Britain - answering the housing question

Summer 2015

Everyone has heard of the latest housing bubble here in Britain. Never mind the fact that the 2007 banking crisis, sparked by greed-led speculation on sub-prime mortgages in the USA, is hardly over yet.

Of course, the on-going housing crisis here feeds on and is in turn fed, by this greed of speculators. Caught in the middle of this are the homeless, low-paid workers and the unemployed, stuck in the eye of a whirlwind which just spins faster and faster around their heads.

But it is not only the poor who are roofless today - and that is what probably makes this issue so prominent in the media. The social networks are buzzing with campaigns and activism, as "generation rent" is faced with its own fundamental problem!

Indeed, the middle class youth who would in the past have been "getting a foot on the housing ladder" - i.e., buying their (first!) home - are today unable to do so. Not only must they pay rent, but they have to share and improvise - or stay with their parents. This is especially so in London where rents are more than double anywhere else in the country. These went up to an average £1,472 a month for a one-bedroom flat this June, compared to £738/month outside London, a 10.7% and 7.6% respective increase over the year.

It is easy to see the problem if you look at what workers earn. On the current minimum wage of £6.50/hour, even if you have a full time 40-hour job, your just-over £1,000 or so per month would have to be topped up by housing benefit so as to pay rent, which would otherwise be impossible.

Wage statistics (which include managers and professionals) give a figure for an "average" full-time wage of £493 per week and thus £1,972 per month. So this mythical "average" full-time worker would still not have enough money left after rent, to pay other vital expenses (food, electricity, travel, etc.,).

In other words, a single person could not, even in a month of Sundays' overtime, afford today's housing costs in London. And elsewhere in the country, it would still be a struggle. Workers today are being bitten both ways - wages being far too low and housing costs just ridiculous.

And although all the figures bandied about in the press explain that there is this tremendous shortfall of "home-building", by at least 100,000 homes per year, in parts of London there seems to be a construction boom, with high rise apartment blocks shooting up all over! But they are tantalisingly out of reach - a bit like in the Rhyme of the Ancient Mariner, where water, water, is everywhere, but not a drop to drink: new homes everywhere, but for the majority on low incomes, not a single one affordable...

Recently the Observer newspaper published an article entitled "London: the city that ate itself". It explains how this city (containing one seventh of the country's population as a whole) is "eroding" the leafy estates in favour of expensive developments - the so-called "safe deposit boxes" in the sky. Perhaps this is not surprising in a city which apparently hosts more billionaires than any other in the world. As one journalist put it "the inflation of the property market has unmoored the city from the rest of the country, with a combination of rampant speculation and a lack of supply pushing valuations into the stratosphere."

Notably, there is "One Hyde Park" (and there is now a "One King's Cross", too) which ironically was designed by the supposedly more socialist-minded architect, Richard Rogers (of Paris' Pompidou Centre fame) - where a 3-bedroom apartment can be bought for £17m. Buildings like this one are, we are told, mostly unoccupied. They are bought by speculators as a safer and more profitable alternative to a bank deposit. The same is apparently happening with many apartments in much cheaper developments. Apparently it is no longer just "buy-to-let", but also, for some, "buy-to-leave".

This, in short, is what has allowed housing costs to spiral out of control. So today, while finding a place to live is one of the most intractable problems faced by working class people everywhere in Britain, in London, it is a nightmare.

A "normal" scarcity

For sure, there have never been enough good and proper homes for all those who need them - not in any period in Britain since the dawn of capitalism.

Some periods may have been worse than others, like more recently, the aftermath of WW2, when cities had to rebuild themselves after bomb damage. But when social unrest threatened and families were occupying army barracks and other public buildings in protest, the government and local councils were forced to construct at least some social homes - first pre-fabricated houses (some of which have lasted up to today as viable abodes!) and more permanent "council estates" with subsidised rents. These were never adequate, but for a while alleviated the problem somewhat - palliation rather than cure.

Sadly, here in Britain, there were only a few examples of the Le Corbusier-type experiments in social housing like France's La Cité Radieuse, or "the radiant city" which can still be viewed in Marseille today. Completed in 1952, this building applied Le Corbusier's idea that a home is "a machine for living in" on a mass scale. It is structured like an ocean liner, with 337 apartments accommodating 1,600 residents, two shopping streets, a hotel and a rooftop terrace. Le Corbusier believed the tower block could be the solution for rehousing the masses displaced during WWII, and that high rise buildings could be used to create spacious city homes with the same amenities as a typical street.

Ironically, it was in London's Lambeth borough - today going hell-for-leather with demolitions of 1970s housing estates - where some of these socially-sympathetic public housing schemes did come into being: modernist (but often low-rise) and designed or endorsed by the borough's then chief architect Ted Hollamby.

But even Hollamby's internationally celebrated council dwellings are threatened by bulldozers, courtesy of today's councillors, to be replaced by higher density, claustrophobic high rises designed for the private buy-to-let market with a few "affordable" to-buys thrown in for bad measure. This is the legacy of today's Lambeth: eviction of the few remaining (often elderly) council tenants and demolition of estates which could have been salvaged through proper refurbishment, but had been ill-maintained for decades by the short-termist, penny-pinching, albeit underfunded, local authority.

Of course, this picture is replicated all over London - and the wider country - and very often in Labour strongholds, just because this is where the most housing for council tenants was built in the 1960s and 1970s. And it is in these boroughs where it was thus neglected, until today, when it is being destroyed.

Whys and wherefores

Obviously, the true underlying cause of this country's dire and chronic housing crisis was and is, the law of the market. In other words, the iron law of profits. Catering for the housing needs of the population is not - and has never been - an objective, in and of itself for the capitalists. As mentioned before, the relatively large-scale building of social housing over the 3 decades following WW2 was also in their interests - both to preserve social peace but also because the workforce had to be housed. It was the same political reasoning which persuaded the capitalist class that the NHS and welfare system was needed. Anyway, if housing costs were kept low, wages could be rock-bottom as well. What is more, private construction companies got the contracts. Today's construction giants cut their teeth on these projects, many of which were initiated by Conservative governments.

By the end of the 1970s, as much as 40% of the population was living in a council home. "Owning your own home" was seen mainly as the prerogative of the middle and upper classes. Working class people had council houses - or at least aspired to have one, given the fact that there was always a housing queue - longer or shorter, depending on where in the country you were located, but always long in London.

But then in the mid-1970s, the world capitalist crisis came back and decided to stay. And the capitalists' past "tolerance" towards social expenditure disappeared. They were now reluctant to risk their own money in any kind of substantial investment, and thus began to demand a bigger share of the state's resources to feed their profits.

It was at that point that Thatcher came into office. Among other things, she initiated her famous great sale of council houses. There was nothing particularly "ideological" in this. Nor did it have much to do with the populist packaging she wrapped it in. In fact, it was merely a way of unlocking new sources of profiteering for British capital.

Indeed, social housing impinged on the free market in a potentially highly lucrative property sphere. With her 1980 "Right-to-Buy" scheme, Thatcher paved the way for 2 million additional homes to join the private housing market over the next 2 decades - an enormous increase by any measure. Eventually, as the building of social housing virtually ground to a halt, despite a growing population, the demand for homes increased disproportionately in the artificially inflated bottom-end of the housing market. This pushed prices up across the whole market and provided the capitalist class with a wealth of opportunities for speculation - the bread and butter of its profiteering.

But Right-to-Buy unlocked other areas of money-making for British capital. It was, by far, the biggest privatisation ever carried out in Britain. Like in every other privatisation, assets built by public funds were sold at bargain-basement prices to the private sector. Of, course, it was claimed that the beneficiaries were council tenants. Except that most of these tenants had to take a mortgage and became, in a way, tenants of their lenders. In reality, the banks and their mortgage-lending arms took the lion's share of the benefits, right from the beginning, but even more so, after the former Right-to-Buy homes began to change hands on the basis of rising prices. Thanks to Right-to-Buy since 1980, banks were able to accrue enormous amounts of interest -  mostly paid out of the wages of working class households!

Another main area of profiteering unlocked by Right-to-Buy, or rather by the resulting rising housing market, was more indirect. This was the artificial increase in consumption it generated, regardless of the state of the underlying real economy: since everyone assumed that house prices would keep going up, home-owners were able to make unusually large purchases on credit, by using their homes as security. This increased consumption boosted the profits of the retail and manufacturing sectors.

In short, the dismantling of social housing was an expedient way for Thatcher to bail out British capital in a period of crisis. And it was for the same reason that Labour, which had originally opposed Right-to-Buy when in opposition, championed it when it came into office, presiding over a further depletion of council housing stock. Today, according to 2015 pre-election BBC figures, the "socially rented" sector comprises just 16.8% of all homes; private rentals comprise 18% and "owner-occupation", 65.2%!

However a large part (one fifth) of this "socially rented" sector is supplied, not by councils, but housing associations. These are supposedly "not-for profit" organisations. Nevertheless they do need to make enough profit to pay comfortable salaries to their top executives and, above all, huge interest repayments to the banks from which they borrow to finance their investments. But, of course, the income from social rents is not enough to feed the appetite of the banks. So housing associations have also made more and more inroads into speculative real estate developments, building or redeveloping homes for sale - thereby reducing even more the resources available for new social housing.

And now, housing association tenants have been given the right by the government, to buy their homes! So this sector is set to dwindle, too. All the more so, because the last parliament before the election this May, cut the budget for social house-building from £2.3bn to £1.1bn a year, thanks to its "austerity measures".

Forever blowing bubbles

So what about the "home-ownership" sector, which covers over two thirds of the population? We are told that there are 40% fewer homes being built than demand would require. As a result, London house prices, for instance, have increased to the point where they are the second highest per square foot in the world - the principality of Monaco being the most expensive! First-time buyers need to find 5 times their annual income - up from 2.8 times in the early 1980 to buy a place...

Indeed, things have changed radically since the 1970s, when the state still intervened to increase housing supply, by building new homes - thereby limiting price increases. Of course, ever since 1979, successive governments have found ways to support demand by subsidising buyers. (Shared ownership, shared equity, etc.) This way, they ensured that all homes for sale were sold, regardless of their price. But not only has this pushed prices up by artificially boosting the demand for homes, but it has also encouraged property developers to build more expensive homes.

There is a logic to these policies - the same logic of profit, which was behind Thatcher's Right-To-Buy scheme. And, once again, the banks are the main beneficiaries. But of course, these government/council-sponsored ownership schemes don't even provide a small drop in the huge ocean of need. According to house-building companies like Barratt, Persimmon and Taylor-Wimpey, just to supply "to-buy" housing demand they would need to build 250,000 homes a year. In 2013-14, however, all in all, 140,930 were built - so there is already a 100,000 shortfall - which if maintained, will mean that the country is half-a-million homes short just in the ownership category, by the end of this government's term.

And so it happened again in 2013 - another scheme was hatched for the sale of the private building sector's houses and high-rise flats courtesy of the government! And to ensure that the banks - still wary after the shock of the sub-prime (toxic) mortgage crash of 2007 - engage heartily in the process, the government is doing all of the borrowing and guaranteeing that the banks could wish for. In other words, opening another potential bonanza for them.

This scheme to get housing stock moving and money flowing round the system into the pockets of the City finance sector, is Osborne's "Help to Buy". While the Financial Times may call it the "biggest government boost to home-ownership since Margaret Thatcher's 1980s Right-to-Buy scheme" - we should read "the biggest boost to the banks" since then!

Unlike previous such schemes the developers don't have to invest a penny. The government makes it possible for lenders to offer mortgages to prospective homeowners (and this time they also don't have to be first-time buyers), who would normally not have qualified for one, either because they could not raise the 25% deposit which is usually now required, or for other reasons. The government provides 20% of the equity needed immediately, so that buyers only have to pay a minimum of 5% deposit in advance.

£3.7bn has been made available (the scheme will carry on until 2015) - with a prospective 74,000 homes potentially funded over the period.

In other words, the banks are once again being handed money on a plate - fully aided and abetted by the government, under the guise of "helping" to tackle the housing shortage and helping home-buyers, by guaranteeing the lenders first and foremost, rather than the borrowers...

Add the government's guarantee on the 80% of the selling price lent to the mortgagee by the banks and not only do the banks get a £3.7bn down-payment from the government for nothing, but at least another £14bn is guaranteed - plus interest! Actually figures given in the Financial Times estimate the cost to the government of "help to Buy" to be £23.8bn. Just for this one little scheme... And so the bubble expands...

So far, the government has spent £1.4bn a year on home ownership subsidies, but at the same time claimed austerity dictated that the funds for social home building should be cut by £1.2bn! But if the amounts spent over the term of the last government - what commentators call "subsidising demand for housing through rents and ownership schemes" - are all added up, they come to a grand total of £115 billion! That would be enough to build 6.8 million new social homes at the current rates of subsidy. And this would be enough to house the increasing population (on the basis of a growth of 7.6% over the last 10 years) for 31 years!

But as the head of the housing charity, Shelter, admits, the private sector will never do it. "House builders are profit making developers, that's their job. Why would they build more homes to sell them cheaply?"

Feeding the slum landlords

Shelter tells us that "1.8m households are waiting for a social home - an increase of 81% since 1997"!

The very few social properties which might become available are allocated to aspiring tenants on the basis of an internet lottery. Those who are not internet proficient are expected to go to the local library to get help. But then for them, winning this lottery is surely out of the question, anyway.

And of course, those already in social housing must contend with the notorious "bedroom tax" which reduces housing benefit if a family is, according to the council, under-occupying - and has a "spare" bedroom. No matter that there may not be a smaller flat or house available on the social register for someone who really does not need a spare bedroom, to move to!

In the absence of available social housing, local councils all fulfil their statutory role of housing the homeless and subsidising rents for the unemployed and low-paid, through housing benefit, by paying private landlords to take in "social" tenants.

Today there are around 1.6m recipients of housing benefit. But as much as 40% (9.5bn) of the annual £25bn housing benefit bill goes to private landlords, large and small! In the last decade these landlords have been making a killing with impunity: few councils even ensure that their properties come up to minimum standards.

Indeed private landlords have been getting away with renting out just about anything: sheds, garages, rat and cockroach infested, damp stinking and mould-ridden holes - where they can still charge the kind of rent (£30-£50/week) which someone on a minimum-wage, part-time, or zero-hours job, might just about stretch to meet. Those with no protection whatsoever because they do not qualify for housing benefit, are particularly vulnerable. They may have to resort to renting a small-berth leaky caravan parked in a suburban street or backyard, without heating, water supply or a toilet. Or sleeping over in Heathrow airport - as a recent London Evening Standard report exposed.

But even for council tenants there is little protection from unscrupulous private landlords. The BBC Panorama documentary "The great housing benefit scandal" (first shown in April 2015) exposed how fixed caravan sites, intended for working class summer holidays by the sea, provide year-round accommodation for housing benefit recipients at a cost of £600-900 a month!

Panorama claimed that the owner of one Essex caravan site made £1.8m in profits in 2014 "out of 300 tenants on housing benefit" and £2m the year before. "Maintenance" of the very damp and cold caravans is down to the occupiers, so no wonder. This documentary also looked at the owners of hostels and hotels which provide rooms for working people who are down on their luck. In Hackney, for instance, the council refers its homeless, seemingly without any qualms, to an unpleasant, jail-like hostel known as "Ridley Villas". It paid the landlord (millionaire Henry Smith and listed founder, Anne Garrit-Smith) the sum of £850,000 in housing benefit last year.

Camden council was exposed as housing its vulnerable homeless in " Happy Vale" (!) hotel - with raw sewage welling up from its drains, crawling with mice and cockroaches, and where, for instance a woman who clearly should have been living in a community-run residential home with qualified staff, had been living for a decade in a cupboard-sized room, for which Camden paid £150/week in housing benefit! The documentary's main point was that landlords behaved in this scandalous way because their fines were set too low - at £5,000 or less (Thankfully, it was not made in order to point a finger at "skiving and cheating" housing benefit claimants!).

But what about the unscrupulousness of councils who hand over the money? The councils say they are obliged to pay the housing benefit of those who qualify, regardless...! So no blame to them?

Indeed, Newham council sanctimoniously reports itself this July in its monthly free magazine, delivered to every household in the borough, that "our enforcement officers uncovered a rented property in East Ham which was housing 26 people including a 2-year-old child". The article tells us that such overcrowding is not uncommon. And of course it is not: a family of 5 in a one-roomed flat is certainly common anywhere in London's poorer streets or indeed in the rest of the country. But when the council knows about it, and still pays the benefit to the "slum landlord" who the council has come to rely upon to house its homeless, what is its excuse?

Councils claim to be "cracking down on criminal landlords" through private rented sector licensing schemes. But this is because they have no intention of addressing the cause. That would involve fighting for the necessary funds to build enough social housing and above all, gaining the powers to confiscate property and expropriate slum landlords. A taboo in this capitalist "property-owning democracy"!

One way out

It is, incidentally, the 100% Labour-held Newham Council which evicted 28 single mothers when it decided to cut its funding to the Focus E15 young persons homeless hostel in 2013 and send them to private rented accommodation in Hastings or Birmingham. The Focus E15 women steadfastly resisted and have resorted to occupying empty flats in Stratford, championed by activists and celebrities. Their campaign is still going strong, but the council continues to harass them, rather than agreeing to rehouse them in the decent homes they need.

Yes, everyone needs and should have a roof over their heads. The society that can build homes as collective "machines for living in" as the visionary le Corbusier put it, which would make domestic life a pleasure rather than the daunting nightmare it often is today for the poor - this will be the society of the future! And it will be possible when the capitalist class is expropriated and a society for need, not profit is created! But in the meantime, it is certainly not necessary to wait passively. The working class does not have to take its advice from the likes of Mark Clare, the CEO of the giant house builder, Barratt Homes. He told the Financial Times that there is no "quick fix". "We live in a five year political cycle, but housing has got to be planned over a 25 year horizon - some of our sites take 10 years to build... it has taken 30 years to screw up as badly as this; any fix is not going to take place in five years."

No, the working class does not have to operate according to the timetable the profit market - and certainly not according to the electoral cycle! There have been many instances where homeless campaigners have taken possession of unoccupied buildings, empty offices, housing under threat of demolition, etc., taking a leaf from the book of the post-WW2 protesters. And these initiatives should be supported. But ultimately, it is a change in the social relationship of forces, through the re-emergence of the working class as a powerful, decisive force to contend with, which will make the capitalist class and its compliant governments fear that whenever they attack workers' living conditions, they take the risk of facing workers' collective anger.