Between 8 July 2020 and 31 March 2021, the government waived stamp duty—an expensive transaction tax on home buyers—for properties up to the value of £500,000.  Homes sold above that price were taxed more lightly than before.  In the run-up to the 2021 budget there have been mutterings in the press (the Johnson government’s preferred method of floating policy announcements) about extending this tax ‘holiday’ further into 2021. This accompanies a firmer promise of a ‘mortgage guarantee scheme’, encouraging lenders to provide 95 percent loans to first-time buyers.

There is an obvious rationale for policies aimed at keeping land prices high. It’s not just the convergence between Conservative voters and homeowners: the more important point is that if the United Kingdom has a key national industry, it is reaping the profits of its own ever-worsening housing crisis. The country’s post-industrial decline has seen house prices, more than anything else, replace manufacturing and industry as the site of its wealth.

On the eve of the pandemic, the value of the UK’s housing stock was about £7.4 trillion.  That is—staggeringly—four times the combined value of the FTSE 100 companies. It’s worth about twice the entire balance sheet of the European Central Bank. As Savills explain, this is because in the ten years between the global financial crisis and the pandemic, the country’s housing increased in value by £750 million per day: each morning we would wake up to find that additional value worth about double the monarch’s personal wealth had appeared overnight.

House prices are now a mainstay of the entire country’s economy, and landlords and homeowners are the current British equivalent of state-backed ‘national champion’ firms. Government policy has increasingly been aimed at supporting the dominant and ever-increasing real estate sector. The delusional belief that massive house price growth is a sensible and sustainable system of generating profits in the economy has persuaded the state to coddle its landlords and owner-occupiers, and to shield the housing market from any harm.

In that context, it’s easy to understand why the government’s urgent responses to the pandemic included the stamp duty holiday and the early waiving of lockdown rules for the purpose of buying and selling homes. It was propping up the national industry.

And, to a degree, it worked: house prices rose stably throughout 2020. The holiday funnelled existing demand, concentrating transactions within an eight-month period during which prices continued to rise. Interestingly, though, the price increases during the holiday broadly just replicated the what a buyer would previously have had to pay in stamp duty. The average saving from stamp duty was £11,556, and the average price rose by just a little more (£14,692). In this sense it was a characteristically neoliberal measure: the Treasury chose to deprive itself of its share, and diverted it towards a private profit-seeker instead.

The question is whether the holiday will work again, or whether the Chancellor will discover that that it was a single-use policy. It’s difficult to see how the ‘funnelling’ aspect can be repeated. A second holiday won’t—can’t—generate new demand. I won’t suddenly want or need to buy a house in April 2021 if I have had no intention of doing so in the last eight months, particularly because prices have only risen since the summer. Landlords, too, may be cautious about high sales prices and falling rents.  The government may find that, by concentrating existing demand, it has exhausted it.

But the bigger problem for the government is that the holiday may have been temporarily masking the much more drastic consequences of the housing crisis and the pandemic.  Like any asset, the value of housing depends on the fundamentals of its value.  In the case of housing, the most important of those fundamentals are things like rental yields, society’s ability to meet its housing costs, and (relatedly) anticipated increases in land value. It seems overwhelmingly likely that we are about to see dramatic changes to those fundamentals in the coming months.

For most of the twentieth century the fundamentals of housing value were deliberately manipulated through rent controls, and through adequate provision of council housing.  House prices were stable because, as assets, they could not produce a particularly good return.  From the 1980s onwards, however, the state de-controlled private rents through a system of ‘shorthold’ tenancies, and decreased and conditionalised council housing supply, in order to create a profitable housing market.  Rents and land values were allowed to rise, a buy-to-let sector began to dominate, and all house prices rose unrelentingly as a consequence.  The government underwrote the increasing rental yields through a system of housing benefits that was designed to ‘take the strain’.

The effects of post-2008 recession on the housing market, which ought to have affected the fundamentals of land value, were muted. The Bank of England’s quantitative easing programme led to massive demand for investment in housing, particularly in London, and an austerity regime (fairly successfully) transferred the ‘strain’ from the housing benefits system to the working class, who were forced to compromise on housing conditions, location, and the proportion of their income that they were prepared to cede to landlords and mortgage lenders. This encroachment on the wellbeing of the population allowed rents to continue to rise post-2008, generating that daily £750 million expansion in the housing market while the rest of the economy staggered on.

The coming recession, though, will be different from 2008.  Fiscal policy probably can’t save the housing market this time: not only has the City become wary about quantitative easing, but the scale of the programme is now so huge that the Bank of England is actually running out of government debt to buy.  And the working class probably has no more left to give: by 2017 we were already seeing housing associations receiving advice about how to increase rents for benefit-capped tenants (by assuming that they could eat for just £2.65 per day), and things are only worse in the private rented sector.  For the last ten years or so, the £7.4 trillion housing industry has been held in place by the empty stomachs and squalid conditions of the poorer part of British society, and the idea that the population can be squeezed further in a severe recession is as laughable as it is frightening.

More important, though, is the fact that rents in cities are starting to fall.  The housing crisis is premised on the government’s guarantee of ever-increasing rents and land value, and for 30 years investors’ anticipation of rising returns has been well-founded: rents and land value genuinely have consistently increased.  But once these yields start to fall, the most important fundamentals of price will have changed, and rising house prices can no longer be justifiably expected.  Given that so much of the super-heated housing market relies on the confidence of global investors, who have been generating almost limitless demand for a limited number of homes, an evaporation of that confidence is likely to have a big impact (and prices at the ultra-high end are already starting to look wobbly). To get a sense of the scale of a housing market crash, when Ireland’s property bubble burst after the ‘Celtic Tiger’ boom, homes lost more than half their value. In Spain the drop was smaller—37 percent—but a second crash is now expected (although both Ireland and Spain were genuinely housing bubbles, and the situation in the UK is less clear).

It’s possible that the first signs of a collapse are have been masked by the stamp duty holiday. It’s troubling to see house prices go up as rents fall, and it may well be that the concentration of demand has delayed the inevitable; the Chancellor may have failed to prevent a significant readjustment in house prices, and merely deferred it.

The budget, like so many others before it, will pursue the impossible dual aim of ensuring that prices stay incredibly high, while hoping that people don’t remain priced out of adequate housing as a consequence.  But the whole question may now be out of the Chancellor’s hands. If rents continue to fall, if prices re-adjust as a consequence, and if housing speculation stops being a profitable endeavour, all the tax relief in the world won’t help the government or its national champions.