Poor Doors: Segregation Made Classy

When news reached Americans that a new upmarket apartment block in New York would have a separate entrance for inhabitants of its social housing units, there was uproar. These “poor doors” were seen as an unnecessary humiliation for those on low incomes. The Mayor of New York, Bill de Blasio (an unusually left-leaning Democrat) promised swift action to prevent the policy being implemented in any other housing developments.

Britain is, generally speaking, kinder to its ‘lower classes’ than the US. That is why many people will be shocked when they read a Guardian report on the proliferation of poor doors in London. Most of the public would consider poor doors not only an affront to good manners, but rather tacky as well. In polite society, the only respectable means of flaunting one’s wealth (insofar as that is not a contradiction in terms) is to do so in an modest, understated way. I can imagine that ‘rich door’ developments appeal to the sort of millionaire who buys diamond-encrusted smartphones and rings with rubies the size of hubcaps. Tackiness, as I say,

Supposedly, there is more to justify poor doors in these developments other than preventing wealthy residents having to endure the sight of people on incomes beneath six figures. (But, to be fair, the plebs do smell, don’t they?) After all, members of the elite have to interact with waiters, shop assistants and suchlike on a daily basis. No, additional features like concierges, swimming pools and hotel-style lobbies have become fashionable in upmarket developments, and social housing tenants are denied access to these in order to save them the service charge.

That’s the official explanation, which I shall consider shortly. Unofficially, the absence of interaction between the ‘social strata’ is advertised as a selling point to wealthy would-be residents. In London, it is difficult for housing developers to avoid the mixing of their open market and the social housing units they are obliged to build alongside them. So their response is the poor door. I’m sure many rich home-buyers are put off by the tastelessness of the policy, but clearly there is sufficient demand anyway. As for the social housing tenants; they have little choice in the matter. Those who reach the top of comically long housing waiting lists may often only decline one or two properties allocated to them by their council, or they risk being struck off the list altogether. Having to use a poor door becomes a trivial concern.

Whilst it is true that social housing residents cannot afford the service charges that accompany the upkeep of upmarket lobbies and concierges, I don’t see segregated entrances as a proportionate solution. If developers can come up with a creative solution (they are paid to devise creative solutions) to provide unnecessary extras to those who want and are able to pay for them, that’s fine. Poor doors, however, are not fine. If developers cannot devise an alternative, then unfortunately London’s millionaires shall have to live without a 24-hour concierge service.

It is important to remember that these poor doors are not only separate, but unequal to the “rich doors”. Almost invariably, the poor doors are located in dimly lit alleys alongside bins or commercial goods entrances, whereas rich doors have accessible street entrances. Moreover, even the doors themselves look different. The Independent reports the case of one development “the affordable [housing] has vile coloured plastic panels on the outside rather than blingy glass.”

As if this were not sufficient demonstration of the perceived inferiority of social housing residents, everything from the corridors to refuse collections to postal deliveries tend to be segregated too. This blatantly and inexcusably eliminates any prospect of affluent and less affluent neighbours coming into contact at all, which is hardly conducive to community cohesion. And the Establishment wonder why there are periodic riots. Many social scientists maintain that mixed tenure housing developments, hosting communities in which all social classes interact to the greatest possible extent, are the key to mutual understanding and respect. A pity nobody is heeding their advice.

A Chinese ambassador once visited the Khmer Empire at the end of the 13th century, and reported with a sense of wonder the treatment of slaves there. It was extreme even by medieval standards. He wrote:

They are permitted to lie down or be seated only beneath the floor of the house. To perform their tasks they may go upstairs, but only after they have knelt, bowed to the ground and joined their hands in reverence.

The snubbing of social housing residents is perhaps not quite as extreme. But you do wonder if those inflicting poor doors on London would feel it reasonable to demand similar ‘reverence’ from the second class people, who are grudgingly tolerated in these developments!

A Wealth Tax in the UK?

Today, income inequality is so extreme that the interest alone on the accumulated wealth of the richest few exceeds the growth of many economies in which they live. In other words, by owning so much already, the rich are now absorbing all of the growth generated by many of the world’s leading economies, and more. It’s not even a case of active exploitation any more: the only way a multimillionaire could avoid perpetuating her/his build up of wealth is to stick her/his millions under a mattress. Or deposit it in Barclays. This is why economies with apparently healthy GDP figures, like the UK and US, are delivering rising living standards only to a tiny minority.

The Simpson’s Mr Burns on wealth inequality

Logically speaking, the only way to end this spiral into virtual feudalism is to redistribute not only income (as inequality of wealth is now so great) but also wealth too. That was relatively easy from the 1940s to the 1970s. But in today’s globalised society, wealth redistribution through the tax system- when capital is highly mobile and capable of skipping between competing tax regimes- is easier said than done. It’s not even easily said when the majority of politicians (but fewer and fewer economists) are attempting to ignore the issue.

The Green Party has proposed that Britain follow France, Norway and the Netherlands, and introduce its first tax on accumulated wealth, rather than income. The “Wealth” or “Solidarity” Tax would apply to all British residents with assets (of any kind) worth £3 million or more. The rate would vary (it would presumably be banded) between 1% and 2% per year. Green Party policymakers estimate revenues of £21.5 billion and £43 billion- greater than the entire transport and defence budgets respectively.

I think the idea deserves consideration, even if a 2% wealth tax is quite steep for a medium-sized economy to pursue without international co-ordination. Although I don’t hold with the notion that tax rates must fall through the floor or the wealthy and talented will leave the country, there are limits to practicable tax rates. Without exchange controls or an internationally co-ordinated wealth tax rate, we’ll find that there would be little wealth left in the UK to be taxed at 2%.

Not that a wealth tax itself is an impossibility. The Netherlands, for example, has a marginal top rate of Income Tax of 52% and levies a wealth tax of 1.2% on all investments above €21,400. While this is quite heavy, the Netherlands is seen as one of the most “business friendly” (a phrase which is often code for “anti-worker” and “pro-inequality”) economies on Earth. Assuming that Britain could raise even £10 billion a year with a similar rate, one in eight pounds of planned spending cuts could be cancelled altogether.

Not that the policy has any significant prospect of fruition. The most influence the Greens could yield in the next parliament is as a band of two or three MPs negotiating with a minority Labour government. The list of policy concessions made by Labour would not be long.

New York Chooses A Dash of Liberalism

The US has had its first spate of elections since the Presidential vote in 2012. The governorships of New Jersey and Virginia were contested, as was the Mayoralty of New York City. There were no great surprises: the moderate Republican Chris Christie (who is to the GOP what Ken Clarke is to the Conservative Party) was comfortably re-elected in Democratic-leaning NJ, whist the Democrats secured victory in Virginia.

But, as the title suggests, this post is centred on New York, where Bill de Blasio (D) defeated Joe Lhota (R) with a majority of about 45%- that’s right: de Blasio has won an astounding 72% of the vote. What makes this even more surprising to an outsider is that de Blasio is about as leftwing as it is possible to be in American politics, described as an old-fashioned tax-and-spend liberal. Although genuine liberals are all too often out of fashion in the Democratic Party, it seems that de Blasio’s positions on issues such as the eye-watering inequality that exists in his city (and a police force that’s slightly too trigger happy with its anti-terror powers) have struck a chord with New Yorkers.

In my country, New York is seen as a city of glamour, towering apartment blocks, busy and often aggressive people, and a bustling metropolis where millionaire bankers and the downtrodden working class live and work in startling proximity. In many ways, NYC is simply a reflection of London twenty years or so into the future.

(By the way, the original York is infinitely better than both its namesake and London: it’s a leafy, people-shaped city in which there is a calmer approach to life.)

So when de Blasio talked of “two cities”, communities of rich and poor who share the same physical space but live entirely lives, he has identified an awful trend which is fracturing our societies as they have never been divided in the modern age. It’s the sort of ‘soft segregation’ that will make harmonious democracy impossible if we allow it to grow and reinforce itself unchecked.

Of course, there are severe limitations to the powers of the Mayor of New York, and the progressive tax rises de Blasio has pledged will need the approval of New York state in Albany. Even then, the “two cities” cannot be bridged by fairer taxes and homebuilding alone: no, the national and international corridors of power will have to be stormed to tackle inequality. But we have to start somewhere, and where better than the Mayor’s office?

Housing Is Not A Commodity: Part 2

A rational approach to the issue of the disparity between supply and demand in housing sectors in several developed countries would be to tackle both excessive demand and insufficient supply. I will focus on Britain in this post, but much of it will apply to other countries.

A major factor in the absurd inflation of house prices is the rise of wealthy landlords buying homes with buy-to-let mortgages. When deposits are 10-20%, those with a good level of capital will easily outbid a twentysomwthing on a modest income. With the buying power of potential landlords increased so effectively, they have made home ownership unaffordable for the people who must now rent from the landlords at inflated rents.

One’s reaction to this very much depends on their perspective. Homes are either commodities or a right. If the tips roofs over people’s heads are a legitimate market for speculation, then it doesn’t matter if costs become unaffordable. If, like me, you see homes as a right, then it is only sensible to correct any imbalances in the market. There is a serious imbalance. When potential tenants are pitted against each other to bid their way into a small home; to pay nearly half their income for something worth so little; and when some prospective tenants feel compelled to submit their CVs to landlords, the situation echoes, to some extent, aspects of mediaeval serfdom.

Water prices are regulated, as are public transport fares. Rents should be too. Going above and beyond old fashioned rent controls, all private sector lettings would have to be made through a National Lettings Agency, which would work with regulators to guarantee fair rents and a good state of repair in all properties. The agency would also have powers to discourage the leaving of empty properties.

These moves would be accompanied by a government commitment to build one million quality new hones in mixed-tenure developments. Ideally, the state would be the direct owners, so that they could sell homes to selected groups at a profitable, yet below market, rate. A sustained boost to supply at this rate should ease pressure on social housing and existing developments.

Lastly, buy-to-let mortgages must be curtailed. If a landlord is putting more of their capital at stake, they will collectively be less keen on speculation in the housing market. Also, it will limit competition with families, who should have “dibs” in a system that should serve them. Therefore, I propose that deposits on buy-to-let be increased to a statutory minimum of 50%. This represents a level that still doubles their natural spending power, but doesn’t quintuple it as before.

Importantly, many of these methods of creating “people shaped homes” will have to be phased in, so as not to trigger a crash in house prices and wave of mortgage defaults. It may well take 15, or even 20 years to rebalance the system. But if we don’t do it, the all powerful markets will do it for us.

Growth and Equality

 

In the 3^rd quarter of 2012, Britain finally clambered out of its double-dip recession. It not only did that, but achieved GDP growth of 1.0%, the fastest the country has seen since 2007. In light of how much pain the British public have seen due to the nation’s poor economic performance, the ever-unpopular government might have expected the news to be widely celebrated. It wasn’t. As soon as the figures were released, experts began to urge caution regarding the figures. As much as 0.6% out of the 1% figure could have been accounted for by businesses making up for productivity lost during the Jubilee and the Olympic games. The United States’ economy grew by 2% over the same period, a sign that stimulus s working and austerity isn’t. The construction sector had declined by an alarming 2.5%, suggesting that a “triple-dip” recession is a real possibility.

In fact, the only group conspicuous by their lack of gloom is the opposition Labour Party. They remained largely silent on the matter, apparently planning to see if the situation develops into a sustained recovery or if the economy falters once more before passing judgment. It was pointed out that, on the same day is the figures were announced, the car manufacturer Ford announced that it would move 1,000 production jobs from Britain to Turkey. The prospect of a jobless recovery has been raised.

In fact, it is clear why few are celebrating these growth figures: the GDP figure has ever less relevance to the living standards of the working and middle classes. Wages have been falling in real terms since 2008; food, energy, transport and housing costs have been rising; public services are enduring deep cuts; and there is no prospect of economic growth changing any of these trends.

This is because the economy is now structured in such a way that ever less wealth filters down to the workforce, and it is instead concentrated in the hands of businesses and the shareholding elite. A simple measure of such income inequality is the Gini coefficient. The calculation of it would be difficult to outline, but the figures can be easily understood. The higher it is, the greater income equality exists within a population, with 0 representing total equality, and 1 representing perfect inequality (when a single individual holds all the wealth). It rose steadily in the UK from 0.24 in 1979 to over 0.37 today- similar to those seen in Victorian times. Another way of looking at it is that the bottom 10% of earners hold 1% of the nation’s wealth, compared with 31% held by the top 10% of earners.

The arguments surrounding the problems around inequality are well known, and do not need repeating now. However, it is worth noting that an economic system which fails to deliver a better quality of life to its workforce is seldom one which survives for very long. As in the 1930s and 1970s, a radical revision of our priorities looks likely. The electorate, and the political classes that are supposedly there to serve them, are beginning to ask if there is an alternative to passive government, rising poverty, and a flawed employment market.

Ed Miliband, the Labour leader, attracted much criticism a couple of months ago when he talked of “predistribution”.  The concept is a sound one: the state intervening to ensure that employers raise income of their low-paid so that their incomes do not have to be topped-up with tax credits and other benefits. The private sector is currently receiving implicit subsidy from the Government by its sustaining of artificially low wage rates. Instead of higher taxation of profits to fund said subsidy, employers would directly cover labour costs, and benefit from lower taxation in return.

Once the link is restored between the interests of employers and their employees, when we’re genuinely “all in this together”, we’ll find that good GDP figures will be of more benefit to the man on the street than they are now. But while the division between the 99% and 1% becomes ever more entrenched and ever more potent, it is impossible to say that our economy is benefiting the hard-working majority.