Housing policy: Who Does It Best? - Part 2
Katz goes back to the drawing board. If the housing crisis is really about wealth inequality, doesn’t the policy we need to fix it… need to address wealth inequality? We go in deep, and what Katz finds makes us wonder: are we even having the right conversation when it comes to the housing crisis?
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Dominic: Hello listeners, and welcome to Part Two of ‘Who Does It Best?’: housing policy. In this series, we are digging for the policies around Europe that are actually making our lives better. In Housing Part One, Katz took us on an adventure across Europe and showed us some good examples of housing policy in Vienna, Finland and Paris. And we also learned about the inheritocracy and this massive wealth inequality that is driving the housing crisis that is rampant across Europe. In Part Two, Katz has promised to flip the way we think about housing policy on its head.
Katz: Yes, that is the plan. In Part Two, we're going a bit off-piste. So first of all, let me start with some myth-busting. You know what doesn't make enough of a difference when it comes to housing affordability?
Dominic: What?
Katz: A lot of the big problems and solutions we hear about the most. It's a bit like plastic straws. So, what are the first things you think about when you think about the housing crisis?
Dominic: Well, here in the Netherlands, people talk a lot about asylum seekers and housing.
Katz: Right. Even though there is endless research proving that asylum seekers do not drive this housing crisis – if anything, they're often the hardest hit by it. There is a ton of research about discrimination on the housing market based on race, religion, economic status, marital status. It's a whole universe I don't have time to get into here. But anyway, through a combination of the media and the government, it's just become this hugely powerful story that it's the migrants' fault. It doesn't seem to matter that it's just not what's driving this housing crisis, nor does it seem to matter that we do know what's driving it. It's deregulation of renters' rights and wealth inequality. Ok, but before I get into that, what other solutions immediately come to mind?
Dominic: Well, we hear a lot about building. I don't think it happens so much, but my main understanding is that we just don't have enough homes and that we need to build them.
Katz: So I dug into building and, well, it's not that we don't need to build. That's a very important part of what we need to do. It's a part of Vienna's success, for example. But a lot of European cities really don't have that much space to build. I mean, it varies per city and of course you could get inventive. But that aside, we have been talking about building for over 20 years now and it's just not happening. Building costs have gone up massively. Also, the building projects seem to fall through at quite an astonishing rate. Governments are not investing in it. And it's really hard to find investors who are willing to finance affordable housing because they're not going to be making a profit on it.
Dominic: Right. So where are those benevolent rich people of the early 1900s?
Katz: My favourite character in this story.
Dominic: Ok, but what you've been telling me is that the core of this housing problem is not scarcity.
Katz: No, it's about affordability.
Dominic: Honestly, before you started opening my eyes to the realities of Europe's housing problems, my impression was like, all the houses in Europe's major cities are occupied. We need to build more houses.
Katz: I really don't think you're the only one.
Dominic: Is it really not true?
Katz: Yeah, my impression was also that Amsterdam was like one in, one out, completely full. But even in the capital cities, there's tens of thousands of empty homes. Like in Amsterdam, there's about 15,000 homeless people and there's about 10,000 empty homes.
Dominic: Yeah, that definitely wasn't clear to me before this episode. But hang on, do these empty homes belong to like investment funds, private landlords? Or are they second homes that are just empty because people use it for a holiday?
Katz: That, Dominic, is the right question. And the answer is: all of the above. Our experts stressed that private landlords and second homeowners have a much bigger influence on this housing market than investors, which you might not guess from the way we talk about it.
Dominic: But it's also difficult because it would be quite radical to just, like, force building owners to take in tenants.
Katz: It would and it wouldn't. We've had times where that was much more normal. In fact, Ian Brossat, the former deputy mayor of Paris, who was a major engine behind this really ambitious housing policy, he really emphasized this. Paris City Hall is really doing its best with the tools that it has. But the biggest challenge is that the national government overprotects property rights. And that makes it really difficult for the city hall to go any further than they already have. Because right now, one in 10 homes in Paris is a secondary home. One in 10!
Dominic: Wow, that is really more than I would have thought.
Katz: Yeah. And on the other hand, as you say, it's quite difficult to get people to let go of those secondary homes. So the question is, what policy has to be written to stop housing from being such an attractive asset, like this profit machine, and bring those houses back to becoming long term homes for people with proper rights?
Dominic: Just a small little task.
Katz: So to come up with an actually satisfying solution, I'm going to take a look at who does it worst.
Dominic: Oh, the really dark flip side to this series.
Katz: Exactly. But I wanted to see what we could learn from their mistakes and come up with something more hopeful out of that. So the winner of that dark competition is… drum roll… our home country, the Netherlands!
Dominic: Oh! No place like home. ‘No place like home’ is really dark, actually.
Katz: Oh, that is really rough! I've never thought about it like that. Moving on swiftly. We established that the root of the housing problem is economic inequality. It's true everywhere. But in the Netherlands, it's particularly extreme. And so I thought, maybe figuring out how it got so bad here might teach us how to fix it. Here's Cody Hochstenbach from the University of Amsterdam. You heard from him in Part One.
Cody: So homeowners are indeed around 90 times richer than renters in the Netherlands.
Dominic: What? I don't think I'm that rich, Katz. And also, hang on. Right at the beginning of Part Pne, you said renters pay 30 to 40 percent of their income on housing costs and homeowners about 10 percent. My housing costs are definitely way above 10 percent of my income.
Katz: Yeah, so there's a couple of nuances here that we need to understand to make sense of, like, how we rank economically. So your monthly bill, Dominic, is made up of your mortgage payoff, like just paying off the bill, and then you also have your mortgage interest, right?
Dominic: Yep.
Katz: But in all of those measures, economists only count the interest as your monthly cost.
Dominic: Ah, yeah. But that doesn't feel like it reflects my lived reality.
Katz: Yeah, I get it. But to measure it in any other way would be massively unfair to the renter. Here's Molly Broome, an economist from the UK who wrote the annual intergenerational wealth report.
Molly: We only take into account the mortgage interest payment as part of that housing cost measure because the actual principal repayment we consider to be saving. Because, again, you're building up an asset.
Katz: First and foremost, you're basically paying off your own mortgage instead of a landlord's mortgage. Even if you include the whole monthly housing cost, mortgage holders pay less per month on average than renters.
Dominic:I guess this is where the conversation can get a bit awkward. Some homeowners might feel like they're in the same boat as renters because of their monthly costs, but they're really not.
Cody: You are simply not in the same boat. Tenants are in a different position than homeowners and they have different interests. And what I think is very important to acknowledge is that improving the position of renters might also require making the position of homeowners less privileged.
Katz: Yeah, what I also noticed is that people don't actually say numbers. So you're not really having a very clear conversation about like, ok, but everyone's feeling struggle. But like, what is the reality of this situation? And that's because people don't like talking about money. But it means that you walk away and you're like, I don't actually have any idea how anyone is doing.
Dominic: Yeah, I guess this is why it's so difficult to know, like, how wealthy you are.
Katz: We're definitely not the only ones. The average non-economist is really bad at knowing where they stand on the wealth ladder. Here's Molly again.
Molly: There's that really famous video on Question Time, I don't know whether you've seen it circulating on the internet, where there's this man who just like, can't believe that he's in the top 5 percent of the income distribution. It's like, ‘Yes, you are.’ And he's just like, will not believe it.
CLIP: ‘I'd like to call out Labour as liars. I’m not in the top five percent’. ‘So we're not going to increase your income tax.’ ‘But you are, because I've read your policy. It's above £80,000. And I am nowhere near in the top five percent, let me tell you. I'm not even in the top 50 percent.’ ‘So hang on, let's just be clear.So you're suggesting you would raise income tax on those earning over £80,000. You're saying that would affect you because you earn over that sum?’ ‘Yes.’ ‘So you earn over £80,000?’ ‘Yes, and I'm not in the top five percent.’ ‘Yes, you are.’ ‘I think that is the top five percent, isn't it?’ ‘No, I'm not. I'm not.’ ‘If you earn over £80,000, are you in the top five percent, categorically?’ ‘Yeah. So the top 5% of earners will pay more income tax.’ ‘The top 5% don't even work.’
Dominic: I love this video. I wish my Instagram would only show me videos in this category. I don't know what it is. Of like, privileged people not realising their privilege on live TV.
Katz: Yeah, it's funny, and it has a more serious note.
Dominic: Of course.
Katz: When we talk about wealth inequality, we talk a lot about billionaires. And I mean, they're in a completely different league than all of us, and they absolutely should be taxed differently. But what this reporting made clear to me is that middle class homeowners have a much bigger role in the housing market than we realise. And according to Molly, middle and wealthier class people tend to think that they are much lower down on the wealth scale compared to other people than they actually are. And that's not just in the UK.
Cody: The top 10 percent of Dutch population owns about 40 percent of all housing wealth. And the bottom 50 percent, so the bottom half, doesn't own any housing wealth. This is quite a stark inequality, right? That the top 10% has 40 percent and the bottom 50 percent has nothing at all.
Katz: Once you know how huge housing inequality is, the next question is, how did this inequality get so big?
Dominic: Yeah, I want to know which policies have driven this huge divide.
Katz: So after the 2008 financial crisis, almost everywhere, large swathes of people were losing their homes. And there were already quite a lot of tax policies from like 100 years ago that meant that people who still owned their homes were a lot better off. And then on top of that, while Finland was choosing to eradicate homelessness, here's the Dutch former housing minister, Stef Blok.
Blok: People see that we made the investment environment better by deregulating the rental sector. We created the possibility to increase rents more. We bring back the social housing sector to their core business, social housing, and thereby creating a level playing field for the commercial rental sector.
Dominic: Oh man, it's painful to listen to.
Katz: I know, the things it caused.
CLIP: ‘Spanish banks are about to receive billions in European bailout funds...
and there's growing evidence that the high street is feeling the pinch… Protesting further austerity measures…’
Katz: This is where governments prioritise making housing an asset – so, something rich people invested in to grow their wealth, instead of protecting people's right to a home. In a moment where lots of working and middle-class people were losing their homes, so there was a ton of it on the market.
Dominic: Ah yeah. And I imagine this is happening across Europe on different scales.
Katz: Exactly. But everywhere, the wealthy got a lot richer through buying up housing. And those investments worked because of the way we tax things.
So, after telling you about how most policy areas we talk about are a bit of a distraction, what policy area am I excited about that could have a huge impact?
Dominic: Drumroll...
Katz: Housing tax!
Dominic: Yay! Oh, I can't wait.
Katz: I'm glad. Me neither. Maybe those words aren't very sexy. But housing tax massively benefits homeowners, the people already better off, and it's a huge problem and thus also potentially a major solution. Ian Brossat, the major force behind Paris's housing policy, he said that this was the key. Whether or not the national government gets on board with rewriting housing tax would make or break Paris getting from 25 percent social housing, where it is now, to 40 percent social housing, which is their goal.
Dominic: Changing the tax system, that's like famously quite an unpopular move, especially if it's going to cost some citizens money.
Katz:True, but if you think about it, we used to not pay income tax. Like, can you imagine never having paid income tax and then having to pay income tax?
Dominic: That's actually true. How did we persuade people to start paying income tax?
Katz: So at first tax was just on products like alcohol, food, stuff like that, and then we realized that wasn't fair because then proportionally you would be paying way more of your income if you have less money. So they invented income tax and people got on board because they could see it was unfair. If that's possible, surely we can do way more exciting things than we're doing now.
Dominic: Katz, I really did not expect you to be so excitedly waxing lyrical about income tax on this podcast.
Katz: I know, me neither, but I'm serious!
Cody: So I think we should invest in rental, affordable rental housing, but I think we should also start thinking seriously about taxing the wealth tied up in homeownership, getting rid of all these advantages that we have in place for homeowners. So these two are inextricably linked, in my opinion.
Katz: If the core of the housing crisis is inequality, Cody argues you can't fix the housing crisis without redistributing this wealth, and you can't do that without taxing homeowners differently. But the thing is, this is politically very difficult to get through, because more than half the population in almost every European country is a homeowner. So it's complicated.
Cody: Bottom line, I think you need to develop a strategy that doesn't focus only on investors, but also focuses on the homeownership market, because it's so much bigger and it's so much more important than housing dynamics.
Katz: Yeah, so it might not be in the public debate much, but once I started calling experts who are working on this, they were like, ‘Yes, finally, someone calling us about housing tax!’
Dominic: Why is that? Like, why is housing tax such a big deal?
Katz: Well, there are people who have been talking about it for ages. The IMF, the national banks, the EU, they've all been talking about it for years. The OECD, this organization that monitors and steers the wealthy economies of the world, which includes most of the EU. They made two detailed reports in the past five years on what tax policy should be scrapped and what new tax policy should be written to fix our housing crisis.
Dominic: Oka, it sounds like there's quite a bit of momentum coming from the big institutions.
Katz: Yeah, not that we would know about it.
Dominic: Well, you're doing something about that, Katz.
Katz: Yes, I'm doing my best. So let me explain. Across Europe, there are all kinds of ways that the tax systems favour homeowners, which also means that they are stacked against the people who don't own a home.
Dominic: This couldn't possibly be about politicians trying to convince homeowners to vote for them, could it? Maybe it's also because so many politicians are also homeowners.
Katz: Yeah, maybe. There's actually a website in Canada called Is My MP a Landlord?
Dominic: Oh my god.
Katz: First of all, there is no country where you are taxed on the full value of your house. So if you're putting your money into housing, you're paying a lot less tax on that than you would be if you put that same money into savings or invested in shares.
Dominic: Which is part of why so many people are driven to buy a home.
Katz: Yeah, it's a totally logical financial decision. But let's zoom into one of these regulations, a version of which exists in many European countries. I learned that there is a running gag that the only thing you can get 10 economists in one room to agree on, is that the mortgage interest tax deduction is the most major policy that should be scrapped.
Dominic: Very niche running gag.
Katz: Very. It sounds incredibly boring. And maybe that's why renters often have no idea what it is. But it's actually dramatically affecting their lives. So I'll say it again. Mortgage interest tax deduction.
Dominic: Mortgage interest tax deduction. It is a bit of a tongue twister, isn't it?
Katz: It's ridiculously difficult to say.
Dominic: Did they do that on purpose?
Katz: Honestly, it's the same in Dutch. Hypotheekrenteaftrek.
Dominic: So tell us, what is this complicated word and how does it impact us so dramatically?
Katz: Yes, here is for a small explainer. So it's this thing where homeowners are allowed to deduct their mortgage interest payments from their income tax.
Those words are an earful, so stay with me, people. Basically, the more mortgage you pay, the less tax you have to pay on your income.
Dominic: Cashback.
Katz: [laughs]
Dominic: Inappropriate.
Katz: Oh my god. Cruel. Anyway, quite a lot of governments across Europe do this, but it's an especially big deal in the Netherlands. Guess how much money these mortgage deductions add up to? So, tax that would have otherwise been paid by homeowners in the Netherlands.
Dominic? Oh, I find it very hard to guess this kind of thing. Two million? Two billion euros?
Katz: Last year, it was 11 billion euros.
Dominic: Oh, my goodness.
Katz: Yeah. That's enough to pay off our entire generation’s student debt, like the entire country in just one year. Imagine what you could do with 11 billion.
Finland's Housing First policy, that was only 270 million euros over 10 years. And this super ambitious policy in Paris, it was 528.8 million euros in a year, which is a lot, but nothing compared to 11 billion.
Dominic: Ok, that is a really baffling difference.
Katz: Yeah, it really is. And not only that. How does this mortgage interest tax deduction compare with how much we invest in social housing? It turns out the Dutch government doesn't actually directly invest in social housing at all.
Dominic: Not at all?
Katz: No. No euros. At least, not directly. So we do have this subsidy for the lowest incomes to help pay their rent. But this is the real kicker. According to the Dutch housing union, in 2011 – so, the height of the financial crisis – people struggling to pay rent, they were subsidized three and a half billion euros. That same year, homeowners were subsidized 14 billion euros.
Dominic: Why are we subsidizing people's mortgages?!
Katz: You know, I have to say at this point, just like everything I thought about the housing crisis just completely went out of the window. Like, months of political debate about asylum seekers getting too much social housing, about whether to build a few hundred buildings here or there. It all just felt so tiny and slow and well, completely ridiculous. Like, meanwhile, the tax systems are working in the opposite direction at a much bigger scale.
Dominic: So I'm starting to realize that whilst we were talking about building and asylum seekers taking our homes, we should have been talking about tax policy.
Katz: Yeah, like how is it that we're only learning properly about this now? And the few journalists who have been talking about mortgage interest deduction, they basically call it a subsidy for the wealthy.
Dominic: But is it actually a subsidy?
Katz: I mean, that's probably debatable, but it is the language that a lot of economists and journalists are using. And frankly, it was really jarring to first learn that the difference between homeowners' wealth and renters is just so much bigger than I could have imagined. And then to find out that we're giving tax discounts to homeowners that are so massive, they could probably fix the whole housing crisis several times over. And not only that, but economists say you can clearly measure that the bigger this tax break, the worse the housing crisis. You can see it quite clearly if you compare us with our neighbours in Germany. They have a lot more middle class people choosing to rent long-term instead of buy. And economists say that fewer tax breaks for homeowners is one of the major reasons why housing prices in Germany, both renting and buying, are much cheaper.
Dominic: I can see why you feel cheated. I really didn't know this.
Katz: Me neither. And the even madder thing is that this mortgage interest tax deduction, it was written in 1892 – before we even had housing policy. In fact, it was specifically written when income tax was introduced to keep the wealthy people who owned a lot of homes happy because they were upset about also having their homes taxed. And that's why we have it.
Dominic: So we have this tax policy thanks to feudalism, basically.
Katz: Still going! And experts say it's not going to change unless we start taxing differently.
Dominic: And is that true everywhere in Europe?
Katz: Well, I picked the Netherlands for its particularly extreme tax exemptions for homeowners. It's actually the only country that has both the mortgage interest tax reduction and it also doesn't have any capital gains tax on your house. So it really is quite extreme here. And experts say that that is why we have such a bad housing crisis.
Dominic: Makes sense.
Katz: Yeah, which is really different to what I thought before of like, it's just a small country that's full. But to go back to your question, there are less extreme versions of this kind of tax regulation all across the continent. It's not just the Netherlands.
Dominic: No. We're the worst. In this aspect.
Katz: The other thing is, rewriting the tax system would work best if we promised to invest this new tax money at least partially into building or buying back affordable housing or alternatively bringing down income tax for the lowest earners, which would have a similar redistribution effect.
Dominic: Sounds like there are a lot of possibilities.
Katz: And that might sound like bad news for homeowners. But Molly says it's ultimately what drove people's mortgages up in the first place. So even if some people lose out in the short term, it's the only way out of these ever-spiraling house prices.
Molly: Our research shows that the majority of people would be better off under a proportional property tax system. There would be some people that would be worse off and some people that would be, like, quite significantly worse off because they have very big expensive houses. And those are the people that tend to shout the loudest. So it's just really difficult. But that's where I would like to see some more ambitious policymaking.
Katz: There are versions of these tax benefits all over the continent. And as I said, the Netherlands is particularly extreme. I mean, it is an insane benefit for the wealthy and a whopping cost for the entire nation. The EU has called for the Netherlands specifically to get rid of these benefits five times. So has the Dutch central bank.
Dominic: This all sounds clearly unfair to me, as it is. But if you're a homeowner receiving these tax deductions, why should you want them to be scrapped?
Katz: Yeah, so if you're a homeowner, especially one stressing about your mortgage bills, you might instinctively think, ‘Do not take the tax reduction away from me.’
Dominic: Yeah, I guess although now you've explained it like this, I'm like, ‘Take it, please. It's fine. I don't need it.’
Katz: Yeah, we've learned a lot. Homeowners who haven't listened to this episode yet might find it hard to swallow. And let's be honest, there might not be enough political will to make this happen given just how many voters are homeowners. But things are shifting as it becomes more and more blatant how unfair it is.
Dominic: And as more and more people listen to this episode.
Katz: Exactly, changing the world. But on a more serious note, there's a point at which inequality becomes so bad, it becomes everyone's problem.
Dominic: True.
Katz: If you're like winning because the value of your house is going up, where does that money come from? And at what cost to the other people in your life? For example, your kids can't buy a home unless you then sell your house to give them a massive down payment. And then you both have to buy a smaller house for more expensive. Or, the people who work to support your life. That's also a problem. It's already practically impossible for workers like teachers and nurses to afford a home in many of our cities.
Dominic: Yeah, that makes sense.
Katz: The housing crisis even spills over into state economics at some point.
Molly: Governments are starting to really realise if we see more people reach retirement in the private rented sector, then that basically means they're going to need help from the state to pay their housing costs, given the fact that we know that lots of people aren't saving enough for their retirement as it is.
So yeah, governments are going to face a pretty eye-watering housing benefit bill if the current status quo of low home ownership among younger cohorts is continued.
Katz: Oh man, it's such a classic example of us just not being good at species and long-term thinking.
Molly: I know.
Dominic: What are we going to do when a significant portion of retired millennials are still renting and can't afford their housing?
Katz: Yeah, I found this both unsettling and comforting, as in this is going to be a state problem. The retirement issue hasn't hit yet, but it is coming for us in a few decades.
Dominic: Yeah, so it seems with the exception of Finland, most of us missed this opportunity of the financial crisis as a moment of transformation.
But is the housing crisis big enough now to give us another opportunity to transform? Please say yes!
Katz: Yeah, that's what I wanted to know too. I'm not sure we're at ‘tuberculosis’ level of urgency, but the steam is definitely building. And I asked Cody, like, you'd think there'd be more support for at the very least taxing secondary homes, especially properties that people own to make money as landlords, because most people aren't landlords.
Cody: Most people are not landlords, but still, many people would vote against these kind of policies because they think these policies are sort of enacted out of jealousy, like, ‘Oh, but these are hardworking people that have done a lot of work to accumulate this wealth.’ If you are going to tax them, that's sort of a jealousy tax. And the real estate lobby also plays an important role in sort of propagating this narrative.
Katz: There's a guy called Daniel Kahneman who actually won the Economics Nobel Prize decades ago for basically proving that people do not make decisions based on logical arguments. They choose based on emotion.
And on his deathbed a few years ago, Kahneman argued that we keep making the mistake of trying to solve meaty issues like climate change by assuming that a political shift will come with exactly the right logical argument, like maybe just one more. But time and time again, evidence shows it's emotion that drives people to vote one way or another. So actually, Cody's first book was on how policy got us into the housing crisis. And his whole second book is about how shame is getting in the way of rewriting housing policy.
Dominic: Shame?
Katz: Yes, shame. Everyone's favorite emotion.
Cody: People living in moldy homes, for example, were ashamed of inviting people over, or people in their late twenties, early thirtiess were ashamed that their peers were buying homes and they were still with their parents, for example.
Katz: Or house-hopping if they didn't have parents they could fall back on.
Cody: They might have internalized the idea as well that it's their own fault, like, ‘I should have worked harder in my life, I should have made better decisions, and I didn't, and that's why I'm now living in this situation.’ While, in fact, it's a systemic issue and it's the result of politics and policies. I think shame is also part of this political strategy. It might sound a little bit more conspiracy theory than I intend it to be, but I think it's part of a political strategy of silencing people that actually have rightful claims to a better life, and this is what's fascinating to me. All people experience shame at some point, and it's a very personal emotion, of course. When you are ashamed, you keep it to yourself, and if people stay quiet, then the people that benefit from the system, sort of the status quo, the people that own property, the people that are living comfortably, can keep the system as it is, and that's what they want because they're benefiting from it.
Katz: In our defense, this doesn't really feel at all like the central narrative in the media or in politics.
Dominic: Yeah, it does not.
Katz: Cody argues that's because it forces a much bigger reckoning.
Cody: Basically, we'd have to question our entire value system, and also that maybe what we say we value isn't actually what we're doing. There's a strong belief in many societies in the ideas of meritocracy, and the idea that your position in society is the result of basically hard work and talent. So, having to acknowledge that, well, actually, you were only able to buy this apartment or this dream castle because your parents essentially bought it for you or supported you with insane amounts of money, it emphasizes your success isn't because of what you did. It's simply because of privilege, the privilege of being born into a rich family, and it also indicates the randomness of certain people being able to buy property because of parental support.
Katz: The housing crisis has gotten so bad that it's becoming too loud to avoid. Many people who inherited money or a house or both, they might not have known how much better off they were, but they've known for years that inheritance was a crucial part of it. On the other hand, experts say, the people who didn't get family money, they're only just starting to find out quite how much their lives have been determined by chance. And how little they can do about it by, like, working harder now.
Dominic: In so many cities in Europe, you're just not going to be able to own a home if you don't have that family money.
Katz: Yeah, and that's what the Parisian policymaker said. This is about who gets the right to live in cities. In an interview earlier this year, the mayor of Barcelona said, we are in serious danger that the housing crisis becomes more of a threat to our EU democracies than Russia. We're running the risk of having the working and middle classes conclude that their democracies are incapable of solving their biggest problem.
Dominic: The housing crisis is a bigger threat to our democracy than Russia. I have to take a second to process that. Do you agree?
Katz: Well, like, when I first read the sentence, it felt a bit bombastic. At the same time, after months of looking into it, I think it's a much more major threat than we realise. This kept on coming up in my reporting, that the have-nots are finding out on another level, and that is unleashing a lot of anger.
Dominic: I've noticed, like most people, that there is more anger in society now than there was 10 years ago.
Katz: Yeah, and interestingly, this is a polarisation that isn't necessarily along, like, left and right political lines.
Dominic: Yeah, maybe it's more along the lines of who's benefited from the inheritocracy and who hasn't.
Katz: I really resonated with this. Like, I just did not know for most of the 13 years of not even having a permanent rent contract, let alone a home ownership prospect, I just didn't know that almost every one of my friends who bought a house had gotten money from their families. And a part of that was that almost none of them told me.
Dominic: Really? Yeah, and the more I got into reporting, the more I found I kept a lot of my housing stress over the past few years to myself and I thought and talked about it as a personal problem. But I'm just one of millions, like, it's so much bigger than me. And it was only in the process of this reporting that I realised not just that I was homeless for quite a long time, but also that I too had felt unconsciously like it was sozmehow my fault. Lots and lots of renters are having the same realisation. Not only that, but homeowners are not as aware as I thought about how precarious the lives of renters are.
Dominic: And Kat, is this true all over Europe? Like, we promised policy ideas that every country could apply. So is rewriting the tax policy something we can all take away from here? I would say a cautious yes.
Dominic: Yes? Yes.
Katz: Yes. With some caveats. What exactly the most important tax policies are and how they work is obviously really varied per country. Like in Spain and Italy, a lot of families own a collective second home because it's so hot in the summer. But those homes are worth much less and there are places that are less inhabited. So policy would look really different there. Another example is that in 2015, the French-speaking part of Belgium kept the mortgage interest tax deduction and the Flemish-speaking part scrapped it. And what you can see is that the housing prices went up much more slowly in the Flemish-speaking part. They went up much more significantly in the French-speaking part. And Cody says that you can basically see in the data that most of the money from the mortgage interest tax deduction goes directly into increasing housing prices.
Dominic: Ah, a good Belgian experiment.
Katz: Yes. Tailoring aside, experts resoundingly said that tax was by far the most important policy for us to be rewriting.
Dominic: If you'd asked me a year ago what I guessed would be the most important policy around housing, I would not have guessed this is where we were heading.
Katz: Me neither. To be honest, after all of that, like what we were talking about a year ago, building, migration, it just feels like such a complete distraction from the fact that solving our housing crisis is not possible unless we rewrite housing tax.
Dominic: Well, you did promise that this episode would be ominous and hopeful, and yeah, I think you've delivered.
Katz: You're most welcome. The thing is, inequality is at the root of not just our housing crisis, it is driving the climate crisis, so many things. How long are we going to hold out on not doing something that is in the benefit of the majority of the population because it's, like, awkward or not sexy?
Dominic: Yeah, that doesn't seem like a good enough reason.
Katz: The question is, is this going to be a crisis where we finally make the right choice and make a much fairer tax system, or are we going to miss the boat once more?
Katz: Do you think it's something where we can sort of trust that the millennial generation will be more responsible and maybe intrinsically motivated to redistribute wealth, or do you not trust that, think we'll just be the next boomers and we need some really strict policies to manage this?
Molly: I think that is a really good question, and I don't have a crystal ball, but what we do know is that people tend to become more conservative as they age, but millennials don't seem to be making that switch.
Katz: Interesting.
Molly: Yeah, I don't know whether we're going to be more responsible as a generation.
Katz: Are we as millennials brave enough to let homeowners get a bit less comfortable for the sake of renters?
Dominic: Well, there's actually an election this week in the Netherlands, a general election. And yeah, I'm not allowed to vote, but I am having a lot of discussions with friends and families about the choices of which politicians to vote for, the policies in their manifestos, etc. And honestly, this episode has already changed how I think and how I talk about the housing policies on offer. So thank you, Katz, for opening my eyes.
Katz: Yeah, I think it's honestly influenced how I would talk about this too. And that's really cool, like that's so cool when you get the chance to report and dig into something and learn all of this stuff and you're like, wow, it has genuinely made me feel more informed and changed my mind.
Dominic: Yeah.
Katz: I find that quite hopeful in a time of polarization and hardening opinions.
Dominic: Yeah, me too.
Katz: So thank you for doing that with me.
Dominic: Well done, us.
Katz: Yay!
Dominic: Let's give ourselves a pat on the back, Katz.
Katz: Let's.
[patting sound]
Dominic: Yeah, I guess these just aren't the conversations that colleagues usually have with each other, you know, comparing their wealth. But we've done it and I'm glad we've done it because even if we both work for the same podcast where it's not that impressive day rate, it is really important to discover which policies are there making that difference worse.
Katz: And I mean, it's even more remarkable because we talk about money under pressure frequently. You know, we've worked together for, I don't know, six years. We look at budgets for our financially struggling podcast and make hard decisions about like our day rate and stuff like that. And then this conversation about money and housing feels much more tense and awkward.
Dominic: Well, and you know, one thing I think is that the strange thing is you don't know what it's like to have this security. That's what I'm just realizing now. That's the thing that's awkward to share maybe that I do feel an element of security and I guess relaxation because of the fact that I know I've got somewhere to live in, as long as I want to live here, and that will eventually be mine.
Katz: Yeah. And the thing is like, I don't not wish that for you. Like, the point is that I wish that for everyone. And I think seven years ago and also just being younger, I think there was a moment at which it was just like, ‘Oh, that hasn't happened for me yet. Or that's happened for some of us and not others.’ And now it's gotten further and I'm like, ‘Oh, wait, hang on. This isn't going to happen for me.’ And that's not like the fault of the people who have that stability. But it does mean that it becomes a bit awkward to acknowledge that the stability that I wish for you is something that I can't imagine.
Dominic: Yeah. And I really wish it for you. We have this phrase in Dutch, gunnen.
Katz: Yeah, I know. It's a lovely word.
Dominic: And, yeah, it's just really unfair.
Katz: It really determines what our futures are and like even what we can do now. Like, because of that not so impressive day rate – I mean, journalism is really not famous for being well paid, and privately, I've been thinking for like two or three years: ‘Do I need to completely change my career? Can I carry on doing this job if I don't also have a house?’
Dominic: And we really don't want a world in which the only people that can afford to be journalists are people that own a home.
Katz: I'm not sure the journalism would be the same.
Dominic: You may well be right.
Katz: The pitch of this series was to look into policy that is tangibly shaping our daily lives. And well, having to move every few months and now paying half of my income to some company that's making a bunch of profit that I will never see again, it's a pretty damn tangible situation.
Dominic: Yeah, that is very tangible. And I'm actually quite pleased to see that quite a few of the big Dutch political parties have a policy to remove the mortgage tax subsidy for homeowners in their manifesto.
Katz: I know, I cannot believe the timing. Watch this space.
Katz: This episode was written, reported and produced by me, Katz Laszlo. The series was edited by Jasmin Baoumy, and Katy Lee, with precious editorial support from my trusty cohost Dominic Kraemer, as well as Morgan Childs, Uršula Zaletelj and Maja Stepančič. Mixing and mastering came from the wonderful Wojciech Oleksiak. Sound design came from the fantastic Jesse Lou Lawson. Music and sound effects came from Epidemic, and Freesound.org, and our artwork and beautiful visuals came from the one and only Rosa Ter Kuile, otherwise known by her artist name RTiiiKA.
Huge thank you also to Vera Vrijmoeth, Georgia Walker, Cody Hochstenbach, Molly Broome, Marie-Jeanne Dumont, Juha Kahila, Ton Heijdra, Museum Het Schip, and the team at Woonbond. Shoutout also to my friend Paul who took me on that tour, and beyond that a really huge thank you to the many many friends and strangers who had conversations with me about money and housing and inheritance all across Europe, it was absolutely fascinating. Yeah! I hope that maybe some of you will feel inspired to do the same.
Most importantly, this series was a hundred percent funded by you, our listeners. Our generous crowd-funders made it possible for us to do extensive reporting, completely independently and we definitely do not take it for granted. We couldn’t be more grateful. If you’re feeling inspired to support our ongoing work, please feel free to go to patreon.com/europeanspodcast. You can donate as little as three euros, which is less than an overpriced cappuccino! But you can also donate so much more. Ok, bye!
Credits
Written, reported and produced by: Katz Laszlo
Editors: Jasmin Baoumy, Katy Lee
Editorial support: Dominic Kraemer, Morgan Childs, Uršula Zaletelj, Maja Stepančič
Additional reporting: Lara Lise Bullens
Sound design: Jesse Lou Lawson
Mastering: Wojciech Oleksiak
Music and SFX: Epidemic & FreeSound.Org, including pneumatic drill by acclivity
Artwork: RTiiiKA
Special thanks to: Vera Vrijmoeth, Georgia Walker, Cody Hochstenbach, Molly Broome, Juha Kahila, Ton Heijdra, Marie-Jeanne Dumont, Museum Het Schip, Woonbond, and the many more friends and strangers who talked to us about housing and money.
Interesting resources:
If you’re curious about where you stand on your country’s wealth ladder, you can find the World Bank’s wealth calculator here.
If you want to know your renters’ rights, many countries have renters’ unions that give (legal) advice. Here is the Dutch one: Woonbond.
Interested in hearing more radio that looks at how politics gets into our intimate lives? Journalist Anna Sale’s book and podcast “about the things we think about a lot and need to talk about more” have been a huge inspiration for this podcast.
Support Us
And most importantly, this series was fully funded by you - our listeners! Our generous crowdfunders hit our goal within two months, and made it possible for us to do extensive reporting fully independently. We couldn’t be more grateful. If you’re feeling inspired to support our ongoing work, please go to patreon.com/europeanspodcast. You can donate as little as 3 euros, less than an overpriced cappuccino! But you can also donate plenty more ;)
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