Britain's housing market is broken. A mass council housebuilding project is the perfect solutionby Chaminda Jayanetti / January 10, 2019 / Leave a comment
This week’s landmark cross-party report on council and social housing brought a much-needed injection of reality into a housing debate that has spent decades fixated on homeownership and worthless wheezes designed to create new classes of “affordable” housing that aren’t actually affordable.
The report calls for three million new council and social housing units to be built over the next 20 years, outpacing the mass building programme that followed the second world war. The programme would address urgent housing needs—but would also provide housing for more than a million young people and 700,000 older people stuck in the private rented sector.
The bracing ambition of the report raises an important and oft-overlooked question: who, and what, is council housing for? In its modern denuded state, and at a time of soaring homelessness and hunger, we tend to see it as being just for “the poorest,” like an extension of the benefit system.
The doctor, the butcher, the labourer
It wasn’t always thus. The original vision of the postwar Labour government’s council housebuilding programme was to create socially mixed communities where, in housing minister Nye Bevin’s words, “the doctor, the grocer, the butcher and the … labourer all lived in the same street.” That was before the doctor, the grocer and the butcher took advantage of Thatcher’s Right to Buy revolution.
But there’s a more pressing argument for extending council housing back to the middle classes: affordability. It ought to be a natural objective of public policy to ensure that housing costs are kept low for the majority of the public. It is not the proper aim of government to ensure high returns to landowners and rentiers. Yet for decades, policy has secured the latter at the expense of the former.
This is because policymakers wrongly assumed that housing works best as a deregulated market. The difficulty with this is that prices will be set at the level that people are willing to pay—and because people needsomewhere to live, they’ll be willing to pay ever more money for it.
Sure enough, this is what has happened: property developers and landlords have been able to push costs ever higher, knowing that people have no choice but to pay. Over the last sixty years, the share of household income that goes on housing has more than doubled.
Where are the houses?
This is particularly relevant in today’s economic geography. Many Western governments are grappling with how to restore economic growth in towns and small cities in ex-industrial regions. Job creation is concentrated in larger cities that benefit from agglomeration, meaning surplus housing stock is often not where the jobs are.
These effects are especially acute in Britain’s housing market, which serves not just domestic demand but speculative interest from global investors. Manchester’s economic revival has been accompanied by rocketing house prices and soaring rents. The fruits of growth turn mouldy fast.
Many argue for more private house-building to bring down housing costs—but simply relying on the market is inefficient, with developers favouring luxury accommodation that delivers the biggest returns and international investors driving up prices.
“A hundred new luxury flats are just a hundred council flats that should have been built but weren’t.”
The efficient approach is for the government to step in with mass council house-building that drags down market rents. A hundred new luxury flats are just a hundred council flats that should have been built but weren’t.
The goal is what currently seems like an alternate universe: one where a strongly-growing local economy isn’t inevitably accompanied by soaring housing costs; where the ‘gentrification’ of an area doesn’t invariably mean existing communities being priced out to be replaced by vanity towers with stupid names for Singaporean pension funds. It’s not an impossible goal. It just needs mass council housing instead of market mania.
A basic right
Three issues remain. The first is Right to Buy. Serious thought would have to be given to how to use Right to Buy’s ability to spread asset ownership across the population, thereby reducing wealth inequality, without triggering another decimation of Britain’s council housing stock.
The second is that of need. It was not until 1977 that local authorities were legally required to award council tenancies on the basis of housing need. That prioritisation must remain: council housing must be extended to the middle classes through massive breadth of provision, not by throwing those in greatest need under a bus.
Finally, there is the issue of time. Building millions of council homes will take many years, and there is no solution to our immediate housing crisis without reversing Housing Benefit cuts, scrapping the benefit cap, and boosting tenants’ rights.
Council housing is finally back on the political agenda after decades in the wilderness. Britain should seize the opportunity to make it truly transformative: so that the doctor, the grocer, the butcher, the labourer and the stay-at-home single parent can all enjoy the basic socioeconomic right of secure, affordable housing.