Lodge Hill Development – A Corporate Wet Dream

The Lodge Hill development now approved by the undemocratic Conservative controlled cabinet style Medway council is an exercise in excess.  The nation’s largest property company; Land Securities Group, with MOD government contracts in it’s grasp stalking the nation for large areas of undeveloped land to create ‘Great space where people and businesses thrive’.  Sounds marvelous, what a business with more than a £1billion in pre-tax profits in 2014 and a superb 27.2% shareholder return, if I only had some money I’d be phoning my broker immediately demanding ‘get me in on this’.

Their ‘consultation’ with the local community and Medway council makes it look soooo sweet.  You can just smell the freshly cut grass of all those pretty little garden plots with nicely trimmed lawns and perhaps a US style picket fence, SUVs in the little drive and everyone smiling and happy as they trot off for work each day.

 

What’s wrong with this, I mean it all sounds so wonderful and… contrived, artificial, faux I could add adjectives all day long.

 

What’s wrong is wrong place.  The Hoo peninsular currently has about 5000 residents many of these in Hoo itself and the rest in small villages dotted across the area.  It’s a unique area, a peninsula formed by the convergence of the Thames to the north and the Medway flowing up from the south into the Thames estuary.  The fact that the human population is sparse, means other species can also thrive.  It is spectacularly rich in bird habitats and populations and Lodge Hill in particular has been designated a SSSI and has especial importance for one of the UK’s most iconic birds the nightingale.

 

Much of the area of Lodge Hill is a former military training area and so was a legitimate brownfield site – ideal for development many would say.  I’m all for developing brown field sites except in this case the length of time taken to demolish old buildings and make safe any contaminated ground (I’m not assuming there is any but the problem is mentioned in the planning application) has taken so long and has not been undertaken without finding a scheme so grandiose that the costs involved, potentially for the MOD simply evaporate like the dew on those pretty little lawns they’re planning.  The fact is that new residents from nature have expanded from the areas cordoned off by barbed wire for years and now occupy the entire site.

 

The scale of this project is such that it would not just double the human population it would treble it and then some.  5000 homes equals at least 10,000 people.  The area of land currently occupied by the natural world WILL be devastated, destroyed, gone forever.  But don’t worry they’ve offered to pack the bags of nature and ship them off to far away lands which have lovely rainbows and streams and they’ll live happily ever after.  Maybe one or two will escape and they can perch on those pretty little fences next to the pretty little lawns chirping prettily.  How nice of Land Securities Group to make such a generous offer.

 

Most parts of the UK need additional housing and I think Medway needs to play its part in meeting this need.  However, Medway Council appear to have been seduced.  Seduced by the goddess of plenty in the form of Land Securities Group and their grandiose scheme to turn the Hoo peninsula into a sort of cross between Bluewater shopping centre and a little slice of Milton Keynes.  Sure, there’s a lot to tempt people to like this project, I myself might find that at last Medway Council has more than 3 shacks to offer small businesses an affordable base.  The houses will probably built to look really nice, they’ll be shops and schools.  But 10,000 people – 10,000.  This is ridiculous.  But look at it from the council’s point of view, they’re under pressure to find somewhere to plonk 1000’s of new homes to meet their objectives and with this scheme all their prayers are answered in one easy, prettily packaged solution.

 

Now, let’s look at the bigger picture.  Medway like the rest of the country and the most of the world for that matter experienced the biggest failure in the financial system, probably of all time when the system collapsed from excessive and fraudulent banking practices in the USA and Europe in particular.  Incredibly, despite this total disaster, which many including myself are still recovering from the financial and corporate world have sort of forgotten how it all happened.  This is useful because it means they can begin again to build the same ‘bound to fail’ financial system backed by banks and corporations that are now ‘too big to fail’, meaning that they can take any risk they like because we have to bail them out if they mess up.  If you think that I’m wrong just look at today’s headline in the Independent “property prices higher than pre-crash 2007 figures in 6 main areas of the UK.

 

What’s this got to do with Lodge Hill development.  Well, probably almost everything.  We’re fed a media diet of how we can’t kick start the economy without the construction industry taking the lead and building loads of houses – that’s the ticket, that’ll get us out of this mess.  Um… no it won’t.  When you’ve built a house does it continue to produce income – no.  (Actually under the lunatic policies of Mark Carney (head of the Bank of England) and George Osborne (the Chancellor of the Exchequer – he tell’s us) a house once built can produce income but only if you create the right environment.  This is called a housing bubble.  What many people don’t realise is that Mark Carney ‘brilliantly’ created the biggest housing bubble in Canadian history before ‘escaping’ the wrath of his countryman by coming over here to inflict the same disaster movie on us.)

 

Some facts about house building: in the years building up to the financial crisis of 2007/8 house prices tripled. A small part of this was supply and demand, i.e. not enough housing to satisfy demand but mostly it is because of mortgage lending (including very importantly re-mortgages), which quadrupled during this period.  For those that think there’s a direct link between house building and demand, this graphic, courtesy of Positive Money shows that the growth of actual housing stock and population hold a steady and balanced course while mortgage lending soars pulling house prices up as it does so.  house price relative to lending

 

This explodes the myth that this lending is ‘necessary’ to cope with increasing population and therefore demand.  To understand why so much money is ‘made available’ for property speculation, because this is really what it is, it is necessary to look at what happens when a bank makes a loan.  When a bank makes a loan it doesn’t, as most people think, go to it’s safe deep underground and count out the gold or cash to lend to you, it simply types the figures into your account that you spend on your shiny new house (or old house of course).  Yes, that’s right – it invents this money, creates it – out of nothing.  It’s pretty much a myth that it’s related in some way to the total money it holds in reserve, that would be called fractional reserve lending (where they can lend let’s say, ten times what they hold on deposit).  In reality they don’t even stick to this idea in the UK.  But surely this is criminal.  Wouldn’t you go to jail if you ‘invented’ money and lent it to your mates – at interest.  Well yes and no, you see they have been granted a so called charter which allows them to do this and not be prosecuted.  All they have to do to get away with it is ensure that you sign a contract saying that you’ll repay the capital and all interest charged on the loan of that capital.  That contract then balances the books because they can call it an asset and this balances out the ‘liability’ of the ‘money’ they lend you.  Brilliant, although the truly brilliant part, when it comes to mortgage lending, is that ‘money’ they lend you comes with interest charges on top.  This ‘interest’ is payable immediately and is income for the bank, so think how much interest you’re paying when you purchase a house and this figure is income for the lender.  One reason this type of lending is so appealing to banks is that it is secured on a real asset – your house.  You don’t pay – they get the house.  You do pay, they pocket the interest and tear up the piece of paper that said they once lent you a lot of money along with your contract promising to pay and no one need ever know that money never existed in the first place.  So if you’re lucky enough to have paid down your mortgage – shhhh.

 

Ok so if you’re really keeping up here you might be saying, ok apart from inventing money out of nothing and not actually really risking anything really they are sort of taking a risk and surely if the market collapsed they would pay a big price.  Well in a non fraud financial system this should be the case but the really really brilliant part, for the banks is; they securitise the loan they make to you, essentially they insure against you defaulting mitigating the tiny risk they might be taking.  Not withstanding the fact that they’ll take the house if you don’t pay up.  But then you ask, surely in the event of a financial collapse, including a house price collapse (as seen in the USA more than in the UK) such as the one most of us remember as clear as day (unlike our government) they would face ruin.  The answer again should be yes but the government decided that they would bail out any banks that faced ruin.  So rather than pay the depositors who’d done nothing wrong they replace the banks missing funds by borrowing vast sums of money on the world markets and printing money, not for you and me (although they pretended that it was for investing in the economy) but to re-capitalise the banks, i.e. allow them to continue ruining the economy as before.  What is wrong with this?  Well, we pay for it, as the national debt sky-rockets we pick up the tab paid for in taxation.  Why can a government always borrow, because they have us lot that they can force to pay tax.  The amount we contribute to debt has sky-rocketed in recent times and at the present rate of climb will continue to affect us more and more.

 

This sounds pretty bad but it is nothing when you look at how much we now pay for property.  In 1997 a first time buyer would be expected to find 17.5% of their income to pay their mortgage.  At the peak of the previous housing bubble (2008) this had risen to 49%.  Remember this higher figure also applied to millions who re-mortgaged thinking they could use their wise property investment to raise their living standards, or to improve their property faster than their wages would have otherwise allowed.

So for the property buying generation of the late nineties to the present day, they are paying 30% more to buy a property and more of their tax payments are being used to pay interest on a national debt that under the current financial system will never be paid off but will require a higher and higher percentage of our income or our productive capability just to keep pace with the interest payments.  It is important to bear in mind that all these increases in the price of buying a home also create a rise in the cost of renting so it’s not as though you can rent as a sort of alternative, cheaper lifestyle option, which in the case of social housing and lower price rental accommodation, it should be.

 

But don’t we feel better when we hear on the news that our houses are worth three times what we paid for them.  Yes we do but wrongly.  However, the media – otherwise known as the autocue readers for the banks and corporations, sell us on the idea that we’re doing really well – just look how much your house is worth – whooo.  Except it’s not.  Unless you fancy a pied de terre in war-torn Syria you’re not going to get any benefit from your houses increase in value.  If you’re really canny and don’t mind where you live it might be possible to move when your house in Kent has increased more, in percentage terms, than a property in Northumberland and hey you can pocket the difference.  However, it’s not likely to be much – let’s return to the headline above “Property Prices increase to 2008 levels in 6 regions of the UK”.

 

The facts we need to all realise are that the current financial system, of which mortgage lending is a major part, is a mechanism for taking money from the poorest in society and gifting it to the rich.  How? It’s simple, the poorest in society have to borrow more and pay a higher rate of interest than the rich.  And when I say poor or poorest I don’t mean some unfortunate person that’s been excluded from the world I mean the bottom 90% of people.  So pretty much all of us.  The easiest way to understand this is to look at the 2 extremes in distribution of wealth drain from the banking sector.  The 10th placed income group pays avergage 9.4% of their income to banks compared to the top income group that pays 1.4% of income to banking sector.

 

These headlines are a warning… house price bubbles are a warning as are all increases in a good that races ahead of wages and other prices.

 

So what’s in it for the banks.  Well really quite a lot… many trillions a lot when looked at globally (banks are pretty much all international concerns).  Inventing money out of nothing creates real wealth for the banks.  Interest begins the moment they create this ‘money’.  Interest is real money, not invented.  It’s real because you gave your time, your energy, skill and learning to earning it in good honest fashion and you’re giving it away to an organisation that did nothing but type the figures for lending into your account.  They get to spend that money before it devalues where you get to think your portfolio is increasing and therefore you’re getting wealthier but in reality your purchasing power has decreased enormously.

 

So, back to Lodge Hill, why the rant on the financial system when I started out discussing the pros and cons of a local housing development.

 

It’s true that something needs to be done to restore Lodge Hill and to enable the barbed wire to come down forever and be ‘normalised’.  Some increase in housing stock is justified in respect of supply and demand figures, there is some brownfield restoration needed.  However, the scale is ridiculous.  It cannot be justified on supply and demand.  So why is it being approved.  National Politics.  The government have embarked on a disaster course of house building in the mis-guided belief that it’ll kick start the economy.  Anyone notice after 7 nearly 8 years since the financial crash the economy being kick started.  Any progress we see currently is down to people refusing to be beaten and starting up their own businesses if they couldn’t find work or taking zero hours contracts and part time work – they refuse to be beaten or have no choice.  In other words we have slowly dragged ourselves back to survival DESPITE the government bailing out banks.

2 comments for “Lodge Hill Development – A Corporate Wet Dream

  1. Irving Kaminaka
    19/02/2016 at 6:39 pm

    wow, awesome blog article.Really looking forward to read more. Great.

  2. Emmitt Gittleman
    19/02/2016 at 6:39 pm

    great post…thanks for share this tips..keep up

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