeking help if you are experiencing such issues, of course); the poster starts:

"This can be a particularly stressful time of year...".

The poster has actually been up all year now.

But it's right: this is a stressful time of year. And thinking about the above doesn't ease the mind much.

I was going to provide a breakdown of the housing policies of the main parties, as I haven't written a blog post for a while, and I've read all the manifestos now: but then I remembered that at the last election the Tories promised to build 200,000 starter homes - and haven't built a single one. So, the fact that in the current manifesto of the Tory party they promise :""First homes"- discounted properties for purchase with discount maintained in perpetuity" - means almost nothing to me, as they blatantly disregarded previous policies, and didn't even pretend to implement them, so why would they honor this one?

Labour's chances of forming a majority and implementing their own housing policies are, apparently, zero. So there's not much point there, either. Ditto Lib Dems etc...

However, Labour's promise of offering a form of Right to Buy for private tenants - rapidly hidden from public view, and not making it into their manifesto (which is instead replete with promises of housing milk and honey, when the time of angels is upon the earth) - will, I am convinced, return with a vengeance, and probably be all we talk about by 2023.

Whether this, or a form of this policy, is done by stuffing the mouths of landlords with gold, or simply by confiscating all Buy to Let properties, will determine the future of our country for the next decade. It will lie somewhere on this continuum, but I am convinced it will happen, one way or the other. Whether we end up eating zoo animals for food will also depend on how this is handled. The longer we leave starting to at least attempt to help ease the housing crisis, the more chance of the latter occurring, and the more our country's collective Zoo's elephants and penguins should be nervous. Addressed quickly, we could plausibly find a way forward as a country without ending up boiling stones for soup.

Currently, I am not optimistic.

But then, this is a particularly stressful time of year.

The Revenge Of the Evictions

I appreciate that the title of this blog makes no sense. But nothing does these days. So why change it?

Anyway.

As a child I discovered that you could completely and utterly lose an argument on the basis of the facts to hand, but as long as your last words were “yeah, but, still…” you could leave with your reputation for reasoned argument in tact, and your argument technically undefeated.

All political debate is rendered thus. So this blog means nothing. These words, however true, however based in actual reality, change nothing.

However, for what it’s worth – here are my views on the Section 21 proposals announced this morning.

According to the BBC, the Tories are ending No Fault evictions –

Residential tenants at present can be turfed out for no reason at all, even if it’s just because the landlord’s daughter takes a dislike to you and asks daddy to turf you out as punishment for being vewy vewy wude (happened to my neighbour. Feudal eh?). This process is formally initiated by serving a Section 21 notice – a so-called ‘no fault eviction’ – as no reason has to be formally stated for the eviction, unlike anywhere else on the planet.

Except….well, except.

The Tories actually only plan to consult on the ending of Section 21 notices. So they are planning to consider if they might.

One day.

Possibly.

This is, without any shadow of a doubt, not a plan to ban them now.

And…well, the Tories have no absolute majority in the commons. They are so terrified of wrecking amendments that they dare not even propose legislation. So even if they do decide it might be a good idea – and we have no idea if they will – then they cannot turn it into law, because they cannot get it through the commons.

Any even if they did one day decide to ban Section 21 notices, and reality ceased to be important in these things and they could actually get the legislation through the commons – this is only the policy of a Theresa May government, and she has said she’s leaving soon, and there’s no plan to finish the consultation before she goes – so her successor will be in charge of implementing this policy, and there’s no reason at all to think that his or her manifesto will include it, as they won’t in any way be bound by May’s previous promises (much like May, actually).

Even if all of that was true, they also propose to consult on making it easier for landlors to evict tenants in rent arrears – at present quite a lengthy process. And they are not banning exorbitant rent increases. So if a landlord wants to evict a tenant for no reason, they can simply raise the rent fivefold. And it will be easier to evict them.

I get that the Tories have realised they face an existential crises – that with collapsing home ownership, they will disappear as a party, but…

…to launch a policy that won’t actually happen, but the announcement of which will piss off their core support base (1 in 5 Tory MPs are landlords, and a large slice of Tory voters) at a time when their existing support base is pretty pissed off, all to attract the votes of people whose votes won’t actually be attracted because it won’t happen, and if it did, would make the situation worse for them, just seems….a bit mad?

Well, yeah, but.

Still.

Maybe It Was Just An Acorn

Following the last post, and in the spirit of New Year optimism: what if our trusty Chicken Licken is, in fact, wrong? What if the sky isn't necessarily going to fall in?

How fast things move. Conventional assumption at the moment now appears to be that my last blog post in fact reflects where consensus opinion has currently moved to - ie a No Deal Brexit is on the cards, and that it would be a Bad Thing. House prices would probably drop by a third, with significant effects on the balance sheets of our major banks. And we would have to start eating zoo animals.

Clearly, being in line with the general consensus makes me feel uneasy, so I feel compelled to correct myself. I have to say, being a tin-foil hat wearing loon (to block out the Martian mind-control waves - it's a thing) is no fun if you look around and suddenly see everyone else wearing the same hats. Combine this with the fact it's always good to look at the counter-arguments  - so, what is the opposing non-sub-optimal outcome, given a No Deal Brexit?

I still can't get my head fully round the numbers, as there seem to be so many conflicting data sets.

However, based on ONS figures (and depending entirely on how you slice them) the base facts seem to be the following:

- Imports of goods and services from the EU are £302 billion annually.
- Exports of goods and services to the EU are £438 billion annually.
- Of our exports, approx. £188 billion are goods destined for the EU.

This last figure is likely to be a high-end estimate, as a number of goods are shipped to ports such as Rotterdam, which are then shipped to a final destination, so wouldn't be impacted by new EU tariffs. Services will not be impacted by a No Deal Brexit, as they barely form part of the Single Market anyway. The government has said that no tariffs would be applied in the short term on goods coming into the country from the EU. So this last figure is the only hard bit of our GDP which will be impacted upon straight away if TRESemmé loses her giant game of Chicken with the British public.

Our total annual GDP is just over £2 trillion. Average WTO tariff schedules are 20% - which would automatically be applied in a default scenario (granted, it maxes out at 35% on some goods, this is just an average). A No Deal Brexit would therefore add a fifth onto the cost of 0.09% of our total economy, or approx. £38 billion in extra tariffs. This is £1 billion less than we would be paying were we to stay - so we would, on a purely finger-in-the-air fag packet calculation, save a small amount of money in year 1 - just enough to cover the cost of Mark Carney's hair stylist (or around a billion pounds). And this is if we did nothing at all - the logical response would be to drop tariffs on goods from the rest of the world, which we currently cannot do because we are hidden behind a customs union wall designed to protect, in many cases, continental EU producers.

The problem then seems to be entirely a logistical one and the general downside risk to sentiment, with a break down in our just-in-time supply chains - although the Calais authorities are moving heaven and earth to ensure that there are as few issues as possible (they stand to lose an awful lot if things go wrong). I have been wondering for two years how the people that run this country (who are, unanimously in favour of the status quo of course) would stop Brexit - and this appears to be how: by making no preparations or alterations whatsoever for leaving the EU, and then at the last minute pointing out that if we leave, we haven't done any preparations or alterations at all for leaving the EU and our homework is in fact in my other bag miss oh and we'll run out of food - so we should have another vote so we can jolly well stay. Great, thanks for that. Not sure I'll ever bother voting again if that happens.

But, seeing as I'm a Chartered Surveyor (pre-Brexit, anyway - post-Brexit I am He Who Structurally Surveys Our Burnt-Out Cave Dwellings For Food Scraps) - what of housing?

I predicted a market value collapse after the last financial crisis (and there was one, of sorts) - but I was staggered by the rise - and rise and rise and RISE - of house prices subsequently. In the interests of full disclosure, I also predicted house price crashes in, erm...2013, 2014, and the period 2015-2018 (including years 2016 and 2017). But this boom was outside my market-modelling as it was down to a Deus Ex Machina, or "ZIRP" as it was known (zero interest rates) - and the pumping of £375 billion into the house market by Mark Carney et al (small hands, smells of cabbage). And, interestingly, the Bank of England have now said that, in a No Deal scenario, they would release another £40 billion or so of QE. And - this would be the key bit, housing-wise - if they didn't in fact raise interest rates, on the grounds that competitive devaluation is a good thing and would help our trade deficit, this extra money sloshing around would inevitably end up being lent by banks to house purchasers. This would lead to house prices actually going UP.

As I say, the above is just a stab in the dark - but despite all the screeching hysteria, very few people have explained to me exactly why the underlying figures look quite so apocalyptic if we leave the EU without a Deal - a melt-down just sort of seems to be expected. But unfortunately, expectation often begets reality (apart from at Christmas, seemingly, I wanted a train-set and OH SOCKS THANKS A LOT GUYS) so I wouldn't bet against it, given the pyramid scheme that in any case constitutes our fiat economy.

I think I need a lie down.

Chicken Licken Was Right

Wondering what will happen with a No Deal Brexit?

Well, here are my thoughts – by the way, the title of this post refers to a story I was read as a kid, about a chicken who had an acorn fell upon her head, and as a result she thought the sky had fallen in. Then she said she would go and tell the king [SPOILER ALERT – she gets eaten by a fox in the end].

I now think the sky is going to fall in. I will explain why, below.

Essentially, I’ve been trying to model what will happen if a No Deal Brexit occurs. I put the chances of this at about 55%-60% - this is, of course, purely speculative.  I think you can be pro-Brexit, but point out that the chance of leaving without a deal should, of course, be zero – but in game theory terms, the incentives for each side to reach a deal are relatively low, in comparison to how insane leaving without a deal actually is (we will have to start boiling stones for soup, for example). I voted for a sane Brexit - my friends tell me this is an oxymoron, but this is a separate discussion.

As it stands, the incentives on both sides are skewed: the people negotiating for the EU (Barnier et all) will not lose out if there’s no deal, as their large EU Civil Servant salaries will be paid in any event – they would, arguably, be pleased as it would stand as a warning to others.

The four great offices of state in the UK (and all of those in charge of the negotiations) are all occupied by people who were (are) firmly remain – and in the event of a No Deal they could presumably say “well, we did say it would be a disaster” and hold their heads high. Most of my remainer friends would at least also starve to death with their heads similarly held high: in fact, can you imagine anything happier than a metro-liberal Brit who actually gets to be a martyr? To make matters worse, Theresa May now seems determined to die in a ditch over the Chequers proposal, something that the EU have already said is not acceptable.

I still think that this could lead to my original prediction materializing: that a loaded gun is put to the head of the British people, and we are asked at the last minute: are you sure you want to do this?

But what happens if we, the electorate, call their bluff and a No Deal Brexit happens? (Specifically in relation to our financial system, that is.)

Well, other than having to start eating zoo animals - two things are likely, both of which I think are reasonable predictions: the first is that there’ll be a run on the pound, and secondly, interest rates will have to go up to defend the currency. Based on historical precedent, by about 3% seems likely.

How will this impact on the housing market and our financial system generally?

Well, significantly. 

This is what my model is trying to war-game. The outputs of my little model, simplified, are below.

By the way, all these figures are approximate, and gathered largely from the ONS or figures put out by the banks themselves.

To start, total housing stock at the moment is £7.14 trillion. Total bank assets are £8 trillion, with UK bank assets at £4.2 trillion. Despite what you may have been told, nothing has fundamentally changed with regards to our financial system since the last financial crisis, which came within hours of ending Western Capitalism: no UK bank has enough reserves to fund itself for very long, they are still entirely reliant on wholesale markets for day to day funding: UK bank’s capital reserves now stand at a meagre £450 billion.

The total mortgage market is £1.3 trillion, roughly a quarter of total UK bank assets. This is based on an average house price of £226k, with 1.18 million houses changing hands every year. Of these, 40% are bought with cash – about 700k being bought with a mortgage. There are 27 million houses forming part of our housing stock in total, so just over 4% change hands annually.

Non sequitor: this is what makes the idea that building more houses will make houses affordable such a bizarre idea – even an extra 100k houses a year only increases supply by a maximum of 6-8% - and average house values are valued at over 8 times average incomes. To make houses affordable, ceteris paribus, you’d have to build well over a million houses a year. But I digress.

If rates go up to historical norms - ie to, say, 4.5% - then in our scenario this will more than double interest repayments in aggregate, and arrears will roughly double, as a rule of thumb.

House price values are driven by transaction prices, and transaction prices are the product of loan affordability – which is driven by average salaries, leveraged against interest rates.  If rates go up in this way, affordability is likely to drop back to approx. 6.7 times income multiples, again based on historical precedent. This would cause a 32% drop in market valuations for new transactions.

The very big mistake people make here is to think that this will only apply to houses coming onto the market: this is a fundamental error. As a Chartered Surveyor, I am more aware than most that values are based entirely on comparables – ie houses that have sold recently. If ten identical houses are in a row, and one sells at a 10% haircut, then every house in the row is suddenly worth 10% less in terms of our current housing market’s financial ecosystem.

If new transactions, based on what becomes affordable with rates more than 3% higher than they were, transact at approx.. two thirds of their values prior to a rate increase, this will force banks to re-value their entire loan portfolios. Based on current aggregate asset values of housing stock, this would mean a total loan book write down to, at least, £860 billion, more or less.

This would mean that if house prices start changing hands for a third less than they are now, which would be likely if a no deal brexit happens, banks would have £438 billion wiped off their balance sheets, within a few months. This is not taking into account any potential panic taking hold in the market – and also the completely unprecedented fact that 5 million houses are now held on short term ASTs, which can come on to the market in a matter of months – previous significant house price corrections have always been tempered by illiquidity.

Given that total UK bank assets stand at £450 billion, as noted above, even the optimistic scenario would more or less render our entire banking system bank-rupt.

Given our banks barely have enough funding to cover day to day activity as it is, I think I might start planting vegetables.

Someone needs to tell the King. Not me though. I ain’t gonna get eaten by no fox, no siree.

Last Chance Saloon

Not to brag, but I’ve just solved the housing crisis. But I’ll get back to that: firstly, I just want to look at where we are. Here’s the problem: about two million people who would’ve bought in the past few years, in normal historical conditions, haven’t been able to, and are now renting. This is a problem on several fronts, but mainly as our economy is essentially built around owner occupation: it is the main way in which most people are able to save and build capital, and plan for retirement, and has been incentivised as such for decades through our taxation system.

As millions of people are now excluded from buying, and home ownership for the under 40s has fallen off a cliff, this means they are not only excluded from security of tenure – renters only ever being two months away from eviction at the whim of a landlord, and the ensuing psychological impact that has over many years, even if the dreaded Section 21 notice is never actually issued – but they are also excluded from any form of capital accumulation, and thus have no stake in the system.

A few other countries have majority rental sectors – such as Germany – but people are encouraged to save in other ways, through the local Landesbanken system etc, and thus can accumulate a stake in the status quo without owning a home, and their home is in any case an actual home as they have decent tenure for rental properties. There is nothing wrong with the owner-occupier model of saving and investing per se, but clearly if most people under the age of forty are excluded from it and there is no route in, then it is not sustainable.

So we now have the rise of Corbyn, and the Tories scrabbling around for ideas to counter his rise to power. And for them, it's now or never. I cannot have been the only person to have watched Mrs May’s recent speech open mouthed: having briefed before the speech that she was going to unleash a new generation of council house building, she announced that she was in fact going to build 5,000 new council houses a year. There are 1.2 million people on council house waiting lists, and this was her answer. I was absolutely, completely flabbergasted. We’ve had the worst decade for real wages since the 1860s, home ownership is plummeting, and the Tory answer is, erm….well, just, well. Utterly bizarre. And Help to Buy is just…..I mean, how will this help affordability for First Time Buyers in any way, at all? AT ALL? I mean, crumbs.

If this is going to be as good as it gets, then Corbyn will win power, without any shadow of a doubt. Now, Corbyn has already talked about confiscation of private property in response to the simply awful Grenfell disaster: I don’t want to go into that because it is too horrible for words and a side issue in terms of solving the housing crisis: but Our Future Glorious Leader’s words were instructive, in that he saw no problem in simply confiscating empty flats nearby as a solution.

Once you start on this road, and are happy with the first ideological leap, then it’s very easy to make the next logical step: there are millions of renters, and not so many landlords, landlords have had it good in the last few years, so why don’t we just…….well, take their stuff, and, well, just give the flats to the renters? I don’t think we’re far from this stage. Fewer than 1 in 5 renters are saving for a deposit, and essentially, now, if you don’t own or have parents who own, you will never own – so taking stuff is going to be the next logical step, as there is no other step that they can see. If I was a BTL landlord, I would spend every waking minute haranguing my local Tory MP to ensure better rights for renters, and to solve this crisis asap, as if not my pension is going to go up in smoke. And the consequences of this sort of confiscation will be: well, total bankruptcy for everyone, to keep the story short. That’s just what happens.

So what do we do? Firstly, build a hundred thousand social houses a year, by letting Councils borrow money. Not difficult. A third of what we built after the Second World War when we were completely bankrupt.

And secondly: there are 11 million renters, and 2 million private landlords: transfer ownership of a chunk of these to the current renters, and the problem is a long way to being solved. If nothing is done, this will happen in time anyway: but through confiscation, and we’ll end up boiling stones for soup. So simply incentivise BTL landlords, right now, to sell to their tenants, at decent market values.

This is actually easy to do. There isn’t really a shortage of properties on a gross level: the ratio of bedrooms to people is roughly static, it’s just that the financial system around home ownership is completely screwed, people are stuck in properties they don’t want to sell as it will financially penalize them if they do, and others are renting houses they would normally have bought.

In fact, most BTL landlords can’t sell, as they have a large (normally 28%) CGT liability if they do, and no other decent investment options: so selling will mean they lose money, for a worse return. The solution is obvious –  say to landlords, if you sell to your tenant, then you will not have to pay any CGT. Suddenly, they save 28% on tax on the increase in value, which will be a big chunk of the gross value, in most cases. And if you are a BTL landlord and put money into the stock market from your property sale, we will exempt you from future stock growth CGT and stamp duty (this bit needs refining, but something along those lines).

The other crazy thing is the mortgage process: we were turned down for a mortgage 18 months ago (luckily not on the second mortgage application or I would be writing this having emigrated) on the grounds that we couldn’t afford the repayments, despite them being lower than the rent we had paid on time, every month, for FIVE YEARS. So say to all private sector tenants: if you can pay your rent on time for 3 years, every month, and can prove that you are funding it through your own endeavours: then a bank -  perhaps RBS, say, which we taxpayers frigging own – will guarantee you a mortgage based on those repayments. Certainty returns, tenants have something concrete to aim at, even if it's a few years away. And hey, why not take some of the 28% CGT saving from the landlord, and loan the tenant a 5% deposit from that saving?

Result: millions of private renters enter homeownership in the next year or two, millions more have a stake in the country again, the rest know if they work hard they'll get there eventually, and if they can't, the state will build them a council house: and the stock market is stock full of private investors and capitalism is saved.

You’re welcome Britain.