Property and the political elitePosted: November 24, 2014
It’s now received wisdom, and a key part of UKIP’s appeal, that we are ruled by politicians who are out of touch with the concerns of ordinary people. How much of this is down to house prices?
Perceived divisions between politicians and voters are nothing new of course. Nor are accusations of champagne (or Islington/Hampstead) socialism and a huge gap between Labour leaders and their core vote. However, if these are US-style ‘culture wars’ over the politics of identity and national flags, they are being fought in the language of house prices, as shown only too clearly in this week’s Mail on Sunday story about the ‘Thornberry set’ and the North London ‘liberal elite’.
The issue was highlighted by last week’s tweet by Labour MP Emily Thornberry about a flag-festooned house in Rochester & Strood and then brought home by media coverage of its Sun-sponsored owner knocking on the door of her ‘£2 million house’ in Richmond Crescent in Islington. This street is iconic in New Labour circles because it’s where Tony and Cherie Blair lived immediately before they won the 1997 election. Former Islington council leader turned Labour MP and chair of the Public Accounts Committee Margaret Hodge still lives there. This is a street of seriously big North London houses but they weren’t always worth in the millions.
Ten years ago, Andy Beckett wrote a long piece for the Guardian using the Blairs’ record in the property market as a symbol of social change in Britain. They traded up through Hackney and Holloway before buying 1 Richmond Crescent in Barnsbury for £375,000 in 1993. Emily Thornberry and husband, both of them lawyers too, bought their house in the street at the same time. The gentrification of the area – ‘a healthy chicken ripe for the plucking’ as a property bulletin put it in 1970 – had been under way for years before it became the neighbourhood of choice for media and New Labour types in the 1990s.
1 Richmond Crescent was a very large house and £375,000 was a lot of money in 1993. However, as the Blairs showed, it was within the reach of a high-earning middle class couple who had traded up a few times. If the Granita pact associated Islington with New Labour, it did not seem at the time to be the home of the political elite and the prices were high rather than stratospheric in London terms.
However, look what’s happened since in Richmond Crescent. The Blairs sold their house for £615,000 just after the 1997 election in a decision famously regretted by Cherie. Little wonder, because while they were still in Downing Street, it sold again for £1.3 million in 2004. In March 2014 it sold again for £2.9 million. Zoopla estimates the current value at £3.3 million and puts the increase over the last year at £502,000, more than the Blairs paid for the whole house 20 years ago. I don’t know if Emily Thornberry’s house has as many bedrooms (five) and bathrooms (three) as 1 Richmond Crescent but these prices definitely seem to put the street in elite territory.
Contrast that with Dan Ware’s house in Strood. Its current value is reported as £175,000, after he bought it in 2002 for £119,000. Both are in line with the mean house price in the Medway area. Had he been buying the average home in the area in the mid-1990s, he would have paid around £50,000. A house in Richmond Crescent would have cost 7.5 times that in 1993: a sizeable differential but still in some kind of proportion. At the time that Emily Thornberry sent her ill-fated tweet on Thursday, a house like hers was worth 19 times more than Dan Ware’s. House price inflation and the growing gap between central London and the rest of Britain have been enough to make them look like they are in two different countries.
In the terms employed by the Mail on Sunday, the political elite is interchangeable with ‘North London liberal elite’. Again this is symbolised by property values, with the family home of Ed Miliband and Justine Thornton in Dartmouth Park now said to be worth £2.6 million and a series of other Labour figures living in nearby homes worth £1 million or more. The Blairs have moved into a different property league and are now said to be the owners of six houses in London as well as a Buckinghamshire mansion.
However, the same thing has happened with a Conservative elite largely based in West London. The flat David Cameron bought for £130,000 as a 25-year-old special advisor looking on as the housing market crashed in 1992 is now worth £1.4 million. When he moved into Downing Street in 2010 he rented out his £2.7 million house in Notting Hill for a reported £6,000 a month. Cameron also owns a £1 million second home in his constituency paid for in part with taxpayer mortgage subsidies. George Osborne is reported to make £10,000 a month from renting out the Notting Hill house that he bought for £1.8 million in 2006 and could now be worth £4 million. He also made a £400,000 profit when he sold his taxpayer-funded constituency second home.
Even these figures are the tip of the iceberg when it comes to Tory wealth. According to a report in 2012, the combined wealth of the Cabinet is £70 million. Cameron and Osborne were estimated to be worth £3.8 million and £4.5 million respectively but this does not include the millions more that they stand to inherit. As for Iain Duncan Smith, he lectures social housing tenants about how many bedrooms they are entitled to from the £2 million farmhouse he occupies rent-free on his father-in-law’s estate.
And back in Islington there is one member of the political elite who is definitely not Labour or liberal. Boris Johnson bought a house in Furlong Road in the north of the borough for £470,000 in 1999, sold it for £1.2 million in 2009 and traded up to a £2.3 million home in Colebrooke Row just behind Angel tube station. His sister Rachel strangely neglects to mention this in her Mail on Sunday column on Labour’s ‘posh snobs’.
The point here is not that a gap between the political elite and the electorate is anything new but that it has grown out of all recognition a result of soaring property prices. The inherited wealth of politicians like Cameron, Osborne and Duncan Smith would always have set them apart. However, even without that head start, politicians of all parties who were lucky enough to buy at the right time and trade up have achieved paper wealth that makes them seem to come from a different planet to the rest of us.
At a time when younger voters are more and more likely to be renters whose only function in the property market seems to be to pay their landlords’ mortgages the gap now seems like a chasm. And it creates a new reliance on inherited wealth to get on the property ladder in the first place, as illustrated only too clearly earlier this year when Euan Blair, 29, was able to buy a £3.6 million house in Marylebone with a little help from his mum. The younger generation of politicians, no longer able to get on the London property ladder or claim expenses for the mortgage on their second home, will have no such luck.
We seem to have moved from property-owning democracy to a property-owning plutocracy. ONS statistics last week revealed that the total value of UK residential property rose from £1.4 trillion in 1997 to £4.7 trillion in 2013. This increase in housing wealth has been massively subsidised by the taxpayer. Main residences are exempt from capital gains tax in the UK at an estimated current cost of £12.6 billion a year. UK property taxation falls on the buyer through stamp duty and the only continuing tax on existing home owners – the council tax – is based on 20-year-old property values.
There are many reasons for the huge increases in house prices since the 1990s – not least the woeful record on the supply of new homes of the same political elite – but a major one is the under-taxation of property relative to other forms of investment. This has driven the value of houses as financial assets rather than just homes. The real charge against politicians – Labour as well as Conservative – is that they have allowed this to continue for so long that they have colluded in the enrichment of a propertied elite that includes themselves. This has not only divided them from voters but created a much bigger crisis of affordability. It’s also one reason why the gentrification of places like Islington (or Notting Hill) is not the ‘natural evolution’ claimed in a controversial Guardian article last week.
As if to emphasise this inaction by the British authorities, it emerged this week that the American IRS is chasing Boris Johnson for £100,000 in tax on the profit he made on his Furlong Road house. In the United States, first homes are liable for 15 per cent capital gains tax. Johnson was born in New York and is a dual citizen and US tax rules apply to earnings and wealth overseas where local tax rates are lower.
And higher taxes on property are on the way here too. Both Labour and the Liberal Democrats are promising versions of the mansion tax that could cost the political elite thousands of pounds a year each. It’s poorly named and designed to raise revenue for the NHS rather than to reform the taxation of property. But at least it’s a start.