SocialismToday           Socialist Party magazine

Issue 167 April 2013

Britain’s housing – Con-Demned!

The disastrous failures of the Con-Dem’s housing policy illustrate the contradictions of neoliberal capitalism after the crash. The coalition came into office committed to ‘get Britain building’. In fact, house-building figures released in February show an 11% decrease in the number of new homes started in the last year, down to just 98,280. Apart from the immediate aftermath of the crash in 2009, this is the only time starts have dropped below 100,000 since records began more than 30 years ago.

Most working-class and middle-class people do not need a battery of statistics to convince them that there is an acute housing crisis. But the figures demonstrate that the position is actually worsening. No wonder there has been an 800% increase in the number of families illegally placed in bed and breakfast accommodation by councils. Rough sleeping has risen by 31% over the last two years.

Cutting housing benefit was supposed to reduce rents but they have continued to rise, particularly in London. Landlords are increasingly unwilling to let to people on benefits and, such is the housing shortage, they see no need to. The number of properties available to tenants receiving housing benefit has dropped by 20% in London over the past 18 months. This is set to continue as rent increases show no signs of slowing down.

As part of the ‘bonfire of quangos’, the previous housing minister, Grant Shapps, declared that the social housing regulator (the Tenant Services Authority) was ‘toast’. Following pressure from banks, some of its functions were retained – with reduced staff numbers. Moody’s, the ratings agency, followed its recent downgrade of the UK economy by downgrading most housing associations’ credit ratings, citing the impact of welfare reform and reduced regulatory oversight.

The chair of the regulation committee has expressed concern at the commercial diversification of housing associations, once lauded by New Labour and Tories alike. Appealing for more resources, he asked: "To what extent is it reasonable for publicly funded, tenanted social housing to be put at risk from diversification into unregulated activities? Will all boards and executives have the skills to operate diversified activities in a significantly higher risk operating environment?" (Inside Housing, 18 January) Tenants will probably feel they do not want their housing put at risk at all!

In 2010, the government initially cut spending on social housing and promised that deregulation and freeing up the market would increase supply. Then, in November 2011, it introduced a new ‘housing strategy’ involving an initiative called NewBuy in which the government indemnified 95% mortgages. The Financial Times broadly welcomed the measure as a support for house builders but, with a degree of honesty, warned that there was no guarantee it would result in new houses as builders could simply pocket the money to support existing plans.

House-builders’ profits are up and they are optimistic about building high-end homes, but there is no sign of a volume house-building boom. With falling wages, insecure jobs and scarce mortgages why would they be planning volume building? According to the 2013 UK Housing Review, home ownership rates among 25-34 year-olds have dropped from more than three-quarters in 1992 to just over 40% now.

The government also reintroduced the ‘right to buy’ social housing. This measure had been popular among some workers in a period when there were more secure jobs and house prices were rising fast – unlike today. Many people who bought could not hold on to their homes, however, and the Daily Mirror recently revealed that 32% of homes sold are now rented by rich private landlords: the son of Thatcher’s housing minister owns 40 former council homes in Putney, southwest London. Thatcher also ended rent control so he can charge eye-watering rents. Private renters now spend 43% of their income on rent, according to the English Homes survey.

Unfortunately, Labour did not bring back rent control when in office, but what a cheek for the government to use high rents as a reason to restrict housing benefits now. After all, high rents and the growth of private renting were the direct outcomes of government policies. Benefit cuts were supposed to bring rents down but they are still rising in areas such as London.

In August 2012, the government-commissioned Montague Report recommended incentives to attract institutional investment to the private rented sector. Not all of its recommendations have been implemented, but the government is investing "£200 million in housing sites to ensure that the high-quality rented homes that are needed are available to institutional investors quickly".

The report dismissed the need for rent caps or any regulatory change, insisting that institutional investment could improve stability for tenants through long-term lets, and that social housing providers could also play a key role in delivering market-rented housing. Already, some large private landlords have registered as social housing providers, and housing associations are moving into market renting and other commercial activities – the distinction is becoming blurred.

In February this year, MPs on the Department for Communities and Local Government select committee questioned Montague and he refined his position: "A lot of growth has been driven by small landlords – only 1% of landlords own more than ten properties… there is an opportunity for institutions to meet that demand and mobilise fresh sources of capital. In the review I didn’t suggest an enduring subsidy because this is an area where the market must stand on its own two feet. But I think it’s legitimate for the government to give it a kick-start. We are faced with both a shortage of homes and a need to stimulate the economy. I think had there been a build-to-let fund (as envisaged in the review) that would have done most of the work. A guarantee scheme offering the opportunity to raise finance at cheap rates on the back of a government guarantee ought to have more impetus than the incentives I recommended".

He is wrong in suggesting that the private renting market stands on its own feet. The social sector gets £1.2 billion, while the private rented sector gets £2.17 billion when factors such as benefits are included. The explanation for the difference lies in profit. Subsidising bricks and mortar is more efficient if you want homes built. It is not so good looked at from the standpoint of profit.

Rather than use this as the basis for making the case for a massive council house-building programme, New Labour criticises the impact of welfare reform while accepting the need for benefit caps and bedroom taxes. It says that it does not support the government’s proposals because they are unfair, but fails to oppose the false premise on which they are based. Labour has rightly called for more security for private renters, although it is vague about what that would be, but it recognises the ‘need’ for incentives for the sector to grow. Rather as Labour argues that cuts have been ‘too far and too fast’, it fails to pose an alternative.

In Britain, the idea of a ‘property owning democracy’ has long been held up to workers. But that is now receding. For young people it is history. For employers, home ownership can be seen as reducing the ‘flexibility’ of the labour market. Workers are unwilling or unable to move from low house-price parts of the country and older workers who have cleared their mortgage are under less pressure and feel a degree of security.

It is quite possible that a major route for private investment will be through housing associations. They have the advantage of putting a respectable badge on private renting and are relatively trusted by the banks and institutions. Social rented housing is part-funded by commercial lending so institutions have experience of them. But the fact that they act as reliable conduits for private capital will not necessarily endear them to tenants.

Some housing associations have initially responded sympathetically, or at least realistically, to the plight of tenants’ struggle to pay rent as a result of benefit cuts, but that is not a universal approach and many are gearing up for evictions. Graeme Russell, a director at the Scottish association, Dunedin Canmore, commented that landlords "will need to adopt a much more commercial and hard-nosed approach to revenue collection. We will no longer be able to guarantee revenue with any certainty. Things will never be the same again. We need to wake up and smell the coffee". (Inside Housing, 13 March)

You have been warned!

Paul Kennedy

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