The Housing Crisis – Is a massive building programme sufficient to resolve the housing crisis?
It is a common-place that a massive building programme is the way, even the only way, to resolve the housing crisis facing the young, those on low and middle incomes and the homeless. Well if my Borough of Wandsworth is any indication the answer is definitely NO.
In Nine Elms, less than a mile from Westminster a development of 20,000+ flats, home to maybe 60,000 people, has begun and will be largely completed in ten years time. But no one imagines that this development will have any affect whatsoever on the housing crisis in London. It is not a problem we have with the construction industry, nor with the planning system. The problem is distribution!
Nine Elms and Battersea Power Station, with first sales going to rich Malaysians but also rich Europeans (including Brits) may not be absolutely typical but what if the higher earners continue to trade up and use their market power to invest in the housing market and use rental income as an alternative to final salary pensions? What if they act as the mortgage lenders for their children – the so-called Bank of Mum and Dad? What if the massive growth of the buy-to-rent mortgage industry is clear evidence of a long-term trend to yet more exploitive rents.
The Tory mantra about the market clearly just doesn’t work – at least not in the UK in housing. We have to take back control of the market; as a society we have to resolve the issue of distribution. The Tories recognise this to an extent and are trying to tackle the issue in the socially rented sector with the mean-spirited Bedroom Tax, but it only tackles a small sector of the market and it only tackles an easy defenceless target – the poor, social tenants. Meanwhile the social sector gets smaller and smaller and the better off collar more and more of the market.
There are three interesting and dramatic examples of this process apparent in my analysis of how “right-to-buy” has operated in Tory Wandsworth. Firstly let’s look at the overall impact. Of the 18,000 Wandsworth Council properties sold nearly 6,000, 1 in 3, are now privately rented. (see my blog of December, 2012) Some of these rental properties are part of quite large portfolios. Several millionaires have been created. Their millions have, of course, been created out of the increased rents imposed on private tenants, rents ironically frequently paid by the state in the form of housing benefits. Many examples exist in Battersea’s Doddington estate, where Council flats being let at £200 per week to families classified by the Council as being “in need”, sit side by side with others being rented out at over £500 per week using landlord practises not far short of what fifty years ago would have been known as Rachmanism (Google Peter Rachman for a brief history).
Another completely different example is where small council blocks have been bought up by developers and redeveloped as very expensive town houses. One example is in Sisters’ Avenue (see March, 2013, Blog), where six modest post-war family flats were sold to sitting tenants in the 1980s at an average price of £17,500. In the late 1990s and early 2000s they were sold on to a developer at about £300,000 each. Now the six replacement town houses are being bought at £1.95 million a time. The end result has no doubt been a major improvement in the quality and scale of the housing stock and certainly the relative enrichment of six working class Battersea families but also a complete loss of affordable housing. The effect, unintentional of course, has been of some lucky people pulling up the ladder behind themselves.
Whatever the rationale, the benefits for the original purchaser, the enormous political gain for the Tory Party, there can be little doubt that “right-to-buy” has been disastrous for the future of affordable housing in Wandsworth and by extension much of London.
To counter this situation the London Labour Housing Group (LLHG) has produced a powerful and useful manifesto for the London Borough Elections of 2014 but it admits that as long as the Government and the London Mayor are under Tory control there are limits to what can be done. Typical of the dilemma facing Labour is the comment of Councillor Peter John, Leader of London Borough of Southwark at a recent Battersea Labour Party meeting, where he asked, “Just what are the prospects for social housing in Southwark, when the new council housing we are building now is subject to government subsidised right-to-buy schemes”?
The LLHG understands the problem but it is beyond its competence or political power to challenge the real issue, which in my view is the way that much of politics in general and property taxation in particular is so warped in favour of higher income groups. There is clear evidence of the former in George Osborne’s introduction of the “Help to Buy” incentive aimed at encouraging house price rises but doing very little for housing construction – a plan many economists clearly believe to be about creating a feelgood factor and not a sustainable housing boom. As to the latter the inequity of property taxation in the UK hardly needs mention – in Wandsworth for example the Council Tax on the many expensive £1 million+ properties in the Borough is currently £1,357 per year, exactly double that on the average property (serious comparisons difficult as no revaluations since 1991 – another example of the moneyed classes, scaring Governments off re-distributive taxation).
Unfortunately, the only policy remedies that I see are to take control of the market, to close the market in social housing and to control the private rented sector. But the politics of controlling the market (subsidising large scale construction for the social sector), abolishing “right-to-buy” and controlling rents is beyond the Labour Party as at present and, to be fair, beyond political reality unless the political mood can be changed in the same radical way that the Tories managed in the 1980s.
Tony Belton
Tony Belton 