The government does not intend to solve our housing crisis. Instead it aims to use the housing crisis as a weapon of policy against the beliefs and attitudes that sustain a welfare state.
Much of the attack on the welfare state has been about constructing a new common sense view in which the private market is the only really fair system of distributing goods and rewards. It is seen as unfair when people don’t pay their way – meaning when they don’t pay market prices they seem to get something for nothing.
This common sense says that housing benefit is unfair, we are told, because it allows some people to live in expensive neighbourhoods without paying for it. The message is that if you can’t afford to live in nice places, you shouldn’t live there – it’s as simple as that. As a result housing benefit has been cut back and capped, and the fairness of the housing market has been reasserted, with house prices fairly keeping the nicest and most expensive areas – and those parts of the country where homes are most in demand – out of the reach of anyone who is not already very well-off.
The Housing and Planning Bill makes that message of fairness even more explicit.
It introduces big subsidies for people buying high priced housing, and, at the same time, it gets rid of affordable homes in high priced areas. The Bill defines home ownership as affordable if it costs £450,000 in London, or £250,000 elsewhere. It redirects all existing subsidies to build these Starter Homes and cuts the supply of affordable non-profit housing. First time buyers who can afford these prices would need to be earning around £100,000 a year. They will benefit from a 20 per cent discount and when they sell their house in five years’ time they are likely to make a cash profit of £141,000 paid for by the taxpayer.
To pay for this cash transfer to the already well-off, the Housing Bill forces local authorities to sell their council housing in high-value areas when it becomes vacant. This will mean that high rent cities in the North of England like York and Harrogate will lose a majority of their affordable housing, while in London boroughs council housing will be almost wiped out. It is anticipated that around 350,000 social rented affordable homes will be lost. A new right to buy for housing association tenants comes at the very worst time, when hardly any new affordable homes are being built, and it is unlikely that those sold will be replaced. Again massive tax-payer funded discounts are available for people to buy their homes, and once bought, those homes stop being affordable and can be sold on the open market or let out, after five years, at high private rents.
Rents for local authority and housing association homes are set by the government, so you’d be forgiven for thinking that they were already fair, and that cuts in housing allowances like the bedroom tax were unnecessary. Late in 2015 the government made a surprise U-turn in policy and reversed a ten year rent programme to impose a 1% cut in income for social housing providers, year on year. This has forced councils and many housing associations to stop building affordable homes or to drastically cut-back, and make hundreds of staff redundant. As well as reducing the amount of affordable rented homes, the Bill also sets out to make conditions worse for council tenants by tearing up their security of tenure and bringing in a personal means test linked to higher rents. At the same time the government is making even bigger cuts in housing benefit and these will affect social housing tenants, and especially people living in sheltered housing, supported housing, hostels and refuges. The effect is to drive people into the private rented sector, and to reduce the quality of non-profit housing so that it is as bad and as expensive as market rented housing.
The message is that there is only one common sense, the common sense of the market. The trouble with this idea is that the housing market does not operate according to any of the rules of the free market. Supply and demand do not function in housing. For a start housing is a basic human need and everyone needs a home. But housing also operates as an investment market, with strong demand for second homes, and a thriving buy to let market, and buy to leave market, providing sustained interest growth for global investment finance. At the back of all these different housing markets, is the scarcest commodity of all: land. Land is not a real commodity because it’s a finite asset. We don’t make it anymore, as Mark Twain once joked. Its use is rightly regulated by planning law, and that makes it all the more expensive and highly prized. Land prices are fuelling the price bubble in housing, and also contributing to the shortage of new homes built, because more money can be made trading land with planning permission, than actually building on it.
So it is misleading to pretend that housing is a free market and that supply and demand will balance out if left to their own devices. And anyway, government is continuing to intervene in the housing market by inflating demand and supply. Although buy to let has lost some of its tax discounts, market housing is supported by substantial tax incentives and the Housing and Planning Bill will provide additional subsidies to people who are already benefiting from the credit guarantees and deposit loans of Help to Buy. In total £43 billion in public money is going to subsidise market housing, while investment in affordable homes has fallen to its lowest since the Second World War. Public subsidies for home ownership are not aimed at bringing house prices down. Instead government tries to try to pull off the clever balancing trick of pushing prices higher while helping more people afford them. House price inflation is the lever of the UK economy; high house prices mean home owners feel like spending or taking out extra credit and that drives economic growth. The last thing the government wants is to bring house prices down.
The result is an incredibly polarised housing market dominated by affluent retirees who have fully paid off their mortgages and now outnumbering first time buyers for the first time. Home ownership has declined from 71% in 2003 to 65.2% today which can be no surprise when the average house price is now 10 times average wage. Rising house prices mean even higher private rents and the private rented sector is the ultimate beneficiary of government housing policy, expanding and bloating as it engulfs all those deprived of an affordable home. One third of private rented housing is unfit for human habitation but that can’t stop this supersized sector which has swelled by 57% in the last five years. The encouragement of buy to let mortgages has driven this expansion giving strong returns on housing investment, with an open door to international investment capital. The outcome is that most private landlords own only one or two rental properties and depend on the services of rental agencies whose interests are served by increasing rents every six months, and racking up charges for credit checks and other unaccountable administrative charges. One third of tenants in the private rented sector are forced to move every six months as their tenancy is ended. The profile of renters is no longer young singles, but families with children, and the end of a six month tenancy is now the greatest cause of homelessness, with the number of evictions increasing by 53% over the last five years, to the equivalent of more than 170 a day.
There is a direct connection between the rise in house prices, the resurgence of private renting and the loss of public and not-for-profit affordable housing. Up until 1980, around one third of UK households lived in council housing, and until the 1970s this country was building about 100,000 council homes each year, on top of those built by the private sector. A buoyant council housing sector kept market house prices low and avoided boom and bust. Council housing out-performed private renting, because it was far more affordable and provided hugely better standards. Although the supply was rationed, and often the most vulnerable got the worst of it, council housing provided generations of families with a secure start in life, and gave them hope, aspiration and belief in progress. Public and not-for-profit housing has proved itself an efficient and effective economic model across Europe, enabling rents to be kept low, while bringing in surplus that can be reinvested in improved homes. Its economic efficiency has made it a target for attack by private corporate interests, supported by governments, who see a healthy public housing sector as a threat to private profit.
Public investment in building affordable housing – managed by public or not-for-profit landlords – is the most cost effective way of helping people find a home. An initial public subsidy means the house can be let at rents that are truly affordable to generation after generation. As more affordable homes are built, rents can be pooled allowing new homes to be subsidised by those whose costs have already been paid off. For every pound invested in affordable housing, another three pounds are brought back into the economy.
Affordable housing is a public good – a collective investment for everyone – for the many, not just the few. The government has converted public good into private gain. It is giving cash discounts on private housing to those already well-off while doing its best to rob future generations of their affordable homes. It justifies this mass sell-off of public goods by telling us it is fair. We must all buy our homes. At the same time, it is right and fair that homes are unaffordable. In this looking-glass world, there is no sense, and no logic to the economic argument. Irrational opposition to any sense of public responsibility or collective insurance is sustained by a morbid fear of free-riding and propagated by the horror stories of poverty porn. This dog-fight society is fuelled by competition for public goods to such a pitch that we now think it’s better to get rid of all our affordable homes, and better that nobody can have one, than god forbid they should go to someone less deserving.
The battle for affordable homes, and for human wellbeing, can be fought and won on economic grounds, but it is really a battle about fairness and about how we encourage a society of care and of hope. These are messages that still have the power to move and to convince. I look back on council housing as a demonstration of faith in future generations. It was an investment in people as well as in bricks and mortar. We can build a new message of fairness around the demand for a mass programme of affordable house building. We can draw on the best examples of affordable house building from across Europe, acknowledging the mistakes made in the past, and building on the future. We can plan for more co-operative housing, public and not-for-profit housing run democratically, drawing on the example of Denmark but better, built for everyone, a universal investment in public good, as in Sweden, but better, financed by a range of investment options, tax breaks and land transfers, and creating a level playing field of housing subsidy, as in Germany, only better. Affordable housing that is planned by neighbourhoods, to generous space standards, with the best energy efficiency, designed for conservation and sustainability – an economically viable model that generates surplus to pay for itself over the lifetimes of its homes. This is a vision where fairness lies in everyone having a safe and secure place to live, where everyone has a good start in life. Where fairness means believing that we really are all in this together, and that we all want to feel at home in the world.