CITY FOR SALE
How the Housing Crisis is a Political Creation
In the first of a new Byline Times series, ‘City for Sale’, film-maker and writer Tom Cordell outlines the reasons behind the housing crisis, the role played by politicians and the property and financial sectors, and the possible solutions.
Only fools or scoundrels can pursue policies that are certain to worsen a crisis, and then cry out in horror at the result.
Yet, British housing policy-makers are doing just this; harnessing public outcry about the housing crisis to push on with programmes that, over the past four decades, have consistently ensured that housing costs would go up faster than earnings, tenants would live in fear of eviction, and that consequentially more people would end up living in insecure and overcrowded homes, or on the streets.
Housing is the area where inequality becomes most undeniable and the housing crisis is essentially one of affordability and distribution. As housing costs have risen beyond what increasing numbers of people can afford, there is a mass of empty or underused homes around the country. While one person can afford a home with spare rooms, another is left without shelter. Even in London – the area of greatest housing demand in the UK – there are around 21,000 empty homes, often new builds used to store capital by wealthy investors.
In this dark world, where politics and profits meet, staff now rotate from jobs with developers into council and government roles, all the time managing the private takeover of the city.
It’s not that the Government is unwilling to subsidise housing. Since 2013, it has invested £11.7 billion in its ‘Help to Buy’ scheme, offering subsidised loans that have enabled 211,000 affluent households – people very unlikely to face genuine housing crisis – to buy their own homes. Beyond helping these lucky homeowners, the subsidy has served to push up house prices, driving the underlying affordability crisis.
The Government is less willing to intervene to house the less well-off. Since 2010, it has cut grants to housing associations, meaning that they now have to fund 90% of new house-building from commercial loans. This money is borrowed against the value of their existing housing stock, so that they too are locked into supporting high property prices, as a housing market crash risks pushing them into insolvency.
Venerable housing association Peabody exemplifies the new order, issuing bonds to fund new building, providing the City with a low-risk store for global accumulations of capital. Together with bank borrowing, its total commercial debt is over £2 billion. But, while the finance industry profits, the G15 group of major housing associations (of which Peabody is a key member) admitted in 2016 that, of the 35 major regeneration schemes they were undertaking, there would be a 17% reduction in the stock of social or affordable rental homes – even though this is the housing type most able to insulate low income residents from market-driven price rises.
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The policy drive to push up housing costs extends to every area of urban planning. City Hall measures the success of a project like Crossrail in terms of how much it will drive up property values along its route. This land value uplift becomes the key driver of the urban regeneration projects that London Mayor Sadiq Khan is promoting in partnership with big private developers. The mayor claims that the schemes will solve the affordability crisis, by using the increased value of new market price housing to fund a smaller amount of “affordable” homes in the same area. But, in practice, these big projects drive up housing costs for entire areas, making housing more expensive for far more households than the small number who benefit from the new “affordable” homes.
The logic of this housing policy, both regionally and nationally, only makes sense when seen in terms of who benefits, and lurking behind the usual suspects – lucky property-owning baby-boomers – are the conjoined twin interests that dominate Britain’s modern economy: finance and property. And, with these sectors’ profits dependent on land values going up, it is clear why Government policy has driven the rise in housing costs.
The Legacy of Thatcher and Blair
The ascendancy of these sectors started in the 1980s under Margaret Thatcher, who was determined to break Britain’s trade unions and pursued rapid de-industrialisation to curb their power.
Instead, her Government promoted a post-industrial economy based around London’s finance sector. In the 30 years leading up to Thatcher’s election in 1979, the Government had funded councils to buy land and build around 150,000 council houses every year. It also encouraged businesses to move jobs away from the areas of highest housing pressure in the south-east. This brought benefits even for people buying their own homes, as the plentiful supply of cheap and secure council housing for rent helped to dampen speculative increases in house prices. Not all the housing was perfect but, overall, it was a remarkably successful way to house the nation.
Housing is the area where inequality becomes most undeniable.
Thatcher was determined to break this settlement, forcing local authorities to sell-off much of their housing stock at massive discounts to their tenants, while refusing to allow them to replace it. Meanwhile, the emphasis on home ownership created a massive new demand for mortgage products from the finance sector. The shift in how British people live has been profound and long-lasting. Whereas in 1979, 42% of British people lived in council housing; today the figure is around 8%.
The privatisation of public housing was backed by an attack on the rights of tenants in the private rental sector – with rent controls removed – and landlords given new powers to evict tenants on a whim. This guaranteed that, as council houses became increasingly scarce, private landlords could crank up rents. Again, the property industry profited, selling new ‘Buy to Let’ mortgages that enabled small-scale landlords to build property fortunes at the expense of their tenants.
This drive towards privatised housing backed by mortgage debt was industrialised after the election of Tony Blair in 1997. Under the slogan “building mixed communities”, New Labour championed the process of urban regeneration that goes on to this day. It ordered local councils to work hand-in-hand with developers to demolish existing council housing, freeing up the land for profitable new development. Over the past two decades, established communities – alongside shops, clubs, markets and pubs – have been destroyed as the property machine has rolled through our cities.
The conjoined twin interests that dominate Britain’s modern economy: finance and property.
In this dark world, where politics and profits meet, staff now rotate from jobs with developers into council and government roles, all the time managing the private takeover of the city. And still the prices keep going up.
The solutions are simple enough if we really wanted to solve the housing crisis. We could reintroduce rent controls for private tenants and secure their right to stay in their homes. We could even build new council houses with public money, and fund councils to buy up homes owned by private landlords. But, what’s first required is the political will for change – and to break the grip of the property and financial sectors over our society.