A house is so much more than a home

Real estate may dominate dinner-party talk, but few people think clearly about how the buildings they live in shape their lives. Leif Jerram (right) surveys their domestic and social roles, while Susan Smith assesses their place in household finances

It's hard to talk about "the home" or "the house" intelligently or interestingly in public; it's as if the home was - well, best left at home. When it is mentioned it tends to be in terms of "housing" (a euphemism for "problems with poor people"), spectacular greed ("I bought it for Pounds 104,000 and it's now worth £179,000") and whether wallpaper is really back or not.

Recently, the public life of the private home has been reduced to a sort of televisual house porn, in which looking nice and being interesting pass for solutions to problems such as not having enough space or having little or no family interaction.

Sometimes we tune in to watch rich people building architect-designed dwellings with white walls and clever staircase solutions. Sometimes we reflect on issues such as accent walls or patterned wallpaper. Sometimes we tune in to watch rich people buy extra homes in other countries.

But the middle ground of the way millions of houses, flats, sheds and gardens shape our lives remains relatively ignored. We spend terrifyingly little time reflecting on the homes we live in, why they are built the way they are, how their spatial arrangements shape our lives, from parents'

relationships with children to crime, to sex, to access to labour markets.

For all the effort and money we spend on them, most people - including academics - spend remarkably little time thinking about homes in a rational, systematic way.

This is a shame because there is plenty to think about - such as crime.

Streets with lots of windows facing on to them and few points of entry and exit have less crime than streets where the road is hidden from view by porches and hedges. Although the home is invariably represented as a place of safety, for women and children it can be the place where they face their most profound physical, emotional and psychological danger.

There are, nevertheless, a few "basic truths" we are taught to repeat when it comes to property: 1960s housing is bad; 1930s Tudorbethan sprawl represents the vacuous, cultureless nature of suburbia; Victorian homes are homely and successful.

Yet it is important to remember that the substandard Victorian housing - the poisonous, foetid, damp, diseased, jerry-built polluting hovels that characterised British cities until the 1960s - has been largely destroyed; only the good stuff remains. Anxious middle classes campaign against the continued demolition of terraces in areas such as Salford or Dudley not because they want to live in them but because they want authentic, chirpy working-class salt-of-the-earth types to live in them. Most residents voted with their feet and left if they could.

And most 1960s housing is sturdily built, light, airy and spacious. The quiet success of these homes is revealed by reduced rates of fire deaths and tuberculosis, not to mention a reduction in the grinding domestic labour of our grandmothers, who were forced to carry around water and coal in a vain attempt to heat their dirty, cold Victorian dwellings.

Homes built in the 1960s were designed for a working class and intended to have fast rail links to city centres. Neither the planners nor the residents of housing estates can be blamed for mass unemployment and the way democratic societies were content to see the poor isolated miles away from work and leisure - and from the bourgeoisie.

Suburban sprawl has its upsides too. It gave us The Who, the Beatles, the Jam, the Rolling Stones, Blur, Franz Ferdinand and David Bowie, along with fantastic television, watched in suburban living rooms. Middle-class suburban boys had, for the first time, bedrooms of their own in which to evolve an interior emotional life, and sing about it, and many had garages when their amps got too noisy.

So the type of house we live in is only one part of the story. It is also about how we use the space inside. Kitchens merged with living space link women's domestic labour with their social, familial lives; small, functionally separate kitchens forcibly separate it. The widespread introduction of the television and the settee in the 1950s and 1960s meant people no longer sat facing each other, but in rows facing the same way.

Tables have now disappeared from some 25 per cent of homes, eliminating face-to-face familial interaction altogether.

At the same time, modern construction regulations mean that internal walls are now made of little more than paper, transforming the soundscape of domestic life for millions. Visual privacy was an invention of the 20th century, as parents, children, lodgers and extended family were segregated into the various functionally defined rooms of new housing, but auditory privacy is being slowly abolished as thin walls lead to perpetual listening and frayed tempers for which no amount of clever wall colouring can compensate.

In any case, while working-class homes tend to continue to emphasise a series of small, discrete spaces, territorially marked between sexes and generations, middle-class property owners now knock spaces through, making their homes a series of compulsory and perpetual exposures, where the paraphernalia of status and leisure can always be on display.

Finally, a home represents a great generational conflict of the future: between those who bought a house before 2000 and those who did not. My mother pays a mortgage of a couple of hundred pounds a month on a big house in London bought in 1977, while I pay £600 a month on a tiny terrace in the least desirable part of Manchester bought in 2004.

The home, then, is not just the place where we live, but the class that we are, the generation we represent. Our homes reach into every aspect of who we are and what we are - and it would help us deal with our society more convincingly if we worried about these things first, before fretting about the vulgarity of net curtains or whether wallpaper is back in vogue.

Leif Jerram is lecturer in urban history at Manchester University. His book Streetlife: Cities and the Making of 20th-Century Europe will be published by Oxford University Press next year.



A possible future for the market?

In the UK, the US and Australia, where owner-occupation is the dominant housing tenure, homebuyers have a narrow investment portfolio and are exposed to house-price risk. They are also underserved by the financial instruments developed to protect major institutions from such positions.

This is because housing (with real estate more generally) is the only substantial class of assets that does not inspire a liquid market in derivatives.

Derivatives are contracts whose values derive from the (future) price of an underlying asset. Housing derivatives, for example, are based on a house-price index. Because they can be traded independently (you can buy or sell an index without housing changing hands) they are a means of transferring or managing market risk as well as an investment opportunity.

Outstanding derivatives contracts are worth an astonishing $450 trillion (£226.5 trillion). Practically none of this is anchored on housing, but that is set to change.

The financial logic is compelling. Housing is expensive to hold, costly (and slow) to trade and has other complications for large investors, who traditionally avoid it. They miss out on the gains but shoulder none of the risk. Housing derivatives are more attractive. They offer the benefits of diversification without the costs of physical ownership. This opens the way for small investors (individuals, buy-to-let landlords, housing associations, builders and property developers), who own the majority of housing, to sell some of their price risk to larger institutions (insurers, pension funds, hedge funds and banks) that can carry it.

From a housing policy perspective, this arrangement is attractive only if it transforms the affordability, security and sustainability of home-ownership, and boosts inclusion in other ways. Some economists suggest that it can. They argue that poorer homeowners have as much to gain as wealthy investors from hedging housing risk. There is already talk of a new generation of mortgage and insurance products to deliver this.

At the same time, renters could buy into price appreciation without shouldering the entire cost of buying, maintaining and selling a home.

Price-linked savings accounts are already on the market, but more imaginative and useful ideas are in the pipeline.

To make this happen, the challenge for financial markets will be to engineer products, based on price indices, that are sympathetic to the character and institutions of the housing market.

The challenge for the Government is to ensure that this serves the interests of home occupiers.

Susan J. Smith

Inhabiting dangerous territory

Real estate may dominate dinner-party talk, but few people think clearly about how the buildings they live in shape their lives. Leif Jerram (right) surveys their domestic and social roles, while Susan Smith assesses their place in household finances

'Safe as houses' is a hollow phrase: many Britons expect their property to help provide for them in old age, but it is a risky strategy

Home purchase is a route to good fortune. That at least is the view on the street, in the office and around the dinner table. Britain has, after all, turned itself from a society of renters into a nation of homeowners in less than a century, and each cohort of new recruits has ridden a wave of price appreciation. Buyers know that, despite its ups and downs, residential property performs well in the long run. So it is not surprising when the after-dinner chitchat turns to making over, trading up and moving on. Whether by fixing gutterings or adding Glams (those gorgeous, lifestyle accessory must-haves that add so much to price), climbing the property ladder has become a national obsession.

As personal wealth accumulates faster in homes than through incomes, UK households are busy buying early, paying high and generally "banking on housing". But in the midst of this exuberance, the most significant shift for homebuyers is easily overlooked.

It is not the expansion of owner-occupation or even rising prices that makes housing wealth so topical. It is rather the changing character of the mortgage market. Traditionally, mortgages simply provided the leverage people needed to buy property; they are large loans gradually cleared.

However, recent years have witnessed the rapid innovation and enthusiastic take-up of a generation of increasingly flexible mortgages that, within certain limits, allow borrowers to draw from their account as well as to pay off their loan. This may sound like a technicality, but it marks a sea change in the way housing wealth works.

As flexible features become a hallmark of even the most mainstream mortgages, borrowers can, for the price of a phone call or a visit to the cash machine, roll their home equity cheaply and easily out of housing and into other things. They can spend from housing wealth today rather than save it for tomorrow. And they no longer have to sell up, trade down, move home or even remortgage to do this. Households can bring home equity into their myriad day-to-day decisions about savings, spending and debt.

This new style of in situ mortgage equity withdrawal is on the increase.

Borrowers are at least three times more likely to engage in it now than they were a decade ago, and who knows how much wealth ebbs and flows between housing and other things now that offset, flexible and current account mortgages are so popular? What is clear is that British buyers are not just banking on housing; they are actively "spending the home".

With Beverley Searle and Nicole Cook at Durham University, I have taken a closer look at what they spend it on. A reasonable proportion is, in keeping with tradition, set aside for home upkeep and improvements.

However, our research suggests that the more flexible people's borrowing becomes, the more widely the cash is spread. Some borrowers simply substitute mortgage debt for other, usually more expensive, loans. But the majority withdraw equity either to fund entirely new spending or to buy bigger, better and sooner than they would otherwise have done.

Economists interested in the wealth effects of housing might expect an inventory of enhanced lifestyles and luxury goods: the kind of spend that keeps economies afloat even in periods of recession. And there is certainly an element of this.

However, there is a more sobering tendency, too. Participants in our research value their home as a form of insurance and view their mortgage as a means to claim. They talk of housing wealth as a shield, a buffer, a comfort zone, even a tool. It is becoming a welfare resource that, with a mortgage at the interface, can tide borrowers over dips in income and unexpected expenditures while also meeting a range of basic household needs.

So housing wealth is not just a "feel-good" factor for those homebuyers who having won the price-rise lottery can hardly believe their luck. It is more generally a "feel-safe" barrier between households' wellbeing and uncertain times. It is hard to overstate the extent to which a sense of social security - that quality once rooted in the welfare state - now stems from a store of housing wealth whose spendability glues threadbare safety nets in place.

This has not gone unnoticed by governments. Housing is a major financial asset: it is worth more than commercial property and exceeds the value of equities and bonds combined. Furthermore, while property values are (like every other style of wealth-holding) highly uneven, housing wealth is more widely spread than any other asset class.

If this could be harnessed to help grapple not just with a pensions gap and a crisis of care in older age but also with a shift from social to private provisioning across the life course, it would be an even bigger bonanza than the sale of council housing.

But this assumes that borrowers can draw from housing wealth in the short run - to provide a safety net against unemployment, buy education or boost high-street consumption - while relying on it in the long term to supplement pensions or cover health and social care.

However worthy the package, rising prices plus mortgage equity withdrawal add up to record levels of debt. This puts homes at risk. UK borrowers are vulnerable to economic instability because they prefer variable-rate loans and borrow high relative to incomes. And those who most need a financial buffer to bridge the mortgage payment protection gap are least likely to have one. So interest hikes are bad news.

But the most pervasive risk for the majority of homebuyers is rarely acknowledged at all. Home-ownership societies such as the UK require a high proportion of personal wealth to be invested in housing. Owner-occupiers have a correspondingly narrow portfolio. But the more owned homes constitute an asset base for welfare, the less appealing this strategy is.

After all, it depends on individual properties holding their value, appreciating over time and being immediately saleable should all else fail.

Property values have been buoyant in the present decade, but mostly they are volatile. Anyone who doubts this should ride the rollercoaster of US house prices now showing on YouTube. Too much is riding on the performance of house prices, on the upswing of an inefficient market that not everyone can access and whose downside cannot be hedged. Whether states or markets take this on, there is a case for spreading the risks, as well as sharing the gains, of homeownership.

Susan J. Smith is professor of geography, Durham University. Banking on Housing; Spending the Home is part of the Cultures of Consumption Research Programme, jointly funded by the ESRC and the AHRC. The real estate rollercoaster is at www.youtube.com/watch?v=kUldGc06s3U .