The collapse of social housing in Britain now well underway after budget
The documented history of social housing in Britain starts with almshouses which were established from the 10th century, to provide a place of residence for “poor, old and distressed folk”. The first recorded almshouse was founded in York by King Æthelstan; the oldest still in existence is the Hospital of St. Cross in Winchester, dating to circa 1133.
It was not until 1885, when a Royal Commission was held, that the state took an interest in homes for the poor. This led to the Housing of the Working Classes Act 1890, which encouraged local authorities to improve the housing in their areas. As a consequence London County Council opened the Boundary Estate in 1900, and many local councils began building flats and houses in the early twentieth century.
While new council housing had been built, little had been done to resolve the problem of inner-city slums. This was to change with the Housing Act 1930, which required councils to prepare slum clearance plans, and some progress was made before the Second World War intervened.
During the Second World War almost four million British homes were destroyed or damaged, and afterwards there was a major boom in council house construction. The bomb damage from the war only worsened the condition of Britain’s housing stock, which was in poor condition before its outbreak. Afterwards, Britain was put to work by building and refurbishing it’s council homes stock by the Labour party in 1945-1951.
For many working-class people, this housing model provided their first experience of private indoor toilets, private bathrooms and hot running water. For tenants in England and Wales it also usually provided the first experience of private garden space. Three bedroom semi’s being the build model of the day with only twelve built per acre.
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Council housing declined sharply in the Thatcher era, as the Conservative government encouraged home ownership under the ‘Right to Buy’ scheme.
Laws restricted councils’ investment in housing, preventing them subsidising it from local taxes, but more importantly, council tenants were given the “right to buy” in the 1980s Housing Act offering a discount price on their council house. The ‘Right to Buy’ scheme allowed tenants to buy their home with a discount of 33% – 50% off the market value, depending on the time they had lived there. Councils were prevented from reinvesting the proceeds of these sales in new housing, and the total available stock, particularly of more desirable homes, declined dramatically.
This proved to be disastrous and the housing sell-off kick started the housing crisis we have today. Rolled out during the first half of the 1980s. The selling of council stock homes was accompanied by the slashing of housing budgets and ever more draconian controls on local authority borrowing and spending. The result was large rent rises, falling house building and, by 1986, an estimated £19bn repair backlog for council homes and £25bn for private sector homes (Hughes and Lowe, pp.217-8).
The more the Conservatives cut and financially constrained, the more privatisation became the norm for both tenants and local authorities. The Conservatives also introduced greater powers for private landlords and liberalised mortgage lending for buy-to-let investment to boost the private rental sector and help to develop major property companies, agencies and estate agents.
From 1980 to 1990 4.39 million homes had been sold-off, transferred from councils or demolished to make way for new private developments. Thousands were repossessed in the housing crash that started in 1988 that didn’t end until 1994. Many were bought up by private landlords at knock-down prices.
So concerned was the government at the sheer scale of repossessions that they gave lenders big financial incentives to keep them in what became known as Business Expansion Schemes or BESco’s. Tens of thousands of homes were then rented out (mainly to homeless families forced onto housing benefit) with government guarantees of profits for the following years. These homes were then sold providing huge profits when the market recovered.
The collapse of the housing market amidst the global financial crisis demonstrated how Labour’s disastrous continuation of the privatisation project made Britain’s housing and economy dangerously vulnerable to market shocks and personal indebtedness. But far from taking the market out of housing, since taking power from Labour in May 2010, the Conservative-Liberal Democrat Coalition Government moved in exactly the opposite direction, taking the privatisation project to a new, more aggressive and disastrous level – yet to blow up in our faces.
Meanwhile, David Cameron’s pledge to offer a right to buy to all housing-association tenants has been questioned by housing lawyers. The controversial policy, a core plank of the Conservative manifesto, sparked uproar as social landlords warned that selling off their housing stock at a discount would make it harder to build replacement affordable housing.
And so it has come to be in just a matter of weeks. We are witnessing the slow death of social housing. The number of social homes is being eroded by the right-to-buy scheme, the conversion of social rent to so-called affordable rent and the lack of replacements. That affordable rent is now at least 80% of market rent.
The Chartered Institute of Housing estimates that around 120,000 social homes have been lost in three years but this new announcement will drastically accelerate this number. But housing associations won’t wait, they are giving up on the ideals of social housing for the poor already.
One of the largest housing associations in the UK last week announced it would no longer build social housing. Instead, its chief executive said, it will only build homes for sale, for rent at full market rates or for shared ownership.
Furthermore, Genesis housing association, which owns and manages about 33,000 homes around London and the south-east, will consider selling or raising the rents on its existing social homes once they become vacant.
Housing associations are operating in a difficult environment: government funding to build social homes was cut by 60% in 2010 and the impacts of welfare reforms have heavily affected their tenants and consequently their rental income turning them into unviable operations.
Genesis was established as Paddington Churches Housing Association in the 1960s. Like many others created at the same time, its mission was to provide low-rent homes for families who needed them. Many housing associations still have similar values today, which is why they have charitable status.
Lawyers are questioning the validity of a government forcibly selling privately owned assets – property built without any government or taxpayer assistance.
But the disaster of the unfolding housing crisis continues now that the threats have been made. There is already talk of a number of housing associations considering de-registering as a social housing provider, paying back their grants and becoming private companies.
Housing Associations were set up as ‘Arms-Length” organisations to combat government policies that attacked homelessness and the poor that was dramatically increased by the Thatcher era and now Cameron’s. It is a very sad thing that they are now capitulating these honourable ideals by seeking to profit from this dire situation as they vacate this desperate hole in the housing market.
There are now 1,843,992 families in England and Scotland on council housing waiting lists. This is the direct result of average house prices being between nearly 7 times median earnings. This is the direct result of Thatcher’s “big bang” that destroyed mortgage lending criteria leading directly to the massive and unabated house price inflation we see today.
London alone has 344,294 households on a local authority housing waiting list while average house prices in the capital are now 13.4 times median earnings. In some areas over 100 families are competing for each council house that becomes available. The continuing crisis is spelled out for the public on a daily basis. Figures in the government’s latest English Housing Survey show tenants paid 52pc of their gross income in rent last year – up from 40% in just 2 years. Home ownership for the young is no longer an aspiration, more a dream.
This is because house building has largely collapsed and successive governments have allowed an aggressive banking industry to take full control over housing policy by determining ever increasing and unsustainable debt. Banks do not lose out lending money on property, even if it is repossessed or the housing market implodes – as we have been witnessing over the last seven years.
What we are now witnessing is the sustained collapse of social housing – then what?
By Graham Vanbergen for TruePublica