Britain: The Housing Question - Part Two

Capitalism could only expand (and in a very chaotic, unbalanced, top-heavy fashion) the national housing stock through an enormous speculative bubble which only stored up greater problems for today. Now we find ourselves in the farcical situation of having a desperate, long-term housing shortage, and at the same time hundreds of thousands of unemployed construction workers, idle land and idle brick factories etc.

A Desperate Situation in 'Affordable Housing'

According to GVA Grimley (a property consultancy firm) in their report on affordable housing, "there is a stark imbalance between the rate of household formation and the provision of new housing...the problem is huge and the honest analysis must be that only a massive injection of direct government money would solve the problem, on a scale not seen since the 1950s/60s...shortages of housing in both the social and the private sectors will inevitably be with us for a generation."

The statistics are staggering. It is instructive that the bare facts of the problem are recorded - and yet the perspective is for the problem to only get worse. This is due to the market's inability to plan and provide, to the point that the state has had to prop it up, leaving no room for a government programme of housebuilding (under capitalism that is). The report goes on, "the stock of affordable housing has been in long term decline...The stock of 4.5 million affordable dwellings in 1991 had reduced to under 3.9 million by 2007...As at mid-2008 1.8 million households [comprising 5 million people] were on local authority waiting lists, compared with only just over 1 million at the start of the decade."

Affordable Housing Stock (Click to enlarge)Affordable Housing Stock (Click to enlarge) Capitalism could only expand (and in a very chaotic, unbalanced, top-heavy fashion) the national housing stock through an enormous speculative bubble which only stored up greater problems for today. Now we find ourselves in the farcical situation of having a desperate, long-term housing shortage, and at the same time hundreds of thousands of unemployed construction workers, idle land and idle brick factories etc. The GVA Grimley report admits that the severe housing shortage will be with us even should the housing market pick up, "even when the market improves...shortages of labour [!] and materials [!] will push building costs higher." If there are any shortages of labour and materials, we would like to know what has happened to the army of unemployed construction workers.

The absurdity of 21st Century capitalist Britain is that science, including social science, has developed to the point where we can accurately study patterns of development and realistically predict certain results, and yet the social system of capitalism prevents us from steering a course based on such useful information. So we know that there will be an additional 260,000 households in England alone, every year to 2026. The government's pre 2007 housing crash target was to stimulate the market to produce only 240,000 new homes per year for only five of those years - 2016-2020. This says nothing of what proportion are social or 'affordable' housing.

Cumulative unmet demand - 3 housing output scenarios (Click to enlarge)Cumulative unmet demand - 3 housing output scenarios (Click to enlarge) "The Government's target of increasing the total housing output to 240,000 new homes per annum by 2016 would not be sufficient to meet the projected increase in households of 260,000 homes per annum (in reality more homes need to be built than the increase in households due to second homes, losses from the housing stock, and vacant properties). This figure would be on top of the existing backlog of demand for both social and market housing." [GVA Grimley, Affordable Housing 2009]

Of course, this was not a plan, but a vain (and at that, still insufficient) hope in the market on the basis of a short term boom, now finished. The government's target, in itself inadequate by more than 20,000 homes per year in England alone, will not be met even for one year unless it is transformed from a target into a plan of production, i.e. through the expropriation of the housing corporations and banks. The shortfall is staggering. The sheer scale of lack of social housing is preparing enormous social problems and it is clear that the new government has even less interest in doing anything about it.

"The level of housebuilding in England increased from a historic low of 129,500 in 2001 to a peak174,000 in 2007. However, 2008 saw completions fall to 142,000 as housebuilders responded to falling demand...2009 is likely to see a further dramatic fall in the number of dwellings completed to around 100,000 [!]...the gap between supply and demand will continue to widen." [GVA Grimley, Affordable Housing 2009]

30 Years of Privatisation of 'Social' Housing

It was earlier stated that the general situation in Britain has been thirty years of counter reforms and the undermining of workers' rights. Notwithstanding some earlier measures from the Heath government, this process of course really began with Thatcher, whose landmark policy of counter reform was the previously mentioned 'right to buy' policy. We will come back to this in a moment. But another way of undermining the gains of the working class in housing has been the effective banning of local authorities' ability to build council houses, deliberately paving the way for private housing associations, subject to the vagaries of the market, to replace genuine social housing, that is council housing. What unites the 'right to buy' policy and the promotion of housing associations at the expense of council housing is not by any means the 'modernising' breezes of the free-market, but the conscious intervention of the state to artificially manipulate the balance of forces in favour of privatisation.

Annual Housing Starts (Click to enlarge)Annual Housing Starts (Click to enlarge) Thus councils have not been able to reinvest the surpluses gained from rent collection (yes, council housing makes a surplus every year, despite the comparatively low rent rates), instead it goes to central government. But nor has central government used this pool of national collected rent to launch a massive reinvestment in local authority housing stock. For instance, the government target to get all council housing up to the 'decent homes standard' by 2010 has of course been missed. But "UNISON has shown that the cost of using an investment allowance to clear the backlog of work needed to bring homes up to the Decent Homes Standard is easily affordable from the £2bn surplus generated annually by council housing." [Defend Council Housing]

Another tactic is what in practice amounts to enforced stock transfer. Unnecessarily decrepit estates, deprived of government spending, are given an ultimatum by the council - they can either vote to stay with the local authority and witness the estate continue to crumble, or they can be transferred to a private housing association who, as we know, have more money to invest only because the government has engineered it that way. Despite this, council tenants have voted overwhelmingly to stay with the council. Initially, they were not even given a choice at all (and we must remember, this choice or rather bribe, is an 'offer' in the style of Vito Corleone!), but won this right.

The justification for housing associations is that they are supposed to be non-profit making, and to offer all the advantages of council housing. But they exist as private entities in the midst of a market, with booms and slumps, expansions and contractions of credit. This compels them to behave like normal capitalist companies, albeit ones subsidised by the taxpayer.

Long-term UK House Price Growth in Real Terms (Click to enlarge)Long-term UK House Price Growth in Real Terms (Click to enlarge) But recently the government has limited their subsidies, something that will surely continue considering the state of government finances. This has forced the associations to borrow from private banks, who of course will only lend when it is on their terms. Of course, bank lending has dried up massively in the last two years. This situation threatens the existence of many housing associations and their tenants. As a result, they have tried various ways to get out of their obligations. The collapse in house prices has also compelled private home builders to lessen their proportion of new builds that are 'affordable'. According to GVA Grimley, "housebuilders have tried to negotiate down the proportion of each scheme attributed to affordable housing."

Another regulation for housing associations that is not being met due to the pressures of the market is what is known as 'rent convergence.' This is the government target to get housing association rents and council rents to converge - at the moment housing association rents are higher. But this is another target the market cannot meet.

"… average English housing association rent is not only still higher than the average council rent - it's a greater difference than in any year since 2000 and up 10% on the 2004 figure, which itself was marginally up on 2003...housing association neighbours in the same council [Adur, near Brighton] area have endured a 14% rise between 2003 and 2005...they have been forced to accept a whopping 21% increase in 2004/5" [Defend Council Housing]

Once these housing associations exist, there is an inbuilt tendency toward mergers with other private housing groups, and a gradual phasing out of their obligations, with the excuse of financial difficulties.

"One of the most controversial mergers - between financially troubled English Churches and Riverside - would create England's largest association with 52,000 now emerges that this transaction includes selling off 1,800 homes in a bid to put the association on a firmer financial footing...a total of 6,000 housing association homes were sold off in 2004/5 on the open market...and the Riverside/ECHG takeover is just one aspect of the growing fear over the financial viability of associations as they take on an ever-larger debt burden which is set to soar to £45bn over the next four years." [Defend Council Housing]

No wonder the government does everything it can to distort the playing field in favour of housing associations! Whilst council rents are siphoned off, the government ploughs in millions in subsidies to housing associations, who unlike local authorities are allowed to reinvest their rents anyway.

"By 2005-6 government had already spent £1.8bn on debt write-off in England; and has allocated another £616m for 2006-07...In Scotland alone £1.7bn of public money has already been spent subsidising transfer and the government is prepared to spend another £1.2bn...The government is willing to wipe out debt to facilitate transfer, so why not for retention where tenants choose to remain as council tenants?" [Defend Council Housing]

Indeed, this is the essence and the tragedy of the policy to undermine council housing - the subsidies ploughed in to make the market 'work' dwarf what needs to be spent to improve the stock of existing council housing, which could be funded from rents alone! If the banks will not lend to housing associations, the government should not only take the latter into public control, they should fund them from a plan derived from the credit belonging to the banks they have been forced to nationalise anyway!

As we have seen, the government does not allow rents to be reinvested. This crisis of funding is made worse by the fact that Councils are not allowed to borrow from banks, under the 'public sector borrowing requirement', a completely needless piece of legislation based on the capitalist prejudice against the public sector.

The Government has recently put a proposal to councils to stop the 'siphoning off' of council rents centrally. Essentially council's would take on an amount of debt - but gain by not having to pay rent income to the government. This may allow councils to build 10,000 homes (Gov''t figure). Welcome - but nowhere near enough of course. On this basis, the number of homes built per council ranges from 1 to 374.

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