Homeless people tragically dying on Malvern’s streets over the Christmas period has further intensified local concern and anger about our national housing crisis.
One of our local Labour members, Steve Smart, who is a retired housing expert, has produced an excellent article on the background and solutions to the crisis – Steve’s article is reproduced in full below. The article explains the background to the crisis – in particular the virtual absence of council house building since the 1970s and the parallel growth of an often expensive, poor quality and insecure private rented sector. The article concludes by arguing that the Conservative government’s current housing proposals are totally inadequate to the scale of the problems and calls for a radical programme of Local Authority-led house building properly backed by central government.
Longer Read Housing Article (Jan2019) – Steve Smart
The Guardian’s recent focus on homelessness is timely, but it would be good to provide a fundamental review of the UK’s whole housing problem. Homelessness is a symptom of a housing system that is so broken and overstretched that for the first time in generations many of the most disadvantaged simply drop out of the bottom of it. The recent fatuous remarks by James Brokenshire illustrate that governments will fail to succeed in housing policy unless they address the issues radically.
1 Historical Facts
Policy makers have known since the late 19th century that the unregulated private market has not and will not provide sufficient housing of an adequate standard for the whole population. This is the starting point for any government which accepts that it has a civilised duty to ensure the provision of housing, like health and education, for all its citizens. A Tory government fully embraced this in the 1950s, when Macmillan followed Bevan in giving Councils the role of building the majority of new housing, restricting private developers to building the minority of his 300,000 homes annually, controlled by a system of licences for their developments. From the 50s onwards governments knew also that the role of the private landlord needed to be reduced and their rents regulated, to prevent exploitation, insecurity, and low standards, particularly for families with children. This culminated in the official response to the Rachman scandal. (Milner-Holland Report, 1963)
The Tories since Thatcher moved away from that consensus, wrongly assuming that a reliance on the free market, with some minor support by the ‘voluntary’, non-profit sector, could solve our housing problems.
2 The Modern Private Rented Sector (PRS)
Since Thatcher we have seen an upsurge in expensive, insecure and often unsatisfactory private rentals, now the largest provider of rented housing, including for big numbers of families with children. The growth is in part led by the fact that buy –to-let housing represents virtually the only good option in the UK for the investment of pension pots, whereas in Germany pensioners invest long-term in their own profitable business enterprises. But this is just an example of how the poor modern management of both our economy and pensions policy infects something like the housing market.
This large sector of the market is now however underwritten by rapidly growing billions of taxpayer subsidy through Housing Benefit, which produces no new housing supply at all. The same effectively applies to the Tories’ generous ‘Help to Buy’ subsidy, which merely inflates the price of the limited existing supply of expensive new housing for some first time buyers. Any rational economist must surely judge current public housing finance policies to represent the economics of the madhouse.
But to return to the PRS, one major result of its expansion can be seen in the statistics collected by local authorities on the cases it deals with as homeless. Whilst the overall underlying structural driver of homelessness is clearly shortage of affordable housing, these figures indicate what was the ‘immediate circumstance’, -i.e what had led to cases presenting as homeless. In the 70s and 80s onwards it was ‘ friends, family, relatives etc no longer willing to accommodate ‘ (household/ family breakup); in recent years the majority of cases result from eviction from insecure and expensive private tenancies, exacerbated by benefit caps and welfare payment problems.
3 Local Authorities v Housing Associations
In the 1970s a political debate intensified in Britain about which sector should play the dominant role in affordable housing provision. The left thought that Councils should continue to play the major role, whilst the then small housing association sector could play a useful secondary role. By contrast, the right and some centrists argued that the ‘voluntary’ sector should replace the local state as the main or only provider. The latter view won out; our housing newbuild statistics since the 80s demonstrate that that was a disastrous ideologically driven mistake. Every year our affordable new-build provision has been reduced by approximately the substantial amount previously being built by local authorities, producing a steady and substantial increase in shortage.
The practical housing position of local authorities is now untenable, particularly for the majority whose previous stock has subsequently been transferred to housing associations, (in part for the same bad ideological reasons as above). Our councils still have longstanding duties to ensure housing for the homeless and others in housing need, but no guaranteed or hypothecated financial or physical resources to do so. Housing Associations by contrast have no statutory duties to provide housing for anyone in particular, and many of them now devote part of their activities to providing housing for sale or market/ near-market rent.
Many councils are now forced to lease exorbitantly priced temporary housing, including bed and breakfast hotels, from private landlords. Alternatively they can beg Housing Associations to help them by offering any lettings they may or may not have available; and since the late 70s there have been well-documented reports of some associations refusing requests to house individual homeless case nominees, because they judge them a poor financial risk.
Meanwhile the Housing Associations, which started life mainly as local charitable and philanthropic community-based bodies, have grown massively, largely by financially driven merger,- into large remote organisations, with overblown executive salaries (far in excess of those in the council sector), and often expensive and remote office headquarters. They are both locally and politically unaccountable; their management boards, once the preserve of local church leaders and community activists, are now dominated by accountants and property professionals. But the majority of their tenants are reliant on benefits to pay their rent.
4 UK Housing Provision v the Public Sector Borrowing Requirement (PSBR)
What can fully explain our disastrous move away from large scale council housing provision? Of course it is in part the result of right-wing anti-state ideology. Nick Clegg’s recent memoirs reveal that when Clegg urged a return to such provision Cameron retorted that “that would only produce more Labour voters”. But it has also been driven by the longstanding rules operated by one of the most powerful, reactionary and ineffective actors in the UK government structure: Her Majesty’s Treasury (HMT).
The Treasury’s definition of the PSBR assumes that all public sector borrowing is in effect a ‘bad thing’, which must be rigorously restrained, and this restricts departmental programmes irrespective of which party governs. No distinction is made between different types of such borrowing. Borrowing (in the past often at lower rates from the Public Works Loans Board) for council housebuilding provides a valuable public asset for 30 to 60 years and upwards . This asset generally appreciates in value, and crucially provides a stream of rental income to the authority, which over its life will repay the loan and provide surplus income for repairs or other activities. HMT ought to know the value of public housing: Council house sales (probably the largest of Tory privatisations) have provided them with massive receipts whilst HMT left councils with inadequate slim pickings to replace that housing stock (typically they received only 25% of receipts).
Much public spending and borrowing is of course distinctly different in long-term effect; purchase of government equipment or weapons programmes produces no income stream and gives only a depreciating public asset. But then the modern Tory privatisation programme clearly does not recognise the very concept of a public asset: a point tellingly made by the ageing Lord Macmillan when he castigated Thatcher’s policy of “selling the family silver”.
A major driver also of the switch to housing association provision has undoubtedly been the fact that housing borrowing by councils is defined by HMT as public (bad) whilst borrowing by the associations for exactly the same purpose is ‘private’ , and therefore presumably ‘good’ (and not within the scope of Treasury restriction). This largely explains why since the 90s most of our council housing has been transferred to the association sector; unhappy council tenants faced with transfer were told that their homes could only be refurbished by housing association ownership and borrowing, since their councils were not allowed access to such borrowing. And remember that much of this happened under the chancellorship of New Labour’s Gordon Brown, the man who also gave us the priceless gift, under the same rules, of the expanded PFI programme. For housing investment, this is more economics of the madhouse.
5 Housing, Land & Planning
The new provision of public finance for housing investment will not be sufficient in itself. Much of the current exorbitant cost of new UK housing results from the inflated price of land once it is given planning permission. From Henry George in the 19th century to Lewis Silkin in Attlee’s government, it has been seen that it is inefficient and unfair that the inflated value of development land should accrue solely to private landowners. George Orwell in 1944 argued that a post-war Labour government would need to nationalise land as well as the utilities, and Silkin as Planning Minister legislated for a ‘betterment levy’ on the increment in value of land approved for development. The Tories of course have always resisted this logical policy, partly because they are funded by large landed interests and developers, and thus they are unlikely ever to properly address the housebuilding shortage. The recent report for the government on developers’ land banking by Oliver Letwin was a mealy –mouthed sop for the problem whilst totally failing to address it. Clearly the developers will continue to underperform on housebuilding, including land release, because the continuing shortage guarantees them higher profit margins- something that a one-nation Tory like Macmillan recognised almost seventy years ago.
The problem of land availability is also clearly linked to regional and planning policy. It will be incredibly difficult to meet housing demands and needs if we continue with the modern unplanned concentration of economic activity in London and the South East. We need to return to some long –abandoned policies which would utilise the physical and economic space in the regions. The current and growing housing crisis in the London region shows that a continuation of the current ‘non-planning’ approach cannot be sustained, and of course places growing strains on transport infrastructure.
In all regions some parts of the sacrosanct Green Belt will need revision, since some land within it is of low amenity value and should be released for development. But we also need a return to a programme based on the New Town/ Garden City concept, though one in which the provision of industry, enterprise and employment accompanies that of new housing. The present free market approach to our economy cannot provide that programme, and it is foolish of ministers to pay lip-service to such a programme by assuming that it will – as exemplified by the Ebbsfleet ‘Garden City’ project promoted by George Osborne, which is in effect only a large private housing development for the growing army of south-east commuters.
On a secondary issue, some commentators, notably Simon Jenkins, assert that under-occupancy is so great that there is no real housing shortage in the UK. This may be theoretically true in statistical terms, but it is of limited practical significance. It would certainly help if the present unsatisfactory council tax system was replaced or at least updated, but a property taxation system aimed at greatly reducing under-occupation would need to be so punitive as to be politically undeliverable. The government’s recent ‘bedroom tax’ in the social housing sector illustrates clearly the misery that such punitive policies can inflict.
Some commentators similarly suggest that empty housing can make a great contribution to our housing shortage. Some of it could clearly help, but there is a long-run trend in the UK and other western housing systems for there to be a ‘friction-based’ level of about 3% of empty housing, which in a free society is very difficult to reduce.
Immigration is another housing –related issue which now creates controversy. It is true that it has increased demand and shortage, and the rapid influx from Eastern Europe should have been foreseen by government, and prompted a responsive necessary increase in supply. But it is unarguable that the real underlying long-term problem is that we have not had since the 80s a housing system which is capable, through government policies, of responding to the developing needs of our economy and population.
The present crisis has been long in the making, but is the result of decades of modern political failure since the late 70s. And it has not been the fault exclusively of the Tories; in the aftermath of the 2010 election, the ineffable Hazel Blears told Inside Housing magazine that “there was no one in the Labour cabinet particularly interested in housing” (!)
Old housing hands like me saw the writing on the wall at the time of the original Housing (Homeless Persons) Act in 1977. Why? Because this was the first Housing Act of the 20th century which gave local councils a duty to provide housing without any government-backed subsidies or finance provision to do so. That was because the then Labour Government was not prepared to bring forward a traditional form of government bill which would have committed them to providing finance. Instead in the aftermath of the “Cathy Come Home” campaign, a Liberal backbencher ,Stephen Ross, introduced a Private Members Bill (backed by Shelter) , which the two main parties allowed to pass into law. As a result of the lack of resources, the Act subsequently became a subject of repeated litigation, involving local authorities seeking to clarify and restrict their homelessness duties.
This article does not have the space to dwell on other interesting housing subjects, like the potential for more co-operative housing, or the pursuit by governments and housing associations of the inherently second-best housing option that is shared ownership.
But the last 40 years have surely proved conclusively to our politicians that, once they accept the civilised duty of providing housing for all the population, any serious policy must provide the means and resources for their local authorities to do so. The worsening homelessness crisis is just the tip of a very large iceberg of accumulated housing shortage and no amount of facile bleating by the likes of Mr Brokenshire,- about complex social problems and specialised support services,- can escape the underlying facts of that shortage, for which they must accept ultimate responsibility.
Steve Smart is a retired housing professional and former Senior Lecturer in Housing Studies