Corporate Watch : Newsletter 37 : HOUSE OF CREDIT
Shelter is one of the basic human needs. This issue of Corporate Watch newsletter looks at the way housing in the UK is shaped by the needs of the market and how the housing market affects the economy. Housing has become a big source of revenue for banks; the seemingly inexorable rise of house prices made bricks and mortar a safe investment.
With the sub-prime mortgage crisis in the USA, however, housing has become the achilles heel of the financial markets, creating what has been called the credit crunch. Morgan Stanley, the second biggest US securities firm, has lost at least $3.7 billion, and the IMF has downgraded their forecast for US economic growth, largely because of trouble in the housing market and the associated credit problems.
Our centre pages (House of Cards, 6-7) take a look at the causes and the implications of this crisis in greater detail, as well as the links between the US uproar and the crumbling of Northern Rock, one of the biggest mortgage lenders in the UK. This company suffered a spectacular Mary Poppins-style run on the bank in September 2007. In reaction the Bank of England has been pumping money into Northern Rock the amount could reach £30 billion by the end of 2007. Such prompt action shows the extent to which the UK government sees housing loan corporations as major props of the UK economy.
A similar reaction to the credit/housing crisis has been taken by the European Central Bank, which has injected funds into the money markets in the form of ?60 billion in loans, with a further ?60 billion to follow in mid-December. Invariably the mess caused by financial institutions speculative bubble has been seen as some kind of natural disaster, and taxpayers money has been spent to prop up the system, based on unstable financial corporations. In fact, much of the money these corporations are playing with in the first place comes from ordinary people with pension companies some of the largest public players in the crisis-hit money markets. As with so much of the current corporate-dominated system, public money is used when companies profits are in danger. This current crisis is not, however, a mere teething problem it indicates very deep problems with a system where by corporate-dominated markets allocate resources as important as housing.
BULLDOZERS IN A CHINA SHOP
Meanwhile, the rather more material work of building actual UK housing is also influenced by the needs of corporations. The Communities and Local Government Minister has confirmed that one billion pounds will go on the discredited Pathfinder schemes over next three years. These schemes are based on demolition of existing housing often Victorian terraced streets to allow developers to build more lucrative, higher cost, housing (see past issues of Corporate Watch news). Under the Pathfinder scheme in Oldham, North-West England, ninety homes have been issued with compulsory purchase orders (CPOs). Partnered with the council on this project are the housing and consulting companies Keepmoat, Gleeson Regeneration, BASE and Bellway. In Liverpools Edge Lane area the Pathfinder companies and the council are pushing on with plans for more CPOs despite having their last attempts ruled illegal.
The recent Planning Bill has also raised fears that it will allow companies to push through the planing process even quicker, in spite of local concerns. John Cridland, the deputy director of the Confederation of British Industry, has welcomed it: If the UK is to meet its economic and environmental objectives, including developing new energy sources, the planning bill needs to deliver a swift and efficient service, whilst giving all interested parties a fair hearing.