Throughout history there have been times when the prospect of making vast amounts of money on lucrative schemes that people, carried along by the euphoria of being rich, have invested or borrowed money to participate in them before the price of doing so went higher. In 1934 Thomas Johnson, a Labour MP who served as Secretary of State for Scotland during the Second World War, described in his book The Financiers and the Nation the hysteria that accompanies such schemes. “And so boom and slump, slump and boom have gone on, decade after decade, the severance of fools from their money. As every fresh of small accumulators saved sufficiently to invest, and looked around hopefully for some ‘certain security’ with an adequate income yield, lo! Always there opportunity appeared some plausible leader of finance with a get-rich-quick scheme”
In 2005 The Economist magazine called the house price bubble of the previous decade as the biggest bubble in history. For many people the value of their house has been the cause of their euphoria. Not learning the lessons of history or reading what John Maynard Keynes had to say on the subject from his book The General Theory of Employment, Interest and Money, “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when the enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done.”
Or as Niall Ferguson writes in his book The Ascent of Money, “The financial crisis that struck the Western world in 2007 provided a timely reminder of the perennial truths of financial history. Sooner or later every bubble bursts. Sooner or later the bearish sellers outnumber the bullish buyers. Sooner or later greed turns into fear. The proximate cause of the economic uncertainly of 2008 was financial: to be precise, a spasm in the credit markets caused by mounting defaults on a species of debt known euphemistically as subprime mortgages. So intricate has our global financial system become, that relatively poor families in states from Alabama to Wisconsin had been able to buy or remortgage their homes often with complex loans that, unbeknown to them, were then bundled together with other similar loans, repackaged as collateralised debt obligations and sold by banks in New York and London, who thereby became effective mortgage lenders. This took financial alchemy to a new level of sophistication, apparently turning lead into gold.”
TETT TELLS IT AS IT HAPPENED
It is therefore no surprise that Gillian Tett, New York editor of the Financial Times and formerly its capital markets editor called her book on the 2007 financial crisis Gold Fool‘s. The story of the great credit boom and bust, she writes, is not a saga that can be neatly blamed on a few greedy or evil individuals. Tett tells “how an entire financial system went wrong, as a result of flawed incentives within banks and investment funds, as well as ratings agencies; warped regulatory structures; and a lack of oversight. It is a tale best understood through the observation of human foibles, as much as through economic or financial analysis.”
In the preface to the paperback edition of her book Gillian Tett elaborates on the part that human foibles played in the 2007 financial crisis. Before becoming a journalist she did a doctorate in social anthropology. One of the writers who had a big impact upon her was Pierre Bourdieu, an anthropologist/sociologist who was one of the creative intellectual thinkers that came to prominence in France in the 1970s. In Outline of a Theory of Practice, the book that outlined his thinking, Bourdieu observed that the way that elites tend to control a society, as described by Tett, is not simply controlling the physical means of production, for example, money, but also by influencing the cultural discourse, the way society talks about itself, or its cognitive map. “Moreover, when it comes to influencing a cognitive map, what matters is not merely what is publicly discussed, but also what is not mentioned in public – either because it is deemed impolite, taboo, boring or simply because it is taken for granted. Areas of social silence, in other words, are crucial to supporting a story that a society is telling itself.”
Gillian Tett elaborates on Bourdieu’s thinking; “Sometimes such a silence is maintained through overt strategies devised by members of a social group. They can consciously choose to hide facts, as part of a plot, but on many occasions, Bourdieu observed, social silences arise less deliberately, as a result of social conformity or shared ideology or assumptions -for example about the ability of the market to regulate itself.” It is at this semi-conscious level, she writes, that the most insidious types of social silence develops; insidious particularly when they serve the interests of one particular group. Or as Bourdieu wrote, “The most successful ideological effects are those which have no need for words, and ask no more than the silence of complicity.”
For Gillian Tett such an effect sums up the story of the boom and the bust that followed. Both inside and outside the banking world, she writes, a social silence developed about investment banking and derivatives. This was in part because the topic was thought to be not only too technical but also generally uninteresting to non-specialists. The lack of scrutiny also suited the banking industry. Opacity in the world of finance breeds fat margins. Fat margins produce fat profits for the banking system.
As long as fat profits continued during the years of plenty from what Gillian Tett calls the ‘silos’ – self-contained divisions of knowledge cut off from the rest of the banking system – there was no urge to ask questions. Tett compares the situation as almost akin to Christianity in medieval times. Whilst the congregation did not understand the Latin spoken by the clergy they had faith in them and received blessings in return.
Therein lies the larger lesson of the financial crisis, writes, Gillian Tett. “The modern world is littered with pockets of specialised knowledge, where technical experts work in mental and structural silos. Indeed, these silos are proliferating, for as the pace of innovation speeds up, and spreads further and further around the globe, we are all being connected more closely to one another. In practice, though, innovation is causing as much fragmentation as unity. After all, only a tiny pool of people today has the educational training or technical knowledge to truly understand the details of some of these silos; even fewer have the ability to hop between silos.”
What Gillian Tett believes is needed alongside the need for technical experts are generalists who can also act as cultural watchdogs. It is a role that the journalists would be expected to fill but which in practical terms newspapers are finding hard to do so due to falling revenues. As for politicians and regulators who are tasked with oversight, they are too often compromised by conflict of interests. It should be borne in mind that Gillian Tett’s instincts, as well as being right in predicting the financial crisis of 2008, have been proved to be correct by the MPs expenses scandal and the by the newspaper phone hacking revelations.
2008 AND ALL THAT
Mention of the MPs expenses scandal and the phone hacking revelations chimes with Tett’s conclusion that the relevance of the financial crisis of 2008 reaches further to the many other silos that are developing in our world that are potentially dangerous. “The story of the 2008 financial crisis is a story not only of hubris, greed and regulatory failure, but one of these troubling problems of social silence and technical silos. If we do not use this crisis to tackle these problems, then it is a crisis we may be doomed to revisit, albeit in an innovative form”
Ten years after his death in 2002 the thinking of Pierre Bourdieu is stretching beyond that of former anthropology students like Gillian Tett. Compass, the think-tank, headed by Neal Lawson and author of All Consuming, as a result of recent scandals has begun a campaign that he has called In the Public Interest. In an article in the Guardian, 1st August 2011, co-written with Andrew Simms of the New Economics Foundation and author of Ecological Debt, they outline the reason for the campaign. It is, they write, to tame what they call Britain’s “feral elite’ that is putting democracy in danger. “A new routine is emerging. First, a crisis occurs in a vital part of our lives: banks crash, MPs fiddle expenses, a media empire hacks phones, Public anger and outrage rises. Everyone says that something must be done. But frustration and apathy set in as it becomes obvious that nothing is done. A moment of change slips thorough our fingers. Meanwhile the next – possibly bigger – crisis lurks around the corner, perhaps banking again, or the energy companies. Why is this happening and what can we do about it?”
THE NEW ELITE
Lawson and Simms conclude that we are witnessing a crisis of elites. Society, they write, has always had people in positions of power and influence but now they have broken free of moral and regulatory constraints and operate, unashamedly, in their own interests. “Waves of extraordinary public horror, such as over the hacking of Milly Dowler and now Sara Payne’s phones, refashion only ever so slightly relations at the top. For common to all these crisis is excessive behaviour; greed, risk-taking and hubris, all the products of small sheltered cliques wielding too much power.”
It is the rise of corporate and media elites that as first among equals and their disproportionate influence over a demoted political class which makes this situation very different. Britain has lost any real notion of public interest and the public domain. The very concept of the public has been has been systematically eroded over the past four decades and replaced by private and corporate interests. What was good for them was deemed good for all. Such a spin, whether it was banking, the media, transport or our utilities, that has been shown to be false. “As the public tide went out, it left self-interested elites behind, operating with no predators, nothing to fear” and being accountable to nobody.
It was a mindset that goes back to Margaret Thatcher and her belief that “there was no such thing as society” and that people should be considered as individuals. A view that New Labour tried to triangulate by insisting that economic efficiency and social justice went hand in hand. “All parties conflated the market with the state and squeezed the public out. With no pressure for higher ethical standards, the new all powerful elites, were like kids left free in a sweet shop, going feral as they lost all self-control and all touch with society.”
David Marquard, formerly Labour Party MP and latterly professor of politics at Sheffield University and principal college, Oxford, in his book The Decline of the Public examines how the concept of the public domain came under attack over the past thirty years from the New Right. They made headway largely because they spoke to an unfocused but widespread section of society who tired of the old elites and the old state.
Tony Blair and his successor followed the approach taken by Thatcher and her successor in their approach to the public domain. Marquand writes, “Neo-liberal political economy became part of the political elite – in part because it runs with the course of the world’s capital markets, and echoes the assumptions of the institutions of global economic governance; in part because many, if not most, of the institutions and practices which used to protect the public domain from market incursions were destroyed in the Thatcher and Major years. When Blair and his colleagues say they are new, they mean that they have abandoned the old socio-democratic dream of mastering or remodelling capitalism. They mean also that the new global economic order is an iron cage, to which all governments and societies must adapt; and that the hyper-individualistic Anglo-American version of capitalism offers the only route to adaption. Albeit with different emphases and some qualifications, the neoliberal revolution continues.”
Whilst David Marquard’s book explains the decline of the public domain, former Conservative Party MP and diplomat George Walden’s book chronicled the rise of the new elites that are continuing the neo-liberal revolution in his book New Elites: A Career in the Masses. Epitomising the new elites is David Cameron, who in turn is following in Tony Blair’s footsteps. “Britain is governed by an oligarchy of professional egalitarians, many of them from privileged backgrounds, whose power and wealth increasingly depends on the more or less cynical exploitation of populism in politics.” Walden’s book was written even before David Cameron became Prime Minister and Boris Johnson mayor of London. (It was of course written before the phone hacking scandal where some untouchables believed that they protected by their proprietor’s power)
Walden has no problem with elites but he distinguishes between bogus and genuine elites. “Genuine, democratic elites cannot be inimical to the public interest, since by definition they are open, able and humane. Bogus elites posses no true distinction and depend upon their ascendancy on money and/or membership of a particular social caste. Today they are more likely to be popular opportunists.”
This is a view endorsed by Hywel Williams in his book Britain‘s Power Elites. It is clear from the following article in The Guardian following the publication of his book in 2006 that elites, either bogus or genuine, have a tendency to grab the zeitgeist of the times and use it to their advantage. “The outward appearance of Britain’s power elites – their accents, clothes and origins – change with the times in which they find themselves. And so do the kind of arguments they use to justify their power. There is always a need for some elevating rhetoric about what the national identity, as administered by the power elite, might consist of. The geopolitical roar of early 20th century empire, the 1950s welfare state, the 1960s modernisation of a streamlined Great Britain Ltd, 1970s Europeanization, pious 1980s about entrepreneurial virtues, today’s uncertain millennium platitudes about ‘creativity’, ‘competitiveness’, and ‘innovation’: al have been stabs at producing a story that might making sense of Britain to the British. These myths have sometimes consoled and sometimes inspired, while also performing their real and constant role – that of providing Britain’s power elites with the mechanisms needed to build a career.” (See Sue Cameron’s book The Cheating Classes: how Britain‘s elite abuse their power. Politicians, professionals and bankers are among her targets.)
This is blatantly obvious with the road that David Cameron has taken to 10 Downing Street. First he had to de-toxic the image of the Tory Party from the days of Margaret Thatcher. Embracing the Green agenda and ‘hugging a hoodie’ was all part of the process. In government the narrative of Cameron and Clegg – two public school boys – has been saving the country from the mess left by Labour just as Margaret Thatcher’s objective was saving the country from the trade unions.
FROM THATCHER TO CAMERON
What links the present Conservative Prime Minister to Margaret Thatcher is their joint belief of rolling back the state and is symbolised by David Cameron telling the Sunday Telegraph in its fiftieth anniversary issue that the most influential piece of legislation over that period was the 1980 Right to Buy Act that allowed council tenants to become home owners. Cameron proposes to help the reminder of council tenants to become home owners. (Michael Heseltine described the sale of council housing as laying “the foundations for one of the most important social revolution of this century” which changed Britain forever.) It is probably the most political opportunistic piece of legislation as well as the most significant reason for the decline of the public domain described by David Marquand. It was both populist and opportunistic.
It was also central to Thatcher’s attempt to create a property owned democracy. She may not have been the first Prime Minister to try and achieve this objective for it had been pioneered by both Harold Macmillan and Anthony Eden, both of whom were later to become Prime Minister. In 1953 Harold Macmillan, as Housing Minster, introduced a White Paper which sought “to promote, by all possible means, the building of housing for owner-occupation.” Anthony Eden, as deputy leader of the Conservative Party, raised the vision of a “nationwide property owning democracy” in 1946. Whilst both accepted the need for public housing, owning your own home was seen as natural and normal.
Public housing, largely council housing in the twentieth century, had not been accepted as a fundamental and integral part of the welfare state system of universal service because in the words of Ian Cole and Robert Furbey in their book The Eclipse of Council Housing it was seen as “an expedient service, intermittently making good the shortcomings of the private market.” Peter Malpass, professor of Housing Policy at the West of England University, in his book Housing and the Welfare State believes that this interpretation of state invention in housing has been there since the introduction of state subsidies.
Sarah Glynn in her book Where the other Half Lives: Lower Income Housing in a Neoliberal World writes that this argument, welfare-state rhetoric became retro-fitted onto the existing pattern as a sort of ‘ideological overlay’. This, she writes, “provides an important reminder of the continuities of capitalism, but it risks obscuring the major ideological debate that lay behind policy compromises.” Arguments that stress the continuity of capitalism ca be taken up by those who try hard to depoliticise the debate about housing. Glynn again; “De-politicisation as symptom and tool of neo-liberalism has a long pedigree. A report on council housing produced in 1976 by the decidedly left-wind Community Development Project warned against the then conventional wisdom that housing policy should be an administrative issue removed from politics. They contrasted ‘the political struggle of the working class to establish a socialised form of housing which recognised the right of everyone to a decent home at a reasonable cost’ with the political right who ‘have always tried to contain development of council housing by narrowly defining the purposes for which it is to be provided, and creating an alternative to it more closely related to their interests.’ ” One wonders if they had anyone particular in mind.
Sarah Glynn leaves readers in no doubt that there is anything inherently ‘natural’ or ‘normal’ about homeownership. Simon Jenkins, former editor of The Times and author of Landlords to London, regularly fulminates in his articles, latterly for The Guardian, about the British obsession about homeownership. Glynn cautions against surveys that show a large percentage of people in favour of ownership. “They may well indicate a genuine preference, but there are simply too many different variables that can be understood to be included in the concept of ownership. Is important ownership per se, or are people more concerned with security of tenure, freedom to personalise their home, avoiding high rents, not missing out on the financial gains to be made from rising house prices, social status, or any combination of these?” The aspiration to home ownership is not an independent factor but a result of policy decisions not least of which is the exemption of capital gains tax on house sales. “Homeownership appears normal because it has become the tenure of the majority of the population, with renting being disproportionately concentrated among lower incomer groups.”
When Margaret Thatcher was elected in 1979 people were divided between those who owned their own homes and those who rented, privately or publicly. Whilst the higher priced end of the private rented sector was on a par with privately owned property, council housing increasing become the home of poor people and their homes were often no better than the worst sections of the privately rented market as the budget for housing was cut in the years that followed.
The decision to reduce the housing budget to local authorities came as no surprise to Simon Jenkins after an invitation he made to Margaret Thatcher in 1974 whilst she in charge of the housing portfolio. Simon Jenkins in his book Accountable to None: the Tory Nationalisation of Britain writes of how he offered to show her some housing estates after he had written a series of articles on housing. (See Landlords to London, 1975) On meeting her in a tea room in the House of Commons she began by asking Simon “to show me those terrible council estates.” He explained that there good ones and estates in London. “No”, she said, “there are just bad ones.” Nothing became of his invitation.
Twenty years later after she had left Downing Street in her account of her time as Prime Minister Jenkins’s writes she was still as scathing about council houses: “The state in the form of local authorities, has frequently proved an insensitive, incompetent, and corrupt landlord.” She goes on to say that as regards the traditional post-war role of government in housing -that is, building ownership, management and regulation – the state should be withdrawn from these areas as soon as possible. Jenkins’s writes that she set out to break this corruption in unquestionably her most radical pledge. She would enforce a tenant’s ‘right to buy’ on any property owned by the local council. It was a pledge to which she committed herself personally.
The justification for the sell-off is questioned by Nick Gallent and Mark Tewdwr-Jones in their book Decent Homes for All. They take the view that the political wisdom of the right to buy rested fundamentally on an ideological dogma that allowed the Conservatives to run a sustained campaign of denigration of local authorities as inefficient housing managers. “The rationale behind of the right to buy (seemed) to centre on Thatcher’s hard-line brand of conservatism. There was no simple economic case for the policy: it has since been proven more expensive to place families in housing need in expensive and temporary private accommodation. The capital receipts from private sales total in the billions of pounds but are minuscule compared with the market value of the properties sold (and therefore with the value of the asset that the state has lost). The social case is also unclear: public housing was often of high quality, whereas private housing may provide poor space standards for those unable to afford better accommodation. The RTB seems to be under-pinned by wholly political and ideological objectives. Conservatives often defended the policy by pointing to the number of homeowners created, never conceded the economic cost to local authorities or the social cost expressed in terms of a recent surge in homelessness since 1997, or the emergence of a housing underclass who, after the demise of council housing found their housing access opportunities severely restricted.”
GOING FOR THE PRIVATE SECTOR
Not satisfied with setting in train the sell-off of nearly two million homes council homes over the next thirty years, after the 1987 general election the Conservatives turned their attention to the privately rented sector. They did so after the publication the previous year of a report by the Audit Commission called Managing the Crisis in Council Housing which criticised what it believed to be the political nature of its management and the failure of local authorities to maintain and repair its housing stock. As they were such bad landlords, there was no alternative but to develop policies to encourage development in private renting and housing associations.
As Gallent and Tewdyr-Jones write the government came to recognise the need to provide rental opportunities for people who wanted to do so or were unable to buy a home. The Housing Act 1988 reflected a belief among Conservatives that the series of Rent Acts going back to the First World War and augmented by the 1977 Rent Act had caused the dearth and decline of the private rented market. That is an argument Gallent and Tewdyr-Jones write might be viewed as perverse. “A Conservative government that had spent the previous eight years selling council homes to sitting tenants now argued that a scarcity of rental opportunities was a result of the Rent Act 1977.” Whatever the arguments about reviving the private rental sector Gallent and Tewdyr-Jones conclude that the government real objective was to consolidate the work it had begun in 1980 with the right to buy legislation. One consequence of the 1988 Act was to increase the cost of Housing Benefit.
Another consequence was that it reinforced the charge that successive government s have used housing as a political football. In particular the Right to Buy policy in no small way helped the Conservatives win the 1983, 1987 and 1992 general elections. (After the Second World War both the Conservative and Labour vied to build the most homes) As David Donnison, author of The Government of Housing, wrote in the foreword to Guide to Housing makes clear, “In every country the political movements contenting for power choose particular issues as a stage on which to dramatise and symbolise their differences. If an issue is treated in that way for many years it becomes impossible to develop consistent rational policies for dealing with it. Housing has long been one of the issues used in this way by the main political parties in Britain.”
Tony Blair in order to win the 1997 general election used the issue of education to persuade middle class to vote for him. Shortly after the 1997 general election he visited the Aylesbury Estate in Peckham to tell them that they had not been forgotten. They had been; in order to win he needed the voters in Aylesbury, Buckingham, not the voters on the Aylesbury Estate in Peckham.
Any chance that council housing would retrieve some of the ground lost during the previous eighteen years failed to materialise when the Blair government refused to implement the statement of the National Executive Committee condemning the Conservative policy of selling council homes and passed in a motion by the 1979 Labour Party conference that the next Labour government would repeal the 1980 Act. For three successive years, 2004-6, the Labour Party conference passed a motion allowing local authorities to build council homes. In 2006, unlike 1979, the National Executive Committee instead of supporting the motion tried in vain to prevent a vote on the motion. The motion at the Labour Party Conference in 2004 stated: “Labour will ensure that where tenants chose to remain under the management of their local authority they will not be financially disadvantaged” was passed by a margin of eight to one. John Prescott was booed by angry delegates when he told that councils would only get extra resources to repair their housing stock if they transferred to housing associations, arms length management organisations or private finance initiative consortia. He said there would be no so-called fourth option of direct investment in council housing. During the debate on the resolution Jack Dromey, deputy general secretary of the Transport and General Workers union and now Labour MP, accused the government of having an “ideological bias” over the issue. (Jack Droney is now Labour’s housing spokesman)
When Labour MP Ken Purchase asked Tony Blair at Prime Minister’s Questions about council housing, Tony Blair replied that his government was seeking to create a million more homeowners. Council tenants were being ignored once again for the sake of those aspiring to be homeowners. (“Over the parliament our aim is to increase homeownership by one million and in particular help young families struggling to be first-time buyers”, Tony Blair, Labour Party conference, 25 September 2005.)
THE BLAIR BETRAYAL
The sense of betrayal that council tenants felt when it became clear that the newly elected Labour government had no plans to build more council homes to replace the million and more homes that had sold under the right to buy was nothing to what they were to endure in the years to come. Even before the election of the Labour government in 1997 Cole and Furbey in their book The Eclipse of Council Housing believed that council housing was facing extinction. Of all the state services, they write, council housing has always been the most vulnerable component of the ideas, services and institutions collectively known as the welfare state. “The insecure and uncertain status of the state’s invention in the housing market has thus made it particularly suspect to an ideological and financial attack. The dictates of private property landlord/tenant relations, the influence of private finance and land ownership, the balance of political forces and changing economic priorities by successive governments, have ensured that the dominant definition of housing is as a commodity rather than a social right.”
As John Perry, policy director of the Chartered of Institute of Housing, said shortly after Labour was elected housing was an embarrassment rather than a policy area to be tackled. John Prescott raised the possibility that council houses would once again be built only to come up against a brick wall at the Treasury and Gordon Brown. In 1998 Tony Blair showed in Leading the Way; a New Vision for Local Government made clear his view that providing services in general via local authorities was flawed. For council housing this ‘New Vision” was to come through the benefits of stock transfer. But as David Mullins and Hal Pawson in After Council Housing write there can be no escaping the fact that the primary driver for stock transfer has almost always been financial, as a means to secure the resources to meet the backlog of repairs. Finance, Peter Malpass argues, has often been presented as the key driver of stock transfer, because the finance for repairs and improvements is dependent upon transfer out of the public sector. Yet finance, he believes, is a red herring, because there is no necessary link between investment and transfer. “If raising the money for investment had been the only issue then ways could have been found to achieve this without sacrificing local authority ownership and control of a valuable public asset. But, of course, the reality was that the loss of the local authority role was not a sacrifice from the point of view of the government – it was the point of the exercise, and finance for investment was merely a devise for driving this (transfer) through.”
Also relevant is Alan Murie, professor of Urban Studies at the University of Birmingham, and Brendan Nevin, visiting professor at the University of Salford, contention in New Labour Transfers that politicians at both local and national level have tended to see council housing as a ‘public relations liability’ and that became one more reason to off-load managerial control. “Although tenants were not enthusiastic about other landlords, the criticism of local authorities’ performance in relation to housing was a constant source of difficulty for Labour councils. For those concerned with the modernisation agenda the legacy of municipal housing was an embarrassment. Offloading embarrassments is a long established part of central government’s traditions.” Yet come election time Labour expected council tenants to vote for them at the same time as it was planning to disown them. Council tenants fit into Bourdieu’s definition of a group who were taken for granted by a social elite and its public schoolboy leader. It is an example of how a mass of people had been duped by a member of the New Elite and who rebranded his party to attract the new social elite. So when Tony Blair said that New Labour sought to bury the old ideological split between the public and private sector his object in relation to public housing was to obliterate council housing irrespective of any consideration the effects that transfer might have on democracy, accountability and the security of tenure of tenants.
Both Blair and the Task Force established at the heart of government weren’t too bothered by what means, fair or foul, they employed to achieve that objective. A parliamentary report in 2004 concluded, “We believe that the target of achieving Decent Homes Standard in the social homes sector is a Trojan horse by the government in a dogmatic quest to minimise the proportion of housing stock managed by local authorities.” Austin Mitchell MP, chairman of the House of Commons council housing group, writing in the preface of the report on the inquiry into the future funding of council housing 2004-5 seconded the conclusion reached by the parliamentary report. “I regularly hear of abuses to con council tenants into agreeing to privatisation. I did not realise the enormity of it until I saw it in my own bailiwick, North East Lincolnshire. There the Lib/Con coalition controlling the council was carefully tutored in tenant trickery by the Task Force, the Trojan horse of the huge private sector transfer industry.” (See chapter 3, Sarah Glynn, Where the other half lives, Regeneration as a Trojan horse)
With the sale of nearly two million council homes and the transfer of a further 1.5 million by 2010 it is no surprise that the number of people on local authority waiting lists almost doubled to two million in the decade from 1997. That alone does not explain the reason for the present housing crisis. When the Conservatives came to power in 1979 housing was singled out for cuts in expenditure. It was only in 2001 that expenditure returned to its 1979 level as Labour had committed itself to Tory spending plans for the first two years of its first term. It is therefore no surprise that fewer homes were built in the UK in 2001than in any year since 1924.
In 2003 Gordon Brown, asked the economist Kate Barker to conduct a review of “issues underlying the lack of supply and responsiveness of housing in the UK”. It was pretty obvious why there was a lack of supply, The Thatcher government had instigated a policy whereby the main supply of housing in the public sector had been sold to sitting tenants and not replaced. Both Conservative and New Labour were ideologically opposed to housing provision by local authorities and reliance on housing associations and the private sector through the planning system to fill the void has proved totally inadequate. The consequent crisis as regards supply and accessibility was due to these decisions, taken by politicians in pursuit of a goal to restructure the welfare state and create a property-owning democracy Sarah Glynn sums the sum result of the past thirty years when she writes that the UK has not become a nation of homeowners but debtors.
In asking Kate Barker to conduct a review about the lack of supply of new housing Gordon Brown set the terms of reference that inclined towards providing a response that was more market orientated and highlighting the defects in the planning system rather than increasing the number of homes for people unable or unwilling to buy. As Duncan Bowie, lecturer in the School of Architecture and the Built Environment at the University of Westminster in Politics, Planning and Homes in a World City writes, “The focus of the Barker Report on making market housing more affordable meant that it did not adequately consider the need for affordable housing of those unable to access the market – who in London were the main components of both outstanding and projected housing demand, as demonstrated in the Mayor’s housing requirements study.” The failure of the review to look at affordability from the perspective other than that of the market is missing the point, as stated by Nick Gallent and Mark Tewdyr-Jones. They write, affordability “is not an add-on concern based on an assumption that most housing will be unaffordable and that the state – invariably – intervenes to protect the interests of an economically weaker minority. Rather, affordability is a general concern that affects the entire operation of the housing market. If young people or first-time buyers cannot enter this market (and are confined to social housing) then the processes of trade-up and intra-market movement will stall. The market needs through-flow: the big question, therefore, is not how to provide alternatives for a minority, but how to bring this minority into the fold.”
Kate Barker in her review never mentioned the elephant in the room as regards housing supply – the green belt. It was the planning system that got the most criticism but not a word about the planning restrictions in the green belt. Martin Wolf, author of Why Globalisation Works in his column; How the landed elite incarcerate us in the Financial Times, March 2006, gave vent to the idiocy of the system. “Over the past ten years the value of my house has increased by the equivalent of five years of my post-tax salary. But the rise in prices that has benefited me came at the expense of all those who wished to enter the UK’s housing market. What has happened should be a source not of self-congratulation but of shame.” The problem is as he sees it there is no connection between the price of housing and supply. “The market mechanism is broken. The impediment is a planning system aimed at incarcerating more than 80 per cent of the residents of the UK in ever more cramped urban reservations that occupy a mere 10 per cent of the country’s supposedly overbuilt land area. Behind the romantic dreams promulgated by the Campaign to Protect Rural England (or, as I think of it, the Campaign to Incarcerate Urban England) lie the ugly realities of economically unproductive intensive farming, social elitism and selfish vested interests: the quality of life of the many has been sacrificed to preserve that of the few.” These policies have dire consequences. “People are forced to live in pokey urban flats, instead of the suburban houses they prefer. Nearly half the UK’s playing fields have disappeared in the past 15 years. In London alone, front gardens totalling 22 times the size of Hyde Park have been paved over. The cities most people have been compelled to inhabit are becoming grey deserts. They are losing the green space people most value.” Martin Wolf ends by having his say about the furore between Labour and people who live in the countryside following the decision to ban foxhunting. “The country lobby likes to argue that this government (Labour) ignores its interest. Nothing could be further from the truth.” Labour “continues to protect country people from encroachment by the urban population who put it in office. More fundamentally, it has continued to support the interests of those who already own houses against those who aspire to do so. The shortage of land that creates this result is as artificial as it is absurd.”
PETER PASSES JUDGEMENT
In passing judgement on the period 1979 to 1997 Peter Malpass, professor of Housing Policy at the University of the West of England, in the preface to his book Housing and the Welfare State; the development of Housing Policy in Britain writes that having spent most of his working life involved with housing and teaching housing policy and of how “For eighteen years this was an activity carried out against a backdrop of Conservative governments that seemed determined to undermine the welfare state, attack local government and sell off as many council homes as possible. But Thatcherism and its successors in Britain are part of a global transformation which has produced conditions in which welfare states are everywhere on the defensive if not in actual retreat. And housing appears to have retreated further than other services.” The facts speak for themselves, as he told a conference at Sheffield’s Hallam University in April 2004; spending on public housing was cut by 64 per cent, while all other main welfare programmes saw positive growth.
The government looked to the private sector and the planning system to fill the void they had created. As Mark Gallent and Mark Tewdyr-Jones write, “There is a great irony here, with planning both the cause of and the solution to a shortage of affordable homes. At no other time during the past fifty years has government or society been more concerned with the operation and future of the planning system: planning has become a central theme of government policy, inextricably linked to the delivery of affordable homes. Indeed, the government hopes to achieve ‘decent homes for all’ through new directions in both housing and planning policy.”
In the course of their book the authors ask pertinent questions about what role planning will have in the future of housing provision. They end by considering whether the current or a future government (the book was published in 2007) can adequately address the UK’s housing problems given the present trajectory of planning reform; particularly Barker’s leaning towards greater market responsiveness. Both Conservatives and New Labour believed that the private sector could provide for the vast majority that used to be housed by local authorities, along with housing associations, as part of an ‘independent rental sector.’ Suffice it to say; what they proposed was inherently less secure as well as being more expensive than council housing. Planning has been asked to re-invent its role; it is now being asked to fulfil a role for which it was not intended originally by providing affordable homes to create ‘mixed communities – a concept that has received a ‘mixed’ response – but which is no substitute for a massive injection of capital funding and a huge programme of house-building, the likes of which have not been seen since the post-war period. The biggest question the authors ask is whether it is possible to reverse the huge losses in affordable housing over the past thirty years in order to avoid the worst housing crisis England has ever faced? Projections published in 2006 calculate that an additional 4.8 million households are likely in England between 2003 and 2026 and by 2016 the mismatch between what has been built and what is ‘needed’ will be about 1.5 million homes. Gallent and Tedwyr-Jones write, “Government has become increasingly concerned with apparent mismatch: no administration wants to preside over the biggest housing crisis since the mid-Victorian era.” Or, it should be added, to be responsible for concreting over the English countryside. Therein lies the problem, part of.
It is London with its growing population that is facing the worst effects of the housing crisis. The decline in London’s population in the late 1970s and early 1980s began to be reversed and is now projected to rise to 8.7 million by the 2020s. Converting population projections, Bowie writes, into estimates of housing requirements is a difficult science, as assumptions have to be made as to average households size, a factor which may itself be affected by the availability of housing supply. The revised London Plan includes a higher range estimate of new households to 778,000, taking the total number of households in the capital to 3.93 million by 2026. Although there was a net increase in the number of new homes built between 2001- 8, there was a loss of more than 27,000 homes to rent in the public sector. Duncan Bowie writes that not only has planning policy as set out in the London Plan had limited impact in steering the market, but also planning practice has had rather limited success in managing the market in terms of achieving the best public sector benefit. Missing from the Mayor’s planning policies and practice was any critique of the market’s domination of development and consequently of the planning system as it operated in London. By not dong so, the Mayor was in effect supporting by default, and at times publicly advocating, the interests of market-led developers.
Whilst Gordon Brown has been rightly and roundly criticised for his ‘light-touch’ regulation of the City of London, the same could be said of Ken Livingstone. As Duncan Bowie writes the approach adopted by both was that if economic growth based on unrestrained capitalism, tax revenues for Brown and shining high-rise edifices fitting of a global city for Livingstone, was good for London, it was therefore good for all Londoners, so by definition any constraint or attempt to divert its profits would be bad for London’s economy and bad for Londoners. (It was Thatcher’s ‘trickle-down’ effect but Brown and Livingstone failed to see the irony) As Bowie writes, “The neo-liberal paradigm was to reign supreme and condition every decision the Mayor took. By the time the paradigm collapsed in the autumn of 2008, Livingstone was no longer in office and in happy media friendly exile could of course argue that, now the neo-liberal paradigm was dead and gone, socialism was a good thing after all.” (At a debate hosted by the Evening Standard on housing and held in October 2007 at the Royal Society of Arts Ken Livingstone’s housing advisor Neale Coleman said that the fifty per cent affordable housing target would be achieved in 2009/10 “provided the market doesn‘t go completely rotten“)
Duncan Bowie concludes, “If we could not rely on the market to deliver what London needed in the boom period we certainly cannot depend on the market to achieve public policy objectives in the recession. It is not surprising that the economist John Maynard Keynes, confided to the historical dustbin by twenty years of neo-liberalism, is now back on the reading lists of politicians and civil servants. This is relevant to planning, as planning and planners can no longer achieve affordable housing, health, schools and transport by piggybacking these requirements onto private development.” He makes the same criticism of the London Plan; “A strategic plan, even one containing detailed targets and policies, such as the London Plan, still relies on the private sector to implement it and the implementation will be on the private sector’s own terms.”
Echoing Duncan Bowie’s criticisms of the method of provision not only of Ken Livingstone but of the Labour government since 1997is James Gregory in the booklet In the Mix published by the Fabian Society. He writes there has been a fundamental strategic flaw in the provision of public housing over the last decade: it has relied too extensively on partnerships with private developers, in which Local Authorities use so-called ‘section106’ planning agreements to encourage developers to include a proportion of affordable housing in their private developments. The logic was simple: no planning permission without the 106 agreement. The logic was also fatal in a falling market: if the developer could not sell the private units they could not subsidise the social homes. Public housing thus collapsed with the private market.
It was the same situation with the Housing Associations. James Gregory writes, “The government’s strategy here also has been flawed. Housing Associations have been increasingly asked to act as private developers. With as little as 30 per cent of their development costs coming from public housing grants, the rest has had to be raised from money markets as corporate debt, and through commercial sales on the open market, using the profit to finance their public housing provision. Like the section 106 strategy, it too has failed.”
In assessing the situation Gregory writes, “Thus, over the last ten years the supply of public housing has been driven by a strategy that is only viable in a rising market. Both private developers and Housing Associations have used market profit to cross-subsidise public housing. The collapse of the market has now left us with a complete collapse of public housing, adding to the severe supply constraints of the last thirty years.”
Bowie’s book ends just after the end of Ken Livingstone’s time as Mayor. He makes one comment about the new incumbent Boris Johnson; it is that he finds it strange that just at the time the Mayor’s powers as regards housing have been increased that a strategic London-wide approach is rejected in favour of borough based localism. One of the changes Boris Johnson made in his housing strategy in November 2008 was to tilt the emphasis away from social housing to homeownership through a programme called ‘First Steps which would widen the eligibility by basing the criterion on income rather than employment. In doing so Boris – my home is worth shed loads – was bringing his administration into line with the Labour government at the time and an obsession that is strictly British.(“I mention the British obsession with property so often in this column you could be forgiven for thinking I’m obsessed with everyone else’s obsession.” Merryn Somerset Webb, Merryn on Money, Sunday Times, June 2006, editor of Money Week)
It is an obsession that sends Simon Jenkins into periodic bursts of apoplexy every time the homeownership fever reaches epidemic levels. Jenkins in the article for The Guardian in September 2009 wrote that for half a century home ownership in Britain has been indulged beyond economic reason. The mania for home ownership “has sucked savings out of the productive sector. It has tied up pension money that should have been helping the economy in the stock market. It tax concessions have immobilised young people, who in most countries, remain in the fluid rental sector until later in life. It has lead to mass hysteria with every price rise and fall. Housing sees the British, their rulers and their newspapers at their most innumerable and irrational.”
Tracy Hoffman in an article Home ownership is hurting Britain in the Financial Times in May 2007 agrees with Simon Jenkins. She was at the time researching a book on homeownership in Britain. She writes, “Gordon Brown is no fool. Property mania is the British national obsession. We watch property makeover programmes on television, devour newspaper property supplements and our favourite topic of conversion is property prices.
Hoffman writes in the process, “We have gone from a nation of shopkeepers to a nation of property addled speculators. Property mania fuels the economy, tempts us to borrow to sustain artificially inflated living standards. We treat out houses as piggy banks -blithely signing up for equity release to fund purchases we cannot afford.”
Paraphrasing George Orwell she writes, “Some of us are more equal than others and home ownership is not a democratic right. For those on low incomes, home ownership is beyond reach and it meretricious to suggest it should their goal. The way forwards, she adds, is to challenge the cultural assumptions behind home ownership. “In today’s society being a home owner implies respectability; renting signals fecklessness. That does not have to be the case: in Switzerland, home ownership levels are only 37 per cent, but who would dare to call to accuse the Swiss of being feckless?” Tracy Hoffman believes there is a clear case for increasing the stock of quality rental housing. That would mean creating incentives, or ending the right to buy sales in property hot spots in London and the Southeast. Banging the drum for home ownership in the present economic situation is plain wrong.”
Tracy Hoffman ends that it is hardly surprising that Mr Brown puts a “home owning democracy” at the top of his agenda. Gordon Brown told the Guardian just before he became Prime Minister, “The problem is that even with the great ambitions of the 1950s or the 1980s; they did not succeed in widening the scope for home ownership to large numbers of people who want it. I would say a home owning, wealth owning democracy is what would be in the interests of our country because everyone would have a stake in the country.” In making such a statement he was merely repeating what Ed Howler and Shiv Malik in their book Jilted Generation describe as the same comforting message that politicians have been spoon-feeding British voters for decades: homeownership is good. Howler and Malik write, “Over the last 30 years there has been an observable change in the language, culture and attitudes of British people towards homeownership, just as the politicians wanted. It’s no longer something people aspire to – they view owning their own bricks and mortar as a right.
For politicians such as Margaret Thatcher, Tony Blair and Gordon Brown owning a home was never about a human right that people were being denied; it was and is about the whole ideology of home ownership. The concept of home ownership is the theme of Richard Ronald’s book The Ideology of Home Ownership. He writes, “Home ownership has long been considered in terms of its ideological significance. This association arguably originates in the late nineteenth century with Engels who suggested that individual home ownership leads to the gentrification of the working class and diminishes autonomy in the political sphere.” Ronald writes that this approach to ideology while sensitive to the role of the system of ideas to the reproduction of social relations is subject to the primacy of economic structures.” To understand the motives of Thatcher, and those who followed her, Ronald writes, it is therefore necessary to move away from the simple consideration of home ownership as a socially conservative or bourgeois ideology to a more dynamic consideration of home ownership and neo-liberal ideologies as embedded features and mechanisms in restructuring relationships between the state, the market and individuals.
Essentially, Ronald writes, it is about the restructuring of economic subjectively around markets which has ideological and political salience. Thus the establishment of mass home ownership and the augmentation of owner-occupier household asset holdings have enhanced the potential for governments to reduce welfare to a residual state. “By heightening the significance of housing as an investment good in a progressively asset-orientated system, individuals become increasingly committed to their stake in the market based system by relating to welfare needs and their satisfaction in terms of goods and markets, rather than public services and provision, the relationship of individuals to the state are increasingly realigned in terms of the market.” Ronald makes it clear that “The primary effect of the ideology was the commodification of housing whereby its significance is determined by its economic value and its currency within a market. Housing was no longer a social good that the state was best able to provide, but an object of the market best provided by market agents.”
As Gallent and Tewdyr-Jones write, “no government can be seen to play to the demands of the market, without acknowledging the need to achieve sustainable development. And more importantly, planning that fails to deal with the externalities of development or concern itself with the quality of outcomes will find little support among its users or within society at large. Coupled with the issue of supply is the need to deliver the right planning outcomes, which promote sustainable development and meet with broader social and economic aspirations.”
Labour sought to combine these different strands with its Community Plan. Central to the Community Plan was creating sustainable communities of which housing was only a part. As the Plan states, “Investing in housing alone, paying no attention to the other needs of communities, risks wasting money. A wider vision of strong and sustainable communities is needed to underpin this plan creating places people want to live.”
Whilst recognising that the Community Plan is not just about housing it occupies a central position to Labour’s thinking on sustainable communities. Key also to Labour’s thinking was the social exclusion and if people were excluded from being part of a sustainable community because of the lack of affordable housing the £22 billion allocated to creating sustainable communities would be have been wasted as in previous plans.
London is where such concerns about the lack of affordable housing are most acute. Property prices were continuing to rise beyond the reach of the average salary and the belief that the private sector would meet the demands of first time buyers and housing associations would fill the void left by the sell-off of council housing has proved to unequal to the task. Gallent and Tewdyr-Jones comment that “Planning and housing are key areas of concern for the Community Plan, with some commentators viewing the plan itself as merely a tactical distraction from the real task ahead – to bring about a seismic shift in future housing provision, shrouded behind a cloak of ‘sustainability’. (The authors themselves leave readers in no doubt on the last page of what they think, albeit using a ‘cynic’ to convey the message. They write, “A cynic might argue that the planning reforms instituted by the Labour government amount to an abdication of responsibility.”) A cynic might see the decision by Gallent and Tewdyr-Jones to hide behind a ‘cynic’ as an “abdication of responsibility”.
The need for a ‘seismic shift’ is mentioned earlier in their book. “Bevan and his colleagues (have) shown that a lack of social of social rented housing is a growing source of social exclusion in many areas. The market often provides housing of the right price, but in the wrong locations. The housing market has not worked well for everyone: despite talk of a country inhabited by a well-housed majority, the shift from mixed provision to mainly private provision has created an inadequately housed underclass: in inner cities, in affluent towns and suburbs who are locked out of the housing market, and who may have benefited greatly from access to council housing of the type that was commonplace before 1980. There seems to be no going back to the area of mass public provision, but some mechanism needs to be found to ensure that those unable to compete for private owner-occupation have some alternative option.”
James Gregory in his booklet In the Mix comes to the same conclusion. “We need a new policy framework that both offers alternative sources of supply, and which makes better use of private-public developer collaboration when the housing market recovers, thereby greatly increasing supply in the medium term.”
Duncan Bowie adds his support to the need for a new paradigm. He writers, “The main reason for the lack of affordable housing in London was the lack of central government investment.” Contributions from developers could not make up for deficits generated by the lack of central government investment and the continuing pressure on the Housing Corporation from ministers and the Treasury to reduce the level of subsidy of paid per home. It was not just the lack of adequate government investment but also the inappropriate planning policies and external economic pressures that were responsible for the lack of progress in meeting housing needs between 2000 and 2008.
It should be recognised, he writes, “that this was a period when the economy was strong and when many private developments were highly profitable. From the perspective of the market slowdown of autumn 2008 and the credit crunch, the earlier period can be seen as a golden age, in which, despite appropriate planning policies, inappropriate policy application and lack of public investment lead to opportunities being missed – opportunities which in the new economic context are no longer available, and which demonstrate that a new model for affordable housing provision is required.”
Ronald writes that a key feature of all societies that at some point experience a ‘golden age’ of rapid house-price inflation which may have embedded particular economic perceptions of housing properties and housing markets. In the preface to his book he sets the reasons for writing the book. Firstly, to explain how and why the phenomenal growth of owner-occupied housing tenure in recent decades became so significant. Also to show that ‘home owner ideology’ supports a particular alignment of social and power relations and is therefore not benign as it is portrayed. It has a down side.
Richard Ronald’s book was published in 2008 by which time the fundamental problems following a decade of unsustainable housing market increases he mentions at the beginning of his book in Anglo-Saxon homeowner societies were starting to emerge as a result of “fickle international financial markets.” By the end of the book he writes “Although owner-occupation may be a form of housing most aligned to the interests of contemporary capitalism, the features and orientation of capitalism historically fluctuates. Post-war home certainly has been a golden age for homeowners. However, the latest drive of house-price inflation has demonstrated considerable instability and unsustainability while the neo-liberalised shifts in employment, markets and welfare have formed a far more hazardous context for homeowners. The (recent) collapse in US sub-prime housing finance sent out unsettling financial waves that vibrated across global markets. The queues of worried British savers outside the Northern Rock bank (the most neo-liberal and globalised of UK mortgage providers) in the summer of 2007 illustrated the considerable lack of confidence in housing and mortgage finance that has developed in recent years of housing market expansion. It is possible, if the security and prosperity of home-ownership was challenged by policy and market shifts that the alignment between home ownership and neo-liberal capitalism would be undermined leading to a considerable downturn in home ownership.”
LOSS OF APPETITE
As the Oxford Economics Housing Market Analysis report for the National Housing Federation in July 2011, published in August 2011 showed, the collapse of Northern Rock and the bailout of the banks was the start of events that has undermined the appetite of home ownership. Their analysis shows that the percentage of home owners in England will fall from 72.5 in 2001 to 63.8 in 2021. As much as Ronald is interested in the ideology of home ownership per se he is just as much interested in the shifts that neo-liberalism will have on welfare systems on home owning societies. His object is to explore the growing centrality of home ownership in relations between welfare and social change. He writes. “Housing, and specifically home ownership, has gained in importance in the economic structures of a growing number of industrialised societies and has begum to play an increasing role in the emerging welfare systems. In recent decades, increasing pressure has been put on nation states to reduce welfare spending and liberalise markets in order to keep up with the competitive demands of global capitalism. This has been related to socio-economic changes associated with intensified globalisation, where greater integration of international markets and communication networks has amplified the socio-economic effects of capitalism. A particular feature in some societies, and a growing feature in others, has been a shift towards owner occupied housing policies and practices as a means to restructure the organisation of welfare. Home ownership no longer simply concerns the promotion of politically conservative ideologies, but is part of a neo-liberal restructuring of ideological relations around subjective positions in markets. This restructuring is fundamental to the changing organisation of relations between the state, markets and families.”
Why housing became the target for neo-liberal predators is the same reason as any predatory animal selects its target: both go the weakest prey. In the post -war years when the welfare state was being established, housing was considered different, because of its high capital and revenue costs, from the other welfare services, such as health and education, which were being radically reformed. As Cole and Furbey write; “There was one omission from the services undergoing sweeping post-war legislative reform: housing. The future role of housing was never subjected to the radical reappraisal accorded to National Insurance, education, town and country planning and health. There was little evidence of any fundamental thinking about the role of government in housing, and the relationship of housing and other activities. As a result, and in terms of capitalising on a widespread public optimism and support for state provision as a means of achieving a fairer society, council housing missed the boat.” Also as Alison Ravetz in her book Council Housing and Culture: the history of a social experiment, writes, “council housing lacked the protection of that broad band of middle classes who effectively championed the health service and state education, services that they used themselves.”
In the post-war years the need to do so was overshadowed by the drive to build as many homes as possible. There was cross-party support for the guiding principles of universalism in education and health care but public housing fell short of meeting either of these objectives. As Cole and Furbey write, “It was neither universal in coverage nor did it assist those in greatest need. The post -war consensus on the welfare state as regards housing lasted until the election of Margaret Thatcher in 1979 and the passing of the right to buy legislation in 1980. Discourses on globalisation took particular interest in housing in the years that followed. The National Health Service was well defended by doctors, nurses and health professionals; education could call upon teachers, parents and students as we have seen in the last year to fight its corner. Who had housing to battle on its behalf?
Council housing was championed by Labour governments and the Labour Party until Tony Blair became leader. Whilst Labour was in favour of council housing it was not against home ownership. Ronald writes that “public housing never constituted a considered measure by which the political left sought to undermine private home ownership. However, the reverse case is more evident as housing was central to Conservative policies in the 1980s which sought to undermine the social-collective features of housing objects and their decommodified consumption. New Labour policy and discourse since the late 1990s has persisted with the commodification of housing.”
Peter Malpass commented on New Labour housing policy in an article Housing Policy in an opportunity society, 2006. He points out that housing and home ownership have largely constituted the avant-garde of the choice agenda and form part of the logical basis of the ‘opportunity society’ and asset-based welfare approach. The concept of choice was central to the Conservative governments of the 1980 and 1990s and also became pivotal to New Labour when Tony Blair was leader. Choice became central to government policy rhetoric and the concern with choice in housing has been at the forefront of an attack on public housing as a reminder of the past. New Labour was trying to shift the focus onto the status of individuals as consumers and by doing so shifted the focus of housing provision issues to the market, which in turn provided a means to rationalise a withdrawal from social housing and collective forms of public provision. The concept of choice in housing obscured inequalities between renting and homeowners and the uneven benefits that some homeowners make through the property market.
For Ronald market based home ownership is not the result of genuine choice but is fostered by government housing policies and commercial that materially and ideologically coerces individuals into one form of living arrangement or housing aspiration.
The ’embarrassment’ of New Labour in its first years gave way to initiatives that focused on expanding the construction of private housing, broadening access to home ownership to more households and further disengagement of the state from the provision of subsidised rental housing. As Ronald writes, “What appeared significant in government discourses is an alignment with the ideological positions set out by the modern Conservatives concerning opportunities for individuals to buy their own homes. Even greater emphasis was put on ‘choice’ and asset ownership, with Labour, not the Conservatives, setting itself up as the party of home ownership.”
David Clapham, professor of housing at Cardiff University, in Housing Policy and the discourse of globalisation, 2006, writes housing policy has been subjected to the logic that the government is limited in its manoeuvrability because of global forces and the need to retain the confidence of investors and capital flows by keeping both tight control over public spending and limits on taxation at the top end of incomes. The effect has been substantial reductions on housing and deregulation of private housing markets. For Clapham the acceptance across political parties of the globalisation argument has “shaped housing policy through the creation of a new agenda of housing needs whilst also placing constraints on the ability of government to meet them. The response of successive governments to the challenges posed by the discourse has been to answer the neo-liberal discourses with a neo-liberal housing policy.”
The consequences are clear to Ronald: “The establishment of mass home ownership have allowed the potential for governments to pursue welfare residualisation and the competitive orientation of national economies towards global capitalism. Whereas the contraction of welfare safety-nets and greater orientation to global markets has proved to intensify risk and individual vulnerability, access to home ownership and the equity that can be built up within it has been perceived as a hedge against such insecurities. The function of owner-occupied housing is thus transformed where its relative salience as an exchangeable market good becomes increasingly prioritised over use value, especially when housing property also constitutes a substantial, tangible asset from which to draw other goods from the market. In this context, access to housing and the freedom to choose from the market is considered necessary for the actualisation of security.”
With some prescience, Ronald writes, the desire to become a home owner, but the inability to do so, has drawn a substantial fault line between younger and older generation and challenges the sustainability of the housing system. Lenders, he writes, have engaged with the exhaustion of home-buyers by seeking ways to mitigate risks and get more people into mortgages. There has been an increasing amount of 100 per cent loans as well as an expansion of near prime and sub-prime markets. As a result many young people have been forced to borrow from the bank of mum and dad. As well they might, because the mums and dads generation ‘never had it so good’ when it came to getting on the property ladder.
THE RENT GENERATION
The front cover of the Sunday Times in May 2007 summed up the predicament of the next generation. On the front cover is a photo of a couple of young, middle-aged parents in an open top E-type Jaguar. They are laughing, if not all the way to the bank, they should be because they have just sold the house before the market crashed and are about to drive off to enjoy their ‘golden age’ thanks to the golden age of house-price inflation. Their children, in scruffy clothes, look less than happy. In the article Live now and let the kids pay later by Bryan Appleyard he castigates the baby boomer generation for leaving their children the legacy of a nastier, tougher and more anxious world than the one they knew. At the end of his article he writes the baby boomers forgot the eighteenth century philosopher Edmund Burke’s most imperishable insight – that society is a contract with three interested parties: the dead, the living and the unborn.
Ed Howker and Shiv Malik in their book the Jilted Generation; how Britain bankrupted its youth tell how the baby boomer generation left them to sort out the mess they created. Their book examines the basic areas, including housing, that regardless of any generation forms the foundation of people’s lives. As regards housing “We need to know why young people are spending a greater proportion of their income on rents than at any time during the last thirty years, and why Britain could enjoy a decade-long surge in house prices while the number of young first-time buyers fell through the floor.”
They sum up the situation as regards housing for their generation: “Housing is society’s fundamental building block. It’s completely defining. Housing is not just a traded commodity, not a mere space where people reside, but a focal point for the narrative of their lives, providing shelter, security and a bedrock of certainly in an uncertain world. In Britain today it’s beyond doubt we are getting it wrong; that the housing we build is unsuitable and the way we divide that housing between us is unreasonable. It’s beyond doubt that we are making it difficult for people to find housing that is permanent.” (It is again very prescient considering the coalition’s plans to introduce legislation for short-term tenancies.)
Although the authors of the Jilted Generation complain, quite rightly, about the amount of rent young people are paying they do not look upon renting as a second class tenure. Renting, writes Ronald, is often relegated to a minority status, and confined to those who cannot or do not want to own their own home. Renting and owning have come to represent mutually defining oppositional concepts. Renting has become heavily stigmatised. “It is not only an inferior tenure but also constitutes a poor type of home. In some societies the realm of the public rental housing estate has been marginalised and its residents demonised.”
If people who rent their home are demonised in some countries the opposite is true of home owners; they are sanctified. The status of the home owner has become a social ideal umbilically linked with routes to adulthood as well as discourses of choice and freedom. In Anglo-Saxon societies home owning fulfils the long held belief that an ‘Englishman’s home is his castle’, whilst in America President Bush in 2002 said, “owning your own home has become part of the American Dream.” Buying your own home means you have got your foot on the property ladder.
In Europe, particularly Germany, getting your foot on the property does not mean buying a home and it does not mean being demonised. As Larry Elliott, economics editor of The Guardian and co-author of Fantasy Island and The Gods that Failed, in an article on the Germany economy write recently, “Britain is fixated by the property market; Germany is not. The British want to clamber on the property ladder at the first opportunity; Germans are happy to rent. Britain has had four boom-to-busts in the housing market in the past four decades; German house prices are actually lower in real terms than they were in 1970.”
In his article, Where home sweet is a rented one, Elliot writes that for Germans the financial crisis that followed the property boom has reinforced their suspicions of rising house prices. The idea that families sit around the dinner table discussing how much their home has risen in value is alien. “With less stigma attached to renting than in Britain, just 45 per cent of homes in Germany are owner-occupied, one of the lowest rates in Europe.
There is no sign that Germany will contact the British housing disease. The Organisation for Economic Cooperation and Development cites high subsidies for the building of homes, which contributed to a rise in supply, leading to a flood of properties on to the market in the mid1990s.
The impact of the economic crisis has made the housing crisis even worse. Fewer homes were built in 2008 than in any year since 1924. This was resulted in the number of people who rent increasing by 1.2 million. The annual English Housing Survey for 2011 published by the Department for Communities and Local Government showed the number of private renters increased from 2.15 million in 203/4 to 3.35 million in 200/10. Although the Land Registry figures show that house prices have fallen, except in London, the number of first-time buyers has fallen also from 7 per cent to 4 per cent.
Chancellor George Osborne introduced another initiative to help first-time buyers with a deposit in spring 2011. He announced the £500 million rescue package giving buyers a loan to cover 20 per cent of the cost of their purchase. The initiative, in practice, is not such a good deal. Andrew Ellson, personal finance editor for The Times in an article in June 2011, titled First time buyers beware this scheme wrote “the scheme is designed to help only builders and bankers, not first-time buyers. Young people are being encouraged to subsidise the historic recklessness of the banks and the blind folly of the builders by taking on oversized loans to pay for overpriced property. They should refuse. Of course, there are some understandable reasons why young people still aspire to own their own homes – not least that rents are now so high – but they should be patient and realistic. There is no shame in renting, and it is better to do so than to pay too much for a property, become financially overstretched and tied down to a home that might prove difficult to sell. First-time buyers should remember that purchasing a home with a 95 per cent loan-to-value mortgage is little different from renting anyway. The only real difference is that a bank is the landlord.”
Matt Griffiths of the first-time buyer website Priced Out said there is a definite split in the age groups of home owners. The percentage of young people getting a foot on the housing ladder is clearly falling behind the number of young home owners twenty years ago. What is different from twenty years ago, apart from fewer homes, is the growth of the buy-to-let market which favours the older homeowner. He says; “Unfortunately the unenviable position of ‘generation rent’ is reinforced by the political dynamics of home ownership – older homeowners are a larger group, and are more vocal in defending their interests. Politicians therefore have been very reluctant to challenge the generational inequalities in the housing market and tiptoe around the problem.”
Whether to compensate for raiding pension funds in his fist budget Gordon Brown, under new pension rules from April 2006, investors were allowed to funnel pension funds into property and reduce their tax liability – their money matched from the public purse. The privileged treatment of land not only pushed up property prices but also transferred tax revenue from low-income wage-earners to high-income owners of land. It was the reverse of Labour’s slogan of being on the side of the many, not the few; the new ruling meant that the many were giving to the few. The change breathed life into the burgeoning buy-to-let sector.
Griffiths is critical of the government’s First Buy initiative to help 10,000 people in England get a deposit. A recent survey by the Halifax concluded that despite such initiatives, two-thirds of potential first-time buyers have no realistic prospect of being home owners in the next five years. Griffiths commenting on the initiative said, “The government’s flagship first-time buyer scheme is a classic example of how to do close to nothing with maximum publicity. It will only benefit 10,000 young people and will have no impact on the drivers creating generation rent. Nowhere is this more apparent than in the response to the credit crunch -where stopping house prices falling has been a major concern of government and the Bank of England. The pain of market readjustment is therefore now being felt primarily in the rental market – with younger people shouldering higher costs. Given this group was a major loser from the boom, this seems a bit unfair.”
Not only are questions being asked about the fairness of decisions taken by politicians favouring politically more active groups but fundamental questions about sustainability and the need for substantial restructuring in housing and social policy. In Japan, in the 1980s housing market was at the heart of the economic bubble that proved to be one of the greatest examples of unsustainable over-speculation in history. Most house values during the 1990s, which became known as the ‘lost decade’, dropped by almost half. It marked the end of Japan’s ‘golden age’ of house price inflation.
THE RISE OF HOME OWNERSHIP
The most rapid increase of home ownership occurred during the post-war period of full employment and a fully funded welfare safety net. This was the ‘golden age’ for home owners before inflation took off and workers were laid off in endemic industrial disputes. What followed was the breakdown of the collective consensus of the working classes and the rise of individualism. Buying your council home was the quintessential expression of individualism. The success of the scheme meant that the housing market had potentially a couple more million homes. The merry-go-round lasted as long as the housing market rose and the music played. With a growing population and the failure to replenish the housing supply, which kept the carousal circulating, the music stopped. It had been a long ride on the merry-go-around, people were exhausted. As Ronald writes, “A central feature of post-home ownership regimes has been ‘exhaustion’. This refers to the exhaustion of home owners in terms of affordability and the exhaustion of the housing market in terms of sustaining stable value increases. The numbers of younger homeowners and first-time buyers have been falling dramatically. This has lead to significant readjustments in government policy, lending practices and family support networks. At the same time there has been a growth in the number of buy-to-let mortgages, multiple owners and a build-up of housing wealth among older homeowners. A fundamental divide is emerging between those in or outside the tenure, and different groups of home owners who entered the market at different points in the market cycle, with subsequent disparities in capital gains. Among homeowners, younger or marginal homeowners have greatest exposure to downturns, while older owner-occupiers and those with higher or more secure incomes have least.”
The growth of the buy-to-let sector mentioned by Ronald and its effect on potential first-time-buyers is corroborated by Howker and Malik. They are scathing of the way they have been “egged on” by property programmes and publications. Howker and Malik throw some ‘eggs’ at politicians for their treatment of buy-to-let investors. To give, they write, people an idea of how “blind politicians are to the damaging effect of buy-to-let on Britain’s house-building, you need to only check out the consultation paper offered by the Labour Party in the run-up to the 2010 general election, proposing to cut stamp duty for buy-to-let investors.
Howker and Malik add there is evidence unearthed by Priced Out that Gordon Brown knew perfectly well of the effect of buy-to-let would have on first-time buyers. In 2004 Tony Blair commissioned a report from the Treasury. It stated that first-time buyers would be crowded out from the housing market by buy-to-let investors.
Jeff Randall, the BBCs former business editor and now Sky television business presenter, is no fan of Gordon Brown’s time as Chancellor and its impact upon housing. He began an article for the Daily Telegraph by quoting from Gordon Brown’s 1997 Budget speech. He said, “Homeowners rightly expect their investment to be protected by sensible policies…I am determined, that, as a country, we never return to the instability, speculation and negative equity that characterised the housing market in the 1980s and 1990s.”
In the course of his article, 3rd October 2008, Jeff Randall throws more than eggs at Gordon Brown. “Crash!” his article begins. “Another one of the Prime Minister’s plates has just spun off its stick. British house prices fell for the 11th consecutive month in September. The average home lost 1.7 per cent of its value last month, according to the Nationwide building society, leaving prices 12.4 lower than they were one year ago. After a decade of wild speculation – the buy-to-let frenzy was little more than a huge bet on ever-rising values – the property market is less stable than a house build on sand. Worse still, many homeowners are being plunged into negative equity, especially first-timers who bought in the past two years.”
Randall reminds readers that two months after Labour swept into office in 1997, a confident Chancellor told a credulous country: “Volatility is damaging both to the housing market and to the economy…stability will be central to out policy to help homeowners and we must be prepared to take the action necessary to secure stability.”
Little did the public know that such an empty promise would reveal his fundamental misunderstanding of market forces. Almost from day one they contrived to highlight his impotence. The trouble was, while house prices were rising sharply in the early years of the Blair-Brown regime, very few seemed to care. “Having unleashed a torrent of cheap debt and a culture of reckless borrowing, something had to be done. By 2004 even Mr Brown had worked out that there a potential downside to a property market going up like a hot-air balloon. All that guff about safeguarding stability was in danger of backfiring. Along with “no return to boom and bust”, let us add to Mr Brown list of boomerang boasts an outrageous one-liner from his first Budget: “I will not allow houses prices to get out of control.” That one has just whacked him on the back of the head.”
Jeff Randall belongs to a long list of journalists who have become exasperated at the way both Labour and Conservative successive governments have failed to build enough homes for various reasons. Housing, Steve Richards, author of Whatever it Takes,a chronicle of Labour’s time in power wrote in The Independent on Sunday in April 2002, is the ticking time bomb that could destroy Labour’s second term because of soaring house prices. He quotes what Mrs Thatcher’s said about house prices – how they had gone up – in the 1987 election campaign to show that the economy was thriving. In 2002 they were still rising but now “Instead of being gloriously totemic figures, the unremitting rise in house prices threaten to scupper the government’s main objective (the Euro) for its already stuttering second term. Housing rarely command s the front pages as an issue, but there is none bigger in terms of the impact on domestic policy.”
In August 2002 he returned to the issue of housing in another article. “The right to buy is so totemic of Mrs Thatcher’s triumph and old Labour’s decline that New Labour regards even raising questions about the policy as nearly heretical. Yet with little affordable housing available and taxpayers about to invest in some new homes, the questions have to be asked.” (the question Richards refers to – the right to buy – would not apply as any new homes would not be council homes) When John Prescott announced that 200,000 homes would be built around London it looked as if the time bomb had been defused. The homes were never built but the time bomb has not been defused. (The Housing Time bomb: as builders cut projects, what has happened to the government’s ambitious housing targets? January 19th 2010)
Another journalist and social commentator who over the years has taken a keen interest in housing is the Guardian columnist Polly Toynbee. Like Steve Richards she wrote about housing several times during Labour’s time in power. Only after Labour had left office, she is a member of the party; did she feel free to write about what she thought of Labour’s record on housing? In The Guardian in July 2010 she wrote, “Housing was a great Labour failure, a decade of building the least since the war in both private and social sectors, despite a great property boom.” In the book The Verdict: did Labour change Britain? Polly wrote with David Walker, the former editor of the Guardian’s magazine Public on the public sector, “Housing”, they write, “was one of Labour’s weakest links. The equation was stark: house prices boomed, population grew, but little new housing was build. In this market, supply and demand were not operating. The government resisted the logic of state intervention, partly because rented housing sounded Old Labour, partly because it was scared by the large sums needed for subsidised house-building.” Whatever the amount it would have been less than bailing out the banks caused by Labour’s failure to heed the advice of Kate Barker and build enough homes to prevent house price inflation. “To keep house price inflation at 1.8 per cent per year, Barker calculated that 70,000 extra dwellings should be built every year above and beyond already planned construction. In the second half of the decade, her projections looked more and more fantastic. From around 155,000 in 1997-8, annual housing starts in England fell, then rose to a pre-recession peak of 180,000, then collapsed to 90,000 in 2008-9, down 42 per cent on 2007-8 and 51 per cent below their 2005-6 peak.”
BOOM, BUST, BANKING AND FRED
Fred Harrison in his book Boom-Bust: House Prices, Banking and the depression of 2010, writes the favourite explanation for the failure to build enough homes is the planning system. “Imperfections in the way decisions are made about land use are held to be responsible for the shortfall of affordable homes, leading to the boom in prices. This is the explanation favoured by the construction industry. It is also favoured by the Confederation of British Industry which needs to explain why British productivity is below the levels of its leading competitors. In December 2002 a House of Commons Select Committee published the results of its interrogation of the claim. The all-party group of MPS concluded that there was “no evidence that planning is a significant explanatory factor for the UK’s low productivity compared to its main competitors. The building industry, which ought to know where the pressure points were, appears to emit confusing signals. One of Britain’s major construction firms, Taylor Woodrow, focuses on planners, claimed that output of houses was unlikely to rise further in 2005 as land became increasingly difficult to get through the planning system. But on the same day, readers of The Guardian were informed that Taylor Woodrow chief executive, Iain Napier, noted the difficulties caused by land whose price had been inflated by unrealistic expectations. “With silly inflation prices floated, it is difficult to buy land because they have a higher perception of what it’s worth,” he complained.
Harrison highlights also the part that housing played in the collapse of the economy and how it led to the queues outside branches of Northern Rock. (The first edition of his book was published in 2005 and a second edition in 2007) Unlike Toynbee he highlights individuals whom he believes were responsible for the failure of the government in allowing house prices to get out of control. He levels the charge of negligence against Gordon Brown. In the prologue to his book Harrison states that there was a philosophical flaw problem at the heart of Gordon Brown’s economic policy. It was a flaw that all parties failed to challenge and thus avoid the housing crash that followed.
Besides being St. Patrick’s Day, 17th March 2004, was a defining day for Gordon Brown. It was also the day that Gordon Brown presented his eighth Budget statement to the House of Commons. It was the last day he could announce a remedy for the looming housing crash. Gordon Brown’s speech, as confirmed by Alastair Darlings memoirs, had been left to the last minute, would determine Britain’s economic fate fro the next decade.
Gordon Brown would have been well aware that two previous Chancellors in 1909 and 1931 had tried to lay the foundations for sustainable growth by changing the tax system but had been thwarted by the House of Lords. This time, writes Harrison, would be different. “This time Tony Blair had a majority in the Commons of 159 MPs. He had dismantled the blood-line buttress that protected the privileges of the House off Lords. All that was needed was for Gordon Brown to act as a tough-minded chancellor to reform public finances in a way that would finally shift power to the people.”
Harrison writes that a year before Labour came to power in 1997 Gordon Brown had identified the issue that had defeated his predecessors. It was housing. So when he stepped into the Treasury building in Parliament Street in 1997 he was determined not to suffer the ignominy of his predecessors. Accordingly he asked civil servants to analyse the business cycles that ended in recessions. He revealed the findings in his Budget speech in April 2003. Brown said, “Most stop-go problems that Britain had suffered in the last 50 years had been caused have been lead or influenced by the more highly cyclical and often more volatile nature of our housing market.”
The analysis helped him out of a political hole. He used the housing cycle as reason to delay the announcement on whether Britain should switch to the euro. It solved one problem but created another; he would have to explain how he would prevent the next housing market collapse. “With prices at the beginning of the decade rising at annual rates of 20 per cent, the housing market was ‘overheated’ What could be done to prevent similar prices rises at the end of the decade, prices that would initiate a wild spending spree and the downturn in the years from 2008 into the trough of 2010?” To buy time Gordon Brown commissioned the report on housing supply headed by Kate Barker. (As Polly Toynbee and David Walker comment in The Verdict, “The Treasury commissioned an economist, Kate Barker, to state the bleeding obvious. Reporting in 2004, she blamed too readily available credit, and the crash later proved her point. Supply did not respond because property companies bought land and then sat on it, letting its rising value decorate their balance sheets and share prices.”) When Gordon Brown rise to address the House of Commons on March 17th 2004 had in his hands the findings of the report.
In his speech he gave the impression that Britain, he, had solved the riddle of the slumps. “Britain has sustained growth not just through one economic cycle but through two economic cycles. Having asked the Treasury to investigate in greater historical detail, I can now report that Britain is enjoying its longest period of sustained growth for more than 200 years.” Fred Harrison writes that it was an illusion. “Gordon Brown had not introduced the reforms that would neutralise the propensity of the economy to surge to the peaks that terminate in a valley of tears. Having failed to put in place the preventive measures, the Brown bust of 2005-10 would go down in the history books as yet another dismal failure in the quest for sustainable growth.” The challenge for Gordon Brown was now to maintain the illusion of sustainable growth. The only way that could be achieved was to stop people from capitalising from the gains that could be made from in the housing market.
Gordon Brown’s first decision as Chancellor was to announce the independence of the Bank of England. The task assigned to it by Gordon Brown was to keep inflation to 2.5 per cent. The target of 2.5 per cent was to exclude mortgage interest payments on houses. Gordon Brown’s definition of inflation included the depreciation of the bricks and mortar but excluded the appreciation of the land beneath the houses. Such a distinction puzzled Professor Steve Nickell from the London School of Economics and a member of the Bank of England’s committee that advised the governor on inflation. The Bank of England made it clear in a statement that its remit did not include setting interests rates to target house prices. The responsibility for prices in the housing market remained with Gordon Brown. He failed to take any steps to provide a sustainable supply of homes to ensure the housing market at prices people could afford. His last chance to do so was the 2004 Budget. The housing market, and the economy, was heading for the rocks.
Ironically a week before his Budget speech told the Labour Party Spring conference that the people who would be central to his plans would be “hard working families” and that “our aim should be to lock in stability for a generation …we will take no risks with inflation.” Yet Gordon Brown was doing the opposite and passing the responsibility unto “hard working families” when they bought a home. Harrison writes, “Instead of increasing taxes or public debt to finance investment in infrastructure he presided over the growth of a record level of personal indebtedness. By July 2004 that debt reached a staggering £1 trillion. Britons spent more on their credit cards than the rest of Europe put together. To underpin this indebtedness, a blind eye had to be turned to inflation in the housing market.
Yet the while Gordon Brown pointed to the inflation target of 2.5 per cent as house prices soared. It was the maligned Financial Services Authority that raised the alarm in January 2003. It described as “unsustainable” the level of mortgage debt. Gordon Brown failed to heed the warnings from the one sector that was essential to his plans to maintain stability. The previous month when he appeared before the House of Commons Treasury Select Committee he denied that there was a ‘boom’ in the housing market. In response he said that the housing market was experiencing a “very fast rise” in prices. (When Yvette Cooper, at the time minister for housing minister, was asked by Guardian journalist Jonathan Freedland at the debate on housing at the Royal Society of Arts whether there was as ‘housing crisis’ responded by saying that “challenging” was the word to describe the situation.)
In June 2004 Gordon Brown surpassed the time for that Lloyd George had been as the longest serving Chancellor between 1908 and 1915. In a speech at the Mansion House he reminded guests that he was still committed to acting prudently in order “to lock in long term stability” for a generation. “Let us recall that most stop-go problems that Britain has suffered in the last 50 years have been led or influenced by the housing sector. Forty years ago we built 4000,000 homes a year, by the mid 1990s it had fallen to just 200,000 so we will press ahead to tackle the large and unacceptable imbalance between supply and demand in the British housing market.” He omitted to mention from his speech more recent amount of homes build since Labour came to power in 1997. He omitted to mention that since 1997 that the number of homes built had decreased 20,000 each year during his time at the Treasury. Ironically it was June 2004 that the Bank of England began to doubt that they would be able to keep inflation within the required level. The biggest influence upon inflation for people was house prices and that was not part of their remit. All the while the economy was sailing towards the rocks.
In February 2000 the Treasury published a paper called The Goal of Full Employment: Employment Opportunity for all throughout Britain. It stated that the government’s ambition is that by the end of the decade there would be a higher percentage of people in employment than ever before – not through an unsustainable boom, but through sustained policies of macro stability.” The government failed to set a course for sustainable growth. As Harrison writes, “New Labour had set the dials on the control systems so that the economy would head straight for the hidden icebergs. This was exemplified in the market for houses.”
As stated, there was one very large flaw in the inflation target that the government had set the Bank of England.; it did not include what was happening in the housing market. What the government had done was shift responsibility to the Bank of England for inflation so that they would get the blame if inflation ran riot. Ultimately from a politically point of view the buck stopped with the government but as was the case when the banks got into difficulties the Bank of England was most unforthcoming to come forward to bail them out.
Harrison asks why the government placed so much emphasis on inflation when in the past it had proved to be an unreliable indicator as to what was happening in the economy. Also why an inflation target that excluded vital information on what was happening in the housing market was bound to be inaccurate. A change of course was not considered necessary because “the chancellor’s inflation target myopically downgraded the one source of instability that would signal risks to people’s hopes of providing shelter for themselves that they could afford. If the economy was to steer a course around the concealed icebergs, it would be due to luck rather than the prudence of Gordon Brown.”
Again ironically when New Labour came into power it established a new statistics commission in order to provide transparency. The commission would be able to challenge the government if it sought to use statistical data to its own advantage. There was one exception; the Treasury decided that statistics on inflation would stay with the Treasury. As Harrison comments, inflation would remain a political concept. Gordon Brown would retain control of the public’s perception of what counted as a relevant price rise.
The importance to collate data was recognised in the Economist’s property survey Close To Bursting in May 2003. “Movements in house prices have a much bigger effect on economies than share prices. Unfortunately timely data on house prices across different countries are much harder to come by than share-price information.” To fill the gap the Economist started its own data base. The survey also provided a timely reminder of the importance of property to the global economy. “Property is probably the biggest business in the world. By one estimate, construction, buying, selling and renting of properties and the imputed benefits to owner-occupiers account for around 15 per cent of rich countries’ GDP. Property also makes up around two-thirds of the tangible capital stock in most economies. Most important of all, property is by far the world’s single asset class. Investors have much more money tied up in property than in shares or bonds.”
One advantage that is often argued for property is that it is a much safer investment than shares because a share is just a piece of paper, sometimes worthless whereas bricks and mortar are something tangible. “Yet that tells us nothing about their relative value. Bubbles form when the price of any asset gets out of line with its underlying value. Housing is just as prone to irrational exuberance as is the stock market. Property is increasingly viewed as an easy way to make money. People buy a home in the expectation that its price will continue to rise strongly over time. Such expectations lie at the heart of all bubbles. Given the boom in the property market over the past few years, at the very least house-buyers betting on further rapid house-price gains are likely to be disappointed. Worse, there is a risk that house prices will take a tumble that they take whole economies with them. Movements in house prices have a much bigger effect on economies than swings in share prices.”
In an analysis of a number of earlier housing bubbles the International Monetary Fund found that output losses after house-price busts in rich countries have been on average twice as large as those after stock-market crashes. The average real decline after a house-price bust has been more modest than after a stock market crash, but at the end of that period GDP had fallen by an average of 8per cent relative to its previous growth trend, compared with 4 per cent after a share-price bust. The IMP also found that a sharp rise in house prices in real terms is much more likely to be followed by a bust than is a share price boom.
The Economist’s survey gave three reasons as to why a house-price bubble might cause more on bursting than a stock market bubble. Firstly, house prices have a bigger wealth effect on consumer spending, largely because more people own their own homes than own shares. A study of 14 countries by three American economists found that in most economies a change in property prices had at least twice as big an effect on consumer spending as a change in share prices of the same magnitude. Secondly, people are more likely to borrow to buy a house than they are to buy shares. Inevitably some of them borrow too much and have to cut back on their spending. Thirdly, a fell in property prices also leaves some households living in negative equity – homes worth less than when they were bought – leaving banks more exposed as a result of housing crashes. Falling house prices leads to a decrease in the capacity of banks to make further loans.
The survey by the Economist came to the conclusion that the housing boom had inflated bubbles in several countries, notably America, Britain Australia and Ireland, all countries with high rates of home ownership “Within the next year or so those bubbles are likely to burst, leading to falls in average house prices of 15-20 per cent in America and 30 per cent or more elsewhere over the next few years, in line with average price declines during past house market busts. This time with inflation so low house prices will fall more sharply in money terms than they did in the past. In Britain as a whole average nominal house prices are likely to drop by20-25 per cent, and in London by much more.”
The survey concludes that there were already indications in some cities, such as London and New York; the housing market was cooling fast, but estate agents still insisting that prices were unlikely to fall dramatically. (They would, wouldn’t they?) In the last year before the credit crunch began to bite figures from the Office of National Statistics showed that the increasing dominance of the housing market in the economy. The annual review of the UK’s financial and non-financial assets showed that 60 per cent of its wealth was linked to property and that the wealth of the UK is now highly sensitive to movement in the housing market, particularly due to the declining importance of manufacturing to the economy.
Despite all the evidence collected by the Economist from around the world house prices failed to fall following its publication of its survey in 2003. Its final warning to readers was that the next time an estate agent tells you that bricks and mortar are the safest bet in which to invest, hit him over the head with this copy of the Economist. A lot of economists were hitting themselves over the head, if not with copies of the Economist, wondering why house prices refused to fall. Andrew Oswald, professor of economics at Warwick University wrote to the Times in January 2003 He told readers that there would be blood on the carpet of estate agents from Torquay to Thurso. A year later he wrote another article, Wait for the housing crash, to the Times. “I think that although I may look wrong now, the fundamentals of the housing market look worse than a year ago. Most of the indicators of an overheating housing market have become more extreme.” Like the Economist he stressed the importance of data that is not produced by vested interests in the housing market.
It is not good enough for those with vested interests to say that ‘this time is different’. This time was different from anything that had gone before since the 1930s. The Economist argued, because inflation is close to its lowest for half a century this meant that overvalued house prices would not regain their long-term equilibrium mainly through inflation, as they have done in the past. Secondly, this time is different because the surge in house prices has gone hand in hand with a proportionately larger jump in household debt.
Like the dog that failed to bark, house prices failed to drop. It was not until 2007 that the economy hit the rocks and queues began to form outside branches of Northern Rock. Yet Gordon Brown in his 2007 Budget was still insisting that there would not be a return to boom and bust because of his commitment to hold firm on “our inflation target” and low interest (and mortgage) rates.
Harrison wonders why Brown struck to inflation as a key indicator when excluded from the calculations was vital information on the housing market. It was too late for remedial action because “the chancellor’s inflation target myopically downgraded the one source of instability that would signal risks to people’s hopes of providing shelter for themselves.”
One of the great wonders of the enigma that is Gordon Brown is his failure to seize the opportunity presented by the victory of 1997, and successive general election wins, to have the courage to put into legislation the measure that truly would have ended boom and bust. After the general election of 1997, and with a majority of 159 seats in the House of Commons, the way was cleared by the exclusion of the landed gentry from the House of Lords, who had twice previously blocked measures to reform the tax system.
Twice previously in the twentieth century attempts had been made to reform the tax system as regards land and twice they had been defeated by people in positions of power who would have been adversely affected by the proposed changes. Predating the two attempts was the influential book on economics by Alfred Marshall, professor of economics at Cambridge University, titled Principles of Economics published in 1898. It defined the public’s revenue base in terms of the rent of the land and natural resources. He wrote, “For the net income derived from the inherent properties of land is a true surplus, it does not directly enter even in the long run into the normal expenditure of production, which are required as rewards for the work and inventive energy of labourers. It thus differs from the incomes derived from the buildings and machinery which are in the long run needed to sustain the full force of production, invention and accumulation.”
As Marion Shoard describes in her book This Land is Our Land the establishment of the present system of land allocation goes back to 1066 and William the Conqueror. He ensured that all land held by the Crown through a group of landowners enjoyed a privileges status. The creation of a privileged class of landowners holding sway over the countryside set in stone attitudes of subservience towards the landowning class. William the Conqueror not only established the principles of the present system of land ownership but also the deference that exists to the present day. That includes the tax system.
Winston Churchill criticised the privileged position of landowners a thousand years after William the Conqueror. In a speech to the House of Commons on 4th May 1909, he said, “Roads are made, streets are made, services are improved, electric lights turns night into day, water is brought from reservoirs a hundred miles off in the mountains -and all the while the landlord sits still. Everyone one of those improvements is wrought by the labour and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, and he contributes nothing to the process from which his own enrichment is derived.”
Winston Churchill, a Liberal at the time, was speaking in support of Lloyd George’s 1909 Budget, which became known as the ‘people’s budget’. In his budget Lloyd George proposed not only an increase in death duties but also two new land based taxes which he believed would be amenable to the Lords. The House of Lords passed an amendment wrecking the plans. The issue of land taxation became lost in the constitutional battle between the House of Commons and the House of Lords. The 1911 general election asserted the supremacy of the House of Commons. This was enshrined in the Parliament Act of 1911. Unfortunately because of the civil unrest in the north of Ireland due to the government’s proposals for a united Ireland an increased number of Unionists were returned to Parliament, thwarting the plans for land taxation. The government needed the support of the Unionists MPs in order to survive and instead of introducing legislation immediately established a Land Inquiry Committee.
The Committee’s report was published in 1913. It supported Lloyd George’s proposals for land taxation. The government set about implementing the recommendations. A Ministry of Lands was established and nearly 5,000 were set to work valuing Britain’s land so that it could be taxed. A far more serious issue over land intervened – the First World War.
After the war, the pre-war support for land taxation had dissipated. As Marion Shoard writes, “Shifting party alignments had left the movement’s most influential advocates in Parliament on opposite sides of the House. Lloyd George, though now Prime Minister was now heading a Coalition government in which Conservatives outnumbered all the other groups combined. In this position he was no longer able to promote land tax legislation. In 1920, eleven years after he had first broached land tax legislation and valuation, Lloyd George found himself presiding over the Government that was to abolish both (measures). There was an ironic final twist of fate to the campaign for land taxation. Lloyd George’s principal adversary, Austen Chamberlain, in 1909 was now the Chancellor of the Exchequer. He used parliamentary procedures to see that the measure was one more casualty of the war.
The Conservatives, through Austen Chamberlain, had won their own war against the land tax reformers. His comments afterwards show how the campaign was seen. “It is certain that if we do nothing the Radical Party will sooner or later establish their national tax, and once established in that form any Radical Chancellor in need of money…will find it an easy task to give it a turn of the screw.”
How galling it must have been for Lloyd George to endure his own Chancellor, although of a different party, speak of a measure he himself advocated so strongly in a speech he made in Newcastle whilst he was Chancellor of the Exchequer in 1909. He said, “Who ordained that a few should have the land of Britain as a perquisite, who made 10,000 people owners of the soil and the rest of us trespassers in the land of our birth? Who is it – who is responsible for the scheme of things whereby one man is engaged through life in grinding labour, to win a bare and precarious subsidence for himself… while another man who does not toil receives every hour of the day, every hour of the night, while he slumbers, more than his poor neighbour receives in a whole year of toil?
The use of the word ‘Radical’, twice, by Austen Chamberlain in his rebuttal of the campaigners in favour of a land tax was not done perchance, it was deliberate. Land reform wasn’t the campaign of a few famous members of the Liberal Party; a land tax was part of their constitution. The Liberal Party’s foremost proponent of a land tax was Joseph Chamberlain. He was an admirer of the ideas of Gerrard Winstanley. He was the leader of the seventeenth century land reform group called The Diggers. The Diggers sought to establish a state in which the poorest would be as free as the richest. They based this idea of democracy on a system of inalienable natural rights, one of which was a right to property and to the fruits of the earth. Winstanley believes; “The poorest man hath as true a title and just right to the land as the richest man…True freedom lies where a man receives his nourishment and preservation, and that is in the use of the earth.”
In the 1880s Henry George revived Winstanley’s ideas and land reform societies were formed all over Britain. Henry George was an American journalist and author of Progress and Poverty which was published in 1879. The book sold hundreds of thousands of copies. It was reprinted ten times in four years. George believed that the “root cause of poverty of continuing poverty in the wake of technological progress was the ability of the owners of the land – upon which all industrial production ultimately depends – to levy a toll in the form of rent upon the earnings of labour”, writes Marion Shoard. George believed that the change in the system of taxation he was proposing would benefit Britain by stopping the one-way flow of resources to a group that contributed nothing to the process of industrial production.
It was Henry George’s belief that the power of the landowner to dictate the economic development of everyone that Joseph Chamberlain found most persuasive. In his book The Radical Programme published in 1885 Chamberlain blamed the squalid and overcrowded conditions of the poor both in large towns and villages on the refusal of landlords to let any land for reasonable rents for houses. As Shoard writes, “As ideas for land reform surfaced and as the Liberal government of the 1880s passed legislation to enable Irish tenants to buy their own land, the great Whig landowners who had helped to establish the party in the middle of the nineteenth century began to break away and join the Conservatives. This step left the Liberal Party more open to influence from the radicals, among whom were to be numbered many enthusiastic land reformers.”
History was to repeat itself after the abandonment of land reform by the Coalition government after the First World War. Several Liberal MPs who had supported land reform joined the Labour Party. After the Labour Party won the 1929 general election one further attempt was made to put on the statute book the reform of the tax system. The person leading the campaign was Philip Snowden. He was convinced that a reconstruction of public finances was needed after hearing a speech by Henry George. He got his opportunity when he was appointed Chancellor of the Exchequer in 1930. His proposals, because they did not fit into the nationalisation schemes that Labour had advocated in opposition, caused the Independent Labour Party to sever its links with the Labour Party.
Landowners were well aware of the implications of Snowden’s proposals. As Fred Harrison states, “Five hundred years earlier, King Henry VIII dissolved the monasteries and began the great land sell-off. Snowden’s agenda, if it was successfully implemented, represented the beginnings of a non-catastrophic restitution of the people’s private and communal rights. The goal was to allow people to retain the income they earned by their labour. The policy would have simultaneously removed the temptation to speculate in land, by removing the windfall gains: people would pay for the benefits that they received from their possession of land. The land market, once stabilised, would lay the foundations of sustainable employment and production, a by-product of which would have been a sufficient supply of affordable homes.”
Once again defeat was grabbed from the jaws of victory. It was less than two months after the passage of the Finance Bill that a financial crisis brought down the Labour government. It was replaced by a National government, mostly Conservative. In circumstances eerily reminiscent of what happened to Lloyd George some of the ministers who had sponsored the land taxation legislation now performed the last rites. There was to be one final irony and twist of fate; Snowden was replaced at the Treasury by Neville Chamberlain, half-brother of Austen. Their uncle, Joseph Chamberlain, must have been spinning in his grave.
In bringing the matter up to date Kevin Cahill, author of Who Owns Britain in an article in the New Statesman in March 2011 wrote what was needed is a debate, informed by the facts. His article appeared before the proposals in the Localism Bill ignited the fuse about England’s green and pleasant land and the danger of it being submerged under concrete from developers. In 2009 Kevin Cahill in an article in the booklet An Alternative Vision for the Land Registry based on the work of academic Professor Roger Seifert of Wolverhampton Business School and Mike Ironside, former senior lecturer at Keele University laid out the facts. He wrote, “Certain lobbies in the United Kingdom have been able to make absurd and alarmist claims about the availability of land, especially land for housing. One lobby went so far as to suggest that at present rates of home and office building, the whole of England would be bricks and mortar by 2035. Even at present levels of construction the whole of England would not be under bricks and mortar under 4000 AD, 2000 years hence. The lack of proper facts, from an authoritative source ensures that house building remains constrained by fantasy, not facts, and ensures that we continue to build the smallest homes and most expensive in Europe.” (A study by the Royal Institute of British Architects in September 2011 based on an audit of a thousand found that UK homes were the smallest in Western Europe and have been shrinking in size for the past twenty years.)
Unfortunately the system that should be providing the facts is failing to do so. Kevin Cahill, in his New Statesman article, writes it is a misconception that the Land Registry is where the ownership of all land in the UK is recorded. They are wrong. “The effort to create a land registry happened at roughly the same time as the publication in 1873 of Return of Owners of Land, the so-called new Domesday Book, and a coincidence that almost certainly led to the failure of the push for a registry. The second Domesday of 1873 exposed the inequity of land ownership in Victorian Britain – that all land in the UK was then owned by just 4.5 per cent of the population.” Most of the land was in the property of a very small network of aristocratic families, most of which had dual links to the House of Commons and the Lords. The second Domesday Book recorded the ownership of almost all land in Britain. It consisted of four volumes, 2,300 pages and contained 321,000 names and addresses. The sources of the second Domesday Book came from an inventory of land ownership from parish records, often centuries old, which no longer exist
It was only in 1925 that the matter of land registry again came to be raised due to the widening of home ownership after the First World War. The 1925 Land Registration Act appears to have passed through Parliament without debate. It reduced all tenures to just two, freehold and leasehold, but vitally importantly restored the Crown’s claim to ownership of the land. The Crown’s feudal claim, which goes back to 1066 and which was enshrined in the 1925 Act, has to be removed. The present position was outlined in a written response to a question by Andrew George MP in February 2009. Bridget Prendice, a parliamentary under-secretary at the Ministry of Justice, stated, “The Crown is the ultimate owner of all land in England and Wales: all other owners hold an estate in land.” (In 2002 Michael Wills, then parliamentary secretary in the Lord Chancellor’s Department with responsibility for the Land Registry, wrote to the Liberal Democrat MP Adrian Saunders setting out the limitations of its remit regarding minor changes to the Land Registration Act. He stated; “The Land Registry do not posses information about the acreage of England and Wales. It creates titles without recording the acreage of each title they register.”
It is hard not to disagree with Julian Assange, the founder of WikiLeaks, when he spoke at a conference in Norway a couple of years ago. He said, “The UK is the worst liberal democracy in the world. It’s never been through a revolution so it’s still a feudal state. Its laws were made for the aristocracy. Now they are made for the new lords, the political elite.” It is also hard not to disagree with the authors of the booklet on an alternative vision of the land registry and that it should start with land reform.
CRISIS FOR CAPITALISM
Will Hutton, economist, author of The State We‘re In, Them and Us: Changing Britain, former chief executive of the Work Foundation, former editor of The Observer, in The Observer in September 2011 commented about the latest crisis talks of the leaders the European Union. He wrote, “Eighty years ago, faced with today’s economic events, nobody would have been in any doubt: we would obviously be living through a crisis in capitalism. Instead, there is a collective unwillingness to call a spade a spade. This is variously a crisis for the European Union, a crisis of the euro, a debt crisis or a crisis of political will. It is al those things, but they are subplots of a much bigger story: the way capitalism has been conceived and practised over the last thirty years has hit the buffers. Capitalism is best conceived and practised, runs the theory, by hunter-gatherer bankers and entrepreneurs owing no allegiance to the state or society.”
That is a view with which Seifert and Ironside agree. In the introduction to an alternative vision for the land registry they write that much of the prevailing ethos of the world after the Cold War was predicated on a rose-tinted view about the forward march of finance capital through global free markets. “Governments throughout the world, including the Labour government in the UK, supported strong banking systems with light regulation, a strong currency and a high borrowing culture. This was linked to a strong ideological commitment to free-market models of economic activity (neo-liberalism) that, it was argued, had served the finance sector well and so should be rolled out to the rest the economy including public services.”
When the booklet was published by the PCS union in the spring of 2009 the authors write, “The Thatcher- Reagan dogma has been smashed upon the rock of economic reality. A deep crisis of the system has thrown the entire decision-making leadership of our political and economic world into both intellectual and practical disarray. Obviously with the dramatic slowdown in the housing and property markets comes a reduction in work flows for the Land Registry. Despite this, senior Land Registry managers are sticking with their already out-of-date blueprint, and are using the market downturn to push through their version of a business model.”
In a booklet about an alternative vision for the Land registry the authors write alternative uses for land can be considered, and so can the alternatives to the precepts that underpin current management thinking on the future of the Land Registry. That future is not just about jobs but the case for compulsory registration of all land assets and for a wider and deeper role for the organisation in the use of land and in the control of land use.
The crisis in the housing market, they write, “is due in both to the failures of the financial markets and to the land-business cycle (as described by Fred Harrison), should jolt government ministers out of their admiration of all things private and methods managerial.”
The authors were concerned to show that ownership of land is not just a market issue for individuals, but a major part of the political process in so far that governments have obligations with regard to what is in the best interests, both economically and socially, for the public. “If democracy is to be associated with justice and freedom then governments should act within a broadly defined public interest regime based on the ideals of the pursuit of a common good. Land itself and its use are a major part of that definition of common ownership and control for social justice and economic equality. Trying to impose a view of the national interest in terms of the interests of a handful of large landowners is both disingenuous and harmful. To defend their liberty as private owners against the social requirements of the majority is neither democratic nor right.”
Seifert and Ironside conclude the collapse of the housing and mortgage markets suggest an urgent need to develop policies that both control market-decision makers and create a more planned system. “Now is the moment to bring in full compulsory registration for all (land), allowing the Land Registry to map out all land ownership and use, and therefore to supply policy makers with both necessary information to plan for a better housing market and to make the political point that wealth inequality in the form of land is unacceptable in its current imbalance.”
How much of an imbalance was recently demonstrated by Savills, the estate agent, in a study they conducted and quoted by Kevin Cahill in his article for the New Statesman. “The national debt is roughly £1 trillion. The total value of the privately owned national housing stock is about 1:4. In other words, for every £1 of mortgage debt, there is £3 of free asset value.” Marx believes that capitalism would always be confined to a minority and that the majority would be a rent-paying proletariat. In doing so he failed to understand the British obsession with property and the transformation of the rent-paying minority into a home-ownership majority. The transformation is fundamental to capitalism and democracy.
CAPITALISM AND DEMCRACY
As the late Paul Foot mentions in his book The Vote, published after his death in 2005, people should be wary of the relationship between capitalism and democracy. He quotes the historian Professor Tawney who just before the Second World War in 1938 argued that there was an essential contradiction between capitalism and democracy and that “unless Labour governments challenged capitalism, and took control of it, capitalism would counter-attack and the chief casualty would be democracy. While modern Labour politicians still pretend to revere the professor, they don’t seem to notice that his most persuasive and appalling prophecy has come true in the most alarming fashion.”
Paul Foot makes his own views about capitalism and democracy clear in the introduction to his book. He writes, “Capitalism and democracy are hostile to each other, and the continued and continuing failure of British Labour to challenge capitalism has undermined the democracy for which it pretends to stand. Indeed, the net result of a hundred years of comprising with capitalism has ended with New Labour, an allegedly social democratic organisation which has surrendered both socialism and democracy.”
Paul Foot’s book is about the struggle for democracy and how it is being undermined by undemocratic bodies such as political appointees. In the conclusion to his book Paul Foot he states that the primary purpose of the book was to remind people that the notion that society should be run by a representative democracy originally horrified the propertied minority because democracy threatened their property. “Their opposition was outright and violent through the whole of the seventeenth and eighteenth centuries. It grew to fever pitch when it was threatened with a revolution under the Chartists, a movement that explicitly merged the demand for the vote with an equally insistent demand for a share of the property.”
In time the wealthy minority conceded the vote rather reluctantly to the urban skilled workers in 1867 and agricultural labourers and miners in 1884. Further extensions were made to the poor and women in 1918. Foot comments that all capitalist states that have conceded universal suffrage there has been a history of the conflict between capitalism and democracy. The second half of his book traces the history of the Labour government in the twentieth century and how they proceeded to transform capitalism and then retreated from their stated aim. Finally how in the twentieth first century they surrendered and abandoned their original goals.
Whilst the battle for parliamentary democracy has been achieved, apart from a fairer voting system, there remains the battle for a fairer form of taxation. A fairer taxation system would include a fairer distribution of the wealth derived from land. There has existed for a number of years a campaign for a fairer tax system and a more just society organised by members of the Labour Party but like the Defend Council Housing campaign (chairman of the House of Commons Defend Council Housing campaign is Labour MP Austin Mitchell) they have been largely ignored by their own party. What they propose is an annual tax on all land based on its value, which would replace other taxes, or allow them to be reduced.
A land tax would help provide a solution to the housing crisis. As their manifesto states a huge increase in house prices in recent years is almost entirely due to the escalating price of land in the places where people want to live and work. With a land tax in place potential buyers would take into account the land tax they would have to pay in the future, the price of land would tend to fall. This would make homes more affordable and reduce the costs of acquiring land for the building of new homes. In addition, a land tax would encourage the building of homes on brown field sites and discourage the hoarding of land by speculators because all land would be subject to the tax.
In October 2010 the Joseph Rowntree Foundation sponsored a supplement on housing in the New Statesman magazine. The cover title of the supplement was considering the economic situation hardly surprising – boom and bust. Among the articles was one on how thoughtful taxation can be one way to reduce market volatility, including a number the couple of ways of implementing a land tax. The main article was by Mark Stephens, professor of urban economics at Glasgow University. He asked the question ‘Is ownership over?’ as a result of the credit crunch or are there other reasons. He writes, “The twentieth century was the century of home ownership. By the end of the century, home ownership was on the way past the 70 per cent mark. But even before the credit crunch the British model of owner-occupation was breaking down. The reason is simple: house prices became unaffordable, choking off access for potential first-time buyers. In the mid-1980s a typical first-time buyer’s mortgage was twice their income. This rose and levelled at about 2.5 throughout the1990s, before leaping to 3.3 in the early 2000s. Whilst the upward movement in prices in relation to incomes was initially explicable by the fall in interest rates that occurred in the 1990s, by 2007 only 55 per cent of 30 to 34 year old couple could afford to buy a purpose-built flat. Even now, the average first-time buyer loan is still more than three times income.”
So it is no wonder Professor Stephens writes that home ownership among the young is falling and falling quite drastically. Between 1991 and 2006 home ownership among 16 to 24 year olds in England halved from 36 per cent to 18 per cent. Among those aged between the ages of 25-34 it fell from 67 per cent to 56 per cent over the same period. (After the report by the National Housing Federation was published in August 2011Rosamund Urwin, a young reporter working for the London Evening Standard in an article called Life‘s too short for the young to own a home wrote about her experiences as a member of Generation Rent – no mortgage, no hope but a abundance of cardboard boxes really for the next time she is turfed out. The idea, she writes, of holding the keys to a place you own is a fantasy for many of us twenty some-things.) While ownership has continued to rise among the older age groups, this has not been sufficient to prevent the overall level of ownership falling in the past few years.
For Professor Stephens the decline in home ownership extends beyond its novelty. He asks himself why there are reasons to suppose that the decline represents more than a temporary blip. “Because falls in house prices have so far been insufficient to restore affordability and large increase in housing supply – especially in the South of England – are required to offset long-term upward pressures arising from house hold and income growth. This has given rise to the phenomenon of the ‘excluded middle’. Members of this group are excluded from home ownership, yet unlikely to qualify for social rented housing or assistance from housing benefit. They have found their voice in campaigns, such as Priced Out and in Shiv Malik and Ed Howker’s book Jilted Generation.”
One other reason why homeownership has fallen is because of the amount that mortgage lenders are asking for a deposit. The average deposit required to buy a house has increased tenfold since 1990. The amount of money required for a deposit is spiralling because mortgage companies have cut back on the amount they are willing to lend. First Direct, which conducted the study, said: “We are seeing first-time buyers getting older and more and more people struggling to get on the housing ladder.” The average deposit required to buy a house in 1990 was £6,793. This has risen to £65,924.
This is an amount quite beyond the means of most first-time buyers. As a result more than 13 million parents paid out £34 billion in loans and one-off payments to their children. Research conducted by Sainsbury Life Insurance found that many children are still financially dependant on their parents well into their forties. The head of Sainsbury Life Insurance said, “Rising university and living costs, a tough job market and a difficult climate for first-time buyers mean children are staying, to some extent, financially dependant on their parents often well into adulthood.”
ALTERNATIVES TO HOMEOWNERSHIP
One consequence of the downturn in home ownership rates is the upturn in looking beyond home ownership. Fundamental questions, writes Ronald, are emerging regarding sustainability that suggests the need for a substantial restructuring in not only housing but also social policy. “A central feature of post-home ownership housing regimes has been ‘exhaustion’. This refers to both the exhaustion of homeowners in terms of affordability and the exhaustion of the housing market in terms of sustaining stable value increases. While on the one hand affordability is a central problem on the other the long-term maintenance of price increases is necessary to the maintenance of the system.” The downside, of which homeowners have become only too well aware, is that demand will drop. This may feed a vortex of falling house prices and leave owners in negative equity.
Such is the hold of home ownership that Ronald’s purpose is to speak softly but to point out the perils of tenure imbalance and the neo-liberal logic that more home ownership is intrinsically good. “Owner occupied housing is a long-term investment involving considerable risk and a sustained and expensive period of indebtedness. It makes households and economies highly vulnerable to fluctuations.” The Joseph Rowntree Housing Market Taskforce conducted a study into the problem. The members of the taskforce include Professor Mark Stephens of the University of Glasgow, who wrote the report, Kate Barker and Peter Williams, director of the Cambridge Centre for Housing and Planning Research at Cambridge University.
The report, Tackling housing market volatility in the UK, begins by explaining why policy-makers have failed to learn the lessons from the four booms and busts cycles that have occurred since the 1970s and how the current model of homeownership has become stretched beyond its limits and their effects on the housing market. “These cycles distort housing choices, increase risks and drive (up) mortgage arrears and possession rates, as well as affecting house building and intergenerational equity. Although home-owners are most exposed to problems arising from price volatility, private renting households are not immune. At the end of 2008, two million households with mortgages would have found it difficult to move due to limited or negative equity in their homes. Moreover, large differences in house prices and different expectations of house price inflation between regions create a ‘mobility trap’, making it difficult for some people to move from one region to another and deterring others from doing so altogether. One of the attractions of homeownership is the ability to accumulate wealth; however, this wealth is shared unequally. As parental assistance has become increasingly necessary for younger households to purchase their first home, there is a strong likelihood that wealth inequality will be transferred down the generations. There are also knock-on effects. For example, in their later years, when most home-owners have repaid their mortgages, they experience low housing costs. In this way, home-ownership mitigates pensioner-poverty. Households excluded from ownership now may not be able to catch up with their peers. (by buying their homes in later life) and this could create an increasing burden for the state when members of these households reach retirement age.”
In its conclusions about how to tackle volatility in the long term the report states unsustainable house prices booms are more likely to develop if there is an underlying shortage of housing. Although it is stating the obvious it needs to be said that the imbalance between supply and demand is the fundamental long-term determinant of house prices. “Modelling confirms that a far higher addition to supply is required even to maintain current levels of housing affordability. If the average annual rate of 150,000 net additions to the number of homes in England continued until 2026, it has been predicted that the proportion of 30-34 year old couples who can afford to buy a purpose-build flat will fall from over half to around 28 per cent in the next 15 years. The vast majority of new supply comes from private house building but the capacity of the house building industry has been restricted by limited credit availability and debts individual firms accumulated during the boom, while demand has been restricted by the tightening mortgage market.”
The proposals announced by the coalition as regards social housing will have little impact on reducing the number of people on council waiting lists which has almost doubled from one million in 1997. Additional social and other affordable housing, it concludes, within current subsidy is likely to play only a limited role in creating new housing supply. Interestingly, more than 40 per cent of the additional 150,000 affordable units announced in the spending review to be delivered over the next four years were already in the pipeline (my italics), funded through the National Affordable Housing Programme. “The balance will be achieved only with higher rents and a much higher level of private finance per unit than has been raised in the past. The near-market rents in this housing, and the introduction of tenancies as short as two years, suggest that this new programme structure will not tackle the needs of vulnerable people as well as would traditional social housing.”
The report looked also at how housing market volatility could be tackled in the short term other than a more adequate housing supply. It believed it was questionable whether including housing costs within the official measure of inflation would have reduced the scale of the recent boom. Various other measures were considered. They included the remodelling of Stamp Duty so that only the amount above the threshold should be taxed. Equally there is a strong case for the reform of Council Tax. Such a change would be controversial and far-reaching and that any new system would require a mechanism to protect low-income households.
In the final section in its conclusions, the report considered the alternatives to ownership. Yet despite all that has happened over recent years, the report states, home ownership remains the preferred form of tenure for the clear majority of the population. The attractions of security, investment potential and a sense of pride outweigh the fear of insecurity or the concerns about the responsibility of repairs and maintenance. (A few evenings watching episodes of the television programme Rouge Traders might add some weight to the arguments against home ownership) Also considering the title of the report is about tackling housing market volatility rather ironically it includes “stability” among the attractions.
The other alternative to buying is private renting but high rents and limited security contribute to high levels of aspiration to ownership among many private tenants and for social housing among others with children. So long as private renting is unable to provide greater security, it remains an unsuitable long-term form of tenure for more vulnerable households. Ultimately, the report ends, rented housing is likely to provide the most suitable option for households that seek long-term security but cannot access full or shared ownership safety. The need for prompt action the report believed was necessary when it was published in May 2011 has yet to materialise. “Over the coming year, there is likely to be an increased focus on the depressed nature of the housing market, while unemployment may further expose the weaknesses in the current home-owner safety net. It would be a profound mistake to leave the underlying volatility of the housing market unaddressed.”
As yet nothing has happened to change that conclusion. The report by the National Housing Federation in August on homeownership merely emphasised the continued parlous state of the economy. Without any foreseeable improvement the short-term alternative of renting is the less volatile option. It is also worth considering making the case for renting in the long-term. Not only are people re-considering their options both in the short and long term governments, Ronald writes, it is necessary to readdress the role of renting housing. “The current strategy of finding different ways to get households into hybrid forms of owner-occupied tenure only perpetuates the home ownership mythology. Such approaches simply support greater flows of capital into the sector which feeds housing un-affordability and the precariousness of marginal owner-occupiers. A more effective strategy may be to rehabilitate and reverse the discursive prejudices that have built up against it. This requires a seismic ideological shift and a symbolic reconstitution of rental housing.” To prove his point Ronald gives the examples of Switzerland and Germany where urban rental housing is highly desirable and there is no discursive contradiction between being successful or living an independent family and rented accommodation. “If housing policies can redeem rental ‘homes’ in homeowner societies, it will provide a real housing ‘choice’ and mitigate the imbalances generated by over-dependency and over-investment in owner-occupied housing. There is thus a fundamental need for research that will identify the kind of practices that will normalise renting in the same way that government policies helped establish owner-occupation as the default tenure. Greater understanding of housing discourses and tenure ideologies in societies with attractive rental sectors is, therefore, as important as understanding home ownership ideology in homeowner-societies.”
THROUGH EASTERN EYES
Whilst encouraging as they are the examples of Germany and Switzerland and the way with which the rented housing sector is seen as ‘normal’ and rent not considered akin to pouring ‘money down the drain’ what is need is a change to an integrated housing system where housing is distributed on a more universally equitable basis. The role of housing is more integrated in what was considered the Tiger economies of Singapore and Hong Kong. Both Hong Kong and Singapore were ruled by Britain and not surprising their housing systems have been influenced by British policies in the past. Singapore was granted its independence nearly 50 years ago and developed “an intense and highly controlled system of ‘public-home ownership’. Hong Kong, alternatively, was influenced longer by British housing policy discourses. It demonstrates a more managed approach to housing policy development and has a large public rental sector. Nevertheless, there was substantial commitment to expanding owner-occupation in the 1980 and 90s, and home ownership remains central to the development of the system.”
Following the housing crash that Hong Kong experienced as a consequence of Japan’s ‘lost decade’ the home ownership policy was put on hold. What is significant is that Hong Kong maintained the level of public rental housing at around 30 per cent. Ronald writes that “The state has been particularly effective in taking policy measures that control the flow of housing and the relative balance between public renters and homeowners. (my italics) What has characterised the housing system in Hong Kong therefore has been the management of both the expansion of home ownership and the maintenance of a strong public rental housing sector.” That is what its former colonial power has spectacularly failed to achieve over the past thirty years and a result has caused the biggest housing crisis since the First World War a century ago.
The significant event in the history of housing in Hong Kong was the establishment in 1973 of the Hong Kong Housing Authority. It has been pivotal not only in housing development but also to social and economic strategies. Although the HKHA’S principal objective since the 1980s has been the promotion of home ownership it has, as has been stated, not involved the pubic housing turning into a residual rump. In fact, what sets the Hong Kong housing system apart from not only other countries in the region, and Western homeowner societies, is the acceptance that it is essential to economic and social planning.
Unlike Britain, Hong Kong has been busy building public housing in volume in the 2000s. As Ronald writes, “The existence of one of the largest public housing services in the world has not been considered contradictory to capitalist interests. Critically, public rental housing sits alongside the home ownership system. They are not seem as ideological antithetical as they have been in Anglo-Saxon societies. This is because public housing has been considered necessary for developing human capital and has functioned as a form of social wages that fosters economic development more broadly. At the same time public housing has been a means to manage the private sector growth and has been adjusted to support stability in private markets. Essentially, public rental housing has been perceived as having a social function that supplements economic objectives and does not promote forms of collective resistant to market consumption.”
Singapore, as in Hong Kong, the public provision of housing was considered a necessity for both social welfare and economic development. Again as in Hong Kong the establishment of an organisation, the Housing Development Board, facilitated the means to provide public housing. Realising that the income from rents would be insufficient to cover costs the HDB provides mortgages and insurance policies for purchases of public owned flats in order to fund the building of new homes. The availability of mortgages was at one time a service provided by local authorities and it is a matter of speculation if the problems faced by potential buyers would have been as bad had they still provided mortgages.
On a practical level the benefits of having an integrated housing authority serving the city-states of Hong Kong and Singapore have shown to be beyond doubt. Their establishment in no small measure owes something, like their housing system, to the capital city of its former ruler so it therefore ironic but not surprising that a similar housing body covering all of London, along with the strategic body serving the capital was abolished by Margaret Thatcher in 1986. Ken Livingstone, leader of the Greater London Council, besides being a physical afford to her and her government in Westminster on the other side of the river Thames in Country Hall, was an ideological obstacle to her and her plans for the public sector.
John Hoskyns, the future head of Margaret Thatcher’s Policy Unit in Downing Street, in one of the briefing papers he wrote in the months before the 1979 general election, commented that the trade unions were the one major obstacle that would have to be destroyed, as they were seen after the ‘winter of discontent’ as the chief causes of inflation, and that a national recovery would require a sea change in Britain’s political economy. When she was elected in 1979 she set about halting the tide, as David Marquand writes, had “eroded the prudent market ethos of the past.”
David Harvey, Professor of Anthrop0oly at the City University of New York, begins his book A Brief History of Neo-Liberalism thus, “Future historians may well look back upon the years 1978-80 as a revolutionary turning-point in the world’s social and economic history. In 1980 Ronald Reagan was elected President of the United States and, armed with geniality and personal charisma, set the US on course to revitalise its economy by adding his own particular brand of policies to curb the power of labour and liberate the power of finance both internally and on the world stage. Across the Atlantic, Margaret Thatcher had already been elected Prime Minister of Britain in May 1979, with a mandate to curb trade union power and put an end to the miserable inflationary stagnation that had enveloped the country for the preceding decade.” The Chinese premier Deng Xaioping, envious of the success of near neighbours Japan, Hong Kong and Singapore, adopted state capitalism.
Margaret Thatcher made up for her lack of geniality and personal charisma by playing up to her image as the ‘Iron Lady’. She aimed to replace the ‘dependency culture’ with an ‘enterprise culture’, modelled on Victorian Britain and America. The result was a battle between those fighting for the public domain and those who wished to see it destroyed. As Marquand writes, Thatcher wanted “to extirpate the legacy of the long cultural revolution which had made the growth of the public domain possible in the first place. They sought to change behaviour by changing beliefs, and to change beliefs by changing behaviour. To succeed, they had to demolish the ideological and institutional barriers that protected the public domain. They had to root out anti-market (and even non-market) values and assumptions, and make sure they did not reappear. They had also to re-engineer public discourse: to silence or at least marginalise the language in which values and assumptions were expressed, and by which they were fortified. They had to capture or neutralise the institutions that embodied or transmitted them, and discredit the practices that stemmed from them. Above all, they had to entrench their changes in the political culture. Their crusade did not follow a predetermined path, derived from a carefully considered strategy. Contingency and improvisation loomed as large as they usually do in political life.”
Marquand remarks that revolutions usually blow themselves out sooner or later. The neo-liberal revolution ended not with a blow out but with a bailout. Larry Elliott, economics editor of The Guardian and Dan Atkinson of the Mail on Sunday, in their book The Gods that Failed put the events that lead to 2007-8 into historical context. “The story of the past three centuries is the story of how little life has changed. Financial markets are endlessly innovative, always coming up with new money-making ideas. The public is entirely credulous, suspicious only in the immediate aftermath of a crash but soon convinced by those selling tulips, shares in railroads, dotcom stock or real estate that ‘it is different this time'”. Elliot and Atkinson have no faith that it will be different this time to prevent a next time as the politicians lacked the nerve to take the opportunity to prevent it happening again when the bankers asked to be bailed out. They end by writing that this crisis is reminiscent of the crisis that lead to the victories of Thatcher and Reagan. In Britain that meant the ‘winter of discontent’ when trade unions “after weeks of often bitter strike action, smashed through the government’s pay limit. In place of the mounds of uncollected rubbish on the streets there were mounds of suddenly worthless securities that nobody wanted to buy. For the trade unions who believed their size and membership made them too big to ignore, there were the banks that were, apparently, too big to fail.”
THE FAILURE OF POLITICAL WILL
It is not only the banks that failed, it was the idolatry and ideology of the false god of neo-liberalism. The god of neo-liberalism won many converts since the message was handed down by its apostles from Mont Pelerin in 1947. Pivotal among those who gathered at the Swiss spa town was Friedrich von Hayek. His rallying cry was that freedom was in danger and that the market would be ensnarled by special interest groups. In 1948 a young anarchist Giancarlo de Carlo wrote an article that was translated and published in England by Freedom, a defunct magazine, about the housing situation in Italy. (mentioned in Housing: An Anarchist Approach, edited by John Ward) Both had a very different view of freedom and although one may be more inclined to agree more than the other with Engels that the housing problem is a permanent aspect of capitalist society its solution is no nearer today than it ever was in the past hundred years.
The nearest Britain has come to a solution the housing problem in principle was in the post-war period. Housing, As Peter Malpass writes in Housing and the Welfare State, housing has been at the forefront of retrenchment, restructuring and modernisation for more than twenty-five years and now merits hardly a mention in announcement on the reform of public services whilst the National Health Service still retains its iconic status as the jewel of the crown of the welfare state. “This stands in marked contrast to the way it was perceived in the years after the Second World War. In those days both Labour and Conservative parties were committed to building very large numbers of new houses, to be let at subsidised rents to families in need. The relative importance of housing in the 1950s can be judged by the fact that the Minister of Housing, Harold Macmillan, was a senior cabinet figure who went on to become prime minister in little over two years, while for most of the decade the Minister of Health was not even in the cabinet, an inconceivable arrangement in the present period.”
Cole and Furbey state there were several reasons behind the absence of bold new strategies for public housing. “Most obviously, the war had left a visible legacy on the condition of the housing stock. Adolf Hitler proved a more effective influence than William Beveridge in shaping the housing requirements of post-war Britain. Subsequent policies were dominated by a single object: meeting the housing shortage. Council housing programmes developed as a peacetime equivalent of the type of government intervention, control and economic direction which had characterised the war effort. The drive to meet production targets completely overshadowed any attempt to reconsider the state’s responsibilities for meeting a basic social need or achieving a more equitable housing system.”
Fred Berry in 1974 wrote a book called Housing: A Great British Failure. He had spent practically the whole of his life working in the public sector. His book is not only a critique of his time working in local government since the Second World War; it is also an account of subsidised housing since at the end of the First World War. He writes, “It is difficult to distinguish any philosophy whatever behind the great mass of legislation since 1919. At different time state effort has been concentrated on housing for general needs, working class housing, slum clearance, overcrowding, multi-occupation, accommodation for the elderly and improvement of existing property. Added to this, housing policy has always been considered as an expendable, a suitable case for Treasury treatment as soon as the economy got into difficulty, or to be jettisoned because of changes in the political climate. Housing programmes have been axed many times as part of the regulation of the economy, though in fact housing makes a very bad regulator. In broad terms it takes two years for the brakes to be put on and another two for them to be taken off again, long after the precipitating crisis has been forgotten. Not only housing, but the construction industry generally, not to mention the building supply industry, has been clobbered unceasingly in this way since the last war and even to some extent between the wars. As a result housing policies have been makeshift, hasty and ill-conceived. The great lack, indeed one can claim the great failure, of British housing is the failure to work out a clear, logical approach and then to pursue it with single-minded vigour.” (This may explain why Lowe and Hughes (editors), A New Century of State Housing, argue that state housing has not so failed as been denied the chance to succeed in the first place due to “lost opportunities, wrong turnings, and above all of a continuous battle to establish the legitimacy of social renting as part of the solution to the nation’s housing needs.”)
Berry ends by saying it is hard to avoid the conclusion that in this apparently elementary matter of providing ourselves with adequate shelter what has been regarded with complacency and even with pride as a British success story, is proving to be, with greater certainly every passing year, a great British failure. But for Fred Berry the greatest failure of all has been the failure of political will “to build the homes, deal with the slums, provide for the homeless, to protect the weak and the vulnerable, to achieve in short the commonly accepted goal of housing policy which is to provide a separate decent home for every household in need of one. In spite of the achievements of individual local authorities, some of which have been very considerable, we are driven once again to the conclusion that housing in the twentieth century has turned out to be a great British failure.” (George Tremlett in his book Living Cities published in 1979 agrees that the housing policies of the past sixty years have been a failure. He writes, “no matter where one goes in Britain, one finds the same depressing evidence that our country’s housing policy these past sixty years has been a total failure.” The fact that the author was the chairman of the Greater London Council’s housing committee controlled by the Conservatives undoubtedly coloured the views he held on housing policy)
TWEEDLEDEE AND TWEEDLEDUM
What is clear from announcements by David Cameron and Ed Miliband at their party conferences in 2011 is that neither of them have the political will, mentioned by Fred Berry, to solve the housing problem. In fact both of them of want to turn the clock back; in Ed Milibank’s case back to the nineteenth century and Octavia Hill. If his object was to gain some headlines, he succeeded. Before he had even finished his speech the London Evening Standard had his comments on its front page. ‘JOBLESS GO TO BACK OF HOUSING QUEUE’ was the headline. (Ed Miliband’s comments echoed those of his Communities Secretary at the time Caroline Flint, since moved. In the summer she told Progress magazine that some people were “working the system” to get priority on housing lists over people who worked.) The proposal received the backing of all three main parties the report stated. The response from those involved in housing was not so favourable. Duncan Bowie in a letter in the Evening Standard the following day wrote that “The populist approach of both Conservative and Labour proposals to change how housing is allocated to prioritise those in employment or activity seeking work is mistaken for a number of reasons.” What is needed, he added, is a strategy that helps people into jobs. Secondly, it is not cost effective to keep unemployed people out of social housing. Thirdly, Mr Miliband’s approach reinforces a perception that the needs-based system is unfair and the wrong people get help. He ends, “The amount of social housing has continued to fall as the population has grown. The government has withdrawn all funding for new social rented housing at controlled rents. This is what we need more of, not unaffordable shared ownership or rented properties at only marginally below market rents.”
An editorial in Inside Housing stated that Mr Miliband’s idea of rewarding those who show responsibility falls down in practice when you ask what happens to the person for whom the provision of social housing forms a key part of the welfare safety net. It asks “Is the person who has not enjoyed the opportunities of which Mr Miliband also speaks meant to be further penalised? David Cameron on the first day of the Conservative Party conference in Manchester announced that Margaret Thatcher’s scheme of the 1980s was to be reintroduced with the proceeds used to build new social housing. Nothing was said about the billions from the proceeds from the millions of council homes under the right-to-buy legislation that already had been sold. He promised that for every home sold another one would be built. It would seem wiser to wait until every one of the two million homes that had already been sold had been replaced and waiting lists significantly reduced before any more homes are sold? David Cameron’s pledge to “fire up the economy” came the day after the chairman of the Treasury select committee, Andrew Tyrie, published a report criticising the government’s handling of the economy.
Peter Hetherington, former social affairs of The Guardian, was critical of both Cameron and Miliband in an article for the paper following what they had to say about housing at their conference speeches. In resurrecting Margaret Thatcher’s flagship housing policy of selling council homes Hetherington writes that he seems desperate to exploit a seemingly populist cause. In doing so he is going against the warning of a Conservative councillor quoted by Hetherington who described the policy as a waste of public money, undermines local authority strategies and should be consigned to history. Ed Miliband, other than offering what Hetherington called “faint praise for Thatcher’s right-to-buy policy” and a commitment to get tough on the workshy by allocating council housing to those in jobs had little to say. Hetherington suggests that if that is all he has to say he should keep quiet until he has a credible housing policy. (A letter in Inside Housing the week after Miliband’s speech said a lot about Labour’s proposal to reward those who are ‘making a contribution’ and to change housing allocation rules to prioritise those in work. Officers from Horsham Labour Party took exception to Caroline Flint, Labour’s former shadow communities secretary, espousing of such a proposal and submitted. They submitted a resolution to the Labour Party conference calling on delegates to prioritise a strategy to build more affordable homes. As the letter explains, three days before the conference they were advised that their resolution did not meet the criteria used for discussion of policy issues and was not regarded as a contemporary matter, whatever that means. The chairman of Horsham Labour Party was keen to discover what issue the Labour Party does think worthy of debate at its conference if not the very serious issue of housing.)
Housing has suffered more than any other sector since David Cameron’s government came to power. In addition to reducing the housing budget by more than 60 per cent – 80 per cent in London – there has been radical changes proposed to housing tenure and housing benefits. Just how radical he was going to be in housing was seen when housing minister Grant Shapps addressed the Chartered Institute of Housing’s annual conference in June 2010. In his speech he announced his decision to abolish the Tenant Services Authority. In a sound bite to announce his arrival as housing minister he told the conference that the “TSA is toast” (To announce his appointment as opposition housing spokesman some years ago he was photographed sleeping rough near Victoria Station). In a speech to the Royal Institute of Chartered Surveyors he said, “Cash for affordable housing has run out.”
David Cameron in a speech in August 2010 stated that he wanted to see the end of life-time tenancies for new council tenants. In his speech in Birmingham he said, “There is a question mark about whether, in future, we should be asking when you are given a council home, is it for a fixed period? Because maybe in five or ten years you will be doing a different job and be better paid and you won’t need that home, you will be able to go into the private sector.” He warned that the spending cuts will not be restored when the economy recovers. Similar to the promise before the general election that that there would be no major restructuring of the NHS, the Conservative Party stated that it had no policy to change the current or future tenure of tenants in social housing.
Grant Shapps, defending the proposals announced by David Cameron, said, “It is quite clear that the real losers from the current system are the 1.8 million on council waiting lists who the current arrangements do not help. It is time to consider our affordable housing system can be better used and whether one of the benefits would be greater social mobility.”
The proposals announced by David Cameron are part of his government’s approach to housing are evidence that the severity of the cuts suggest that reducing the debt is more important than increasing the number of affordable housing. Brian Berry from the Federation of Master Builders in a letter to The Guardian, 5th July 2010, wrote, “If the government expects the private sector to create the 2.5 million new jobs over the next five years to compensate for public sector cuts and drive the economy, it will need to think more carefully about its policies impact on the job-creating industries. The construction industry, with its extended supply chain and labour-intensive work, is one of the most effective industries for converting investment into jobs. Every pound spend on construction output generates an additional £2.83 in total economic activity.”
The National Housing Federation in a letter leaked to The Observer, 13th June 2010, warned that housing building would “fall off a cliff” this year due to a “catastrophic” combination of financial cutbacks and changes in the planning system. The National Housing Federation calculated that the most vulnerable in society will be hit hardest with the number of affordable homes build this year in England falling by as much as 65 per cent to 20,390. This would have profound consequences for the 1.8 million people on waiting lists. The Federation feared that the total number of homes that would be built in 2010 will fall below 100,000, the lowest for almost a century.
David Orr, chief executive of the National Housing Federation in his letter to Grant Shapps, said, “The Prime Minister and deputy PM have repeatedly said public spending cuts will not disproportionately hit the most vulnerable, but if these measures go ahead the impact on house building will be catastrophic. If the government fails quickly to replace the regional planning mechanism, the building of affordable homes could potentially grind to a halt this year.” The consequences, he added, of not replacing the regional house building targets will allow councils to reject al new social building developments.
Eric Pickles, Local Government and Communities secretary, had warned in August 2009 that if elected they would abolish the targets which the Labour had set for the number of homes that had to be built in each region. He denounced regional targets as “a terrible, expensive, time-consuming way to impose house building.” He abolished them on 6th July 2010. Local authorities had already begun tearing up plans for new housing in May when he wrote to them to confirm that the regional strategies were not long of this world. Research commissioned by the National Housing Federation found that Eric Pickles’s letter in May had a “very significant impact” on reducing local authority house building targets.
A report commissioned by the National Housing Federation found that almost 85,000 homes in the planning pipeline are now not going to be built because of the abolition of the regional housing targets. The majority of the homes that were going to be built would have been in the southwest and east of England. North Somerset council’s plans for 10,740 homes were dropped. The decision to abolish regional strategies was challenged in the High Court by one developer following the cancellation of 2,000 in Winchester.
Just as significant as the ending of the regional housing targets was the scrapping of the independent housing affordability watchdog, the National Housing and Planning Advice Unit. Before its demise the Advice Unit had calculated that England needed to build 240,000 homes a year to meet demand. Peter Williams, former chairman of the Advice Unit, in an interview with Channel Four News in September 2009 said, “The likelihood is that we will see fewer homes built and affordability pressures get worse. The prospects for first-time buyers look extremely difficult and not likely to get any better in the near future. Only better off first-time buyers will get access to the market.”
In a letter to Grant Shapps before the National and Planning advice Unit was disbanded Dr Williams warned that the UK faced an “increasingly severe social and economic consequences and house prices will become less and affordable with dangerous booms and busts.” Dr Williams referred as “high risk” the current government strategy of offering a New Homes Bonus, a six year council tax incentive to councils. The NHPAU suggested a house building target of over 300,000 per year was required. Dr Williams commented that “getting back to the level of house building before the recession is nowhere near enough. We need to deliver half as many again extra homes.”
The Channel Four report included an interview with Jamie Sullivan of the consultancy firm Tetlow King Planning. He said, “The overall reduction in housing targets will now be at least 95,000 since the Pickles letter.” In response Grant Shapps said that the Labour government’s use of centrally set targets had not worked. In a statement to Channel Four, he said; “Central house building targets and regional spatial strategies don’t build homes. Under the previous government the number of new homes being started slumped to the lowest levels since 1924. Top-down targets and bloated bureaucracy haven’t worked. Reviving a house building market on its knees takes much more than pieces of paper from central government telling town halls what and when to spend. That’s why we’ve pledged to give councils substantial extra funding if they build new homes under our New Homes Bonus. This will mean that they get significant financial benefits and new homes their communities really need. We’re managed to safeguard funding for thousands of new and affordable homes, despite tough economic times, which the last government had left unfunded.”
Anne Ashworth, editor of The Times Brick and Mortar weekly property supplement, in her column in 10th October 2010 commenting on the government’s New Homes Bonus proposals wrote that even before the Comprehensive Spending Review rumours surfaced that there may even be opposition to the plans within government. “The Comprehensive Spending Review on 20th October is set to outline the rewards available to local authorities that give the go-ahead to the construction of more private or public sector homes in their area. But it is now rumoured that some in the Treasury are not convinced that the incentives – which will match the six years the council tax paid by the inhabitants of these homes – represent value for money.” The reforms which will abolish the regional targets for new homes and allow local communities to decide on such matters were part of proposals contained in the Localism Bill. “As a result, people of the NIMBY persuasion will have far greater capacity to stop new developments. Local politicians, seeking the NIMBY vote, will side with this faction, regardless of the incentives. Or so claim house builders who say that councillors will be happier to pay more council tax than contemplate even the most contextual schemes.”
Anne Ashworth adds that even if the matter clears that hurdle there are other obstacles in the way. “Even if a developer can wring some cash out of a bank for an affordable housing project and contrive to win the hearts of the local citizenry, his efforts may be in vain. For creditworthy borrowers wishing to buy such homes they have turned into untouchables in the eyes of the banks. Lenders have re-classified such customers as sub-prime. Grant Shapps defended the reforms with considerable vigour. But his eloquence is unlikely to be enough to persuade the banks. Which is the reason behind the whisperers that the Treasury may be wondering why it should even bothering to offer the incentives.” (On the Inside Housing website about the proposals someone posted the comment “Isn’t Grant Shapps a darling, so much success already.)
Also in October 2010 Tetlow King Planning carried out a follow up to their report and found that the number of homes halted by local authorities since the coalition came to power could reach between 280,00 to 300,000 in a year’s time. In a statement they said that “Looking forward to the next twelve months, we should expect at least 280,000 to 300,000 fewer homes at the planning stage.” Grant Shapps’s asserted during the election that if the Conservatives formed the next government that they would turn Britain into a nation of house builders.”
David Orr, chief executive of the National Housing Federation, said; “The government has said that its housing policy should be judged by whether or not it delivers more homes than the last administration. Whilst not wishing to rush to judgement, and even before the government set out its plans for housing for the next four years in the Comprehensive Spending Review, the verdict leaves the government swinging in the breeze.”
Housing in the Comprehensive Spending Review had its allocation of funds for building affordable housing cut by 60 per cent. George Osborne announced that the housing budget would be cut from £8.4 billion to £4.8 billion over the next four years. The front cover of Inside Housing the following week made it clear that the government’s proposals heralded the end of social housing. The obituary-style cover gave the year of its birth and death. One of its reporters wrote after £2.3 billion of existing commitments have been met £1.9 billion will be left over for the period covered by the spending review. Martin Hilditch, assistant editor, writes “Amid the storm of the Comprehensive Spending Review social housing as we know it was washed away. The traditional social home will get no funding in the future and will slowly cease to exist.” Abigail Davies, head of Policy at the Chartered Institute of Housing, said, “This clearly appears to be the end of government funded social housing, if not necessarily the end of the provision of social housing.”
NOT THE END OF SOCIAL HOUSING
Abigail Davies’s comment echoes what Paul Holmes, former Liberal Democrat Member of Parliament for Chesterfield until 2010, said in the debate on the Housing and Regeneration Bill in November 2008 that the dogmatic thrust of Labour’s housing policy was to bring an end to council housing. One of the other speakers in that debate and long time supporter of council housing was Jeremy Corbyn, Labour MP for Islington North. Earlier this year he secured a debate on social housing in London in the House of Commons to highlight what he described in opening the debate as the “biggest single issue that we all face” , as MPs can testify, as it constitutes the vast majority of constituency casework. (The debate was held on the same day as referendum on alternative voting and local elections outside of London. As a result it received very little coverage in the newspaper, even housing journals. Jeremy Corbyn had previously sponsored a debate in Westminster Hall on housing in Greater London 11th November 2008) He said that he got very angry when reading about the demise of council housing or that council housing models are outdated. “Council housing made it possible for millions of people in London and throughout the country to live in decent housing and bring up their children in a safe, secure, affordable environment.”
Jeremy Corbyn highlighted not only the plight of families on council waiting lists but also single people living in London. Single people in London, he said, cannot in many instances even get on a housing list. “Some 30 per cent of people in my constituency are in private rented accommodation. A large number of them are young, single people who pay extraordinary high rents, although they are not particularly well paid. They are probably spending 60 to 70 per cent of their take-home pay on housing. If we do not address the whole problem of the cost and supply of housing, London will become a divided city, and the people who do all the vital jobs in the ambulance service, hospitals, the Post Office and street cleaning will simply not be able to live in London.” He added that if “we want London to remain a successful, cohesive, coherent city; we have to address the issue of the provision of social housing in London.
Another important issue Jeremy Corbyn raised was the government’s proposal to introduce an ‘affordable rent’ for local authorities and housing associations that would be 80 per cent of market rent. Such a proposal will have devastating effects on the affordability of council properties. He attacked the cuts in the housing budget as even greater than those made by Margaret Thatcher’s government in the 1980s.
John McDonnell, Hayes &Harlington, in his contribution to the debate said that the bulk of council housing in his constituency was sold off as a result of the right-to-buy legislation introduced by Margaret Thatcher. It has not been replaced and the money was not reinvested. He was equally critical of the Labour government that came into power in 1997 for failing to provide to take the opportunity to replenish the housing stock.
Andy Slaughter, Hammersmith, focused on what Hammersmith & Fulham council is doing to what he believes is “removing the bulk of social housing tenants from the borough.” He quoted from the borough’s core strategy, the planning document used as guidance for future development, which states “The Council would prefer all additional affordable housing to be intermediate housing unless a small proportion of new social rented housing is necessary in order to enable proposals for the regeneration of council estates or housing association estates.” At the public inquiry the words ‘affordable housing’ was added. For Andy Slaughter it was very revealing as to the council’s agenda. As long as ‘affordable housing was defined as council housing they “wanted none of it, but as soon as it became 80 per cent of market rent, it was happy to include it in the planning documents.”
The function of government, Andy Slaughter said, “is to provide for unmet need, but those unmet needs are not being provided for. On the contrary, the whole thrust of policy – not just in Hammersmith, although it is more obvious in Hammersmith – is to reduce the quantum of social housing, to stop the construction of new social rented housing and in that way to change the nature of housing tenure across inner London.”
As proof he quoted a couple of paragraphs from an article on the Conservative Home website. It read: “While Conservatives are at a highpoint in local government, we still have a mountain to climb in our inner cities. We have no Conservative councillors in Liverpool, Sheffield or Newcastle and just one in Manchester. Many inner London boroughs remain either Labour or Liberal Democrat-run. Finally Boris Johnson’s stunning victory in our capital city was largely a suburban revolt. Why is this? The current state and levels of social housing in our inner cities may provide part of the answer. All our inner cities have relatively high levels of social housing compared to our suburbs. Today social housing has become welfare housing where both a dependency culture and a culture of entitlement dominate. Conservative principles of freedom, self-reliance, and personal responsibility run counter to this culture.”
The passage quoted was, Andy Slaughter said, not some lunatic advisor attached to the Conservative Party, it was the head of the innovation unit for local government and the leader of Hammersmith & Fulham council and the guy who is running Boris Johnson’s re-election campaign. The sentiments expressed in the article have, in Andy Slaughter’s words, poisoned the well of political discourse such that it is impossible for rational voices to be heard. Unfortunately, he said, it has become government policy. The ideas came from a document, Principles for Social Housing Reform, issued by Conservatives in Hammersmith & Fulham, through to government policy in the Localism Bill and the demise of social housing. It is that policy which is driving social housing policy in this country, particularly in London.
In London, he said, Boris Johnson is in charge of some of the most controversial and largest developments not just in this country or in Europe but across the world and is presented with the opportunity to put in practice the ‘Principles of Social Housing Reform’, not just in Hammersmith & Fulham, where thousands of good quality social housing homes will be demolished and replaced with luxury high-rise homes for people from abroad who want to have a pad in central London.”
THE REASON WHY
Andy Slaughter concluded that the policies being pursued by the coalition government were shameful. “They should have received more attention from the media, and I wish they did, but I think there is enough morality in the governing parties for them to go back and look at what they are doing in relation to housing policy and to think again. We are talking about future generations of people in this country who are growing up in conditions that are wholly uncivilised and wholly unworthy of the country.”
For morality and for comparison to what is happening in housing and in London in particular, it is necessary to go back to Victorian times. (In the meantime the government can reflect upon what former Conservative Prime Minister Harold Macmillan said about housing, “Housing, he said, “is not a question of Conservatism or Socialism. It is a question of humanity.”) Gareth Stedman Jones in his book Outcast London: A study in the relationship between classes in Victorian Society, published in 1976, quotes a man called William Farr. The quote shows that what is happening in housing is not new. “You can take down the dwellings of the poor, build homes in their place for which only the middle classes can afford to pay the rent, and thus by diminishing the amount of cheap house accommodation, increase the rents and aggravate the evil you attempt to cure.”
It is left to the Victorian social reformer John Ruskin to express the duty of a government to its people as regards housing. He wrote, “The first duty of a State is to see that every child born therein shall be well housed.” That will be the first duty of the House Party.