The Housing Question: An Eternal Riddle for Capitalism

As long as capitalism has existed there has been a housing crisis, and this particular phase shows how bankrupt this system is, figuratively and increasingly literally. Homelessness, slums and overcrowding are the visible signs of poverty in the midst of plenty and while poor housing has blighted the lives of workers for generations, now more than ever it is an obvious sign of the failure of both free market ideology and the ideology of state intervention against the backdrop of a system nose diving into one of the worst economic crises humanity has ever seen.

A Capitalist Problem without Solution

The current economic crisis is completely bound up with housing failure. The banks, eager to cash in on staggeringly inflated house prices, encouraged people here (as in the US) to take out mortgages they could ill afford and suddenly the word ‘subprime’ was on everybody’s lips. The dream of homeownership, pushed militantly by every Government since Thatcher, now lies in tatters for millions, with the number of first time buyers falling by one quarter since 2008. Within a generation it is estimated (1) that Britain could become a nation of renters rather than buyers as more and more first time buyers struggle to get a mortgage. Dubbed ‘generation sofa’, the hidden homeless are set to grow as mortgage providers tighten their lending.

This is especially the case in London where a recent report (2) predicts that six in every ten Londoners will live in rented accommodation by 2021 (3). And rents are set to rise to their highest level on record, according to new research from the housing charity Shelter, which has found that typical rents for a two-bedroom home are over a third of average take home pay. London is as ever the most unaffordable place to rent, with 22 boroughs having average rents costing more than 50% of local take-home pay. Nationally buying is now 15% cheaper than renting. Shelter’s Private Rent Watch report stated that 38% of families with children who privately rent have cut back on food to help pay for their housing. The consequences of the banking crash are clear. With buyers forced out of the market, pressure grows on the rented sector, pushing up rents and creating opportunities for dodgy landlords to make a fast buck. Councils are in no position to regulate landlords, the few powers they had have been weakened by the cuts. It isn’t just the cost; the quality of accommodation is also declining. More than a million people already live in physically substandard accommodation and the problem is spreading. Poor housing is adding an extra £7bn on NHS, social services and education bills, with long term physical and mental health damage resulting not only from bad conditions but from the financial strain caused by expensive housing.

Full Circle

Those who are lucky enough to get a mortgage will find themselves better off, though increasingly only the better off will manage to get one. (While house sales in general were down 69% in the first 6 months of this year, sales of £1m plus luxury properties - principally in London - are even higher than at their 2007 peak.) On average first time buyers have to put down almost 30% of the property price (double that before the recession) and are now only able to borrow about 2.8 times their income, compared with a peak of around 3.2 times. Many will benefit from low interest rates (currently 0.5% a year) but not all will get the home of their dreams; houses in the UK are the most expensive in Europe but they are also the most dilapidated when old and are among the smallest when new, with builders squeezing as much profit as they can from tiny, badly built houses with little space or natural light. Worst off in these properties will be the tenants from owners with buy to let mortgages, a sector where complaints about poor housing is rising. Buy to let landlords (BTL) are now a big part of the housing scene. Of the 11.3 million mortgages in existence this year, 1.3 million had been taken out by BTL landlords (in 2001, only 185,000 were in existence) (4).

The rapid growth of this sector has crowded out many first time buyers and the whole business is rigged to favour landlords who can offset many of their costs, including mortgage interest payments, against their tax bills. In the property-owning democracy where we are all encouraged to be capitalists, the result is that someone has to lose, and lose badly. LSL Property Services, which monitors private rents, says they have now risen for six months in a row and are now on average more than £1,000 a month in London. Would-be buyers, unable to get a mortgage, are increasingly moving into the private rented sector, and with demand outstripping supply, rents are being pushed up even further. According to the National Housing Federation, home ownership is on a path of long-term decline. In ten years time, owner-occupation rates will be back to where they were in the mid-1980s when Thatcher’s right to buy started taking off.

The Death of Council Housing

And here is the crux of the problem. In the last housing crash in the early 1990’s, homelessness fell as lower house prices meant first time buyers could buy and homes were released for rent. That hasn’t happened this time. Instead homelessness is rising as a result of both the recession (causing lower wages and higher unemployment, especially youth unemployment) and government cuts in housing benefit. According to Crisis, the homelessness charity, homelessness is rising on almost all measures, reversing a trend that has seen more or less continuous declines since 2003. In the 1960’s, the poor housing situation shown in ‘Cathy Come Home’ shocked a whole generation but almost fifty years on and we’re still grappling with similar problems. The right-to-buy scheme has decimated council stock (5).

In 1977 30% of the population lived in council housing, today only 14% do so. Councils have been left with the worst housing (obviously the better housing was snapped up first and sold on) which led to councils finding various ways of ‘gatekeeping’, limiting the numbers and categories of people who were eligible for social housing. Over the years this has led to the most vulnerable only being accepted which in itself has led to a decline in the quality of neighbourhoods. Since the right to buy was pushed in earnest by Thatcher in the ‘80’s, councils have not been allowed to build new properties to replenish dwindling (and worsening) housing stock. Nor were they allowed to use the money from right to buy sales which has meant that over the years the social housing sector has lost £45 billion from the sale of council housing and £6 billion from selling council estates, all of which has gone to central government to prop up the ‘property owning democracy’ through, for example, tax breaks to private landlords.

Housing Associations have been allowed to build, but nowhere near the level of local authority building seen in the ‘60’s, ‘70’s or early ‘80’s. Fewer family homes are being built by housing associations; in each of the past five years fewer than half completions were family sized. According to the National Housing Federation there is no incentive to build bigger homes, leaving an estimated one million children in overcrowded homes (6).

Four and a half million people are currently on the waiting list for social housing with the numbers in London doubling since 2007. With the economy set to nosedive further, the total will only rise.

A Problem Made Worse by the Coalition

Last year the government announced a reform of social housing in England. Since the budget for social housing had been cut by 60% in real terms, the government announced plans to make up the shortfall for housing associations by allowing them to charge an ‘affordable’ rent; up to 80% of the market rate. Instantly there were two problems; in low value areas they simply wouldn’t be able to make enough money, meaning low rent homes would be left to dwindle leading eventually to higher rents. And in higher rent areas the increase in rent, coupled with cuts in housing benefits, would lead to more vulnerable people losing their homes.

In October 2011 David Cameron revealed a strategy to ‘fire up the engine of the British economy’. The coalition’s latest great idea is… bigger price discounts on the right to buy, funneling some of the money back into the public sector. There are many problems with this, one obvious one being right to buy has historically been part of the original problem, but it also comes at a time of deep cuts to the social housing capital budget so replacement homes will have to charge rents at up to 80% of the market rate, meaning some tenants will struggle to pay even with housing benefit. The other great idea is the ‘build now, pay later’ scheme, first announced in March, which could see 100,000 homes built on state-owned land by 2015 with no upfront cost to developers. By giving public land to developers and only taking payment once homes are sold the government hopes to kick-start the building industry. Sudden moves to simplify the planning system in order to encourage builders have already been met with anger as people realize that green field sites are at risk from speculative builders out to make a fast buck from free public land (7). Another direct attack on tenants is the proposal to increase rents for “under occupiers”. For tenants, often elderly or where other residents have died or left, it is proposed that they will be forced to pay a surcharge on their rent. The alternative would be an enforced move to a smaller property, which is often an impossible option due to the shortage of properties of all sizes.

A Solution for Housing? The End of Capitalism

The past three decades have shown more clearly than most how capitalism treats a basic human right like a roof over one’s head as a chance to make a profit, with disastrous results. The dream of the property-owning democracy is turning into a nightmare for millions trapped in substandard, overpriced accommodation. The housing situation today shows that no matter what the ideology, no matter what dreams are pedalled, the truth is always the same; the richest increase their wealth while the poorest become increasingly impoverished while watching their dreams disappear. The housing problem is set to get worse and it will only be solved once and for all when the working class decide to get rid of capitalism and build their own society based on fulfilling human need. As Friedrich Engels wrote on the ‘Housing Question’ in 1872:

It is not the solution of the housing question which simultaneously solves the social question, but only by the solution of the social question, that is, by the abolition of the capitalist mode of production, is the solution of the housing question made possible.

What was true in 1872 is equally true today as capitalism fails in this most basic of human needs.


(1) Research from the National Centre for Social Research on behalf of the Halifax, June 2011.

(2) Report by Oxford Economics for the National Housing Federation 2011.

(3) Of course this does not take into account ‘illegal’ renting which is on the increase in the capital. According to the Independent, many boroughs, including the London Borough of Newham, are facing an increase in rapidly constructed, often dangerous dwellings not much bigger than a garden shed. Thousands of such structures have sprung up over recent years as people struggle to cope with rising rents. Many are often dangerous, cramped and unsanitary, some have only a hole in the floor for a toilet, others are made from wood with a felt roof. Often they house vulnerable people with little choice about where they live, usually low-earning workers, earning below the minimum wage. Some are illegal immigrants at the mercy of unscrupulous landlords who profit from their illegality. Conditions in the so-called ‘super-sheds’ are said to be reminiscent of Victorian East End slums.

(4) Data from the Council of Mortgage Lenders, 2011.

(5) When Thatcher kick-started the process in 1979, 86,000 local authority homes were still being built (even though this amount was down from 110,000 the previous year. By 1990 that had fallen to just under 18,000 and by 1999 to 330. In 2004 130 were built. Since 1990 social housing has mostly been built by housing associations who have built on average 27,000 homes a year while waiting lists for their properties have risen 72% over the last 13 years from just over one million in the late 1990’s to almost 1.8 million by 2008. The situation has left housing associations wringing their hands. Richard Kemp, vice-chair of the Local Government Association has said there was ‘no long-term solution to this problem’(BBC, 15 January 2011)

(6) Figures released by Shelter, 2010.

(7) Often, of course, the problem isn’t a lack of housing; rather it’s the state of repair of existing housing, something the government seems intent on ignoring. There are an estimated 300,000 homes in the UK that have been empty for longer than six months with many are currently too run down to be used. The government’s response so far has been to draw up plans to make squatting illegal and take away squatters rights for good.


'The property question' rises again and again ! Then there are questions about what is being done with property by its owners and questions as to the point at which property partially or fully passes from owner to owner. And of course there can be many more questions on specific situations. How can awareness of problems lead to solutions ? Let's see.

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