Housing in Crisis : A Clear Failure of Free Market Policy

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Housing in Crisis:

By Henry Stewart : @happyhenry

If councils had continued to build homes at the rate they did from 1974 to 1979, we would by 2014 have had 4.1 million extra dwellings.

That fact perhaps on its own explains the current housing crisis. Now it might not have been possible to build that many homes. Perhaps, due to available land, they would only have built half that, or a quarter of that, number. But even just a quarter would have meant we would not have the same level of housing shortage or, probably, prices as unaffordable as we face today.

The decision to stop local authorities building houses was a political one, taken by the government of Margaret Thatcher. It was based on a belief in the market. Surely, the argument went, if the housing market was not “crowded out” by public construction then the free market would respond and provide the homes that were needed.

Restrictions on council house building were not only continued by her successors, but further tightened. The average 32,000 council houses built each year from 1979 to 1990 was well down on Labour’s 152,000 from 1974-79. However under John Major it fell to an average 3,500 from 1990 to 1997. Under Tony Blair, from 1997 to 2007, just 357 council homes were built each year on average.

house-chart

 

Local authority Housing Association Private Total
Labour, 1974-79 151,678 21,978 144,240 295,920
Thatcher, 1980-90 31,905 14,684 166,417 211,147
Major, 1990-97 3,584 33,052 147,114 183,323
Blair, 1997-07 357 23,712 180,657 202,738
Brown, 2007-10 680 29,847 123,437 153,963
Cameron, 2010-14 2,830 27,158 106,345 140,335

Source: Table 208 House building: permanent dwellings started, by tenure¹ and country2

https://www.gov.uk/government/statistical-data-sets/live-tables-on-house-building

 

The number of dwellings built by housing associations during Blair’s years in office also fell, to 10,000 less per year than under Major. We know from Nick Clegg’s memoirs that, for Cameron and Osborne, there were clear political reasons not to increase social housing. He remembers one of them saying “I don’t understand why you keep going on about the need for more social housing – it just creates Labour voters”

 

Why Labour did remove the ban on councils building more homes is more of a mystery. Owen Jones has said that he once asked Hazel Blears, who had been Secretary of State for Local Government, why Labour did not ensure more public housing was built. The reply: “None of us knew anybody in social housing so we weren’t aware of the scale of the problem.”

Private sector house building did rise. But the 22,000 extra houses built each year from 1979 to 1990 did not come near to making up for the 120,000 annual shortfall in council houses. Neither was a shift made to housing associations, which built an average 7,000 homes a year less during the Thatcher years than under the previous Labour government.

Free market advocates would probably claim that the failure of the private sector to bridge the gap was down to market flaws, such as a shortage of land and planning restrictions. However a successful free market creates a balance of supply and demand, but there is no reason to suggest it will meet a public need for affordable housing.

Faced with a choice between using a piece of land for a £20 million mansion or 90 affordable homes at £200,000 each, it is always going to be the mansion that is more profitable. That is an extreme example. But the choice between 45 expensive home or 90 affordable ones is probably more common. It is clear that, without planning intervention, private developers will tend to build for the more affluent part of the market.

“Subsidised” housing? Or efficient housing?

David Cameron liked to describe social housing as “subsidised”, suggesting that the lower prices faced by council or housing association tenants was due to public subsidy. However social housing in the UK receives no such subsidy.

Cameron’s description was a recognition that social housing provides more affordable homes. It is also a recognition that the public sector can provide homes, without subsidy, at a better price (and often better quality) than the private sector. It is simply more efficiently provided housing.

The housing sector is a clear example that the free market cannot provide the solutions to all our public needs and indeed that it is often the public sector that can do so more efficiently and at lower cost.

Jeremy Corbyn has pledged to build 100,000 council house a year if elected. It does seem to be a policy that makes simple sense. It does not even need an increase in central government expenditure or in taxation, but only a removal of the restrictions on local authorities securing loans to build homes.

During the 2015 election the Green Party leader had difficulty explaining where the money would come from for public house building. Evan Davis on Newsnight explained it very simply: all that is needed is for councils to borrow the money on the public bond markets, and then to to use the resulting rent to pay both the loans and the interest. No extra public expenditure is required.

The housing crisis is a problem created by political ideology being put ahead of what was society needs. But it is also a problem that can start to be solved very easily by a return to public housing.

priced-out-graph

http://www.pricedout.org.uk/why

 

The Landlords’ Game and the Opportunists

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 The Landlord’s Game

And the Opportunists

Most people have heard of the board game Monopoly, a game which like Marmite, children soon learn to love or hate. The playing pieces are a feature of the game, an iron or an old boot are echoes of the poor (the losers?), the top hat representing the wealthy, with wheelbarrows and sport cars to carry home the cash. Perhaps it is significant that pieces representing the poorest are being phased out, the iron to be replaced by a cat.

Today’s game, of wheeling and dealing, auctions and interest rates, is reminiscent of the cut-throat  competition of stock markets, and banking fuelled by greed and ruthlessness. And like those, the game continues until all but one is eliminated, everyone else’s funds exhausted – and if mirrored in the real world, destitute, bankrupt, and left without the means to survive. The winner meanwhile has amassed a massive wealth of cash and real estate. What a dreadful lesson to give to our children!

Landlords_Game_board_based_on_1924_patent

But this was not the original intent of the game, inspired by Elizabeth Magie in the late 1800s and known as “the Landlord’s Game”. In stark contrast to the modern game, this was designed as an example to teach others about social and economic justice. She  had studied the writings of Henry George and eventually became one of many people who took on the task of trying to teach others what she had learned from studying Progress and Poverty and George’s other works.

Collaborating with friends in her Brentwood, Maryland community, Elizabeth Magie created The Landlord’s Game. She applied for a patent, which was granted on January 5th, 1904 (No. 748,626). This was a socialist idea, designed for the benefit of all, stolen by opportunists – and changed into the game of Monopoly. How often do we allow this to happen?

magie-elizabeth-1890Lizzie explained that the game was to be a “practical demonstration of the present system of land-grabbing with all its usual outcomes and consequences.” While still a young, single woman, Elizabeth — or “Lizzie” as she came to be called — became a regular visitor to the Single Tax enclave of Arden, Delaware. This was around 1903. Whether on her own or in conjunction with other Single Taxers in Arden, Lizzie continued to work on the design of The Landlord’s Game as a way to explain how Henry George’s system of political economy would work in real life.

(from How Henry George’s principles were corrupted into a game called Monopoly)

Now Britain is suffering a massive housing crisis. There simply aren’t enough decent, affordable homes ( Shelter)  More than two million people find their rent or mortgage a constant struggle or are falling behind with payments. The UK is now more polarised by housing wealth than at any time since the Victorian era. Today’s Housing Crisis has its roots in Margaret Thatcher’s Right-to-Buy Council House Scheme, offering tenants the chance to own their own homes, but not allowing councils to rebuild the stock.  Like Lizzie’s Landlords’ Game, opportunists stole public housing stock, to make a killing, many now in the hands of MP’s lobbyists. In short, like Lizzie’s Landlords’ game, opportunists profit, while others do the work. As Owen Jones, reports in the Guardian today Right-to-Buy has been a definitive disaster.

Those council homes, sold off and not replaced found their way into the hands of private landlords – almost forty per cent, and it’s rising. One ex- council flat in Central London has been sold for £1.2 Million (Guardian) Meanwhile, homelessness soars.

The Independent reports, 14th August 2015

Almost 40 per cent of former council homes sold on the cheap under the Government’s Right to Buy scheme are now being let out on the hugely expensive private rental market, enriching a new generation of landlords.

The first national study of its kind, carried out by Inside Housing magazine, comes as the government prepares to extend full Right to Buy discounts – of more than £100,000 per property in London and £70,000 elsewhere – to a further 1.3 million housing association tenants.

Figures released by 91 councils in England under the Freedom of Information act show 37.6 per cent of flats sold to tenants under the controversial policy are being sublet at up to seven times the cost of average social rents.

v2-4-Council-Houses-Getty

Everyone needs a decent home – people should not be paying astronomical prices and working longer and longer hours for a basic human need, while others can profit, while never doing a “proper job” at all. It is scandalous that people can gain advantage from buy-to-let-mortgages, putting the dream of a home well out of reach.  Now hard working people are finding their pay is not enough to pay a rent or a mortgage, and it is predominantly working people who need Housing Benefit to get by – and that Benefit is going straight into the landlords’ pockets.  It is siphoning off public assets directly into the private sector. This is a madness, why are wages inadequate for paying for a home? In order to access rented accommodation, massive deposits first have to be secured, plunging tenants into debt before they have even moved in. House prices have risen again recently, giving an illusion of wealth to some, but an unrealistic dream for young people.  And then, let us not forget the hated Bedroom Tax, that unkindest cut of all. Monopoly is an appropriate word for the housing crisis and it is becoming increasingly difficult for young people to pay for a decent home.

The last Labour government should have addressed the housing crisis. The next Labour government must. It must be a priority for Labour.  Jeremy Corbyn is promising a “radical reboot” of council house building to tackle the housing crisis.  A link to Jeremy Corbyn’s Housing  Manifeso is here  Please take time to read.

Extracts

  • Evidence suggests that we need to be building at least 240,000 homes per year(the coalition government averaged 145,000). We should be meeting and building in excess of that target, with at least half comprising of council homes.
  • A National Investment Bank could support new build housing projects with low interest rates, both by councils and developers as long as tough new conditions were met on the proportion of genuinely affordable housing built. For every £1 spent on housing construction an extra £2.09 is generated in the economy.
  • We need to bring (private) rents down to make sure they take up a lower proportion of people’s income, and given that many people are likely to renting for longer and longer, we need to make sure tenants have the right to a longer tenancy. A survey by Survation in January this year showed fewer than 10% of British people are against mandatory legal limits on housing rents.
  •  Regulation of private rents should be linked to what determines whether something isaffordable. We should consider average earnings and in particular their rate of increase, not the market rate for housing. JC HOUSING MANIFESTO

From the Mirror: Jeremy Corbyn would ‘reboot’ council house building and cap soaring private sector rents to combat the housing crisis if he was elected Prime Minister. The Labour leadership front-runner says councils should be allowed to commission and build houses themselves, instead of being forced to put construction out to tender for private companies. In his housing manifesto, he proposes regulated rents for private tenants, which would be linked to local average earnings. He also pledges licensing of private landlords, and giving tenants the right to longer tenancies. Daily Mirror

On the Monopoly story, Lizzie made very little money from her innovative idea; meanwhile the big corporations cashed in. Her teachings were censored, and as today, only the views of the rich and powerful were heard. Undoubtedly, she held firm to her convictions, and showed integrity which many of our modern politicians it seems lack. There is wisdom in Lizzie’s words from which we can all learn. An essay written by Elizabeth appeared in the September-October 1940 issue of Land and Freedom, under the title “A Word to the Wise.” 

Like Lizzie, there are many intelligent, inspired and creative people with great ideas to share for the good of society. Some of these are in the Labour Party, some in our schools, universeities, factories and offices. Working people. That is where ideas grow, and where wealth grows, We should not allow opportunists to steal what is rightly there for us all. That is what socialism is all about.

The Great Housing and Welfare Swindle is discussed at length here Parts 1 ( and 2).

References and Further Reading

The Case for Public Housing

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When did property ownership become such a major aim in the life of ordinary people? When did living in council owned housing become a stigma? When did mortgages did multi-generation mortgages come to be considered? Who has benefitted? In the light of current levels poverty and homelessness, why did we all go along with it all?

Sarah Glynn’s article looks back at the change in housing over the last hundred years or so.

The Case for Public Housing

By Sarah Glynn, Occupy Times

A home is such a basic need that the provision of adequate and decent housing should be a fundamental requirement of a fair society. But what do we require of a home beyond sound and safe shelter that can accommodate our household in a reasonably convenient location? Security of tenure is a vital basis for secure lives, and affordability is crucial. We may also need the option to move without penalty as and when circumstances demand. And most of us enjoy the opportunity to personalise our home.

public3

These should be the major considerations behind any housing policy, but increasingly they have become subservient to a free market politics that views housing as a major source of wealth and investment. None of the basic requirements listed above are dependent on home ownership – in fact affordability and moving house can be easier if you are not a homeowner.

Politicians like to claim that homeownership is a ‘natural’ aspiration, but it has been deliberately cultivated and subsidised by our capitalist society. As successive politicians have argued, homeownership encourages people to identify with conservative ideas about private property, and workers tied to a home and a mortgage are less likely to risk taking part in strike action.

One hundred years ago, almost everyone in the UK rented their homes, but they rented them from private landlords who sought to extract maximum profits. For working-class people, that meant dreadful, overcrowded conditions, insecure tenancies, and extortionate rents. State-subsidised council housing was brought in after the First World War because the private system wasn’t working – and because the government feared the growth of revolutionary ideas if they weren’t seen to be doing something about it. By the end of the 1970s, one third of households in the UK – and over half in Scotland – lived in publicly-owned, state-subsidised rented housing, and living conditions had undergone a massive improvement. But these developments were not without problems. An emphasis on quantity over quality meant housing estates were often poorly designed, serviced and maintained; and problems were compounded by distant, bureaucratic management.

Meanwhile, homeownership grew even more significantly, becoming associated with higher social standing. Investment in private property took on a growing role in national and household economics. Home owners used their property wealth to climb the economic ladder, leaving renters behind in relative poverty. Three decades of neoliberal free market policies have sold off the best council homes, restricted funding for those that remain, and created a disastrous property bubble. Private renting is again on the rise, along with all the problems that made public housing necessary in the first place. Landlords are amassing easy money as tenants hand over ever higher proportions of their income in rent. Housing benefits only serve to subsidise the landlords.

It needn’t have been like this. Public housing can provide everything that we want from a home, and fiscal rules can be drawn up so that homeowners do not gain a financial advantage over those who rent. Well considered and resourced housing policies can make a substantial contribution to a fairer, more equal society. In 1960s Sweden, a combination of regulations and subsidies ensured that tenants were not penalised with respect to owner occupiers; in modern Helsinki, 80% of land is publicly owned and half of homes are subsidised rented houses, which are often indistinguishable from their privately owned neighbours; and even in the UK there have been successful experiments in tenant management.

Public housing in the UK has been given bad press because vested interests did not want it to be too successful. Inadequate funding and bad management ensured its second class status. Its increasingly “safety net” role has led to it being stigmatised as poor housing for poor people. And there have been some spectacular failures. However, despite all this, the majority of schemes provided good homes that made a real difference to working-class living standards. And if we learn from past mistakes, we could see public housing playing an even more significant role in the future. There is no reason why we couldn’t plan for good quality, well-subsidised public housing for all who want it. This might seem extravagant, but it would be an investment in better life chances and a more cohesive and equal society. This time we could construct a system of local management, incorporating tenant involvement. Public housing also offers the possibility of co-ordinated planning, taking account of all the other things that make a community, and making efficient use of green technologies.

Public housing satisfies urgent practical needs as well as offering opportunities for a much more holistic approach to creating fairer and more sustainable communities.

By Sarah Glynn | sarahglynn.net

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.
– See more at: http://theoccupiedtimes.org/?p=11971#sthash.1imXPAAp.dpuf

See also: Uniting the People – Houses for People, not Profiteers

Monopoly and the Landlords’ Game

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 The Landlord’s Game  

From @Earwiggle

Most people have heard of the board game Monopoly, a game which like Marmite, children soon learn to love or hate. The playing pieces are a feature of the game, an iron or an old boot are echoes of the poor (the losers?), the top hat representing the wealthy, with wheelbarrows and sport cars to carry home the cash. Perhaps it is significant that pieces representing the poorest are now being phased out, the iron to be replaced by a cat.

Today’s game, of wheeling and dealing, auctions and interest rates, is reminiscent of the cuthroat  competition of stock markets, and banking fuelled by greed and ruthlessness. And like those, the game continues until all but one is eliminated, everyone else’s funds exhausted – and if mirrored in the real world, destitute, bankrupt, and left without the means to survive. The winner meanwhile has amassed a massive wealth of cash and real estate. What a dreadful lesson to give to our children!

Landlords_Game_board_based_on_1924_patent

But this was not the original intent of the game, inspired by Elizabeth Magie in the late 1800s and known as “the Landlord’s Game”. In stark contrast to the modern game, this was designed as an example to teach others about social and economic justice. She  had studied the writings of Henry George and eventually became one of many people who took on the task of trying to teach others what she had learned from studying Progress and Poverty and George’s other works.  

Collaborating with friends in her Brentwood, Maryland community, Elizabeth Magie created The Landlord’s Game. She applied for a patent, which was granted on January 5th, 1904 (No. 748,626).

magie-elizabeth-1890She explained that the game was to be a “practical demonstration of the present system of land-grabbing with all its usual outcomes and consequences.” While still a young, single woman, Elizabeth — or “Lizzie” as she came to be called — became a regular visitor to the Single Tax enclave of Arden, Delaware. This was around 1903. Whether on her own or in conjunction with other Single Taxers in Arden, Lizzie continued to work on the design of The Landlord’s Game as a way to explain how Henry George’s system of political economy would work in real life.

(from How Henry George’s principles were corrupted into a game called Monopoly)

Many of Henry George’s observations ring true today. Poverty is rising in the UK, homelessness is soaring.

Now Britain is suffering a massive housing crisis. There simply aren’t enough decent, affordable homes ( Shelter)  More than two million people find their rent or mortgage a constant struggle or are falling behind with payments. The UK is now more polarised by housing wealth than at any time since the Victorian era.

Osborne’s policy is to create a mini boom in house prices, attempting to appeal to voters, who feel a windfall coming their way – the modern day monopoly player believing there is a recovery in the economy. But, just like in the game, all that can be achieved is disaster for many. Dominic Lawson (Independent) describes the policy as a dangerous political placebo, and Steve Keen labels it as a Ponzi scheme, and suggests it should be renamed “Help to Sell”. Today’s Housing Crisis has its roots in Margaret Thatcher’s Right-to-Buy Council House Scheme, offering tenants the chance to own their own homes, but not allowing councils to rebuild the stock. The Great Housing and Welfare Swindle is discussed at length here Parts 1 ( and 2). House prices have risen again recently, giving an illusion of wealth to some, but an unrealistic dream for young people. One third of the council houses originally sold to tenants are now owned by rich landlords. Now hard working people are finding their pay is not enough to pay a rent or a mortgage, and it is predominantly working people who need Housing Benefit to get by – and that Benefit is going straight into the landlords’ pockets.  This is a madness, why are wages inadequate for paying for a home? In order to access rented accommodation, massive deposits first have to be secured, plunging tenants into debt before they have even moved in. The Labour Party has pledged to tackle the unregulated agents and criticised the lack of transparency. There is certainly a need to make this a key issue in forthcoming elections. More hype about house-price rises is not going to solve this problem – as homelessness is soaring.  And then, let us not forget the hated Bedroom Tax, that unkindest cut of all.

SOME KEY FACTS OF UK HOUSING (see Guardian)

26.4m: The number of households in the UK in 2012, according to the Office for National Statistics. Following the 2011 census, the government predicted that the number of households would rise to 28m by 2016. 
2005: The peak year for home ownership. In 2005-06 home ownership peaked at 71% of dwellings (figures for England only). It declined to 65% in 2011-2012 and is expected to fall further.
58%: The increase in the number of privately rented homes between 2005-06 and 2011-12, which went up from 2.4m to 3.8m (source: DCLG English Household Survey, 2011-12).
449,000: The number of households with six or more occupants. The most common household in England – 7.9m properties – is two people living in a home.
£4.2tn: The net value of British household dwellings, after mortgages are deducted, according to Office for National Statistics figures this week. The total value has now surpassed the 2007 pre-financial crisis peak, when it stood at £4.1tn. British houses are now worth 55% more than they were in 2003, said the ONS, and make up 60% of the total net worth of the country.
£169,624 Average House price The “seasonally adjusted” average price of a home in the UK, according to the Halifax house price index for July 2013, up 4.6% on the year before. The non-seasonally adjusted figure is £172,015. This is still 14.5% below the all-time peak of £201,081 recorded in August 2007. Average house prices fell by 22% from August 2007 to March 2009.
£318,214: The average price of a property in London, according to the Nationwide house price index. That’s 2.75 times than the average for the North (£115,763), and almost three times higher than the UK’s cheapest region, Northern Ireland, where prices average £108,116. (Source: Q2 2013 Nationwide regional index).
£1,118: The average monthly rent in London in July 2013, up 5.7% from a year earlier, according to the LSL Buy to Let index. The average rent across the UK in July 2013 was £738 a month, up 11% from £663 in April 2010, the month before the coalition government came to power. Earnings have increased by around 1% over the same period.
106,820: The number of houses built in the UK in the year to June 2013, down 9% on the year earlier. In 1970, total house building in the UK was 378,230 units. Council house building has collapsed from 185,000 units then to less than 1,000 a year across most of the last decade

Extracts from Progress and Poverty make interesting reading today:-

  • Wages are not drawn from capital. On the contrary, wages are drawn from the product of the labor for which they are paid 
  • Rent, in short, is the price of monopoly. It arises from individual ownership of the natural elements — which human exertion can neither produce nor increase.
  •  If any class gets less, it is for one reason only — because the distribution of wealth has become more unequal. 
  • We must make land common property.

Lizzie made very little money from her innovative idea; meanwhile the big corporations cashed in. Her teachings were censored, and as today, only the views of the rich and powerful were heard. Undoubtedly, she held firm to her convictions, and showed integrity which many of our modern politicians it seems lack. There is wisdom in Lizzie’s words from which we can all learn. An essay written by Elizabeth appeared in the September-October 1940 issue of Land and Freedom, under the title “A Word to the Wise.” Even in her declining years, she was urging surviving Single Taxers to action:

What is the value of our philosophy if we do not do our utmost to apply it? To simply know a thing is not enough. To merely speak or write of it occasionally among ourselves is not enough. We must do something about it on a large scale if we are to make headway. These are critical times, and drastic action is needed. To make any worthwhile impression on the multitude, we must go in droves into the sacred precincts of the men we are after. We must not only tell them, but show them just how and why and where our claims can be proven in some actual situation….

The 24th August 2013 – A National Day of Action –

Mass “Sleep Out” in 45 towns and cities across the UK.

References and Further Reading