For the opening of Community Housing Cymru’s new offices Gillian Clarke the National Poet for Wales penned a verse titled ‘Not much to ask.’
A holt, a den, a form,
like otter, fox or hare,
shelter from shadows of the night
against the bitter air,
four walls for the winds to lean on,
a roof for the rain’s knock,
a door to close against the dark,
a key to turn in the lock,
a window to watch people pass,
a street, a tree, a patch of grass.
As night falls it’s our breath, our story
clouding the glass.
A poem about all of us having a basic need for shelter, triggered the thought that the economic storm that’s raging around Europe was initially caused by a massive slump in the housing market in the United States.
The story starts with more and more cash lent on houses that had a low asset base. People used the cash to buy all kinds of goods, cars washing machines you name it the money was there to buy it. But as they say, all good things come to an end.
These banks got cold feet. They collectively decided they’d been a bit imprudent had put out too much cash on such a slender base. They decided to roll things back.
So how did they set about getting themselves out of a hole of their own making.
The first port of call was to become heavy with those a few years earlier they’d been encouraging to take more and more cash. But just like low life loan sharks they pushed the poor householders for their cash back.
So what happened when the pressure was put on, the owner-occupiers try to sell their houses to clear their debts. Or more often than not foreclosure happened. Homes were seized by their creditors the owners evicted. The banks then try to sell a job lot of houses.
It’s not rocket science to work out the consequences – plunging house prices and then more and more find that their debts greatly outweigh their assets.
Even more find themselves forced to sell. Each day, not to put to fine a point on it, the numbers finding themselves in the financial mire goes up. House prices? They’re in a spiral moving relentlessly downwards.
Result – a massive slump in the housing market which triggered the general slump we’re all in today.
Not only did these banks lean on those they’d handed the cash to, but they also off loaded as many of these mortgage agreements to other banks and financial institutions.
What these banks were buying was junk. If you buy junk you eventually run out of cash and just like the householders you’re in trouble. In banking terminology, they’re over exposed. To the rest of us they’re in a mess. So there you have it – the banking crisis in a nutshell.
What starts as a genuine need by families for a roof over their heads, becomes a financial instrument that is more and more distant from that basic need. And as they say, that’s why we’re where we are, in a middle of a recession or perhaps even a depression.
So what’s to be done? Well, government needs to bring back confidence to the market. This cab be done by building more homes for rent. It also can help with mortgage rescue schemes so that families don’t loose their homes and cause creditors to further depress house prices by off loading these homes onto the market.
The Welsh government bemoans that it hasn’t got many weapons in its economic armoury. Housing is something it has responsibility for. It could and should use housing as a vehicle to grow the economy of Wales. All it takes is a little imagination and some determination.