Housing: A Never-ending Crisis under Capitalism

The ideology of the free market, beloved of politicians from Thatcher to Blair, frequently clashes with the reality of modern capitalism. An economy based on huge amounts of state regulation propped up by debt is not the free market Adam Smith had in mind. Nevertheless, the ideology generally trots along until it is slapped in the face by reality. The housing market in Britain, especially England, is a case in point. The free market, rather than creating the mythical balance of supply and demand, has instead created a monster in the shape of a hyper-inflated housing boom as even the most modest ex-council house is put out of the reach of many first time buyers. One of Blair’s legacies has been to leave Britain a far more polarised society than even Thatcher and her successors managed to do, with the gap between rich and poor widening at alarming rates. The current state of housing illustrates this clearly. For the poorest families decent housing is now totally out of reach, for those with money who want to make a quick and easy profit, it is boom time.

House Prices Out of Control

House prices are at an all time high, with average prices in London standing at £318 864. Elsewhere, unless there is a sudden collapse in the market, average house prices are set to rise in England by 40% over the next five years to £300 000, according to the National Housing Federation. For houses to be affordable, they should be no more than four times the average salary. As it stands average prices are eleven times the average salary. The result has been a boom in house building by investors’ eager to cash in. Ill-conceived developments have been squeezed on to any green space with little or no regard for either the environment or the infrastructure. In London and the South East, much of the development has been inflated by massive city bonuses which in the first quarter of 2007 increased by 24% on a year earlier. Many invested in the luxury end of the housing market, driving house inflation for multimillion pound properties to more than 30%, the highest rate for nearly thirty years, with a knock on effect for properties further down the scale. House builders have rushed to cash in, many of the properties being bought by rich foreign investors. According to London Development Research, two thirds of all new houses built in London are bought by investors, especially buyers from France, Russia, Italy and Saudi Arabia. Buying to let is not of course, restricted to rich foreigners. One of the keystones of Blair’s housing policy was to encourage mixed tenure in social housing developments which meant in practice a shift in subsidy through housing benefit to pay the inflated rents charged by buy to let landlords.

Decline of Social Housing

For most workers on a low wage, the shrinking social sector has been the only real alternative. Years of neglect, coupled with subsidies being shifted to owner occupation through the tax system, has meant that for those living in social housing the crisis bites deep. In 1977, 30% of the population lived in council housing, today only 14% remain. The right to buy, promoted by Thatcher and continued under the boom of the Blair years, has left stock in the social sector dwindling. Councils were not allowed to build new properties to replenish their stock. Worse, they weren’t allowed to use the money from right to buy sales or the sale of council estates. To date the social sector has lost £45 billion from right to buy sales and £6 billion from selling council estates, all of it to central government, which in turn has starved the sector of finance and instead pushed owner occupation as an active policy. As a result the social sector found itself no longer managing mainstream housing but instead has been left trying to cope with some of the most vulnerable people in society living in some of the most run down, violent, marginalised and neglected slums. The Communities Secretary, Ruth Kelly, stated that tenants on estates are more likely to be the victims of burglary than anywhere else in the country; they are also more likely to suffer from vandalism, depression, ill health and social isolation. Children are particularly affected in their social, intellectual and physical development. Over a million children are estimated to be born into housing need. Child poverty, despite all the rhetoric, is on the increase and has doubled over the past ten years.

Government Promises: Too Little Too Late

Brown’s promise to build three million new homes by 2020, with up to 70 000 of them being social housing for key workers and low income families may seem like a willingness on the part of the government to tackle the situation at long last. Putting aside the fact that Brown has not come from nowhere and was actively part of the decision making process that led to the crisis in the first place, the figures run short. At present, some 1.6 million households are on council waiting lists and according to the charity Crisis, there are a further 400 000 hidden homeless households. Shelter has estimated that to halt the crisis an extra 20000 social rented homes will need to be built over the next three years, some 60000 above the government’s current plans. Last year, some 93000 households were in temporary accommodation, with one in ten children living in overcrowded conditions. One in ten young homeless people have been diagnosed with mental health conditions including schizophrenia and clinical depression. All in all, those without the means to escape social housing are increasingly marginalised and condemned to growing poverty.

An Uncertain Future?

Those workers who have managed to get mortgages to buy their homes face increasing interest rates as the Bank of England tries to curb inflation, (which is increasing, in part, thanks to the enormous bonuses received by the City). The inflated value of their homes may be a way to access more debt, but many also face the choice of having their adult children live with them for a longer period or pay their mortgages for them. Increasingly, owner occupation is a hereditary state. In any case, building is failing in all sectors to keep pace with need. Each year 210,000 households form as society becomes increasingly splintered, while only 160,000 new homes are built. Since the 1970’s the numbers of households has risen by 30% while housebuilding fell by half. As people chase existing stock, prices edge up further.

The Permanent Housing Crisis

The housing crisis under capitalism is almost a permanent state of affairs. It just shifts its focus depending on the conditions of the time. After the First World War, the priority was to build “homes fit for heroes” and rid neighbourhoods of the private slums, which blighted the lives of so many workers. Today, many of the slums are Government-owned in one form or another and decent housing is as far out of the reach of many just as it was one hundred years ago. If prices rise at their current rate, the polarisation of society between homeowners and non-homeowners will deepen despite all the promises Brown might make about tackling child poverty. If the bubble bursts, as it did in the nineties, those who fall off the housing ladder will find the social sector just isn’t there to pick them up.

The Only Aternative

Decent housing is a fundamental human right. Under capitalism, housing, like everything else to do with humanity’s basic needs, is an investment opportunity and the chance to make a profit by whatever means. Just as it is incapable of providing basic necessities like food and clean water to workers who live in poorer parts of the globe, capitalism is incapable of ensuing decent shelter to those in the richest. Although it prides itself on its rationalism, it creates instead wildly fluctuating and unstable conditions where the poorest are increasingly impoverished and marginalised and the richest increase their wealth. The housing crisis is here to stay in one form or another, it is just another example of how the needs and drive of capitalism conflict with the needs of the majority of people on the planet. It will only be truly resolved once the working class decides to rid itself of capitalism in all its forms with all of its insanities and instead builds a creative society based on finally fulfilling human need.


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