Councils Monetising Housing to Pay for Public Services in an Age of Austerity
Tom Cordell continues his series on the housing crisis by looking at plans in Lambeth, south London, to use land assets to plug the gap in Government funding for local services.
It’s become a lazy journalistic habit to dismiss the Labour Party’s internal debates as vicious sectarianism, divorced from the reality of voters’ concerns.
Yet, increasingly, these battles are markers of how vital grassroots local campaigns are bubbling up into the electoral mainstream. And, while the issues seen alone are often intensely rooted in place, when joined together have the potential to reshape policy and the party itself.
On a hot summer evening last Friday, a packed gathering of the Streatham Labour Party cheered as they heard that Lambeth’s nominally-Labour Council was facing defeat in its plans to demolish 306 homes at the Cressingham Gardens estate.
To rapturous applause, Cressingham resident Tom Keene announced that the Housing Minister had rejected Lambeth’s objections to transferring their homes from council to community ownership. The residents still have a long road ahead before the transfer goes through, but, if they succeed, it will finally kill the council’s plans to demolish and regenerate their estate.
Squeezed between angry voters, internal activism and economic reality, it’s hard to see how local authorities’ recent efforts to play the property market for profit can survive.
When it launched in 2015, ‘Homes for Lambeth’ was intended as an exemplar for boroughs struggling to provide public services in an age of austerity. Denied funding from central government, many councils have looked to their land assets to plug the gap and provide key services. For Lambeth, in south London, this meant a huge plan to rebuild its existing council estates at higher densities, selling and renting some of the new flats at market prices, and using the profits to fund what it claimed would be 1,000 lower rent “council” homes.
Lambeth has made much of how the special purpose vehicle that would build the new homes – named ‘Homes for Lambeth’ (HfL) – would be entirely owned by the council, yet this was, to put it politely, disingenuous. To fund the programme, Lambeth plans to transfer its housing stock into the ownership of a company jointly owned by a private institutional investor, with the council retaining only a minority stake. And, despite the rhetoric presenting the scheme as a way to increase the borough’s supply of council homes, the new tenants would not be offered either secure council tenure or controlled rents.
what the papers don’t say
It was a high-risk strategy. When academics Joe Penny and Joe Beswick examined the HfL scheme, they saw that, by converting existing housing into a leveraged financial asset, Lambeth’s prime obligation would no longer be to its tenants but instead to servicing the debt it owed to its investment partner. Any future shortfall in funding the debt – say a cut in housing benefit from the Government or a fall in property values – could force the council to either raise rents, or even to sell off its housing stock to clear the debt.
Penny and Beswick found that, because HfL was external to the council, its decision-making would be excluded from the normal oversight and democratic accountability that councils are legally obliged to provide for genuine council housing. Understandably, the HfL plans have faced huge opposition from tenants and leaseholders across the borough.
Friday’s meeting was significant because it was clear that HfL’s unpopularity has now reached inside the local Labour party. Not a single voice spoke out to defend the council’s policies or leadership. Instead, speaker after speaker called for a change of policy, and for de-selection of the councillors who have driven the demolition plans. Between internal party dissent and local electoral reality, where Labour votes are haemorrhaging to the Greens and Lib Dems, it will be difficult for Lambeth’s Labour leadership to survive without changing course.
But the HfL plans face a further – more existential – threat. On the other side of the river Thames, Camden Council has been pursuing its own policy of land value extraction to fund public services. Describing its housing estate sites as its “North Sea wealth”, Camden has been busy building homes on them for private sale. Yet, it has been struggling to sell the new homes on the open market and, at a recent scrutiny meeting, council officers were forced to admit that, to keep the programme afloat, Camden was considering buying some of the new homes from itself. If the oil well of property sales is running dry, it will affect boroughs across the capital.
Squeezed between angry voters, internal activism and economic reality, it’s hard to see how local authorities’ recent efforts to play the property market for profit can survive. For the millions still living in council estates, it’s a realisation that can’t come a moment too soon. The question of how we pay for vital public services remains unanswered.