Depressingly high house prices for the young could at the same time also be depressingly low prices for the old.

Sir, I refer to “What’s really depressing our young men” by Rahm Emanuel Washington Post August 12, 2025. It has to do with the high house prices.

December 18, 2018 you published a letter in which I wrote: “If you want easy financing to help someone afford a house, then house demand and house prices go up, and you need to give even more help to the next person who wants to afford a house. Do we want affordable homes or houses as investment assets? There’s no easy answer, because going back to just homes would also cause immense suffering for all those believing they have, with their houses, built up a safety net.”

When “Tackling homeownership head-on”, Rahm and all other political influencers and decision makers should beware that the above remains just as valid today.

With respect to the financing aspect, you all need to give much more credit to Paul Volcker’s valiant confession in his “Keeping at it” biography: “The assets assigned the lowest risk, for which capital requirements were therefore low or nonexistent, were those that had the most political support: sovereign credits and home mortgages.”

PS. For further references read what ChatGPT and Grok answered when I asked: "If with lower bank capital/equity requirements you make banks hold more residential mortgages than loans to small businesses and entrepreneurs, will not house prices, in the long term, become higher than what the real economy can justify?"

https://subprimeregulations.blogspot.com/2025/03/ai-chargpt-grok-can-lower-bank.html

@PerKurowski

 

Jeff Fairburn’s £75m bonus is nothing when compared to the real problem with house prices.

Aditya Chakrabortty holds that “Jeff Fairburn’s £75m bonus has sharpened focus on the vast windfalls generated by help to buy” “Let’s stop lining housebuilders’ pockets and tax them instead” The Guardian, November 9, 2018.

No, it clearly has not! By focusing on that bonus, which naturally stirs up some envy into all of us, he misses the real issue, namely how much helping houses to be affordable for some, makes these even more unaffordable to others.

So first, let us all shake off that Jeff Fairburn’s £75m bonus. To begin with just take it as if life had dealt him a lottery jackpot. He has most certainly paid much more taxes on it than the taxes that would be paid had that £75m bonus been shared out equally among us all. And I would bet that more than 99% of what purchase power he had left over, has already been returned to the real economy by him buying assets or services.

That “the five biggest British housebuilders together paid out £4.4bn in dividends to shareholders between 2014 (the first full year of help to buy) and 2017” is totally irrelevant when compared to the magnitude of the real problem with houses.

That problem has to do with how much house prices have been inflated by this scheme and so many other distortions; especially like regulations that allow banks to hold much less capital when financing the purchase of houses than when lending to entrepreneurs… those who could be the ones who create the jobs so that house buyers will be able to afford to pay their mortgages and utilities.

Aditya Chakrabortty laments “Without that money from you and me, Persimmon would simply not have made that many sales, nor made that much profit– and its outgoing boss probably wouldn’t have got such a large bonus.” He should look at himself first.

Does Aditya Chakrabortty own a house? Then he should reflect on how much his house has gone up in value because of all the political kindness awarded house buyers. Should he not pay high taxes on that? House builders at least built. What have house owners done to enrich themselves so?

Does Aditya Chakrabortty not own a house? Then he should reflect on how much all the political kindness awarded house buyers has made houses even more unaffordable to him.

Houses are no longer homes; as a consequence of all regulatory and political kindness these have become investments assets too. The day too many house-owners will want to cash in their investment, for instance to pay some retirement costs… will the buyers be there for them? 

Well if we prohibit all political kindness awarded house buyers… as we in fact should so as not to blow the bubble larger, then many if the current buyers will definitely not be there... but then those that do not own houses may begin to find these affordable.

It all makes me remember Alan Price’s “Oh my, my, my, my, my, my, my, it makes you wanna cry. This is the house that Jack built, baby, and it reaches up into the sky”

More important than affordable houses for the young, is for them to afford houses.

A letter sent to The Globe and Mail (not published)

The Inter-American Commission of Human Rights (IACHR) has joined UN Rapporteur in recognizing Canadian Human Rights-Based Approach to Housing. When it refers to the creation of safe and affordable housing during the next 10 years for the Canadian population most in need, such as women and children fleeing family violence, seniors, persons with disabilities, those dealing with mental health and addiction issues and veterans, I cannot but concur.

But, it also makes reference to “young adults” and, in this, as a grandfather of two Canadian girls, I must raise my hand to argue that much more important than allowing the young adults affordable housing, is allowing them to afford houses.

Currently, because banks are allowed to leverage more with “safe” residential mortgages than with loans to the “risky” entrepreneurs who stand a better chance to create the future jobs our young need; and banks therefore earn higher risk adjusted returns on equity with mortgages than with loans to entrepreneurs, Canada, like all countries using the Basel Committee’s risk weighted capital requirements for banks, has put the horse before the cart.

PS. Not sent to The Globe and Mail: What would the price of a house be if there was no financing available to purchase these? Of their current price how much is represented by the intrinsic value of the house, and how much is a reflection of all one-way-or-another subsidized financing allocated to that sector? The sad truth is that our society has ended up financing the financing of houses. When all that low risk weighted mortgaging comes home to roost in a subprime unproductive economy, it will be hellish

PS. Chinese money: What’s the problem with Chinese freezing some of their wealth in Canadian real estate? What’s important is what those selling that real estate do with the money. Or not?

Research project: How much in the current house prices can be attributed to the market having priced in all preferential treatments the society has awarded the financing of houses… like the low risk weights in the risk weighted capital requirements for banks?

@PerKurowski