How Britain profits from the housing crisis

8th October 2019 / United Kingdom
How Britain profits from the housing crisis

By TruePublica: Homelessness is any country in the world is a sign of a failing state or at the very least of a state system in breakdown or decay. Take the example of Finland, the most sparsely populated country in the EU with an income per capita similar to that of the UK.

In 2007, Finland’s government decided to adopt a new approach to dealing with homelessness. Setting themselves the ambitious aim of halving long-term homelessness by 2011 and eradicating it by 2015, a working group developed and implemented an integrated strategy based on the Housing First model. Housing First follows the principle of providing each homeless person with permanent housing, accompanied by individually tailored health and support services.

Even though Finland did not eradicate homelessness by 2015, it made considerable progress in reducing it. Through political commitment and the well-managed involvement of several stakeholders, the Finnish government managed to bring down the number of homeless people by 33 per cent in seven years and create new homes and packages for long-term homeless people.

Finland is a model country. It may only have a population the size of Scotland but it punches way above its weight in numerous metrics of national performance, including education, economic competitiveness, civil liberties, quality of life, and human development. It only goes to show what can be accomplished with political will.

In Britain, the government adopted a different strategy and the following few paragraphs from an investigation by the Bureau of Investigative Journalism describes the national breakdown of rational economic thinking, common sense and morality. Our recent report comparing life in the 1960s to today adds further information to the disastrous policies that successive governments have followed since the early 1980s leading to the crisis-ridden country that Britain now represents. For the first time since records began, two people now die on Britain’s streets every day in a betrayal of the social contract exacerbated heavily since the arrival of the Conservatives in 2010 because dying of homelessness is the end of a line of multiple failures of the state.

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How Britain keeps people homeless

Families on housing benefit are priced out of almost all homes to rent in Britain, according to new research by the Bureau of Investigative Journalism.

As part of our investigation into housing and new homelessness laws, the Bureau has found that councils have been increasingly encouraging those facing or experiencing homelessness to try renting privately, rather than wait for a council house.

However, only 1 in 20 of two-bed properties in the research were affordable. In some cities, the Bureau found almost no affordable two-bed flats to rent: York had seven, Bristol three, and Cardiff two. Moreover, even the affordable homes are often out of reach, because most landlords won’t let to benefit claimants – as the Bureau found when reporters contacted almost 200 landlords across Britain.

The local housing allowance (LHA) was frozen as part of the government’s austerity policy in 2016. The allowance, which varies from region to region, was supposed to cover the cheapest 30% of the local rental market. However, since the freeze rents have kept rising.

 

In a new and extensive piece of research, the Bureau captured the details of more than 62,000 two-bed rental properties across England, Wales and Scotland that were advertised on a single day. By mapping these against the LHA rates in each area, we found just 5.6% are actually affordable on benefits.

 

When the Bureau investigated the advice people were being given to avoid homelessness, we found many councils were simply giving vulnerable people lists of property rental websites.

In Bristol, a city of half a million people, just 3 of 450 properties were affordable, while in Ipswich, not a single two-bed flat was available.

The situation is dire in capital cities. Cardiff had only two properties that were affordable, out of 391 that were advertised. Last year more than 4,000 people asked Cardiff council for homelessness support. In Edinburgh, there were 12 flats out of 662 that a person on benefits could afford. In Central London, which has one of the highest rates of LHA at £320 a week, out of more than 4,400 two-bed homes advertised as for rent, only seven were affordable.

Across the country, people are regularly having to rent more expensive homes and top up their housing benefit with other funds to cover the shortfall. Our analysis found that the average British council would need their benefit allowance to be raised by £100 each month to make the cheapest 30% of the two-bed properties we sampled affordable. But in some areas that was much higher – in Central London, claimants would need an extra £1,422 a month.

Refusal to let to those on benefits makes the shortage of affordable properties even worse. Reporters from the Bureau contacted the landlords of 180 two-bed properties that would have been affordable on housing benefits. In each case, the reporter claimed to be a single mother with an 8-year-old daughter.

Half of those landlords said definitively that they would not let to anyone on benefits. Of those that were left, most said they would consider letting to our hypothetical family, but only if they could fulfil further conditions, such as paying six months’ rent in advance or providing a guarantor. One property site asked for a week’s rent in advance to even talk to the landlord.

 

Government market manipulation

That report says it all, except that the crucial problem is the lack of what was once council housing. At the dawn of Thatcher’s neoliberal experiment in 1979, 42 per cent of Briton’s lived in council housing. Today, that number is below 8 per cent. In 1953, the height of council house building in Britain, 220,000 new homes were completed. In the Blair/Brown years from 1997 to 2010, only 7,800 were built in total in 13 years. The Tories have been even worse though. Government investment in social rented housing was then cut by two-thirds almost as soon as the Tory/Lib Dem coalition took power. Since then, right-to-buy has been turbo-boosted by forcing councils to sell. The government pledged to replace each one with a new build. The result – for every nine sold, one just one was replaced.

The right-to-buy scheme – hailed as a great success, from start to finish, has actually seen over 40 per cent of sales end up in the hands of private landlords. So-called starter homes and affordable homes schemes, along with market rigging incentives such as help-to-buy have only made property owners and developers even wealthier and anyone trying to get there witness the dream of a stable home disappearing before their eyes.

 

In March this year, Britain’s biggest housebuilders paid out £2.3bn in dividends in their most recent financial year, as the help-to-buy subsidy pumped up their profits and house prices.

 

A New Economics Foundation investigation found that behind the housing crisis sits a crisis in the affordability of land. “The power of landowners to set the sale price, and their capture of enormous windfall financial benefits for doing little other than owning a piece of land, skews our broken development model before a single brick has been laid.” Property developers have been hoarding land to drive property prices even higher.

In 2014, radical pension rule changes allowed people to raid pension funds (money that was inaccessible by the state) where £billions ended up in buy-to-rent schemes that increased house prices. The government were then able to increase taxes on those buyers, while they still saw better returns than from failing pension providers. It was another ploy to push house prices just before an election.

Far from being a free market led by an age-old economic idea of price discovery versus supply and demand – successive governments have also added considerable weight to the problem of availability and pricing. They have cynically encouraged the strangulation of supply to push property prices up. The reasons were political. Property owners tend to vote, council renters tend not to vote. Combined, the housing crisis has emerged as nothing more than money and votes.

Then a new class war emerged with its centre-piece announced in 2010 – called Universal Credit. The result – a study by the Residential Landlords Association found that more than half of private landlords who let to tenants on Universal Credit saw them fall into arrears. By 2015, evictions had risen by 51 per cent from 2010 and in 2016 and 2017 new records were broken. Last year was no different as hundreds of families were thrown out each week. The number of female single parents found to be homeless has risen by 48 per cent in the last eight years.

Today, over 1.2 million families (2.5 million people) are stuck on waiting lists for some sort of permanent housing. Many have been waiting for years. Most that do become available only became so after tenants were evicted, died, or simply moved on inside or outside the social housing sector. All this because of money and votes for a minority.

There is light at the end of the tunnel though. The housing crisis has gone too far and now it’s a political issue. A recent study analysing the last election saw notable numbers of people targeting Labour’s stance on solving the housing crisis. A political tipping point has been reached.

In the end, there’s a simple question to ask when it comes to the housing market, the crisis it has caused and votes. What is the point of any government if it can’t even accommodate its own people?

 

 

 

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