|SocialismToday Socialist Party magazine|
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.