Labour and the Housing Crisis
by Eamon Dyas
On 22 March 2021 the Guardian reported that in four London boroughs 40% of the households residing in those boroughs were in receipt of housing benefits. In other words, close to half of the households are currently having to get help from the authorities to cover the basic costs of renting a place in which to live. The London boroughs impacted by this shocking statistic are Newham, Haringey, Barnet and Hackney. This is an abysmal state of affairs and yet it is one which Labour at Westminster has been eerily silent despite the existence of the Party’s perfectly credible 2019 housing policy.
What is even more abysmal is the fact that the Guardian report was based on a document produced by the Conservative thinktank Bright Blue and not one produced by the Labour Party. Unfortunately, this is just another example of the current failings within the party. There was a time when any serious social problem that affected the disadvantaged would see the Labour Party not only taking leadership in exposing the problem but in the formulation of a solution. Unfortunately, like other issues highlighted in this magazine, the Labour Party appears to have lost its way in this regard.
The Tory Bright Blue report was published to coincide with the launch of a cross-party commission on social security reform in the wake of the Covid pandemic. This commission includes the likes of Jack Monroe, the food campaigner, and the Labour peer and social policy expert Ruth Lister as well as Stephen Crabb, the former Tory work and pensions secretary.
Other features of the Bright Blue report dealing with housing highlight the following facts:
- While on average the proportion of all households receiving state support for housing costs has increased by 2.8 percentage points across all English local authorities outside of London in the first nine months of the pandemic, this rises to an average of 5.9 percentage points in London.
- There has been, on average, a 3.7 percentage point rise in the proportion of all households claiming state support for housing costs in the average urban English local authority in the first nine months of the pandemic as opposed to a 2.3 percentage point rise in the average rural English local authority.
- 17 of the 20 English local authorities with the highest increases in households claiming state support for housing costs in the first nine months of the pandemic were in London.
- The growth in claims for state support for housing costs is driven mostly by those renting privately. In February 2020, 53.3% of households on Universal Credit which received the Housing Element were renting socially, while 45.5% were renting privately. By November 2020, the proportion reversed, with 45.1% of households renting socially, while 53.5% were renting privately.
- In 212 out of 317 English local authorities (66.8%), the proportion of new claimants of state support for housing costs in the first nine months of the pandemic who are privately renting is above 60%.
Although it serves the useful function of highlighting the housing benefit issue the Bright Blue/all party commission is not specifically targeted at the housing problem per se. Rather it considers housing benefit as part of the general issue of social security benefits and only in the context of the post-Covid recovery. However, even allowing for the abnormal conditions associated with Covid it does highlight a serious underlying social problem when it comes to housing in London – but one that is not served by the nature of the Bright Blue report or the associated commission to investigate the social security payment system.
Social security embraces everything from Disability Living Allowance to State Pensions as well as Housing Benefit. But Housing Benefit is quite unique in the family of social security payments. While it does have a relevance to other aspects of the social security system any insights into the problems underlying Housing Benefits requires an acknowledgement of its direct relationship with the fluctuations in the property market. As such, while it is part of the network of social security benefits it needs a specific investigation in its own right into how the fluctuations in the property market influences the payment of Housing Benefits. Part of such an investigation also needs to look at the way in which the housing policies of successive governments have influenced the fluctuations in the property market and how those fluctuations in turn influence the supply of homes and the payments from the public purse.
Over the past four decades Governments of both persuasions have exerted an influence on the housing market deliberately and consistently as a matter of policy. Whether that influence was indirectly exercised through the deregulation of the finance sector or the direct influence of the policy of selling off council homes it cannot be denied that the current situation has arisen in the wake of such policies.
Thus, any investigation into the housing crisis must begin with the role that government policies have had in generating that crisis. It also needs to establish the extent to which the impact of these policies was compounded by the reduction of central government grant by both Tories and Labour administrations to local authorities over the years. The combined effect of these twin policies has left local authorities devoid of the means of instituting any meaningful public housing programme while at the same time compelling them to sell their existing stock.
At the time those policies were formulated they were not based on empirical evidence or pragmatism. Rather, they were the result of an ideological commitment to the belief that the market could be relied upon to eventually come up with the required solution to the ongoing need for housing. A coincidental policy pursued by the Thatcher Tory government at the time was the commitment to deregulate the financial sector. While the thinking behind the decision to deregulate the City of London was more broadly based it is inconceivable that it was not also taken without an awareness of how such deregulation would “free up” the necessary capital for investment in the property sector. And it is also inconceivable that the decision was made without knowing that this would also have the effect of stimulating the council homes sell-off scheme through the provision of mortgages to those who previously would not have had access to such finance.
From the perspective of the local authorities these policies have led to an increasing reliance on the private property developer as the main vehicle for the supply of social housing and it has been a disaster.
The legacy of those policies has now evolved over a period of nearly fifty years and it has become an issue of real import for Labour. The way in which the party handles it will determine if it is serious in offering a real alternative to the current Tory government. As housing is a basic human need it is a particular problem for those local authority areas under Labour control. However, it has to be said that the recent omens do not look good for Labour’s ability, or willingness, to honestly address the housing issue that now confronts it.
It is important to remind ourselves of the extent of the housing failure and the implications of a Labour neglect of its responsibility to get to grips with the problem. The bald fact is that since 1979 (when the Thatcher Tories came to power) the stock of local authority homes has fallen from nearly 6.5 million to just around 2 million in 2017 (the statistic for the latest year that I have been able to find).
It has been claimed, with some justification, that the actual social impact of this is less dramatic if it is acknowledged that sales of local authority council homes has had a commensurate impact on the numbers in need of such homes. In other words, the purchasers of council homes no longer require access to council homes and therefore the overall demand for such homes inevitably decreases. However, the beneficial (if that is the right word) effect of this on the numbers of those in future need of council homes was always going to be temporary. After all, the factors that create the poverty associated with the need for social housing do not evaporate because swathes of social housing are sold off. Those factors continue to assert themselves with the arrival of each generation in need of housing.
We can see how housing needs in England have gradually reasserted themselves since the initial surge in home-owners after 1979. In that year, before the council home sell-off took effect, the level of home ownership was 55%. By 2007 this had risen to a peak of 71% in 2003. Presumably this was because of the huge swathe of council house sales. However, by 2016 the figure for home-owners had declined to 63% and it remained at that level in 2018. (Note: these figures only apply to England. The figures are slightly different for the UK as a whole).
Additionally, the statistics for the age group 35-44 – the age group that represents the first generation of potential home-owners after the council home sell-off – also confirms a marked decline in the number of home owners since then. According to a report in the Guardian on 10 February 2020:
“Home ownership has collapsed for adults in their prime working age, according to the official figures that show those in their mid-30s to mid-40s are three times more likely to rent than 20 years ago.
In a reflection of surging house prices and a lost decade for wage growth since the financial crisis, the Office of National Statistics found that a third of 35-44-year-olds in England were renting from a private landlord in 2017, compared with fewer than one in 10 in 1997.
The government statistics agency said home ownership had become increasingly concentrated among people over the age of 65. Almost three-quarters of adults in the generation that includes baby boomers born after the second world war own their own homes outright, up from just over half in 1993.
Against a backdrop of rising generational divisions in modern Britain, the ONS linked Margaret Thatcher’s flagship right-to-buy policy with the boom in home ownership among older Britons, as well as a slump in social housing across the country.
Since the launch of the scheme in 1979, which allowed social housing tenants to buy their homes at reduced prices, the proportion of council properties in Britain has slumped from 33.2% to only 17.6% in 2017.” (Home ownership among people aged 35-44 has plunged – ONS, the Guardian, 10 February 2020).
It is reasonable to conclude that this new generation of people seeking homes will include a significant proportion of those in need of the social housing that is no longer there. Such was the dearth of suitable housing for those in need that in 2017 the BBC reported that local councils were spending millions of pounds in buying back homes they had previously sold at a discount under the Right-to-Buy schemes. And, as was to be expected, these homes were being re-purchased at rates that were multiples of the price the councils had been paid for them in the first place. In the case of Islington Council the sum spent was more than £6.2 million in buying back properties it had originally sold to tenants for less than £1.3 million (see: “Town Halls buy back Right-to-Buy homes”, BBC, 3 May 2017).
But this madness is only one aspect of the legacy of the policy of reliance on the property developer to supply social housing. For, aside from the failure to meet the re-emerging demand for council housing there is the ongoing cost in terms of the provision of housing benefits for those forced to meet the costs of private renting.
The extent to which this additional feature of the social housing crisis continues to divert resources from where they could be used to build new local authority housing into the private sector was revealed in a recent news report in the Hackney Citizen. Remember, Hackney is one of the boroughs reported in the Guardian on 22 March 2021, as having around 40% of its households on housing benefits. Ten days prior to the report in the Guardian announcing that fact the Hackney Citizen carried the following:
“Councillors have expressed bitter disappointment at housing figures that lay bare the borough’s ‘poor performance’ in delivering socially rented homes – including a year in which the borough saw only a single new one.
According to statistics for new housing in the borough – through both council and private developments – the council came close to hitting its five-year target of 7,995 homes between 2015 and 2019.
However, over 5,200 of these were at market rates, while just 227 were for social rent.
In 2019, just one socially rented home was successfully delivered.” (Hackney Citizen, 12 March 2021).
Just to reiterate. In Hackney, a Labour borough with around 40% of its households in receipt of housing benefits, only a single social housing unit was made available in 2019! But local authorities should not be held responsible for this failure. That responsibility lies with those in central government who originally perpetuated the myth that the market and private property developers could be relied upon to meet the needs for social housing and then went about creating the legal framework to facilitate that myth.
While the ultimate responsibility lies with Thatcher’s Tory government and its subsequent adherents, the New Labour government of Tony Blair in 1997 cannot escape its role in creating the toxic legacy. The combined effect of the Thatcher and Blair governments that spanned the decades of the 20th and 21st centuries left councils like Hackney in an impossible position when it comes to supplying its social housing needs.
Yet, it was a legacy that continued to avoid being named for what it was. In the entire period since the end of Blair’s New Labour government in 2007 there has been no serious challenge within the Labour Party to the reasons for the housing problem legacy. It took until 2019 for a serious policy to emerge that addressed the ongoing effects of the legacy. On 21 November of that year Labour announced its Housing Policy under which it promised:
- Scaling up council house buildings so that we are building 100,000 council homes a year by the end of the parliament, a more than 3,500% increase.
- Building at least 50,000 additional genuinely affordable homes a year through Housing Associations by the end of the parliament.
- At least 150,000 new council and social homes a year within five years, delivering the biggest council housebuilding programme since the years immediately after the Second World War, and the biggest overall affordable housebuilding programme since the 1960s.
This radical policy emerged under the leadership of Jeremy Corbyn and at last it seemed that the party was finally making a serious attempt to address the housing problem. Unfortunately, the way in which this new policy emerged was through a “layered” approach. It existed on top of arguments that had been sanctioned and legitimised by the Labour Party for the previous twenty years without directly confronting those arguments or those powerful elements in the party who continued to hold them. In failing to confront and discredit the ideological basis of Blair’s New Labour project and those who continued to act as its advocate, Labour under Corbyn chose to pretend that it was a crisis that emerged from policies and influences that were historically outside the party’s control. This fatal flaw was to go on to ensure that the attempt under Corbyn’s leadership to formulate a decent housing policy did not survive his replacement as leader by Keir Starmer.
I will go into the reasons for this and the continuing incapacity of Labour to get to grips with the housing problem in the next issue.