Five years ago, if you’d told me I’d spend a Sunday evening in a sold out Peckham cinema screening of a film about the US housing market starring Brad Pitt, I’d have patted you on the back and suggested you cut down on the super-strength lager.
But since its release in early 2016, The Big Short, based on the book by Michael Lewis, has pulled in the crowds to see a caper movie about the 2008 financial crash, and how the housing market blew up, first the US, and then the global economy.
A film about subprime mortgages isn’t an obvious choice for weekend entertainment, but The Big Short’s popularity reveals a number of things. First, most people still feel they understand little about the roots of the 2008 crash. The layperson knows bankers were at fault, but the intricacies of credit default swaps and mortgage bonds usually prompt eyes to glaze over. Second, there is a real hunger for knowledge about the economy, how it works and doesn’t, and contrary to what those profiting from public ignorance might say, it’s relatively easy to understand economics once you break down the jargon. Third, Ryan Gosling and Brad Pitt could probably have cameos in a film about watching paint dry, and still draw in the crowds.
But the film also functions as a morality tale: people believed houses were a safe investment because “who stops paying their mortgage?”. Well, people who can’t afford to do, because they’ve been irresponsibly mis-sold a very expensive financial product and the cost is too high. This is where the uneasiness and deja vu sets in.
The champagne-swilling bad guys in The Big Short, happily flogging subprime mortgages and mislabelling bonds’ credit ratings, are adamant that everything is fine, that prices can rise indefinitely with no market correction. A world of infinite profit and unshakeable confidence.
Watching house prices and the overheating housing market in the UK, it’s difficult not to feel the same wilful refusal to accept the facts is at play here. Unless wages are rising too, house prices leaping tens of thousands of pounds every year mean mortgages are unsustainable and increasingly unobtainable.
The government realises this, hence the sticking plasters of help-to-buy and starter homes, to try to help a few households onto the housing ladder without affecting house prices and profits from housing. The Bank of England knows this, hence Mark Carney’s repeated warnings about the state of the market, and refusal to raise interest rates – a move that would imperil people just about meeting their mortgage obligations now.
The tension in The Big Short comes when the viewer realises that for the heroes – those betting against the housing market and exposing the lie at the centre of the subprime bubble – to win, people will suffer. They’ll lose their houses as they default on their mortgages, or their landlords have their homes repossessed. The same is true in the UK: there is no possibility that the housing crisis has any solution that is casualty-free. If house prices continue to rise, fewer people can afford homes. If the bubble bursts, more people become homeless after being saddled with huge mortgages. Even if the market remains static, homelessness remains a problem, and lack of access to social housing puts many households in financial precarity.
The Big Short tells us not to place all our eggs in one economic basket. Subprime mortgages were never a goldmine. But we haven’t learned from that: instead, the government pushes the idea that home ownership is the only acceptable tenure, while decimating social housing, and therefore bolstering house prices for private landlords and the dwindling number of people who can get on the ladder.
After the 2008 crash, many people hoped that gambling with something as essential as housing would be verboten: instead, people became hooked on profit, and continued believing housing could, and should, make money, rather than just provide shelter.
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