In 1824, Nathan Rothschild was wealthy enough to personally bail out the Bank of England. By 1836, the richest man in the world died of an abscess at the age of 56. This disease is currently treatable with widely available antibiotics. Medicines that were previously unavailable to the ultra-wealthy are now commonplace for the average person. This is observed in all aspects of human life. What was once unavailable to the richest is now available to the poorest. The Rothschilds would have marveled at your flat screen TV, iPhone, AirFlyer, and straight white teeth, not to mention your online shopping and Ryanair planes flying around Europe in search of songs. In the past, traveling for fun was a privilege of the aristocracy. Today, Dublin Airport is one of the most democratic and socially representative public spaces in the country.
This is what we call economic growth, where more people have access to more things at more affordable prices. This economic penetration changes the amount of money we spend. In 1922, the typical household spent 57 percent of its money on food and non-alcoholic beverages. Currently, that number is 8.3 percent. At the time, nearly 90 percent of the family's money went toward food, clothing, rent, fuel, and utilities. Today, that proportion is less than a third. We have seen the process by which the poor purchase things that were previously the property of the wealthy (luxuries, consumer goods, experiences, etc.).
This seems obvious, but there is one big exception when it comes to housing.
In Ireland today, wealthy people live in houses built over the past 100 years for poor people. This is strange when you think about it. A similar point about England was made in an article by the always insightful Rory Sutherland in The Spectator last week. Ireland's predicament is even worse. Everywhere you look, the wealthy are competing for former council homes and Craftsman cabins built for the poor. How did we get to a situation where the rich are spending huge portions of their incomes to live in homes that were built for the poor and were once much cheaper for the poor? Is not it?
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In 1866, the Artisan and Worker Housing Act was enacted in response to a major housing crisis in Dublin. A new company was formed to build houses for the poor. These houses were also connected to the city center by tram. To make things affordable, the Dublin Corporation offered the premises it owned at cost price and also offered low ground rents. A house has been built. The main concern was affordability. For example, in February 1906 the Irish Independent reported that the rent for Harold Cross Cottage, one of his developments, was too high. How does a man who has himself, his wife, and four children, who receives $18 a week to feed, clothe, and pay society, pay rent of $6 or $8 a week? Is it possible? ”
Although they are wealthy, they have bought ex-council houses and artisan cottages dotted around the city, and the rich have settled in the homes of the poor and spent over 30 years making huge sums of money and salaries for their pleasure. are paying.
People thought it was outrageous that a worker earning near minimum wage would have to spend more than 30 percent of their wages on rent. Today, someone living on the minimum wage would probably spend a much higher percentage of their wages on the same Harold Cross Cottage, which sells for €1,558 a month. That would mean a minimum wage worker's monthly income would be 1,700 euros, almost nothing. Today, only the rich, and in some cases the really rich, can live in these houses built for the poor.
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Consider a wealthy couple returning from a stay in London. In his early 30s, he is a staff software engineer at a large tech company on the pier, and she is a corporate lawyer. In total, their household income amounts to a considerable amount of approximately 200,000 euros. They are in the top 5% of all earners. Ireland has a lot of wealthy young people. Over the past two years, the number of “tax units” (both singles and married couples are jointly taxed) with income above 200,000 euros has increased by 112%. For our engineer-lawyer couple, even the top earners can only borrow up to 4 times their gross income, so the mortgage could be her 800,000 euros. On the other hand, LTV (loan to value) regulations require that a minimum deposit of 10% of the property price, or 80,000 euros, be put aside.
Next, take a look at where and what they are buying. We're talking about former Craftsman homes in places like Portobello. Remember, they are the wealthiest young earners and are currently buying homes built for “ordinary” working people.
Let's move from the top 5 percent to the top 15 percent, those with incomes of €100,000 or more. Although they are wealthy, they have bought up ex-council houses and craftsman cottages dotted around the city, again wealthy people settling in the homes of poor people and paying huge sums of money for their pleasure over 30 years. They pay large sums of money and salaries.
Quite apart from the social impact of pushing poor people out of older neighborhoods, the infusion of so much money into housing through mortgages has reversed the original structure of our economy.
The main reason is that they have no choice. There are very few on the market, and 40 years of financialization have dumped mortgages on homes, accelerating price increases. And, as we have begun to observe, people's monetary worth has risen in many ways, giving poor people more access to lifestyles previously reserved for the rich, while housing The opposite is happening with respect to At a time when Harold's Cross cottages became prohibitively expensive, life expectancy increased from around 50-51 years in 1875 to 80-83 years in 2016. This would add another 30 years to his lifespan. The infant mortality rate in Ireland in 1916 was 81.3. Currently, the number of deaths per 1,000 live births is 3.7. 150 years ago many Irish people could not read. Currently, the literacy rate in Ireland is 99%. And the list goes on.
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Quite apart from the social impact of pushing poor people out of older neighborhoods, the infusion of so much money into housing through mortgages has reversed the original structure of our economy. We now reward people who buy homes and live in them, and penalize workers who go out and work. These renters are extracting vast amounts of wealth from real estate and giving two fingers to those who remain, many of whom, especially young people, are choosing to leave. Taking money from workers reduces spending in the total economy because young workers spend while rich people with access to cash hoard.
A solution to this problem was offered by Henry George around the time Harold Cross' Cottage was being built. The idea was to tax housing assets, tax land hoarding, and create a land value tax to make the country more livable for the many rather than the few. Any party that proposes this will win my vote and hundreds of thousands more.
