New Labour’s housing plans in disarray
NEWS HEADLINES highlight new aspects of Britain’s
housing crisis on a daily basis: repossessions up 48% compared to last
year according to the Council of Mortgage Lenders; house builders laying
off workers; overcrowding and failure to meet decent homes standards in
social housing; and bad landlords, disrepair and insecurity in the
private-rented sector. This reflects both the deepening crisis of New
Labour, and the malaise of neo-liberalism internationally.
Brown came into office acknowledging the pressing
need for more housing and pledging to build three million homes.
Affordable housing was "one of the great causes of our time", he said.
His targets are widely described as ‘ambitious’ but in reality they
don’t measure up to the pressing need for more housing and they fail to
correct Britain’s historic under-investment. The target is three million
homes by 2020; in the 1950s a Tory government achieved 300,000 a year –
much of which was achieved through council housing. But the ‘credit
crunch’ marks a turning point in the development both of capitalism and
capitalist ideology and its effects mean that these targets are fast
receding into the realms of fantasy on the basis of current market-based
policies. House building is actually declining fast rather than
increasing in line with the targets. In August the Chartered Institute
of Purchasing Supply purchasing managers index – an indicator of future
activity – fell for the fifth month running with the sharpest rate of
decline since 1997.
Housing associations were seen as a vehicle for
achieving the social housing part of the targets, working with private
developers to draw in private investment and build more homes with less
grant from the government. They were also attractive to New Labour
because, unlike local authorities, they were not accountable to voters
and would not mount campaigns against cuts as some councils did in the
1980s. Now though, they have the same problems as the private house
builders.
Their business plans are reliant on selling houses,
but the market is collapsing and they have increasing problems raising
finance from the banks. Much housing association development is carried
out in partnership with private speculative developers through ‘section
106’ agreements between councils and developers – but as private
developers mothball schemes, the association’s part of the scheme
doesn’t get built either. Many associations are now scaling back their
development programmes and looking at how to spend less on services to
existing tenants. At the end of last year, for the first time ever, an
association went insolvent and the Housing Corporation has said that it
has a list of five to ten associations at risk. The consequences of a
major collapse would be dire for tenants, and also for the banks that
present lending to associations as ‘safe’ to their investors.
New Labour politicians have failed to understand the
changed situation and their spin is increasingly out step with everyday
experience. Faced with looming recession, the financial crisis, the
crisis in home ownership, and the forced nationalisation of a mortgage
bank, Caroline Flint chose to grab the headlines when she became housing
minister earlier this year by suggesting that council tenants should
loose their tenancies if they didn’t get employment – presumably council
housing should just go to the grateful and deserving poor.
It is true that because of right to buy sales and
the low level of building, access to council housing is now severely
rationed: there are now almost one million fewer social homes than
during the recession of the 1990s. The position is made more grotesque
by the fact that the ‘Housing Revenue Account’, a system by which
council rents nationally are pooled and redistributed by the treasury,
is currently in surplus by nearly £200 million annually. In effect this
is an extra tax on council tenants. Demand threatens to grow massively;
the Local Government Association predicts that five million people will
be on waiting lists for social housing by 2010. A penal approach to
council tenants won’t shrink the waiting list. More recently, Flint has
announced more help for people facing repossession, but closer
examination shows that all she was offering was a partial reversal of
earlier cuts in advice services.
Stephen Byers, who likes to be seen as a Blairite
‘thinker’, has also come up with some bright ideas. He suggested that
council housing tenants could hold the key to ending the housing slump
by allowing them to transfer ‘right to buy’ discounts to buy homes on
the open market. His idea is that this would free up desperately needed
social housing and, at the same time, boost demand in the housing
market. It is true that many tenants would like to own, particularly if
they live in poorly maintained housing in areas with social problems and
see ownership as an escape – but why not address this with a massive
expansion of council housing and an investment programme to improve the
stock? The money used for right to buy discounts could help to pay for
that. Byers is trying to revive an approach that can be traced back to
the Thatcher years, but in very different conditions. With unemployment
rising and mortgages harder to obtain he is suggesting a boost to the
sub-prime mortgage sector as a way out of the crisis. And even given the
level of subsidy (money that could go straight in to maintaining homes
and building new ones) how many tenants would be able to stump up a 10%
deposit anyway?
Many people who exercised the existing ‘right to
buy’ will already be among those fearing repossession of their home by
their bank. Even the Financial Services Authority, the official
regulator, found in its recent report that some lenders failed to
consider borrowers’ circumstances and were quick to take court action
rather than using repossession as a last resort. They also found
examples of unfair charges being slapped on homeowners struggling with
their repayments and ‘irresponsible’ practices among sub-prime lenders.
For much of the post-1945 period owner-occupation has been seen as a
virtually risk free way to accumulate wealth with security of tenure and
greater freedom to choose where to live etc. This was the context for
Thatcher’s ‘right to buy’ policy in the 1980s. But in a downturn all
these factors can reverse. Falling house prices mean owners get poorer
with no ability to cash in on rising values by re-mortgaging. This was
often a way to cover house repair costs or to cover the costs of the
retreating welfare state, for example paying college fees, and security
depends on ability to pay the mortgage. With home ownership in Britain
now standing at 69% these changes will have a profound impact on
consciousness in Britain.
Governments have been forced to prop up the finance
sector in both the UK and US. In America the government has been forced
to jackpot responsibility for the mortgage institutions Fannie Mae and
Freddie Mac, a combined liability of $5.3 trillion or about 60% of the
existing US national debt. This represents an enormous set back for the
idea that free markets deliver, the idea that the Labour Party leaders,
and most trade union leaders, came to accept in the neo-liberal era.
Faced with the collapse of their policies ministers
are looking at making more significant policy changes, including giving
councils a renewed role in house building, bringing forward public land
for building, and desperately trying to revive the housing market by
cutting stamp duty (the tax on property transactions). Any new council
homes will be welcome, but it would take a massive investment to make a
real impact. The government, of course, spent billions propping up the
banking sector and nationalising Northern Rock. Yet the Rock has one of
the highest increases in repossessions of all the banks – up 67% on last
year.
In this situation a radical programme could gain a
real echo. Yet unions like UNISON have welcomed the governments’ recent
housing act, restricting themselves to voicing ‘concern’ that social
housing grant can now go to private companies, and expressing a ritual
support for council housing. If they campaigned for a moratorium on
repossessions, for councils to take over homes when owners can’t pay
mortgages, and for bank nationalisation linked to a massive programme to
build cheap housing, they would connect with the changing mood of their
hard-pressed members.
Paul Kennedy
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