I have been intending for some time to write something about the housing crisis. After all, I worked for 17 years in the Council housing sector, then as a housing consultant, and later served as a member of a major city’s Housing Committee – so I ought to know something about it. However, it is now over 20 years since I ceased to be involved, so I find the current situation both unfamiliar and disturbing. It is difficult to know where to start.
Nevertheless, over the past year or more I have several times tried to put together some thoughts on the current situation. Having been written at different times, the piece is a bit repetitive and has become far too long. I am sorry about that but I do not want to spend any more time editing it. If anybody has time to read it, I would welcome any feedback on any errors of fact or judgement.
Background history
First, some background history. By the end of the 1970s/beginning of the 1980s it could be said that the great majority of British[1] people were adequately if not well housed. In Great Britain in 1979, 57.3% of the population owned their own homes (either outright or with a mortgage). Most of the rest had a safe Council (29.2%) or housing association (2.0%) tenancy. Private tenancy had dwindled to 11.5% and was falling rapidly[2]. Private rents were regulated, and Council rents covered only the amortisation of the historic cost of provision, plus maintenance and management costs (with no profit element). Housing Benefit met any costs that tenants could not reasonably afford.
The slum clearance programme had been completed. The Housing (Homeless Persons) Act protected the most vulnerable, and rough sleeping was virtually unknown. True – a small minority of Council housing was either “hard to let” or needed modernisation or conversion – but a remedial programme was in hand.
So, with a few exceptions, the nation was adequately housed.
Contrast this with the picture today.
The current situation
- The rate of new housebuilding (including net gains from conversions) has not kept pace with the growth in the number of potential households[3]. As a result there is a shortage of housing, especially in certain areas. A factor in the slowdown in housebuilding is that for many years Councils were effectively prohibited from building or acquiring housing, while the rate of new private sector housebuilding in England declined from a peak of 176 000 in 1988 to a low point of 83 000 in 2010[4].
- This shortage is reflected in the waiting lists for council and housing association housing. In 2018 there were 1.1 million households on English Council waiting lists, of whom 494 000 were in the “reasonable preference” category[5] - i.e. had an urgent need for rehousing because of overcrowding, sanitary conditions, medical or disability problems etc.
- Street homelessness (“rough sleeping”) – almost unknown in the UK before 1980) - is a further very visible symptom of housing shortage in many town and city centres.
- Rents are determined by market forces, including in the social housing sector, rather than being fixed by social landlords simply to cover costs.
- By 2017 the private rented sector had grown to 19% of the GB market (from 8% in the mid 1990s), whereas, mainly because of the “right to buy” (RTB), the social housing sector had shrunk from 21% to 16%[6]. Many of the Council houses sold under the RTB are now privately rented.
- Partly as a result of transfers of housing stock from Councils to new housing associations established for the purpose (encouraged by central government with offers of funding), the social housing sector is now divided roughly 40:60 between Council housing and housing associations.
- Regulation of the privately rented sector has been substantially weakened. Rent controls have generally been abolished, and local Councils lack the resources needed to exercise their enforcement powers – e.g. in regard to disrepair.
- Private tenants generally have no security of tenure and can be subject to “no fault eviction” at the end of their tenancy. This can deter tenants from trying to enforce their rights to repair. Security of tenure has also been weakened in the social housing sector – for example, by offering fixed term “flexible” Council tenancies.
- Financial support – in the form of Housing Benefit, now subsumed under Universal Credit – has been reduced, and some tenants suffer hardship as a result of the “bedroom tax”. Delays in payment sometimes lead to rent arrears and threatened eviction, resulting in homelessness. Some private landlords will not accept tenants on Housing Benefit/Universal Credit as they fear delays or deficiencies in rent payment.
SOME ISSUES WHICH ARISE
DO WE NEED A PRIVATE RENTED SECTOR?
When I was first looking for independent housing in the early 1960s, both as a student in Bristol and when working in Newcastle and London, I could not afford to buy a house or flat and was not eligible for Council housing, so I was forced to rely on the privately rented sector. My experience then has convinced me that it is an inherently unattractive and undesirable way of finding a home.
No doubt, there are people for whom home ownership may be inappropriate (e.g. people whose jobs require them to move around the country, or the world) or who do not want the responsibilities of home ownership, especially if they have insecure jobs), However, for most people, private renting is expensive (and often not fully covered by Housing Benefit), confers no security of tenure, frequently involves difficult landlord/tenant relationships, and has nothing to show for it at the end of the tenancy. As far as private tenants are concerned it is money wasted.
This contrasts with renting from the Council, which normally gives basic long term security, rights such as the right to repair, a benevolent and responsive landlord, reasonable rents (which can be largely or wholly met by Housing Benefit if needed) and often the right of dependants to inherit the tenancy. For many Council tenants, their tenancy is as good as owning their home. Yet when they no longer need the property, it is available for somebody else.
The growth of the private rented sector is the result of both market factors and deliberate policy. The enormous increase in house prices (by a factor of 22 times between 1973 and 2019 in the UK[7] - far exceeding both the general rate of inflation[8] and the growth of earnings[9] over the same period), has put home ownership out of reach for young people on average incomes unless they have a very substantial deposit (e.g. provided by relatives). This rise in house prices in turn is partly the result of housing shortage - the failure of new housebuilding to keep pace with the growth in the number of potential households.
The Conservative government’s removal of rent restrictions and removal of security of tenure in the 1980s has helped to make private letting a worthwhile investment. Whereas in the past people who inherited houses would seek to offload them as soon as possible, now they would be prepared to let them. This is one reason why many ex-Council houses, sold under the Right to Buy, have transferred to the private rented sector. Later, the “buy to let” phenomenon appeared, and most recently there have even been instances of “build to let”. At the same time the removal of the requirement to buy an annuity has enabled many pensioners to invest their lump sum in a house, so that the rent from that house has in effect become the major part of their pension.
This presents a problem for policy-makers. Although private renting is the least preferred form of tenure (and arguably is inherently undesirable except for limited groups for whom owner occupation and social housing are inappropriate), there is now a class of small landlords with a strong vested interest in maintaining the private rented sector.
Nevertheless, the answer to this question, “Do we need a private rented sector?”, is “No”. Housing is a basic human need, and it is wrong that it should be a profitable investment, exploiting both the shortage of social housing and the vulnerability of people who lack the savings or income to afford owner occupation. There is a case for a small quantity of privately rented housing to meet the short term needs of mobile or footloose workers, students, and others for whom social housing or owner-occupation are inappropriate. However, these are a special case, and private renting should not be a normal, long term form of housing for the great majority of people.
RESIDUALISATION
A horrible word. Defined as “the process whereby ... social housing ... moves toward a position in which it provides only a safety net for those who for reasons of poverty, age or infirmity cannot obtain suitable accommodation in the private sector” (Malpass and Murie, 1999).[10]
When I was first working in Council housing from 1975 onwards, my ideal was that one could drive around the city and not be able to tell from outward appearances whether a house or flat was owner-occupied or Council rented. (Privately rented properties would be more conspicuous by their poor state of repair). The guiding principle was to be “parity of esteem” – that is, renting from the Council was to be regarded as a perfectly normal form of tenure that anybody might choose – open to all, without discrimination, and carrying no stigma or assumptions about the lifestyle of the occupants.
Sadly, it has not worked out like this. Council housing has long been viewed with suspicion by the Conservative Party as a form of municipal socialism. Council housing was believed to be heavily subsidised (generally it wasn’t, since Housing Revenue Accounts (HRAs) were required to break even and only had to cover the historic building costs of their estate), and many recipients of this “largesse” were considered to be undeserving (the myth of the Jaguar parked outside the Council house). Decent thrifty people should aspire to buy their house – and should be encouraged to do so by a tax relief subsidy (MIRAS), which continued until it became such an obviously blatant injustice that it was phased out in the 1990s.
Conservative policy from 1979 was therefore to shrink the council housing sector. The 1980 Housing Act introduced the Right to Buy (RTB), which effectively gave away much of the assets of the HRA to better off Council tenants, while discouraging or preventing Councils from reinvesting the capital receipt in new or improved housing. Council rents were forced up, and rent rebates for poorer tenants had to be contained within the HRA – that is, paid for by other tenants rather than the taxpayer. Inevitably, new Council housebuilding collapsed. Financial carrots and sticks were then used to persuade Council tenants to switch their landlord from the democratically elected Council to voluntary quangos specially created for the purpose.
Thus, as we have seen, in England renting from the Council has shrunk from 29.2% of households in 1979 to 6.5% in 2019, and it is indeed the case that Council housing is now overwhelmingly a tenure of last resort for people who cannot afford to buy or rent in the private sector.
The effects of this policy go well beyond housing. RTB sales have been primarily in the most attractive low density Council houses and low rise flats rather than in the less popular medium and high rise maisonettes and flats. This has in turn resulted in an increased concentration of the poorest people in the least attractive housing – social deprivation reinforced by physical segregation, with knock-on effects on educational achievement, juvenile (and adult) delinquency, and ill health.
RTB has thus been a major factor in confirming and emphasising the division, polarisation and inequality in our society.
WHAT ABOUT HOUSING ASSOCIATIONS?
It may be objected that this account ignores housing associations (“private registered providers”) who accommodated 10.2% of English households in 2019 (up from 2.0% in 1979).
There have been housing associations (or Trusts), such as the Peabody Trust, since before there was Council housing. Originally, they were philanthropic organisations, usually charitable, run and managed by volunteers such as Octavia Hill in the late 19th century. Indeed Octavia Hill was opposed to municipal provision, which she regarded as bureaucratic and impersonal. By contrast she favoured a paternalist style of housing management that regarded tenants as in need of training and improvement.
Housing associations continued for decades as a small sector of housing provision, but by the 1970s, a view was growing that they should be encouraged to meet “special needs” that were not being met by Council housing. (It was never really very clear what these “special needs” were since Councils had powers to meet any identified need).
When the Conservatives came to power in the 1980s, this view of housing associations as niche providers of “special needs housing” fitted in well with their prejudice against Council housing, and investment in social housing was steered away from local Councils and toward housing associations – albeit the sums involved were small. An additional attraction for the new Government was that housing associations were then considered to be in the private sector and able to raise some of their funds from sources that did not add to the Public Sector Borrowing Requirement - a key test of fiscal virtue under the then prevailing monetarist doctrine. By the end of the decade, as described above, Council housebuilding had virtually come to a halt.
Nevertheless, Council housing remained popular with those tenants who could not be persuaded or induced to buy their Council house, so the next step was to encourage Council tenants to vote for the transfer of Council housing stock to either existing or specially created housing associations. Known as “Large Scale Voluntary Transfer” (LSVT) this policy was reinforced by promises of new investment in the transferred stock while Councils were effectively prohibited from undertaking the same investment. As a result many local authorities reluctantly agreed to cease their role as major housing providers (although they still retained their duties to rehouse homeless families).
As a result of these policies, the housing association sector has grown so that it is now larger (around 10% of the market) than the Council housing sector. Indeed some of the largest housing associations have a larger stock than the Councils whom they have supplanted. Few now resemble the small scale local charities catering for “special needs” envisaged by their advocates in the 1970s – let alone the agents of social reform favoured by Octavia Hill. Rather, they are medium to large public sector businesses, suffering much of the bureaucracy and remoteness that Octavia Hill criticised, but lacking the democratic accountability of local Councils.
FUTURE OF RTB
The “Right to Buy” (RTB) policy is credited with having won the 1979 General Election for the Conservative Party. It enabled Council tenants to buy their property at a substantial discount over its tenanted value (which itself was well below its much higher vacant possession value) with the benefit of a 100% mortgage. In effect the Conservatives were using the assets of the Housing Revenue Account - which had been built up over half a century and which had enabled Council housing rents to be kept low - to bribe tenants to vote Conservative. This cynical manoeuvre was brilliantly successful and helped to keep the Conservatives in office for 18 years.
The popularity of the RTB with its potential beneficiaries has made it difficult for Opposition parties to deal with it. Many critics could see the obvious social injustice of the policy, but the Labour Party did not dare to oppose it and did nothing during its years in office (1997-2010) to tackle it directly. The ensuing Coalition and Conservative Governments have actually increased the discounts available, and RTB sales have continued – albeit at a lower level (19 389 in 2018/19 in England, including housing association sales).
This policy of converting social housing into private renting is now largely a fait accompli, and even if it were to be reversed, it would take many years to repair the damage caused by 40 years of indifference or outright hostility to social housing.
So what is to be done?
As we are faced with another 3½ years of Conservative government, there is little hope of serious action to tackle these problems – at least in England. The question is academic. Nevertheless it is worthwhile to set out the range of policy options that a future Labour government (some hope!) should be considering for inclusion in its 2024 or a subsequent election programme.
POLICY PROPOSALS
A. Authorise and encourage councils to resume their role in providing housing for rent by
- Building new housing
- Acquiring existing housing from private landlords and individual owner/occupiers
- Enabling housing association tenants, either individually or collectively, to choose to transfer to Council management
- Borrowing funds from the Public Works Loans Board (PWLB)
- Utilising existing and future capital receipts
- Approving Compulsory Purchase Orders (CPOs) for land where needed
Obviously this policy would need to be supported by appropriate allocation of capital funding within the long term public expenditure programme.
B. Freeze private rents, pending a review to set “fair rents” related to average incomes
I argued above that the private rented sector is inherently unattractive except as a short term measure for footloose groups such as students or itinerant workers. It is not a long term tenure for the majority of the population, for whom it is money wasted. The sector should be reduced in size by transferring the properties to social housing or owner occupation. The problem is how to achieve this without creating undue hardship for individual landlords who rely on private rents for their pensions.
I would propose an immediate freeze on rents, subject to an annual increase capped at the level of inflation, swiftly followed by a phased transition to “fair rents” based on a modest return on capital (say 2% p.a. net of expenses) and related to average earnings[11]. This would make private renting a much less attractive investment and would probably lead to many landlords selling up – either to sitting tenants or to social landlords (provided that they were funded to do so).
C. Restore security of tenure for private, housing association and Council tenants
In the case of social housing tenants this would be a reversion to the 1985 Housing Act position, whereby tenants enjoyed many of the same advantages that owner occupiers have: the peace of mind from knowing that nobody can evict them without a serious and specific justification; the right to have repairs done and to make non-structural alterations; the right to take in lodgers and keep pets; the right to be consulted on management issues.
Similar rights and security for private tenants would be a further incentive for private landlords to divest themselves of their property and transfer it to the social or owner-occupied sectors.
D. Restrict the “right to buy” (RTB) as follows:
- Valuation to be “vacant possession” value
- Discounts limited to 2% per year of tenancy (maximum 20%)
- Pre-emption clause to prevent resale at a profit
- Councils authorised to deny RTB in conditions of exceptional shortage
E. Housing Benefit
Rates of Benefit (now included in Universal Credit) should be restored so that they cover the actual rent (rather than an assumed market rent) and not reduced by the spare bedroom penalty (the notorious “bedroom tax”).
F. Other possible suggestions
- How about a “choose your landlord” scheme, whereby tenants could opt to have the management (or possibly the ownership) of their tenancy transferred to a different landlord. This would provide an element of competition between private landlords, Councils and housing associations to provide a good service at reasonable cost.
- Or a “right to rent” (as a counterpart to the Right to Buy), whereby an occupier could require a Council or housing association to buy their property and grant them a secure tenancy.
CONCLUSION
The above programme is so far removed from current policy, after 40 years of Thatcherism, New Labour and Austerity, that it may seem difficult to imagine - let alone implement. Yet much of it was actually mainstream policy in the 1970s. Given a favourable political environment, there is no practical reason why it could not become moderate, mainstream policy again. Sadly, with a very right wing Conservative Government in office, and an Opposition in process of reverting to Blairism, it seems unlikely to be achieved in my lifetime.
[1] I have used “British” throughout, although most of the figures and references are to England. The situation in Scotland and Wales differs slightly but is broadly consistent.
[2] Live tables on Dwelling Stock, MHCLG 2020, Table 104
[3] This statement is difficult to substantiate from official statistics. This is because separate households cannot form unless there is somewhere for them to live, and therefore suppressed or concealed households do not show up in official figures. However, the ONS “Families and Households in the UK: 2019” records that “Multi-family households (consisting of two or more families) were the fastest growing household type over the last two decades to 2019. They grew by three-quarters from 170,000 in 1999 to 297,000 households in 2019, a statistically significant increase.”
[4] 50 Years of the English Housing survey (MHCLG 2017)
[5] Local Authority Housing Statistics 2018 (MHCLG 2019)
[6] “The cost of housing for low income renters”, IFS, 2017
[7] Nationwide Building Society House Price Index
[8] According to ONS the RPI rose by about 12 times. See https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/adhocs/10747earningstimeseriesofmediangrossweeklyearningsfrom1968to2019
[9] Median male earnings rose by about 16 times. See https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/adhocs/10747earningstimeseriesofmediangrossweeklyearningsfrom1968to2019
[10] Malpass and Murie “Housing policy and practice” 5th Edition, 1999
11 For example, for a £200 000 property, after allowing ca £1500 for maintenance and management expenses, in order to achieve a 2% net return (£4000 p.a), it would be necessary to charge a gross rent of £5500 p.a – or £458 per calendar month. This is substantially less than the median private rent in England (£700, or £1425 in London) – according to ONS. See https://www.ons.gov.uk/peoplepopulationandcommunity/housing/bulletins/privaterentalmarketsummarystatisticsinengland/april2019tomarch2020
See also https://s3-eu-west-1.amazonaws.com/pub.housing.org.uk/Efficiency_Report.pdf
© 2020 Robin Paice
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