The Housing Crisis

The housing crisis in Britain gets worse every month. According to Shelter, statutory homelessness is at a seven year high and nearly 100,000 children in England are now classed as homeless. The situation in London has now reached critical levels where the number of renters becoming homeless has increased 700% in five years, (most losing their homes due to the ending of short-hold tenancies – the type most commonly held by private renters). In all the numbers of individuals and families becoming homeless has jumped to 6,790 in 2014/15 from just 930 households five years before. ⁽¹⁾

Meanwhile house prices have risen so fast in the UK that any potential homebuyer earning the national average wage will now find 91% of England and Wales beyond their reach ⁽²⁾ and the average length of time UK homebuyers need to save to afford their first property is now 24 years ⁽³⁾.

Everything the government has done so far to solve the housing crisis has made it worse. The new Housing Bill currently working its way through Parliament is unlikely be any different. It is meant to free up social housing and turn ‘generation rent into generation buy’ (or so the press release in Gov.UK tells us). House prices, for example have risen directly as a result of another Conservative housing solution: the Help to Buy scheme. The scheme was launched in 2013 to help first time owners buy their properties with deposits of only 5%. As a result the average house price has risen by £8,250 ⁽⁴⁾ and research by Shelter estimates that the scheme has skewed the market against first time buyers. North West Leicestershire has seen the biggest house price rises due to the scheme with prices up £19,000. According to Campbell Robb, Shelter’s Chief Executive, “Help to Buy hasn’t helped many people at all, instead it’s pushed a home of their own even further out of reach.” ⁽⁵⁾

The bedroom tax, introduced to ‘encourage’ tenants in larger council properties to move to smaller ones, has put two thirds of people in arrears and one in seven households now face eviction. It’s split up families, been responsible for an increase in child poverty levels, led to several suicides and leaves three quarters of those affected unable to make ends meet. It’s also failed to free properties up. Instead it’s created a massive waiting list for smaller properties and has been such a headache and so expensive to manage that some councils (like Leeds) are reclassifying their property sizes. Some councils are even demolishing partition walls to get rid of bedrooms.

Buy to Let

And then there’s ‘Buy to Let’. Due to cheap buy to let mortgages, this scheme has had two main effects: one has been to increase the number of private landlords (over 1.61 million Britons are now amateur landlords); the other has been to yet again push prices up. Buy to let is soaring and because of limited housing supply, the result is higher property prices. Buy-to-let mortgages are growing at four times the pace of first time buyer mortgages and it’s been estimated this will lead to a 7% rise in prices in 2016 ⁽⁶⁾. The Bank of England has realised the scheme has created a bubble and fears a housing crash if new landlords bail out ⁽⁷⁾. As a result the Chancellor was forced to increase stamp duty last November, change Capital Gains Tax rules and reduce the tax relief private landlords could claim on mortgage payments.

Buy to Leave

All this has led to perhaps the most stupid phenomenon of all; buy to leave. There are currently 610,123 empty properties in England and although most of them are empty short term, over 200,000 have been empty for six months or more. Many of these are in poor repair or locked up in the legal system due to inheritance, but an increasing number have been left because some investors are reluctant to let properties out. For some, it’s just not worth the hassle of getting in a tenant when you can leave it empty then sell it in a pristine condition. In turn this adds to the housing pressure and raises prices further. Buy to leave obviously applies to luxury new builds in the centre of London which are increasingly being advertised globally for sale to investors (a Battersea flat last year made the headlines when it was bought for £1m in the spring and then put on the market a few months later for £1.5m without even having been built), but it’s also a problem which is increasingly happening all over the capital. Islington council recently found that 30% of a representative sample of 2,000 homes built in the past six years had nobody on the electoral register, and that close to a quarter of homes in five of their newest residential developments appeared to be empty.

So on the back of all this, what’s in store with the new housing bill? In short, it’s yet another death blow to social housing while heaving a big wad of subsidy to the private sector. The bill aims to swap the already limited current obligation to build homes for social rent, and instead build discounted, so-called ‘starter homes’. The price for them will be capped at £450,000 in London and £250,000 in the rest of England, which stretches the meaning of “affordable” since the London price is 17 times the average British salary. What will happen will be that wealthy private investors will buy with the discounts and then sell within five years at full market value.

Right to Buy

But the biggest nail in the social housing coffin is the extension of the right to buy to housing association tenants. As with the right to buy for council housing, there is no provision to replace lost stock. The idea that the right to buy created a ‘property owning democracy’ has already been discredited by the facts. In England 1.87 million homes have been sold since 1980, one third of which are now owned by rich landlords ⁽⁸⁾. Some 40% of the council flats sold at discount are now privately rented at market rents, and this has pushed up the Housing Benefit bill to astronomical levels (currently standing at £24.6 billion and rising). The government’s own 2014 Housing Survey found 19% of households in England are now in the private rented sector, up from 11% in 2003, and many of them are struggling to meet ever increasing rents ⁽⁹⁾.

Pay to Stay

One of the most contentious parts of the bill is the provision to charge ‘high income’ social tenants market rents (high income here means families with a total income over £30,000 in England and £40,000 in London). Already known as ‘pay to stay’, tenants will either be forced to move into the already crowded private sector (thus pushing up rents further) or buy their own homes (if they can afford it). The average monthly rent in London has now hit £1,500 pcm with a 12.5% increase across the country over the past 12 months. Even the outlying areas of the capital, once affordable, are now increasingly out of reach of many renters. In Morden (at the end of the Northern Line) you can expect to pay on average £1,024 pcm for a one bedroom flat. According to the Royal Institution of Chartered Surveyors (RICS), rents are set to rise by an average of 5% each year for the next five years, higher even than house prices. So your chances of finding a decent alternative to your social housing are slim to say the least.

In order to encourage people to go, secure tenancies are being phased out, replaced with 2-5 year tenancies. Social housing in Britain was founded on the notion that decent housing be made available to workers at an affordable price and with a security of tenure, which would no longer leave families to the whims of private landlords. Although it’s touted as a means to make social housing more ‘flexible’, there is no doubt ending secure tenancies is designed to get tenants out to sell their homes, for example, there is no additional means in this legislation to evict anti-social tenants.

High Value Housing

And when tenants are out, local authorities will be forced to sell their homes if they fall under the category of so-called ‘high value’ housing. In London this means just about everywhere; once ordinary areas of north London like Camden and Islington are now favourites to be ‘socially cleansed’ since 60% of Camden’s stock and 70% of Islington’s now qualifies as ‘high value’. Much of the capital is already a ‘rich only’ zone and this has created a bit of concern for the capitalist class. Labour shortages in the capital would only bite into their profits whilst workers are forced further and further out. Some are having to leave the capital altogether (adding to the 50,000 homeless people who were forced to moved out of their London boroughs over the last three years).

And finally, the government plans to grant planning permission in principle for housing estates to be redeveloped as ‘brownfield land’ i.e. land that generally needs cleaning up but applied here (as it has been by the Housing and Planning Minister and the Conservative candidate for London Mayor) to the communities that live on these estates. Cameron’s big plan to invent ‘starter homes’ means encouraging developers to build them and one of the ways he’ll do this is by donating the land along with almost £20bn of taxpayers money in grants and loans ⁽¹⁰⁾.

But the building companies already have plenty of land to develop. They don’t want to build too quickly for two reasons. The first is that they can see the land price inflate (and thus add it to their balance sheet) whilst the second is that building a load of houses would quickly would bring down prices in general (thus reducing profit rates). This was confirmed by the National Audit Office which found that government land capable of holding 130,000 houses released to developers had yielded only 200 in the last five years. ⁽¹¹⁾ It makes a nonsense of the pledge of housing minister Brandon Lewis to sell off enough public land for 160,000 homes between 2015 and 2020.

And nothing in this Bill will solve the housing crisis, but everything in it will make it worse. By legislating to sell or demolish social housing to make way for new state-subsidised developments which will eventually be snapped up by private investors and speculators, means increased house prices, higher rents and worse misery for the millions of families already poorly or inadequately housed who will now have no chance ever of finding decent affordable housing.

At a time when this bill is currently being fast tracked and submissions against it have so far been ignored, it’s difficult not to buy into the notion of “greedy Tories”, especially since legislation requiring landlords to make their homes fit for human habitation was recently voted out, (with 73 of the MPs voting against the measure being registered landlords themselves). ⁽¹²⁾ But of course this isn’t the whole story. Housing isn’t just a Tory problem as supporters of all parties involved in housing speculation (the Blairs being the most prominent). The right to buy may have been pushed by Thatcher but during its time in power, only 0.3% of houses Labour built were by local authorities. It isn’t just a UK problem either. The UN’s survey in 2005 estimated that 100 million people around the globe are homeless and one billion more lack adequate housing. And in Britain it isn’t even a recent problem, since council housing was originally a response to the failure of the private sector to provide decent affordable homes as well as a means to buy social peace after two world wars. When the post-war boom ended building council houses was one of the earliest casualties. This Housing Bill is just the latest in a long line of measures which are reinforcing the notion that a house is not where you live, not one of the three basic necessities of life, but just “property”, another commodity ripe for speculation. It will finish off the prospects of many to affordable decent housing.

It's little wonder that grass roots organisations have been springing up in opposition under slogans like "Social Housing Not Social Cleansing". Groups like Focus E15 ⁽¹³⁾, Save the Sutton Estate, Fight for Aylesbury and Barnet Housing Action Group are opposing evictions as well as plans to shut down their estates and replace them with luxury flats. These groups are all facing the attacks on them with courage and determination. If this bill goes through, more and more tenants will discover that capitalism is unable to provide decent homes, and if tenants want to keep what they have, they’ll have to join together to fight for it and against the system that is increasingly depriving them of any hope of a home.

RT

Notes

• This figure doesn’t include rough sleepers, whose numbers increased by 37% last year.
• Guardian January 5th 2016
• The Resolution Foundation, using the Bank of England’s latest household finances survey. This increases to 39 for the poorest fifth of the population.
• Quoted in the Financial Times 20 September 2015
• Quoted in Thisismoney.co.uk
• IHS Global Insight report quoted in the Telegraph 15 September 2015.
• Bank of England Financial Policy Committee report 2015. The report noted that buy-to-let had the ability to "amplify" a housing boom or bust.
• Charles Gow, son of Thatcher minister Ian Gow, owns at least 40 ex-council properties sold in the 1980’s.
• A cynic may point out that many MP’s themselves are cashing in on letting out properties: the numbers of MP’s who earn from renting out properties has risen by a third and now one in four MP’s is a landlord.
• It should be noted that this is at a time when the government has made £12bn in welfare cuts.
• See next.ft.com
• The Government has now imposed a 3% stamp tax duty on but-to-let landlords and from next year will be cutting the tax breaks on their mortgages but this has not cut buy-to-let speculation. It has in fact only increased the stampede to get hold of property before these measures come in. The speculative bubble in housing may yet burst anyway but the Bank of England is doing its bit to avoid it. It gave fear of a housing price collapse as one of its reasons for not raising interest rates this month.
• There is a demonstration against the Housing Bill on Saturday 30 January 2016 starting from the Imperial War Museum. See Focus E15 website for more details.