Housing, wealth creation and welfare- from citizen to consumer.

This is a guest post by Gregory Hill O’Connor, Msc in Comparative Social Policy, University of Edinburgh. 


Integrating Housing and Welfare: The Impact of Housing Wealth on the Shape of Welfare in the UK



This is the dissertation I wrote in completion of my MSc Comparative Public Policy at the University of Edinburgh. I recently received a distinction for it which was a relief as I had been worried about it in the light of new popular attention that the recent Help to Buy policy, the focal point of my work, has received. The Help to Buy policy is designed to try and lower the barriers to home ownership. The significant elements of it is a reduced deposit and an equity loan from the government of up to 20%. The focus in the media has been on the potential for this policy to create a new credit bubble as more loans are given out. However, this report looks at the issue from a different angle. It questions and attempts to explain why housing is such an important aspect of British culture. When I talk about housing I mean home ownership as a particular tenure. The UK was the first EU country to have ownership as the majority tenure, suggesting that the notion of ownership is important to us. However, this piece also examines other benefits of home ownership – the financial benefits. I link the notion of housing wealth with recent welfare state restructuring as people are more and more prone to using unlocked housing equity to support themselves in areas that had previously been covered by the state. This changes the nature of our welfare system and methods of wealth distribution. I argue that it is polarising wealth within the UK. The Help to Buy policy comes into this very clearly as it is attempting to get more people into home ownership based upon the financial and cultural benefits of home ownership. However, the reality and outcomes are more complex than this and are explored in this piece.

This is but a brief outline of my dissertation and its relevance in offering a different angle to Help to Buy than the one being offered. Also, linking it to welfare is also highly relevant at this time. I have much more to say on this matter of housing, finance and culture so if there are any questions or comments I can be found on twitter @GregHillOConnor. Happy reading.









This paper seeks to understand how the use of housing wealth in individualised welfare has changed the shape of the UK welfare state. The relationship between the state, citizenry and market is an important aspect in shaping welfare. The way in which the state acts to support its citizens in times of need characterises particular welfare systems. Thus the incorporation of housing wealth into welfare raises questions as to how the housing market is engaged with. Firstly, it is necessary to establish how housing became such a prolific source of wealth. Furthermore, the way in which homeowners have dealt with this new source of wealth must be examined. Rather than embracing the ability of property to act as a source of income through manipulating the housing market, homeowners have used housing wealth to bolster traditional housing desires. This results in individualisation of welfare resources from housing and introspection of housing wealth, neglecting systemic processes of wealth accumulation. Such processes are driven by the housing market. Here, a regional comparison of house prices will be used as a way to demonstrate limitations on the accumulation of housing wealth based upon purchasing power. Finally, analysis of recent policy, the Help to Buy equity loan and the Get Britain Building construction fund will show that the state is integrating the role of the market, encouraging housing market entry without mediating for the negative impacts of the market.



















1. Introduction: Assets and welfare. 4

1.2 Building Blocks to Policy. 4

2. Literature Review: Setting the scene. 7

2.1 Theoretical Underpinning of Asset-Based Welfare. 7

2.3 Collecting the Strands. 13

3. Research Design. 15

3.1 Relativism and Functional Reality. 15

3.2 Positivism.. 16

3.3 Policy and the intersection of relativism and positivism.. 16

4. The Changing Frame of Home Ownership. 18

4.1 The Traditional Frame of Home Ownership. 18

4.2 Building Societies, Banks and Deregulation: How housing became a commodity for banks  19

4.3 Into the 21st Century: How housing became a commodity for homeowners. 20

4.4 The Financial Meaning of Housing. 21

4.5 Finance in Asset-Based Welfare. 22

5. Between Tradition and Finance. 23

5.1 Merging of Meaning. 23

5.2 Individualisation. 25

5.3 Neglect of the Financial. 26

5.4 Financial Means and Traditional Ends. 27

6. Equity Accumulation and the Housing Market 28

6.1 Data Collection. 28

6.2 Data Manipulation. 29

6.3 Controlling for Migration: Focus on first time buyers. 32

6.4 Impact of the Market. 34

7. Government Policy. 35

7.1 Affordability and Policy: Evidence from the Help to Buy scheme. 35

7.2 Supply Side Policy: Funding construction and enabling the market. 38

7.3 Implications in an Asset-Based System of Welfare. 41

8. Conclusion. 43

Bibliography: 46

Appendix.. 50


List of Figures

Figure 1: Changes in house prices over time in the East Midlands and the South East 29

Figure 2: Changes in the price of terraced housing in the East Midlands and South East 30

Figure 3: Changes in the price of semi-detached housing in the East Midlands and South East 30

Figure 4: Changes in the price of detached housing in the East Midlands and South East 31

Figure 5: Changes in the recorded purchase price of properties bought by first time buyers in the East Midlands and South East 33

Figure 6: Comparison of variable equity based on differential purchasing power and mortgage value  37






















1. Introduction: Assets and welfare


The shape and role of welfare in the UK has been an issue of contention in recent decades. Welfare retrenchment since the 1980s has raised questions about how to create a sustainable system of welfare (Taylor-Gooby, 2001:197). The basis of welfare has transformed so as to change the way people interact with the state and their wealth. The introduction of conditionality and diminishing state transfers means that there is an increasing propensity for individuals to use personal wealth at times of risk, for example, unemployment and old age (Finlayson, 2009:405). This is the basis of asset-based welfare; that people accumulate financial assets in order to maximise their personal wealth to use at times of need rather than relying on the state (Sherraden, 1991). Given this new importance of individual wealth within the UK welfare system, an understanding of how the state and society view the accumulation of wealth is crucial in understanding the new nature of welfare in the UK. This paper will focus on housing as a source of wealth. Housing wealth offers an interesting study into how assets are dealt with as sources of welfare, with property representing 39% of individual wealth (Lowe et al., 2010:110) and housing occupying an important position in British culture (Ronald, 2008).

This paper seeks to establish how the incorporation of housing wealth into welfare impacts the nature of welfare in the UK. However, such an aim must be broken down into a series of research questions:

  1. How did property become a viable source of wealth?
  2. To what extent are homeowners engaging with the financial function of their property?
  3. What are the dynamics of the housing market that determine housing equity?
  4. How is the state interacting with home-owners and the market?


1.2 Building Blocks to Policy

Looking at the ways in which the government engages with home ownership and housing wealth is crucial in understanding the impact of asset-based welfare. The level of support given to homeowners will shape access to welfare. In the traditional pillars of welfare (such as social security) it is the role of the state to provide funding for welfare through taxes. This collective sense of welfare is what characterises the UK welfare state within the Beveridge model; the state acts to mediate the negative impacts of market forces (Esping-Andersen, 1990). However, with increased focus on individualism and individual assets the extent to which the government attempts to retain a sense of collective support will reflect the level of change in the welfare state. This paper will look at two key policies announced by the Coalition government. Analysis will focus on the extent to which the government looks to support homeowners and facilitate the accumulation of housing wealth. However, before housing policy can be properly scrutinised, issues of housing as an asset and the nature of the housing market need to be established.

The idea of using housing as a financial asset has been revolutionised in recent years with the increased availability of in situ equity release products allowing for the use of housing wealth without having to sell the property (Leather and Munro, 2000:514). This has stimulated several pieces of research examining the impact of housing wealth on the distribution of wealth in the UK (Cook et al., 2009a; Bastagli et al. 2013). However, few works explicitly link this idea to the shape of welfare in the UK. Asset-based welfare relies on homeowners engaging with financial processes involved in property. Housing became an important asset, offering a ‘financialised’ meaning to housing (Kim and Renaud:2009) as a counterpoint to traditional, familial meanings. This notion can be expanded to suggest that homeowners merge the two meanings, using housing wealth in order to reinforce traditional housing desires. Housing wealth, along with its welfare benefits, are individualised and privatised within the home space. Consequently, systemic considerations of wealth distribution and equality of access are obscured. Furthermore, it demonstrates the complexity of housing as an asset, performing multiple functions, both financial and traditional. This is an important foundational argument as housing policy neglects these nuances in the meaning of housing.

Within these financial and traditional frames of owner-occupation, the role of the housing market in determining housing wealth remains core to any analysis of housing as a basis for welfare. Housing wealth is determined by the equity in a property; the value of the property minus the value of the mortgage. Consequently, housing wealth is determined by the performance of the housing market, indicated by house price. This paper will use a UK regional comparison of house prices in order to examine the impact of house purchase price on its performance within the housing market. Such a dynamic is important in shaping access to welfare by potentially limiting the accumulation of housing wealth based on the ability to purchase high cost housing. When looking at policy, these dynamics must be taken into account, especially with policy attempting to lower barriers to home ownership.

1.3 Structure

This paper explores the implications of an asset-based system of welfare within the UK. Central to the welfare system in the UK is the role of the government in structuring relationships between citizens and sources of welfare. In the case of housing wealth as a source of welfare, housing policy must be examined in order to judge the relationship between the state, welfare and the market. The elements of this relationship will be established in Chapter Two using a review of the literature on housing and the welfare state. The ways in which housing became an asset from which to withdraw wealth will be examined in Chapter Four, investigating the change in function of housing. This will then lead to Chapter Five which will look at how homeowners themselves view housing, offering a more behavioural perspective on the role of housing as an asset. Chapter Six looks at property as a simple financial asset and tries to outline how housing actually accrues wealth while also highlighting problems with this.

Finally, Chapter Seven examines the government approach to housing, using the above arguments to critique the approach taken by the Coalition; suggesting a fundamental shift in the way in which welfare is approached in the UK. Housing policy represents a further step back by the state insofar as it is helping people access the housing market (the source of welfare) rather than funding outcome based provision. Within this role, the state is seeking to bolster the housing market, protecting against total market failure but without offering mediation against the inequalities found within it. Considering the role individual wealth plays in providing welfare, this means that the market becomes more integral in the ways in which individuals access welfare.












2. Literature Review: Setting the scene

Before embarking on analysis of owner-occupation and the potential inequalities involved in issues of housing wealth it is important to understand how housing and the welfare state became intermeshed. It was a process that involved theoretical exploration into the role of the state within welfare systems along with questions about the nature of welfare itself. However, this developing field of research was taking place amidst a changing landscape of politics and economics in the UK. These changes will be examined, outlining the discussion surrounding welfare state retrenchment and the new role of housing with a realigned welfare state.


2.1 Theoretical Underpinning of Asset-Based Welfare

Esping-Anderson and Comparative Welfare State Theory

Esping-Andersen’s influential Three Worlds of Welfare Capitalism (1990) provides the reference point to most subsequent comparative welfare state research. In it Esping-Andersen formulated a typology of welfare states based on cross-national, comparative analysis. Using levels of decommodification and stratification, Esping-Andersen looked at the impact of different welfare state regimes.

His view of welfare suggests state centrality in managing social risks by emphasising the different role of the state within regime types. This has ramifications for the stratification of society whereby differential access to welfare can entrench or weaken social divisions based on concepts of inclusion and social citizenship (Leitner and Lessenich, 2003). For example, the German ‘conservative’ regime type has a high stratification effect as unemployment benefit is a wage replacement system, offering a certain percentage of previous income in benefits (Leitner and Lessenich, 2003:330). This allows income related stratification to continue through unemployment, systematised through the welfare state. Through this lens Esping-Andersen sees social relations being governed by access to welfare whereby people are categorised by their level of inclusion in the welfare system.

Esping-Andersen (1990) also focusses on the role of politics in the development of welfare state regimes. Though not delving into ideology, he builds a political index suggesting that high occurrences of left-labour parties result in a more collective welfare provision while high labour mobilisation but not political representation results in conservative welfare systems whereby state transfers are based on labour market performance. While remaining important, Esping-Andersen has been challenged in his assertions.


Beyond Esping-Andersen

Castles (1985) developed a contrasting view of welfare to Esping-Andersen’s later state centric view of welfare states. Based on research in Australia in the 1970s, Castles (1985:31) found that the 12.8% of GDP welfare spending was much below the 19.3% in Western Europe. This figure is an anomaly considering Castles’ political analysis that shows Australia having high levels of labour mobilization; evidenced by early inclusion of the labour movement into politics (Castles, 1985:56). In researching this anomaly Castles rejects Esping-Andersen’s (and his own earlier) emphasis on politics as a driver of welfare state development by finding that in fact the labour movement in Australia did not campaign for higher social spending but for higher wages to allow people to invest in private insurance (Kemeny, 2005:64). Castles (1985:102) thus develops the ‘wage earners’ welfare state’ in which political effort is put into maintaining personal income at a level to which they are able to access welfare resources from the market. By focussing on access to insurance rather than government spending, Castles’ notion of the ‘wage-earners’ welfare state’ reconceptualises the welfare state as something concerned with outcomes rather than inputs. Thus, in Castles’ (1985:82) conception ‘real welfare outcomes are not necessarily solely a function of the extent of income maintenance expenditure’. Questions then arise as to how governments view welfare outcomes if they do not influence them directly through state transfers. This paper will seek to address such questions by looking at how the current government supports the accumulation of housing wealth as a pillar of welfare. Central to this will be analysis of recent policies designed to increase owner-occupation rates as well as addressing the ailing housing market in the UK.


Housing Data in Welfare Research

The incorporation of housing data into welfare state analysis is crucial for the evolution of asset-based welfare by emphasising the importance of personal wealth to purchase welfare resources. Key to Castles’ (1985) research is the use of housing data; moving the debate away from income and towards assets. Esping-Andersen’s stratification occurs as people are categorised by their access to welfare as evidenced by his evaluation of the German corporatist wage-replacement unemployment benefit. However, by using housing data in his analysis, Castles (1985) suggests that as ways of accessing welfare diversify, as does the way in which society is stratified by the welfare system. This deconstructs issues of social stratification through access to welfare resources. Individual wealth, stored in housing, for purchase of welfare, in the frame of Castles’ wage earners’ welfare, fluctuates according to market performance. Thus the stratification caused by differential welfare outcomes becomes a function of the market. By comparing two areas of the UK, an attempt will be made to show potential limitations on equity accumulation imposed by the housing market resulting in the unequal distribution of wealth.

Schwartz and Seabrooke’s (2008) research into welfare state theory sheds light on the role of the state in an asset-based system of welfare. Using the Varieties of Capitalism (VoC) approach, they develop the idea of ‘Varieties of Welfare Capitalism’ (Schwartz and Seabrooke, 2008:239). Rather than using the VoC typology of coordinated and liberal market economies to denote the institutional composition of a welfare economy, and particularly the role of the state within it, they use a typology of controlled and liberal mortgage finance. These reflect the extent to which states seek to influence domestic housing systems (Schwartz and Seabrooke, 2008). Schwartz and Seabrooke (2008) see the role of the state in welfare as being to maximise the potential gain from housing through influencing macro-economic agendas in a way that asserts some degree of control over international economic issues. They thus accept asset-based welfare as ‘social policy by other means’ (Schwartz and Seabrooke, 2008:247) and rather than fighting this, welfare policies need to develop in a way that incorporates this highly economic matter. Through this paradigm of ‘social policy by other means’, recent housing policy of the UK government will be analysed on the basis of their impact on access to housing wealth. This will establish whether the state approaches housing wealth as a source of welfare and how this approach changes welfare relationships in the UK.


The Big Trade-Off

The implications of the above theoretical developments are contingent on people using housing wealth to purchase welfare resources. Kemeny (1980), who himself pioneered the link between housing and welfare, argued that people are using housing in this way. He formulated the idea of a ‘really big trade-off’ between housing and pensions (Kemeny, 1980:318). Using data from Australia, he argued that there existed a trade-off between present housing costs and later retirement costs. Using data from 8 OECD countries Kemeny (2005:64) found that taxes and spending were lower in countries with higher levels of owner-occupation. He suggested that as more people became owner-occupiers governments could justify cutting welfare spending in the knowledge that people felt secure in their housing investment (Kemeny, 2005:61). This ideological slant explains how housing has become such a contentious field of research and policy making. In fact Kemeny’s research sparked a big debate around the nature of this ‘trade-off’.

Castles (1998) took Kemeny’s hypothesis, based upon rough data from a small population of cases, and subjected it to rigorous testing of 20 OECD countries using advanced statistical analysis, previously unavailable to Kemeny. Castles’ (1998:263) work confirms the existence of a ‘trade-off’, agreeing with Kemeny’s conception of asset-based welfare. However, Castles (1998) reverses the causality apparent in Kemeny’s (1980) early work. He suggests that it is the shrinking of the welfare state that causes people to become homeowners as a way of saving (Castles, 1998). Kemeny (2005) has responded to this ‘25 years on’ and broadly agrees with Castles’ conclusions given recent changes in the way welfare is perceived. Kemeny (2005:66) goes on to suggest that such changes have had an impact of the decision making process behind house purchase insofar as it not just preferable to own a home but financially favourable. However, Kemeny (2005) retains the frame of rationality, assuming that people will do what is economically more beneficial in response to the economy and the welfare. He does not begin to broach the issue of housing policy encouraging owner-occupation.

The term asset-based welfare itself was coined by Sherraden in his 1991 book Assets and the Poor: A New American Welfare Policy in which he outlines a vision for incorporating asset accumulation into the welfare state as a matter of US government policy. Rather than providing research into housing Sherraden presents a new ideology of welfare taking a very different approach from the conclusions of both Castles and Kemeny. While Castles (1998) concedes that Esping-Andersen’s assertions of regimes based on decommodification and stratification are too simplistic, Sherraden argues that welfare needs to be sought in areas away from state transfers. Rather than being reflexive, Sherraden (1991:8) is prescriptive, arguing that assets rather than income are needed for a sustainable solution to poverty. By promoting individual responsibility through encouraging saving people will learn how to keep themselves out of poverty (Sherraden, 1991:146). Furthermore, he suggests that there is more security in assets as opposed to fluctuating state provision. This security can allow people to make long term financial plans, creating a systemic solution to the problem rather than piecemeal income supplements (Sherraden, 1991:141). Unlike the other literature touched upon here, Sherraden’s wrote a highly ideological book insofar as he established a vision for the future landscape of welfare.



2.2 UK Context: Welfare and assets

Welfare State Restructure:

The conceptions of welfare outlined above are all based in cross-national comparison. In evaluating the impact of asset-based welfare in the UK, there needs to be an understanding of how these ideas map onto understandings of the UK welfare state. Most pertinent is recent literature looking to describe and explain the vast changes over the last 30 years. Changes in the shape of welfare in the UK are key to understanding how ideas behind asset-based welfare, housing and welfare interact. Since the economic shock of the 1970s oil crisis, states have looked for ways to reduce public spending (Glennerster, 1997:308). In the UK it was thought that the introduction of the private sector into welfare would create competition and drive efficiency. Where private sector incursion was politically difficult, such as the NHS, quasi-markets were introduced as a way of bringing market values of competition to welfare. This signalled the roll back of the state in public services.

The influx of private sector actors within welfare provision has been well documented (Glennerster, 1997; Pierson, 2001; Taylor-Gooby, 2002). However, more recently, Hills (2011) has brought a new aspect to the changing ‘architecture’ of the welfare state. He argues that simply focussing on spending does not reveal the whole picture; the focus needs to be on the structure of welfare provision (Hills, 2011:589). Using data of total spending on welfare (here defined as education, health, housing, income maintenance and personal care) from 1979-80, 1995-96 and 2007-08, Hills tracks how, although public spending has increased steadily since 1979, significant changes occurred in where and how the money is spent. He notes that money spent on publically financed but privately provided services increased by 75% between 1979-80 and 2007-08 (Hills, 2011). Cerny (2010) suggests that roll backs of this nature do not necessarily reflect state withdrawal and that the core of government has been strengthened by such changes. The changes made to the welfare state by New Labour encouraged private provision of welfare, however, in line with Labour’s centrist ideology, welfare remained directed by the state. The evidence presented in this paper suggests that a new phase of state withdrawal in which, rather than using private provision to deliver state directed goals, the state is taking a further step back, using the housing market to provide the funds for individual welfare.

Due to an augmented role of the market and diverse sources of welfare, such as housing wealth, Hills (2011) approaches welfare analysis with a focus on outcomes. This attitude of Hills (2011) has a clear echo of Castles’ (1985) analysis of looking into outcomes, deconstructing what is put into a welfare system in order to reveal its true nature. Thus, when Torgersen (1987:116) was describing housing as the ‘wobbly pillar under the welfare state’ he was doing so within a context that has now changed. Housing was an anomaly amongst the core welfare pillars of social security, education and health, in occupying both public and private sectors, now it is the case that they all do. This allows for greater consideration of housing into welfare states. As the welfare landscape transforms in this way, the provision of welfare becomes more dynamic.


From Citizens to Consumers: The use of personal wealth in welfare

The incursion of the private into social welfare has changed the relationship between the state and its citizens. The notion of the ‘citizen’ has been replaced by that of the ‘consumer’. Public services are no longer delivered by the state as a right to its citizens but as a ‘service’ to ‘service users’ (Jose, 2010:129). Within this frame, welfare becomes a consumption good. Changes in housing benefit, to be introduced October 2013 as part of the Universal Credit reform, mean the benefit will be paid to the claimant rather than the landlord (Guide to Universal Credit, 2013). This makes the process of housing support a process of consumption to be paid for from the claimant’s personal wealth. This fits in with Sherraden’s (1991) idea of fostering responsibility in people as a way of creating a sustainable system of welfare. It also attaches a value system to welfare arrangements whereby blame for failure to pay falls upon the individual.

Moving from citizens to consumers changes patterns of how people access, or consume, welfare. The removal of universal benefits, after the abolition of universal Child Benefit, completes the residualisation of welfare in the UK whereby state support is only available based on need, it is no longer a right. Searle and Smith (2010) argue that this has led to an increasing number of people using personal wealth to pay for welfare rather than trying to access state help. Sherraden (1991) and Giddens (2000) suggest that such a view is necessary in order to create a sustainable welfare system after the ‘golden age’ (Giddens, 2000:34) of high spending on transfers. Lowe et al. (2010) link this back to the big trade-off debate started by Kemeny. In the context of new financial products allowing for the withdrawal of housing wealth over the span of the life-course they suggest a ‘really really big trade-off’ (Lowe et al., 2010:111). They show how people are increasingly using housing wealth for a variety of welfare resources, not just retirement. The biggest areas of spending being child care and support at times of unemployment (Lowe et al.:2010:112). This brings the UK closer to Castles’ wage-earners’ welfare whereby people are expected to purchase welfare from personal wealth, however, instead of income assets are used.

Using housing wealth for diverse welfare consumption brings into question the issue of access to welfare as a source of social stratification. Unlike the status of ‘citizen’, ‘home-owner’ is not a unitary group entitled to defined benefits. Instead, the purchase of welfare is reliant the success of housing as an investment. This paper will establish the nature of the housing market that such an investment is operating in; suggesting that it is an unequal landscape on which the purchase of welfare is based.


2.3 Collecting the Strands

Although Sherraden (1991) coined the term ‘asset-based welfare’ over 20 years ago, in its current form it is the product of developments in both the literature and the empirical landscape. Changes in the way the welfare state is organised in the UK have allowed the notion of asset-based welfare to develop into a viable system of welfare as envisioned by Sherraden (1991). However, by engaging with the literature surrounding housing and welfare states, questions arise as to the impact of such a programme.

While disagreeing on the process of accessing welfare, both Esping-Andersen (1990) and Castles’ (1985) highlight its importance for social stratification. Castles (1985), in developing the wage earners’ welfare model, suggests that welfare states must be defined by more than just state transfers but by how the state ensures access to welfare through other means. In doing this Castles brings in housing as a potential source of wealth with which to access welfare. Such an approach is substantiated by later research within a UK context. Lowe et al. (2010) are clear in their conclusions that people are using housing wealth as a way to supplement falling, or even disappearing welfare provisions, especially at times of unemployment and family building. Schwartz and Seabrooke (2008) add to this debate by introducing the idea of the globalised housing finance market determining the amount of wealth stored in housing and the state role in protecting this. Consequently, the whole notion of using housing wealth as a welfare resource changes the welfare state in the UK. State directed welfare is further residualised, potential inequalities arise as ‘housing wealth’ varies from property-to-property and relies on complex economic mechanisms. This paper will look at how homeowners and the state approach the reliance on housing wealth as Lowe et al. (2010) suggest. From this, conclusions can be drawn about the nature of asset-based welfare. Cook et al. (2009c) deconstruct the idea of homeownership by looking at the risks involved in investing such a substantial amount into one investment. However, they still retain a view of the homogeneity of owner-occupation through looking at ‘risk’ but without specifying risk to who. This paper will deconstruct owner-occupation and suggest that government support of the tenure acts to engrain the influence of the housing market on the ways in which people are protected against the risk of poverty.






























3. Research Design

Chapter Two pulls together the vast strands of housing and welfare state research, highlighting the diversity in research methods available to a researcher approaching the topic. These range from Castles’ (1985) hugely quantitative analysis of welfare spending in Australia to the panel survey approach taken by Lowe et al. (2010). In reflection of such diversity this paper will take a broadly mixed method approach. The aim of this paper is to draw a line between the functional reality of wealth and the complex nature of property as an asset. Consequently, a single minded focus on numbers in the frame of Castles would overlook behavioural characteristics of homeowners. Similarly, looking only at behaviour and attitudes would abstract the notion of wealth. This fits between what Robson (2011:22) posits as the positivist-relativist dialectic, a division that has since been labelled a reductive and artificial divide (Mahoney, 2007:124). Methodologically, this paper will be about exploring the impact of relativist notions of housing, property and home on the outcome of policy. However, this will be set within the context of a more positivist approach to the impact of the housing market on housing wealth.


3.1 Relativism and Functional Reality

A core element of this research is to ascertain the level to which homeowners engage with the financial aspect of their property. This requires an empirical grounding in political and financial changes in the UK. Secondary literature will form the basis of research into the meaning of housing. Looking at contextual changes in the functions of property will establish the new financial element of housing. This will be offered as a counterpoint to traditional readings of the meaning of housing. Interview responses will then be examined in order to explore how these meanings manifest themselves in the justification of the behaviour of homeowners. The interviews are from the Banking on Housing project conducted by Susan Smith and her colleagues at the University of Durham including Beverly Searle who kindly sent the transcripts of the interviews for use in this paper. Several articles have resulted from the Banking on Housing project (Searle and Smith, 2008; Cook et al. 2009b; Parkinson et al. 2009). However, these deal with the changes in consumption patterns resulting from increased availability of housing equity. The argument stemming from the Banking on Housing project contributed to the resumption of the big trade-off debate by Lowe et al. (2010) establishing the presence of an asset-based system of welfare in the UK, indicated by changes in the behaviour of home-owners. The interview analysis here will be looking, at the behaviour of respondents but with a specific emphasis on the motivations behind such behaviour. It will be trying to establish the extent to which the financial function of housing has been internalised by homeowners. 150 Banking on Housing interviews were conducted. Considering the time limitations on this paper a sample of 25 was selected for close reading.


3.2 Positivism

While grounded in an empirical reality, analysis of interviews and assertions of housing wealth within them remain rather abstract considering the aims of this paper. A more positivist approach will add texture to analysis, establishing the processes through which housing wealth is accumulated; that is to say the market forces behind asset appreciation. Rather than conducting deep analysis into market forces on house prices, a small-n comparison will be made between two English regions. Analysis is restricted to England in order to avoid complicating factors of diverging housing policy regimes within a devolved UK (Gibb, 2012). The East Midlands and the South East have been chosen to represent different levels of house price. This allows for the examination of the relationship between purchase price and equity accumulation. The data used will be house price data between 2000 and 2010. More recent data is available, however, it does not break down beyond simple averages and therefore certain conditions are hard to control for. The 2000-2010 data allows for controlling for housing stock composition and migration. Using this span allows general trends to be views as well as reflecting the nature of housing as a long term investment (Whitehead and Williams, 2011:1163). Though small-n studies usually involve more qualitative analysis, the analysis of house price data feeds into later policy analysis that involves a more qualitative assessment of the UK housing market as well as recycling the interview analysis as above.


3.3 Policy and the intersection of relativism and positivism

The extent to which the state supports homeowners and their housing wealth is a central consideration in examining the shape of an asset-based system of welfare in the UK. This can be ascertained through looking at policy initiatives designed to deal with owner-occupation and the housing market. Policy analysis can take several forms; looking into motivations, examining processes or extracting ideology. In this case the emphasis is on the impact of policy outcomes on housing wealth and its accumulation. Policy documents will be consulted as a way to establish policy trends, with a specific focus on increasing owner-occupation. Two initiatives will be given a deeper reading. The Help to Buy equity loan and the Get Britain Building construction fund have been selected on the basis of their position in the policy cannon. They represent different approaches to housing policy, one is designed to increase demand and is aimed at individual households while the latter is targeted more clearly at the wider housing market (Laying the Foundations, 2011). Both schemes will be examined in relation to conclusions drawn throughout the paper. Analysis will centre on how both the empirical findings from house price analysis and relative findings from the interviews interact with policy and shape potential outcomes from policy.

























4. The Changing Frame of Home Ownership

This chapter establishes the changing meaning of home ownership brought about by the commodification of housing. It offers context to the different ways housing can be perceived. Traditional ideas of home ownership are centred on the intrinsic benefits of owning a house, that is, what the fact of ownership allows an owner to do. Notions of security, stability and responsibility are tied up in such benefits (Gurney, 1999). However, these ideas are being challenged by the growing importance and accessibility of housing wealth. Financial deregulation allowed housing debt held by financial institutions to be incorporated into global capital flows, resulting in the commodification of housing by banks. Equity release mortgages stemmed from this, resulting in houses being seen as sources of income to households (Finlayson, 2009). Rather than being the centre of family life and symbols of social good, it will be argued that houses have become a commodity, an asset to be nurtured and the rewards reaped.


4.1 The Traditional Frame of Home Ownership

There is a clear sociological aspect to home ownership with regards to what it means for the way people live their lives. Clapham (2010) attempts to draw a line between housing and well-being and in doing so reveals the core strand of the traditional frame of home ownership; stability and security. Such elements of home ownership are developed from Saunders’ (1990:14) concept of ‘ontological security’; the human desire for continuity and control over their immediate personal environment. Owner-occupation provides stability as a landlord cannot suddenly give notice of eviction. Furthermore, it allows for control in building a private, personalised space free from outside influence. These represent the traditional frame of home ownership, concerned with the intrinsic, essential meanings of home ownership. Clapham (2010) develops the traditional frame of home ownership through the prism of ontological security by bringing in the notion of social esteem. Though it is difficult for an individual to control how they are perceived in terms of status, home ownership offers a way to control their social esteem by living a ‘valued lifestyle’ (Clapham, 2010:257) as ownership is considered the trait of a successful citizen. This is a result of owner-occupation being seen as the ‘normal practice’ even by those who do not conform (Gurney, 1999:178).

The idea that owner-occupation is beneficial through provision of security, stability and responsibility is being termed the ‘traditional frame’ of home ownership to reflect its opposition to financialised views of housing as suggested by Rolnik (2013) and Ronald (2008). Notions of ownership are embedded within the national belief system (Ronald, 2008). Within this a social framework emerged that created the ‘housing class’ of homeowners as home ownership became a status symbol (Ronald, 2008:18). The benefits of stability, security and responsibility stem from this baseline. The Building Society movement grew out of Friendly Societies with the desire to facilitate owner-occupation among the burgeoning, urban working class (Boleat, 1982:3). This was desired as a way to get independence from slum landlords. Stability and assertion of status tie in with another cultural frame, familialism. Families and family development are an important part of the social life of the UK and as such, the ability to support ones family and build a quality family home is symbolic of responsible citizenship (Land and Lewis, 1998). Thus the traditional frame of housing is such as it is embedded in cultural values whereby the house is a symbol of success.

Such traditional values offer benefits of home ownership on the qualification of owner-occupation alone. It is the bricks and mortar ownership of the house that affords a person such benefits (Megbolugbe and Linneman, 1993). However, as will be shown, the benefits of ownership have diversified, with the emphasis being on wealth and finance. This means that the benefits of home ownership are now realised through processes other than just ownership.


4.2 Building Societies, Banks and Deregulation: How housing became a commodity for banks

The traditional frame of home ownership began to shift as the meaning of housing was transformed by a process of financial deregulation and the financialisation of the everyday.

Building Societies represented a traditional mode of practice, using the deposits from ‘investor accounts’ to fund mortgages. Loans were given for housing based upon the history of the borrower as a saver at the Society, maintaining an ethic of reward for responsible finances (Hawes, 1986:11). However, there were concerns as to the sustainability of this as savings were seen as finite while the number of mortgages increased; with Building Societies holding 80.7% of all mortgages in 1979 (Boleat, 1982:37). In response to these concerns the 1986 Building Societies Act enabled Building Societies to diversify their income streams, using deposits to purchase stock, the profits from which fund mortgages. The 1986 Financial Services Act further transformed practices as it led the way to the securities market in which debt packages were traded for profit (Glass and McKillop, 1994:1031). In conjunction with the ways in which the Financial Services Act allowed for free flows of international finance, the securities market integrated domestic mortgage debt with global flows of housing finance. The structure of banking became dual-tiered whereby high street ‘boutique’ banks fed resources directly into ‘international finance groupings’ (Hamilton, 1986:17). Thus mortgaging a house became an act of international finance.

As mortgage debt became a more viable asset for short term profits housing became commodified for banks. Rather than having to wait for the mortgage to be paid off to reap the benefits, the debt could be sold for immediate gain. Thus, rather than being a fixed asset on a balance sheet, housing debt became a more liquid source of income. Consequently, banks and Building Societies had an interest in offering favourable mortgages. The personal service based on responsible finance offered by Building Societies was replaced by practices centred on products tailored to suit the needs of the Societies’ wider financial operations that were offered to people who fit the loose criteria, the aim of which is to amass tradable debt in the form of housing commodities.


4.3 Into the 21st Century: How housing became a commodity for homeowners

Two processes stemmed from financial deregulation in the 1980s; processes that converged to result in the commodification of housing by homeowners: the financialisation of everyday decisions and innovation in mortgage products. This has led to the emergence of a financial frame of housing that, some have argued, has eclipsed the traditional frame.

Giddens (1994) suggested that, with welfare retrenchment and the symptoms of post-industrialism, a ‘risk society’ has emerged in which people are more conscious of themselves as social participants and more confident to mediate their own risk (Taylor-Gooby, 2001:199). Popular awareness of risk has been intensified by new social risks that exist outside the established pillars of welfare (Bonali, 2007). As the government does not have a reputable monopoly on these new areas of risk (unlike health) people no longer assume that state help will be most beneficial, seeking out other sources of welfare (Taylor-Gooby, 2001). By taking greater control of personal risk management people have had to become economic agents, making constant economic decisions in order to maximise their wealth and their individual buffer against poverty (Finlayson, 2009:407). It is this financialisation that begins to transform the home into a commodity as housing wealth becomes more accessible and amalgamated into household wealth allowing it to filter into these day-to-day economic decisions.

New mortgage products allow the release of housing equity in situ. Rather than having to sell their house and incur considerable moving costs, homeowners are now able to access their housing wealth while remaining in occupation. Lowe et al. (2010) attributed the development of UK assed-based welfare to these types of mortgage products as people are able to use housing wealth throughout the life-cycle. Housing wealth in this circumstance is the housing equity which can be accessed in two main ways. Re-mortgaging and getting a higher loan based upon the house value at current price (assumed to be above purchase price) (Smith, 2011). Or, lenders, offering flexible mortgages, will now allow homeowners to extend the value of their mortgage, unlocking equity previously inaccessible until resale (Gerardi et al., 2010). Furthermore, over the last decade, controls on what the money is to be used for have been lifted, instead of having to be used just for home improvement costs it is increasingly common to use housing equity to pay off debts, travel or buy a car (Cook et al., 2009a). Housing wealth has become integrated with individual wealth and daily consumption patterns. Using such mortgage products and releasing housing wealth in situ commodifies housing as it becomes a source income based upon accrued value.


4.4 The Financial Meaning of Housing

Mortgage innovation is a central aspect of the financial meaning of housing and the one most emphasised by homeowners. However, it is only the mechanism through which housing wealth is released. The market aspect of housing wealth must also be included within a financial understanding of home ownership as this determines the level of wealth stored in a house to be extracted. Furthermore, it is the actual wealth that provides housing with its welfare function in providing support against poverty.

The wealth available to homeowners is determined by the level of equity on a mortgage. This puts the housing market, in determining house prices, at the centre of asset-based welfare. Such a role means that an implicit aspect of the financial meaning of housing is treating it as an investment vehicle, seeking the best ways to use the housing market to increase the value of the investment. This behavioural change is desired within the asset-based welfare system Sherraden (1991) envisioned, whereby homeowners are encouraged to make the most of their house as an asset. This financial meaning of housing is an important element of asset-based welfare as it is the wealth from housing that acts as the source of welfare. While in situ equity release facilitates this, it is the housing market that determines how much wealth can be accessed, therefore, it is beneficial for homeowners to engage with these market forces in order to operate within the welfare system.

This market emphasis on housing wealth and financialisation is seen in the action of the state. Ronald (2008) suggests argues that New Labour treated housing as an integral part of economic planning; acting within the financial frame of housing. He suggests that housing was no longer seen as a ‘merit good’ of intrinsic value, only valuable as a financial asset (Ronald, 2009:80) This is concurrent with Rolnik (2013:1059) who suggests an ‘abandonment of the conceptual meaning of housing as a social good’ on the part of policy makers. In this frame and with a focus on asset-based welfare, the utility of housing as an asset is determined by its monetary value facilitated by in situ equity release products.


4.5 Finance in Asset-Based Welfare

An understanding of how housing became a major source of personal wealth is important when discussing any dimension of housing wealth. It provides a background to how housing is approached, demonstrating the multiple ways owner-occupation and its benefits can be perceived. Traditional benefits, afforded on the basis of ownership alone, include stability, security and a source of social esteem. However, financial deregulation and the introduction of new mortgages means that owner-occupied property has a financial function. Finance has always played a role in home ownership through the need for mortgages and the trend of downsizing, however, as Lowe et al. (2010) argue, the increased ability for in situ equity release has turned the financial function of housing into a welfare function. Consequently, access to welfare is determined by the performance of the housing asset. This results in the benefit of using property as an asset, engaging with it within the financial frame in order to maximise the wealth available from it. An asset-shaped system of welfare will benefit those who embrace the financial aspect to housing and treat it as an investment. The extent to which this has occurred will be explored in the next chapter using the idea of the traditional frame of owner-occupation as a counterpoint. It is clear from examining the processes behind the commodification of housing that asset-based welfare views property as a vehicle for wealth accumulation within the financialised frame. The importance of this will be seen later when looking at how policy approaches housing.


5. Between Tradition and Finance

This chapter will challenge the notion that the two meanings of home ownership, outlined in the previous chapter, are opposites, that the financialised meaning of housing has not totally eclipsed traditional meaning of home ownership. Asset-based welfare relies on housing being understood within its financial function. However, while there is evidence, from the Banking on Housing interviews, of the financial uses of housing through equity release, it is done so in a way that retains a traditional emphasis. Traditional goals, such as security and independence, are being sought using housing wealth. This merges the meanings of housing; it is not so clear cut between traditional and financial meanings. Using evidence from interviews with homeowners this chapter will establish that traditional ideas of the home remain but are reinforced and enabled by the use of housing wealth. Using housing wealth in such a way individualises housing finance and the welfare it unlocks. This diminishes the engagement with wider distribution of wealth in housing and the mechanisms of its accumulation.


5.1 Merging of Meaning

Evidence from the Banking on Housing interviews suggests that homeowners have taken on the financial frame of housing, using it as an asset with which to accumulate wealth. With evidence from the 150 interviews Cook et al. (2009a:5) identify 72 respondents as ‘housing investors’, for whom property is part of a wider investment portfolio designed to maximise their wealth. Furthermore, most respondents revealed that they had used flexible mortgage options as a way to unlock housing wealth in situ. This behaviour suggests that the financialised frame has been accepted by homeowners in such a way as Giddens (2000) and Sherraden (1991) had hoped; homeowners are engaging with their housing wealth. In the case of the hosing investors, they are engaging with their housing wealth as part of the wider, financialised environment created by the commodification of housing in such a way as to increase their personal wealth.

However, although behaviour may have changed, this analysis is reductive. The extent to which homeowners are aware of their housing wealth as part of a wider economic and social system is limited by their justification of using housing wealth. Even among housing investors, ‘a place to live’ (Interview 005) is the primary reason for home purchase. This suggests retention of traditional meanings of housing along the line of Saunders’ (1991) ‘ontological security’; the desire for a personal, controlled space. Secondly, this traditional view underpins discussions of the use of housing equity:


I’ve painted and decorated, all the standard sort of stuff, {yeah} but that doesn’t, that’s not to enhance its value, that’s to make your living space pleasant

– Interview 035


Here the respondent used the financial element of housing but justifies it by linking it to more traditional notions of home. In this sense the two meanings of housing are being merged with traditional meanings being the focal point of behaviour and facilitated by the financial capacity of home ownership.

The conflagration of traditional and financial meanings of housing in this way continues as traditional ideas of a ‘valued life-style’ and self-esteem (Clapham, 2010:257) gain a financial mechanism. Traditional views on housing are expressed in the form of seeing home ownership as a sign of success:


Interviewer: …and would you have been disappointed [if you had been unable to purchase a house]?


Subject: …probably because you always want to be better than your parents. {right} More successful than your parents, that’s it. And your parents like you to be more successful than them.

            – Interview 035


In this case, home ownership is a symbol of success, suggesting that traditional benefits of home ownership in terms of social esteem are to be found in the fact of ownership itself. One respondent reflected the traditional notion that the process it takes to get a house reflects personal, financial responsibility which is a social good; a desired quality. When asked about whether it was his decisions or luck that has resulted in financial gains from his house he replied:


Well, just, being thrifty and doing without

–  Interview 070


These responses attest to the continuation of ideas that housing is a social good, ideas that Rolnik (2013) suggests have disappeared. However, the individualisation of welfare means that, social esteem through financial responsibility becomes an outcome of independence from financial help:

If ever we need some money, erm, hopefully we’ll be able to get it from the house rather than anything else really

– Interview 015


This taps into images of a thrifty, independent and responsible citizen, relying on personal income rather than burdening the state. However, the principles guiding the decision are not the economic, wealth maximising ones suggested by the financial frame. Instead, the financial decision making is just an element of chasing traditional goals in home ownership. In this way, financialised housing has not completely eclipsed the traditional meanings of housing, in fact, the financial element in housing is used to reinforce the traditional benefits of ownership. This has the effect of diminishing the extent to which homeowners engage with their housing wealth as it becomes only a means to an end. Importantly, the ability to fulfil these traditional desires is reliant on the behaviour of the housing market. With the incursion of finance into housing, benefits are not intrinsic to ownership but the result of the property’s performance on the market.


5.2 Individualisation

The relationship between traditional goals and financial means is problematic as it results in the neglect of the market based element to the financial meaning of housing. With a focus on equity release and the use of equity, there is very little concern for the means of acquiring it. This is exacerbated by the role of housing wealth in individual welfare. Traditional meanings of housing are based in the private sphere of the individual and the family, therefore, the wealth unlocked in order to provide traditional benefits of housing is similarly drawn into this private space. Because a homeowner can use housing wealth instead of having to rely on state transfers the nature of the welfare is private rather than collective. This is especially pertinent considering the often hidden new social risks that are situated outwith traditional state competencies. These risks are not sudden shocks, such as unemployment, but offer a continual source of risk and anxiety such as low wages and the financial strain of single parenthood (Bonali, 2007). It is thought that housing wealth can offer an economic crutch:


‘Cos I’m a single parent you know there is never enough money to go around, but it makes me feel more comfortable because I’m able to use some of my equity. {um-hum} for other things, so, so personally it has benefited me’

– Interview 034


Thus housing remains a source of personal stability. Yet the idea of stability as an intrinsic benefit of ownership of a property has evolved with the financialisation of housing as now, ownership is a source of economic stability within a changing social landscape (Glennerster, 2007). New social risks heighten awareness of financial needs and the risk of poverty as state support in these areas are relatively underdeveloped. Consequently, individuals plan for individual circumstances taking control over the risks they face rather than looking to collective sources (Taylor-Gooby, 2001).

5.3 Neglect of the Financial

Housing wealth as a financial means to a traditional end causes housing itself to be a complex asset. The retention of core traditional meanings of housing and the assimilation of housing wealth into this private space means that wider financial considerations are often forgotten. It is clear that the focus is on the individual. When considering the variations in the housing market with regards to prices, respondents to the Banking on Housing interviews were very absolute:


I’m not so much worried myself about it because I always feel it, this property will always be a profit to me because I bought it at such a good price.

– Interview 060


Such a view is the consequence of the individualising of welfare and housing wealth. As the financial element of housing is used as a facilitator of traditional housing goals, it becomes part of the personal, private space of the traditional home. As homeowners become concerned with their own individual circumstances, they do not think as financial economic agents with the financial meaning of housing; that is to say they do not think systemically. Instead housing decisions are motivated by present pragmatic needs. Respondents attested to being motivated by the quality of the area:


‘ultimately the fact that we liked the neighbourhood, we likes the area’

      – Interview 058

‘the schools came highly recommended’

– Interview 078


Linking with housing as a source of social esteem, purchasing a house involves considerations of the quality of the local area and proximity to amenities that allow for a desired social life. This has ramifications for the housing market insofar as the idea of supply and demand is complicated by traditional housing desires. Rather than just seeking the best property in investment terms (low price with potential to rise), homeowners look at immediate gains, driven by the desire to satisfy personal and social needs as outlined. Furthermore, the housing wealth accumulated from that property is seen as a by-product of ownership, not worrying about changes in the housing market beyond personal circumstance. This brings the financial element of housing out of the fully financial frame and its complexities of market variations, and into the private sphere.


5.4 Financial Means and Traditional Ends

The financialisation of housing, the foundation of asset-based welfare, has not been completely incorporated into views on housing by homeowners. Instead, the financial element of housing, in housing wealth, is only seen as a facilitator of more traditional housing goals. The traditional value of a house as a family home is enabled by using flexible mortgage products to renovate the home space. The retention of traditional meanings of housing results in housing decisions being made based upon present circumstance; the immediate desire for a good quality property and neighbourhood. This complicates the financial frame as ‘demand’ is driven by more than economic considerations. Furthermore, by focussing on immediate and individual housing needs the wider impact of the market is neglected. Homeowners do not consider the long term implications of their property as an asset in the housing market beyond absolute gains. Consequently, home ownership, for many, does not sit within the financial frame of housing that is so important to asset-based welfare.


6. Equity Accumulation and the Housing Market

The aim of this chapter is to explore the relationship between property purchase price and the accumulation of housing equity. This will establish the context in which financialised housing is operating. The extent to which homeowners are able to use their property as an asset to accumulate wealth is determined by market forces driving house prices. This chapter seeks to show that there are limitations to asset appreciation. The following analysis will look at the long term role of the housing market, something that, as shown in the previous chapter, is neglected by homeowners.


6.1 Data Collection

Purchase price and the accumulation of equity are both functions of house price as determined by the market. House price changes determine the potential for equity. Equity equals the current property value minus the value of the mortgage. For ease of example and availability of data, the following analysis will assume a 100% mortgage on properties. This comes from a Council of Mortgage Lenders (CML) report that highlights the increased propensity to borrow close to 100% of the property value (CML, 2011). In order to examine the impact of purchase price on potential equity accumulation two areas of the UK will be compared over time. There are clear extremes within the UK housing market, notable cases being London, the North East and Glasgow (Ferrari and Rae, 2011:15). However, for the purposes of this study which aims at providing insight into wider issues of housing and wealth the East Midlands region and the South East will be used as cases. These two regions represent different levels of house price and affluence but are not at the extremes. The average house price in the East Midlands in 2010 was £184,958, this is 70% of the national average of £261,580, while in the South East it was £309,715, 119% of the national average. Using an inter-regional comparison allows for comparison of two different levels of property prices. Here the focus will be on the performance of high and low cost housing over time. To measure the change in prices over time data will be used from 2000-2010. Although within this time there has been fluctuations in prices, the overall change is of interest. The following analysis will assume the 2000 price to be the purchase price with the 2010 price taken as the point at which the equity is being withdrawn. Raw data is from the Department for Communities and Local Government (see appendix).

6.2 Data Manipulation

Figure 1: Changes in house prices over time in the East Midlands and the South East



Figure 1 shows how house prices have increased in the South East and the East Midlands. There has been a divergence of price over time. In 2000 the difference in price was £63,476 which increased to £124,757 by 2010. This suggests that households who are able to afford the higher purchase cost accumulate more wealth as their property grows faster as compared to lower cost properties. The rate of increase as a percentage of the purchase price is similar in both the South East and the East Midlands (11% and 13% respectively). However, due to the higher absolute figures in the South East, this equal increase manifests itself as differential increase in real terms, evidenced by the widening gap in prices.


Prices By Stock Type

The use of averages can be problematic as it obscures some potentially significant differences between the two regions. For example the availability of different types of property may lead to the differences in average house prices. The South East may not have as many terraced properties as in the East Midlands meaning that the average house prices become a function of variation within the housing stock rather than of inherent effects of the housing market. The following analysis will attempt to address this by doing the same analysis as above but with data that breaks down housing stock into terraced, semi-detached and detached housing in the South East and the East Midlands. The results are presented below and are followed by analysis.

Terraced Housing

Figure 2: Changes in the price of terraced housing in the East Midlands and South East


As with the average house price data there is clear divergence in house prices. The difference in purchase price in 2000 stands at £50,642, increasing to £97,900 in 2010. This means an increase and potential equity of £124,423 in the South East and just £77,165 in the East Midlands. As a percentage of the purchase price the equity is growing at a rate of 12% per year. In the East Midlands this rate is at 15%.


Figure 3: Changes in the price of semi-detached housing in the East Midlands and South East



Once again there is divergence. The difference between purchase prices in the two areas in 2000 was £71,382 increasing to £143,749 in 2010. This translates to an increase of £178,803 in the South East and £106,436 in the East Midlands which is an annual growth of 13% and 17% as a percentage of the purchase price respectively.



Figure 4: Changes in the price of detached housing in the East Midlands and South East


Even with the highest cost housing in each region there is divergence in house price. The price difference in 2000 was £110,758 growing to ££208,153 by 2010. This means that a house bought in the South East for the higher price of £232,359 had the potential to accumulate £225,744 worth of equity compared to the £128,349 available in the lower cost property in the East Midlands. The annual appreciation as a percentage of the purchase price are again similar; 9% in the South East and 10% in the East Midlands.



Once dwelling type has been controlled for the trends in house price increase remain. The aim here has been to examine the relationship between purchase price and equity accumulation. Households with limited incomes have constrained purchasing power and must therefore purchase lower cost housing. The above shows how this inequality in purchasing power is reinforced within the housing market as higher cost properties outperform lower cost ones in the accumulation of wealth; demonstrated by the consistent increases in price differences on all property types. Furthermore, although the rate of increase in equity as a percentage of the purchase price are similar in both regions this only acts to increase the importance of purchasing power to equity accumulation. The higher absolute figures in the South East means that equal percentage increases, as compared to lower East Midland values, result in unequal real term increases, accounting for the big divergences in price. Due to the similar rates of increase, the impact of the initial purchase price is reinforced as it is this figure that gives the base rate for the percentage increase, determining the higher real value increases as compared to lower cost housing.

By controlling for property type in this analysis it has been possible to glean the above conclusions about the role of initial purchase price on equivalent types of housing, diminishing the impact of different composition of housing stock in each area. However, it also allows to show the big regional dimension of the housing market. It is evident that there are huge differences between house prices in the South East and the East Midlands. Thus, not only are households limited in equity potential by their initial purchasing power, but they are also constrained by their location. Differences in house price and the divergence of price such as those seen above mean that households in the East Midlands are locked out of the South East, except with the aid of increased income, as their housing equity which could be used to climb the housing ladder, is outstripped by price increases in the South East (Ferrari and Rae, 2011). This acts to further continue income inequalities within the housing market as even with equivalent types of property, the divergent effect of the market is felt based upon region and the price differences between them. Even when the average house prices have been broken down into dwelling type the divergence in house prices remains between the two areas. Consequently, over time there are relative gains to be made by being able to purchase higher cost housing.


6.3 Controlling for Migration: Focus on first time buyers

Another issue that needs to be controlled for is that of migration. The importance of geography within the housing market has been noted in terms of locking people out of certain housing areas. The other side to this is the migration of people from high cost to low cost areas which can have the impact of lessening the link between income and purchase price, essential to these conclusions, as households can use the cash from the sale of the previous property to increase their relative purchasing power in a low cost area. It will also mean that equity is vastly increased as it is likely that the mortgage will be significantly less than 100%. Using house price data on the recorded sales of first time buyers will reduce these effects.

First Time Buyers

Figure 5: Changes in the recorded purchase price of properties bought by first time buyers in the East Midlands and South East


The trend here continues as the difference between house prices for first time buyers in each area increases from £45,227 to £79,346. This increase is less than those seen above, an increase of 75% rather than the peak of 101% for semi-detached houses. However, it is still a significant level of divergence. Furthermore, the rate of increase as a percentage of the purchase price remains similar, 9% in the South East and 11% in the East Midlands.



While the actual divergence of price is lower, it is still there and, in conjunction with the similar rates of equity increase, the link between purchase price and equity remains important. Furthermore, by just using data on first time buyers it is a more reasonable suggestion that households have a close to 100% mortgage and are relying on income to fund this rather than any money made available from previous property. It also possible to see that the average house prices are closest to those seen with terraced housing in both the South East and the East Midlands. Consequently, this data is representing housing market entry at the bottom of the fabled housing ladder. As such the level of equity accumulated in the two areas based on different purchase prices is important as this can have a large impact on future housing conditions as it boosts the potential purchasing power for the next house. By engraining income inequalities, the housing market continues inequalities into housing wealth through equity which, in this case of first time buyers, can impact the distribution of wealth and the potential for wealth accumulation over the life-course.

6.4 Impact of the Market

From this analysis of house price change over time it is possible to show the impact of the housing market on a household’s wealth and the ability to accumulate housing wealth. House prices are central to housing wealth as it is through increases in value compared to the value of the mortgage that determines the amount that homeowners can access in situ.

Data from the East Midlands reflects lower cost housing as the cost of housing is below the national average while data from the South East shows higher cost housing, being above the national average. By comparing the house prices over time it has been possible to show that those households that are restricted to lower cost housing are also restricted in the level of equity their property has the potential to accumulate. In contrast, higher cost housing accrues much more value over time, allowing for greater equity wealth. It is to be expected that different purchase prices will realise different gains, however, the difference between the values has grown over time, suggesting an inherent bias within the housing market towards higher cost housing. Further analysis suggests that the rate of increase as a percentage of the purchase price is very similar across all populations, this suggests that the housing market may not be entrenching inequalities as this is equal. However, by increasing at a near to equal rate equity increase becomes more of a function of purchase price. In this way the market perpetuates inequalities in purchasing power. This stresses the importance of maximising purchasing power and access to the housing market at a higher level. Policy designed to this end will be examined in the next chapter.










7. Government Policy

With the increased importance of housing as an asset and source of income it is important to look at how asset accumulation is encouraged in policy. The extent to which the state seeks to support the accumulation of housing wealth will suggest how welfare is being redesigned in the UK. With reference to the inequalities of the market, demonstrated in Chapter Six, this chapter aims to look into how the state interacts with such a market. The key strand of policy in this respect is low cost home ownership (LCHO) initiatives designed to offer access to home ownership for those who would otherwise not be able to. In past years barriers to home ownership have been exacerbated by sharp increases in property values, requiring higher mortgages as well as higher deposits. In the 2013 Budget the Help to Buy equity loan was extended beyond first time buyers (House of Commons Hansard, 20 March 2013). This offers a lower deposit rate (5%), lowering the initial cost of home ownership. Furthermore, it allows for a lower cost mortgage, the benefits of which are spread over the entire course of housing costs. However, such an initiative encourages home ownership rather than support the level of potential wealth accumulation. There is a sharp focus on entry to the housing market as the state becomes involved in supporting market entry rather than supporting wealth outcomes as with social security welfare. Furthermore, policy that targets the housing market itself decentralises housing policy, making the market more integral to wealth accumulation, potentially accentuating divisions in an already fractured housing market.


7.1 Affordability and Policy: Evidence from the Help to Buy scheme

House prices increased 3.1% in real terms annually 1980-2004 (Pannel and Williams, 2004:32). This rapid increase in house prices, while providing some with unprecedented levels of wealth, has made home ownership more difficult for others. Within this context the policy focus has shifted to make affordability rather than privatisation the ‘touchstone of housing policy’ (Murie, 2012:1034). The 1980 Right to Buy (RtB) initiative did act to lower barriers to the housing market but it was driven by a desire to privatise the social housing stock owned by local authorities (Boyle et al., 2013). The new focus on affordability for all (the Help to Buy schemes are available for all properties up to the value of £600,000) suggests a new avenue of housing policy in encouraging marginal homeowners into owner-occupation and exposure to the housing market (Bramley and Morgan, 1998:570). Criticisms about the sustainability of LCHO initiatives are easy to find and often compelling (Bramley and Morgan, 1998; Nield, 2010; Bright and Hopkins, 2011). However, this analysis will demonstrate how a new direction in housing policy is increasing the function of the housing market in determining housing wealth without recourse to state mediation. Such an occurrence works to assimilate the housing market into methods of welfare access as the only source of housing wealth is the housing market. This is in contrast to more traditional pillars of welfare that offer market provision as well as a state bolstered safety net.


Equity Loan

Lowering Barriers

The Help to Buy equity loan scheme, announced in the 2013 budget is designed to lower entry costs to the housing market as well as increase the purchasing power of low income households. The equity loan offers a loan of up to 20% of the value of the property to be paid off with the equivalent percentage of the resale price. For example, if a house is bought for £200,000 with a 20% equity loan of £40,000, if the house is then sold for £210,000 (a 5% increase in value), the loan would have to be paid back at £42,000 (Help to Buy, 2013). Using this same example, the benefits of such a policy are evident insofar as it would only require a 75% mortgage of £150,000 on a £200,000 property.

The key benefit of this is the increased purchasing power of households. The equity loan increases the level of housing that can be accessed. This is important considering the conclusions of Chapter Six that showed the differential benefits of high and low cost housing; that the potential equity in higher cost housing appreciates, not just to higher levels than low cost housing, but at a faster rate. It is arguable from this, therefore, that the state is involved in bolstering households’ ability to accumulate housing wealth beyond entry to the housing market by enabling households to purchase property that is more favourable to equity accumulation on the market. Rather than mediating the impact of the market on house prices, the state is increasing purchasing power which means people can enter the market on more favourable terms.


Equity Implications

The benefits of increased purchasing power, however, are nullified by the nature of an equity loan. The amount of equity actually owned by the homeowner is less than 100%; thus while the homeowner has access to full ownership property rights, they do not have full access to the housing equity. Using the same data from Chapter Six it is possible to look at the hypothetical impact on equity accumulation of the equity loan based on a household using the scheme to purchase housing in 2000. A household in the South East that was restricted terraced to housing worth £101,918, if they had the availability of an equity loan, could have purchased a semi-detached property worth £132,347 with a 5% deposit of £6,617 and a 75% mortgage of £99,260. This compares to a 10% deposit of £10,192 and 90% mortgage of £91,726 for the terraced property. Here, the deposit is significantly decreased, while the mortgage for the higher cost property remains larger, the difference is decreased. However, a household with property purchased using an equity loan they only have access to 80% of the property price, thus their equity is calculated, not as the property value minus the mortgage value but as 80% of the property value minus the mortgage value. This severely limits the amount of equity that can be accessed, even when a higher value property is purchased (Figure 6).




Figure 6: Comparison of variable equity based on differential purchasing power and mortgage value



Increased role of the market

The Help to Buy equity loan makes home ownership more affordable by lowering both the upfront costs as well as the longer term mortgage costs. However, it shows an emphasis on access to the housing market that signals an increased role for the housing market in welfare in the UK. Lowering barriers to owner-occupation means that more households are able to enter the housing market. The benefits of this have been noted in justifying the extension of the Right to Buy scheme in order to allow people to:



Enjoy the benefits of home ownership including greater independence, the security of owning a valuable asset and the right to change their home as they wish

Laying the Foundations (2011:26)


However, here the two functions of housing (traditional ‘independence’ and the financialised ‘asset’) are once again merged. The traditional benefits are emphasised juxtaposed with the financial. Within this paradigm the equity loan is helping fulfil traditional housing desires by allowing access to higher cost housing in potentially nicer neighbourhoods. This satisfies traditional housing desires highlighted in Chapter Five, of building a quality family home and personal space. However, the welfare function of housing, situated in the financial benefits of home ownership is not supported by the state beyond purchase.

The equity loan also disadvantages those who use it to purchase housing. Although they are able to own a home, the wealth available from it is limited as compared to those who are able to purchase independent of state help. This changes the relationship between the state, the market and welfare as the financial function of housing is restricted in favour of market entry. The government is helping people access the housing market as a source of wealth, however, as access is prioritised at the cost of relative disadvantage in the accumulation of equity (Figure 6), the wealth is based on absolute individual benefit rather than collective, equal outcome. The focus of wealth generation is on how much the individual can gain rather than trying to mediate the systemic inequalities of the market. The current policy trend is content in affording households the opportunity to realise any level of housing wealth through access to the housing market without recourse to address the impact on wealth distribution this may have. Thus, under the Help to Buy scheme, the state is repositioned as an agent looking to provide people with welfare through access to the market rather than using market forces to maximise centrally directed welfare spending, as was the case after the period of welfare retrenchment under Thatcher and Blair.


7.2 Supply Side Policy: Funding construction and enabling the market

Lowering barriers to the housing market is important for asset accumulation, however, the policies designed to do so neglect the processes of subsequent wealth accumulation. As equity is a function of house price determined by the market, looking at policies aimed at the housing market will help build an understanding of how the Coalition sees the state role in the accumulation of housing wealth for welfare. Market supporting policies could act as ‘social policy by other means’ suggested by Schwartz and Seabrooke (2008:247) insofar as it is bolstering the amount of equity available to homeowners at times of need.


Market flexibility: government strategy

Along with the Help to Buy equity loan and mortgage guarantee the Coalition government is attempting to engage with the housing market, recognising its importance to people’s housing aspirations and wealth (Laying the Foundations, 2011:1). The previous chapter used regional variations in the housing market to highlight the importance of house price in equity accumulation. Here, the diverse spatial element of the UK housing market will be looked at closer. Laying the Foundations (2011:11) suggests that such variation in the housing market is the product a housing market frustrated by top-down planning that ‘seriously delayed the delivery of new housing’. To counter this the Coalition government aims to increase the efficiency of the market, allowing local supply to respond to local demand. Local authorities have been offered financial incentives to allow permission for construction projects while central funds offer capital to struggling projects. Coalition strategy is developed with the desire to create a ‘freer, more responsive housing market’ (Laying the Foundations, 2001:2). Such an emphasis on flexibility and localism is what is needed in the UK with its varied regional housing markets (Muellbauer and Murphy, 2008:8). One of the ways to increase flexibility is to finance large scale development projects.

One such fund designed to support housing supply is the Get Britain Building fund of £400million, the largest such fund (House of Commons Hansard, 3 June 2013). The specific aim of this fund is to promote local construction, offering a boost to the local economy. This combination of new homes and support to the economy will begin to close the gap between localised housing markets in the UK.


Get Britain Building and the equity loan

Despite the fact that the full impact of Get Britain Building has yet to be seen, only being announced in 2012, it is possible to critique some of the assumptions behind it and its potential impact on regional housing markets. The following critique is based on the idea that demand within the housing market is a function of more than just the need for shelter. The complexities of the meaning of housing and its social role have been discussed. Thus, rather than assuming that people buy houses in order to simply own a home, demand must be seen as people buying houses to fulfil personal desires and ambitions (Smith, 2011:251). Following on from this it is not just the property that is being sold; homeowners put value on the surroundings of a dwelling; local amenities, schools and parks all play a part in what exactly is being demanded within the market. Furthermore, such desires and ambitions are based on immediate goals, property is bought on the basis of the good neighbourhood being present. People may speculate on property values but when it comes to the bricks and mortar people want immediacy (Nield, 2010:617). Finally, such neighbourhood effects have in themselves become commodities. The Banking on Housing interviews show that, while respondents recognised the value of a prosperous area, it was far from irreplaceable. Thus it is far from unthinkable that the increased purchasing power available from the equity loan will be used to allow households to migrate to better performing housing markets in nicer areas. Consequently, housing demand becomes a more mobile phenomenon. This suggests that supply too will become more mobile, meaning that policies enabling market efficiency will focus investment in already well performing housing markets.

One Get Britain Building project has already been completed in Bath. The constructed housing in Bath is priced at £251,823 for a 1-3 bedroom flat (Crest Nicholson, 2013), this is marginally higher than the £245,264 UK average and well above the £227,868 average for Bath (English Land Registry, 2013). Thus it is evident that the Get Britain Building fund, in this case, was used to build high cost housing in a relatively well performing local housing market. This is not problematic in itself as housing stock needs developing in all areas of the housing market (Ferrari and Rae, 2011). However, in conjunction with the increased mobility available through the equity loans, this approach does not address the regional imbalance in the UK housing market.

Using the scheme, a Bath Riverside apartment can be purchased with a mortgage of just £188,867, much lower than the UK average. Thus the money that would previously have had to be used in a lower cost housing market can now be used to purchase property in better performing, high cost housing markets. Consequently, the demand being catered to is not that of ailing housing markets in need of affordable housing. Rather, this sort of development works to increase the housing stock in high cost areas as a response to higher demand thanks to augmented purchasing power; thus it is the better performing housing markets that benefit from development. This dynamic takes money away from ailing housing markets. For example, if a person does buy a Bath Riverside flat using an equity loan and in doing so moves from the lower cost East Midlands they are taking £188,867 that would support the market in the East Midlands and putting it into the housing market around Bath. While this may be good for the individual, allowing them to access higher quality housing (though severely limiting their housing wealth accumulation as above), it works to reinforce housing market differences between regions. Therefore, by repositioning itself as a facilitator of the housing market, the state ignores issues of unequal welfare outcomes through differential market performance. In this way, stratification, through access to welfare, becomes engrained within the system of welfare through assets as the state augments the role of the housing market without mediating its inequalities.


7.3 Implications in an Asset-Based System of Welfare

The way in which housing, as a ‘pillar of welfare’ (Malpass, 2008:3), is approached by government demonstrates the changing nature of welfare in the UK with market forces playing a greater role in determining access to welfare. The current policy emphasis on housing market entry means that the state is in the position of opening up opportunity for people to accumulate wealth for use as social security. This is a shift from the traditional role of the state in the UK which was to guarantee welfare outcomes, offer a safety net against market failure through a collective tax system. The Help to Buy policy secures access to traditional housing benefits, found intrinsic to ownership, while the welfare function of housing is left to the housing market. With the focus heavy on access to the housing market it becomes central in determining housing wealth. Given the role of housing wealth for welfare, the market itself becomes more central in welfare as it, rather than the government, props up the ‘wobbly pillar’ (Torgersen, 1987:116) of housing and housing wealth.

Furthermore, strategy to stabilise the housing market acts to enable it and thus potentially widen differences within the market. Market stimulation policy demonstrates a commitment to housing and housing wealth. The regional variations within the UK housing market are a well-recognised problem, therefore, strategy designed to alleviate these variations is beneficial. However, plans to decentralise planning policy and funds to increase market efficiency may act to heighten regional variations in the housing market. By making supply more responsive to demand regional variations increase as demand is driven by factors more than just needing a place to live. Social aspirations are tied up housing decisions. In conjunction with increased purchasing power enabled by the equity loan this means that those for whom the loan represents a significant increase in purchasing power are likely to migrate to a better performing housing market. This draws the demand and thus the supply away from areas that need it. While it is evident that the Coalition expect the market to play a stronger role in housing wealth, promoting access to it without recourse to addressing the processes of wealth accumulation, little is being done to address imbalances within it.































8. Conclusion

This paper has sought to investigate how the incorporation of housing wealth into welfare has changed the shape of welfare in the UK. The nature of welfare in the UK has undergone extensive transformation since its inception. Such changes sparked academic debate as to the role of the state in welfare. Esping-Andersen (1990) argued that the state acts to shape the relationship between citizens and the market, offering financial protection against negative market forces. Other writers such as Castles (1985) have suggested that it is for the state to protect citizens by augmenting their capacity to engage with the market, through higher wages. Another suggestion is that the state should use its macro-economic capacity to influence the market in such a way as to make the market a more favourable environment (Schwartz and Seabrooke, 2008). While Esping-Andersen neglected the role of housing in welfare, these latter two ideas emerged with housing firmly embedded. Within the UK housing wealth became integrated with notions of welfare as the state supported pillars of welfare diminished and people increasingly used personal wealth to support themselves rather than relying on the state. In this regard, the state moved away from Esping-Andersen’s conception as state transfers became just one aspect of welfare in the UK.

Stemming from this theoretical underpinning of housing and welfare, four research questions emerged:

  1. How did property become a viable source of wealth?
  2. To what extent are homeowners engaging with the financial function of their property?
  3. What are the dynamics of the housing market that determine housing equity?
  4. How is the state interacting with home-owners and the market?

Financial deregulation and the individualisation of welfare resulted in property becoming a key source of wealth with which people could support themselves at times of social risk such as unemployment. As the benefits of owner-occupation gained a financial function there was an implicit expectation of a shift in behaviour, towards a more financialised view of housing. Within a financialised frame of housing people would use their property as an asset in the housing market as a way to maximise their wealth. However, it is clear from the Banking on Housing interviews that the financial function of housing is used as a way to support more traditional ideas of the home as a source of stability and personalisation. This incorporation of the financial into the private leads to the neglect of wider implications of an asset-based system of welfare as homeowners treat their housing wealth as something pragmatic and immediate rather than the product of the housing market.

The role of the housing market is integral to considerations of housing wealth and welfare as it is rises in house prices, determined by the market that generates the wealth. However, the housing market is an unequal one, with price differences engrained within it. Over the last ten years lower cost housing has grown at a slower rate than higher cost housing. This divergence, demonstrated here with a regional comparison, means that those able to afford higher cost housing benefit more than those who are limited to lower cost housing. The welfare function of housing, therefore, is derived from performance in a market that entrenches inequalities.

By looking at housing policy it is possible to suggest that in its current trajectory the state is shifting to the position suggested by Castles, supporting the capacity of citizens to access welfare rather than providing it directly. The Help to Buy equity loan allows home-buyers increase their purchasing power. Considering the importance of purchase price on equity potential, such a policy is important. In this way the state is helping citizens access the market on more favourable terms. However, the equity implications of the loan is such that it limits the amount of equity accessible to the home-owner, diminishing the capacity of the property to appreciate in value for the owner. Through the equity loan the government is prioritising housing market entry over equity accumulation. Affordability policy deals with enabling market entry on the understanding of housing as a source of wealth. The emphasis on the market given by policies such as the Help to Buy equity loan reinforces its role in determining the levels of wealth. In this regard, the state is relying on the market to provide a source of welfare, with the role of the state being that of enabler, developing policy to help people access this source.

The other aspect of housing policy examined in this paper was that which was designed to support the housing market. Policies designed to stabilise the housing market could be argued to perform the role of bolstering income through housing wealth and thus acting as ‘social policy by other means’. This sits within the frame of Schwartz and Seabrooke’s (2008) conception of the new role of the state in welfare; creating favourable conditions in which assets can perform. The Coalition government is certainly attempting to rectify problems in the housing market; however, the solutions they have found rest on decentralisation and enabling the housing market. Although this approach is new, it has the potential to deepen regional divides in the housing market by failing to see housing as the complex asset that it is. The government is attempting to support the housing market but without trying to mediate for the inequalities within it.






























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Raw House Price Data – Department for Communities and Local Government

Average prices Terraced Housing
Change over 10 years Price in £ Change over 10 years Price in £
East Midlands South East East Midlands South East



































































Semi-Detached Housing Detached Housing
Change over 10 years Price in £ Change over 10 years Price in £
East Midlands South East East Midlands South East



































































First Time Buyers
Change over 10 years Price in £
East Midlands South East




































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