The funding of social housing provision (cont.): from 1890 to the first Labour Government

By Eamon Dyas

The Local Government Act of 1888 established county councils and county borough councils in England and Wales. It came into effect in 1889 and with it the emergence of the London County Council. This 1888 Act was viewed by the Fabian Socialists at the time as laying the ground for their brand of municipal socialism, which is how Annie Besant saw it:

“It is one of the symptoms of the coming change, that in perfect unconsciousness of the nature of his Act, Mr. Ritchie [Charles Ritchie, Conservative M.P. President of the Local Government Board and the main sponsor of the Local Government Act -ED] has established the Commune. He has divided England into districts ruled by County Councils, and had thus created the machinery without which Socialism was impractical.” (Industry Under Socialism, by Annie Besant. In ‘Fabian Essays in Socialism’, edited by Bernard Shaw. Published by Walter Scott Ltd., London, [1890], pp.152-153).

The Fabian belief in the significance of this Act seemed to be confirmed by the manner in which local authorities had been evolving as the main supplier of products and services that were critical to the wellbeing of local communities. By the end of the nineteenth century local authorities had long been acquiring a growing range of responsibilities for such things as gas supplies, water and electricity supplies, and the provision of tramways. 

In the case of the LCC it had acquired the previous works department of the Metropolitan Board of Works in 1891 and by such means went on to become directly involved in the construction of homes for the working classes. This occurred with the formation in 1893 of the Housing of the Working Classes Committee within the Architects’ Department of the Council. While other local authorities operated works departments before the LCC came into existence – Birmingham was operating its own Public Works Department from 1866 – and others, such as Liverpool, operated similar services out of the City Engineers Department, these departments were normally used to service things like civic buildings, public spaces and cemeteries, etc. and had very little to do with direct house building.

What made the LCC Works Department different was that its Housing Committee operated to a brief that included the potential for direct labour housing projects. The impetus for this came from John Burns who was an original member of the LCC while also an M.P. and previously General Secretary of the Executive Committee of the Amalgamated Society of Engineers. Working with the building trade unions he convinced the Council to consider the option of using direct labour in housing projects as an alternative to the prevailing practice of contracting-out such projects to private firms. The same influence was behind the Council imposing a requirement that all contractors employed by the LCC should pay union rates in 1892 (see: Explaining local government: Local government in Britain since 1800, by J. A. Chandler. Published by Manchester University Press, 2007, pp.150-151). Because the practice of contracting-out remained an option for the LCC (it continued to be used alongside direct-labour project) this meant that private enterprise builders now tendering for LCC housing contracts would no longer have the advantage of a low-cost tender as a result of paying their workers below union rates.

Another object of this measure was the prevention of the contagion of wage depreciation due to the way in which employers were using high levels of unemployment to press down on wages at the time. The bolstering of wages in the building industry imposed by the Works Department of the LCC in 1892 had an echo in how the Commissioners of Works and Public Buildings organised the sale of the Millbank Prison at this time. This had a relevance to the housing plans of the LCC. In December 1892, the Commissioners of Works and Public Buildings, imposed a condition on the sale of the Millbank Prison site which stipulated that “the purchasers will be required to pay a wage at the rate of not less than six-and-a-half pence per hour to all men they may employ, and the Commissioners of Her Majesty’s Works and Public Buildings will enforce this by putting into operation, if necessary, a clause forfeiting deposit money and all right to the buildings bought.” (‘The Sale of Millbank’, The Times, 9 December, 1892, p.10). The Head Commissioner at this time was George Shaw Lefevre who was later (in 1897) elected to the LCC as a Progressive and this condition seems to have been inserted as a means of inhibiting potential commercial buyers in order to keep the options open for the LCC to procure the site or part of it. As things turned out the LCC later acquired part of the site and construction began in 1897 on a working class housing estate that went on to accommodate 4,430 people.

Despite not being the responsibility of the LCC, Millbank Prison had a relevance to the wider area of LCC ambitions to build homes for the working class and, in fact, it touched on the wider issue of how such building programmes were to be financed. The original Bill that went on to become the Housing of the Working Classes Act, 1885, had identified the site of Millbank Prison as well as the sites of Pentonville Prison, Clerkenwell Prison and Coldbath Fields Prison, as potential sites on which local authority housing in London could be built. Presumably, in the aftermath of the Fenian dynamite campaign of 1880-85 and the earlier attempt to free a Fenian prisoner from Clerkenwell the Prison Commissioners felt that these four prisons were no longer fit for modern security needs.

The plan of the Prison Commissioners was to demolish these prisons and replace them with more secure modern prisons on the periphery of London. Coldbath Fields prison had been closed in 1885 and transferred to the Post Office in 1889 (it later became the site of the Mount Pleasant Sorting Office). Clerkenwell prison was demolished in 1890 and Millbank was closed in October 1890 and the site sold in lots in 1892-93. Today, Pentonville remains the only one of the four that survived the Prison Commissioners’ plans of the mid-1880s.

The original Housing of the Working Classes Bill presented to Parliament by Lord Salisbury (before it became an Act) of 1885 provided for the possibility of the sites of these prisons being sold to the Metropolitan Board of Works (the LCC was not yet in existence). These sites were to be sold at their original rather than current market value. This provision was intended to ensure that the Board of Works could acquire the sites at a fraction of their existing value and it immediately raised howls of protest in Parliament and beyond from those who saw it as evidence of Government subvention and subsidy with the Salisbury Government being accused of moving the country towards state socialism (see: editorial in The Times, 17 July, 1885, p.9). 

The opposition not only led to the reduction in the number of prisons involved in the operation of the Act from four to two – Millbank and Pentonville – but it also led to the removal from the eventual Act of any reference to the sites being sold at their original value. Instead, the sites were to be sold at their current market value (section 3 of the Act). This made it more difficult for the Metropolitan Board of Works (the precursor of the LCC) to procure these sites for housing purposes. On top of that the Act reiterated that any loans issued by the Public Works Loan Commissioners to local authorities in pursuance of housing construction should “be made without loss to the Exchequer” (section 6 of the Act). Also, the 1885 Act did not include any provision that might encourage local authorities to be proactive in the purchase of land beyond that required in the course of slum clearances.

Because of the way in which the original Bill was filleted in the course of its transit through Parliament the 1885 Act offered no significant advance in the powers of local authorities in the realm of house building other than those associated with slum clearance. Because of this, and despite its title, the Act is generally viewed as a public health, rather than a housing, act. Any serious advance in the rights of local authorities to acquire land and to construct tenements and housing estates had to wait until the 1890 Act as described in the previous article in this series.

The pushback against direct labour housing programmes

The example of the LCC Works Department was soon followed by other local authorities. For instance, Sheffield established its own direct works department in 1901 as a result of the private sector’s failure to provide competitive bids for the council’s building requirements.

However, at the time when the LCC established its direct labour housing committee there arose a concerted opposition from those who felt it threatened the interests of private enterprise and in the process would lead to the withdrawal of not only house builders from the market but also those institutions that sought to build and manage working class housing at the time. Amongst those was Octavia Hill. In a letter to The Times (19 June, 1893) she argued that artisans’ dwellings subsidised from the rates and built by local authorities would ensure that those private companies currently involved in such activities would cease to operate to the detriment of the long-term welfare of the poor. This was a sentiment that echoed the opposition from the likes of Lord Farrer. He had been an energetic exponent of the virtues of free trade who, because of his earlier reforming work on the Board of Trade had been co-opted to the LCC as an alderman. He became vice-chairman of the LCC in 1890. However, he quickly began to express his dissent at what he saw as the socialistic direction the LCC before subsequently resigning. 

To the defenders of free enterprise, the socialistic direction of local government legislation appeared to be confirmed in the Housing of the Working Class Act of 1900 which expanded to urban local authorities nationwide the powers currently held by the LCC to acquire land for housing purposes outside of their jurisdictions. To the defenders of free enterprise, the country already seemed to have succumbed to municipal socialism at the local level with local authorities in many cases assuming control of electricity, gas and water provision as well as operating tram systems. By 1900 the local authorities of most large cities controlled their electricity supply and by 1905 there were 161 municipal tramway services in operation (see: Municipal Trading, by Herman Finer. Published by George Allen & Unwin, London, 1941, pp.51-53). Then the first housing estate built by a local council using direct labour was opened in Battersea in London in 1903 (the Latchmere Estate) proving that such a thing was possible. Added to this was the passing of the Unemployed Workmen Act in 1905 “which allowed local authorities to raise a halfpenny rate to fund schemes for employing men who were temporarily out of work due to circumstances of the economy” (see: Chandler op cit., p.122). All these developments were seen as evidence of local government’s susceptibility to a creeping socialism and stiffened the resolve of the free enterprise advocates to reverse them. 

As a result, elements from both the Liberal and Conservative camps began concentrating their opposition at the level of local politics in an increasingly organised attempt to push back this creeping socialism. Unsurprisingly, the LCC, as the main local council in the land and the most visible example of the threat posed by direct house building became the early focus of this opposition.

The Municipal Reform Party was formed in 1906 as a political expression organised to fight the good fight at the level of local politics. It had links to ratepayers’ organisations as well as conservatives and liberals with the underlying objective of defending the interests of local private enterprise and the ratepayers of London. Towards that end it emphasised private housing construction and the reduction of the LCC’s involvement in the provision of houses and services such as electricity in favour of a private sector involvement. Consequently, when the Municipal Reform Party won the LCC elections in 1907 one of its first moves was the abolition of the direct labour section of the LCC Works Department. Subsequently, the bulk of the activities of the direct labour housing section of the LCC Works Department remained out of commission until 1934 when it was resurrected under Ramsay MacDonald’s National Government as a response to the ongoing economic crisis of that decade. 

The fate of the LCC direct labour housing section of the Works Department was preceded a couple of years earlier by the cessation of the similar operations of the Sheffield Council Works Department which was dismantled by the Conservatives in 1905 and also only fully revived in 1934 after a fluctuating fate in the interim. The 1930s in fact witnessed a broad movement towards direct labour operations by local councils particularly those local authorities under Labour control which became increasingly reliant on in-house resources in undertaking their local responsibilities, including housing provision.

But to get back to the timeline. After the 1890 Housing of the Working Classes Act the next significant piece of legislation was the Housing of the Working Classes Act of 1900. This Act extended nationwide (with the exception of rural district councils) the powers previously given to London local authorities under the 1890 Act by allowing them to extend housing programmes beyond their responsibilities for the replacement of houses demolished as a result of slum clearance projects. After this there was the Housing and Town Planning Act of 1909. The Act imposed an obligation on local councils to ensure that builders operating in their jurisdictions complied with certain minimum standards of construction and more specifically, outlawed the construction of the infamous “back-to-back” dwellings. In the general sense it was the 1909 Act that provided local authorities with the power to regulate the development of new housing schemes and it is seen as the first town planning Act.

The aftermath of WWI and the emergence of mass council housing

So it was that the lead up to the First World War saw local authorities in England struggling to make an impact on the housing situations in their jurisdictions. Despite legislation that on paper presented the opportunity for them to be active in the provision of houses there were three main factors which inhibited them from adopting such a role. 

Firstly, the fact that the money to pay for such house construction programmes came from the ratepayers (a penny in the pound was permitted under legislation to be used for such purposes) or from loans taken out from the Public Works Loan Commissioners. Both were factors that weighed on the decisions of local councils when it came to pursuing any large-scale housing programmes.

The rates and loans were supposed to provide the source of the seed capital that enabled the housing estates to be built. Once built the rental income from those houses was supposed to assist in the recouperation of part of the initial cost of their construction. However, the rents had to be set within a range that made them affordable to their working-class tenants. This meant that the rent was never capable of repaying the cost of the house and its maintenance within any accountable timeline as such a rent would be beyond the ability of those tenants to pay. That meant that there was always going to be a shortfall and that shortfall placed a burden on the rates and as such the sensibilities of the ratepayers – and therefore the re-election prospects of the councillors – had to be taken into account. This meant that a fine balance needed to be struck between the tenant’s ability to pay and the need to sustain the means by which future housing projects could be initiated and sustained.

In attempting to balance these contending considerations the local councils usually ended up setting rents that were unaffordable for that element of the working class that had previously been housed in the slums cleared as a prelude to the building of new council homes. (It was a similar dilemma to that which was confronted by the philanthropic housing associations discussed in the previous instalment of this series). This constituted a perennial issue that was highlighted by George Bernard Shaw in 1908 (see: The Commonsense of Municipal Trading, by Bernard Shaw, number 5 in the ‘The Fabian Socialist Series’. Published by A.C. Fifield, London, 1908, pp.71-73). Shaw challenged the, then prevalent, belief that this practice was one that indirectly served the interests of the slum dwellers – a belief based on the idea of ‘filtering’. This relied on the argument that those better-off elements of the working class who could afford the rents of the newly constructed council homes would vacate homes that were better than the slums and those newly vacated homes would in turn provide homes for the slum dwellers as landlords would need to reduce their rents to attract replacement tenants. In this way each level of working-class tenant would move up a notch until the slums became less-densely populated. Although it never fully worked that way the concept continued to sustain the commitment to council housing among those who genuinely believed in rehousing the working class at this time.

Secondly, local authority reliance on loans from the Public Works Loan Commissioners posed its own problem. These loans were usually available for the procurement of land as part of a slum clearance programme. Although these loans in many cases could be arranged at a preferential rate they continued to prove burdensome to many of the local authorities. Prior to 1897 the interest charged on such loans was set by the Public Works Loan Commissioners albeit with one eye on government finance. After 1897 however, responsibility for fixing those interest rates became vested in the Treasury with a corresponding tightening of the lending arrangements. 

This brings us to the third reason why local authority housing failed to take full advantage of the legislative environment that in appearance at least, seemed to offer a more promising outcome for working class housing from the last decade of the nineteenth century. This was the absence of a robust ideological base among the leadership of most local authorities – something that we will get on to presently.

These three constraints of ratepayer sensibilities, loan arrangements and the absence of a strong commitment by most local authorities to council housing meant that by the start of the First World War the extent of local council housebuilding continued to fail to meet the needs of the working class. In fact, by the time of the start of the First World War the LCC had only managed to construct around 10,000 council homes in London with Liverpool Corporation only managing 2,747 homes. In total, throughout the entire country only something like 24,000 council homes had been built by the start of the war.

Before the war Lloyd George had championed the cause of central government support for working class housing and within eight months of his being made Prime Minister, on 1 August 1917, it was announced that a committee had been established by the President of the Local Government Board to look into the question of house construction specifications in the context of the housing needs of the working class. The committee was under the chairmanship of Sir John Tudor Walters and it produced its report in November 1918 in time for the election campaign of that year. With the bulk of the report having been written by the Fabian socialist Raymond Unwin (of Letchworth Garden Suburbs reputation) the committee’s specifications for future working-class housing broke new ground in terms of both space and facilities. New housing estates were to have a density of no more than 12 homes per acre except if extenuating circumstances warranted a higher density – something that would be a consideration in city centre areas. The new homes were to have a garden and a bath in a separate bathroom as standard and in some cases a parlour. Lloyd George’s “Homes Fit For Heroes” election campaign was based on the findings of this report with the promise to build 500,000 such homes. However, before any of these proposals had been formulated, they were prefaced by a behind-the-scenes battle of policy between the President of the Local Government Board, William Hayes-Fisher and the man who was to have a significant impact on working class housing in the immediate aftermath of the First World War. 

Christopher Addison was a medical doctor with a strong interest in social issues who was appointed Minister of Munitions by Lloyd George in December 1916 before being appointed Minister of Reconstruction in July 1917. At the Ministry of Munitions, he had introduced a number of welfare provisions for munitions workers as a means of improving production. These measures became known as “War Socialism” and central to them was the provision of Government subsidised housing estates in various parts of the country for those employed in the production of munitions and ancillary activities. These two men, Hayes-Fisher and Addison represented variations between the opposite positions on the question of private versus public housing provision. Normally, the Local Government Board would have undertaken the work of organising the means by which future housing projects would be undertaken. At this time the responsibilities of the Local Government Board included health and with housing being considered part of public health via the sanitation and slum clearance acts, its influence on Government thinking on housing was significant.

In this case, should its influence be conclusive, the LGB, under William Hayes-Fisher, would ensure that such projects were delivered mostly through the direct involvement of private building companies. Hayes-Fisher viewed his responsibility as head of the Local Government Board “to keep alive private enterprise which in the past has provided at least 95% of the housing in this country” (quoted in Chandler, p.128). However, the war had changed things and the sentiment represented by Hayes-Fisher was compelled to concede some ground on the need for State involvement in the expansion of the housing stock. In those circumstances the Local Government Board under Hayes-Fisher fell back on a policy of minimising future State involvement and ensuring that such involvement only lasted for a short a period of time before private enterprise would once again assume what Hayes-Fisher described as its ‘natural role’ in housing provision.

But Lloyd George remained unconvinced that private enterprise could be relied upon to meet the post-war housing needs any time soon while also acknowledging the challenges faced by local authorities in the aftermath of the war. Speaking at a meeting in Wolverhampton on 23 November 1918 as part of the election campaign he articulated his feelings on the subject:

“Slums are not fit homes for men who have won this war or for their children. They are not fit nurseries for the children who are to make an Imperial race, and there must be no patching up. This problem has got to be undertaken in a way never undertaken before, as a great national charge and duty. (Hear, hear.) It is too much to leave it to municipalities merely. Some of them are crippled from the restricted income at their disposal. Some are crippled from the fact that they have crushing burdens of another character, and some are good, and some are not good. Therefore, the housing of the people must be a national concern.” (The Times, ‘Mr. Lloyd George on his task’, Monday, 25 November 1918, p.13).

This more or less echoed the feelings of Christopher Addison who also acknowledged the limitations of local government and its ability to deliver housing on the scale that could meet the challenge of existing housing needs. While at the Ministry of Reconstruction, Addison had compiled a memorandum on the subject of the failure of local authority housing which he blamed on the fact that:

“in many cases the Councillors take little interest in the question or, at any rate, adopt a low standard with regard to housing. Frequently the Councillors themselves are interested parties.

The only remedies for this state of affairs are:-

• Regular supervision on the part of Central Authority.
• Power on the part of Central Authority to enforce the adoption of a high standard of administration and this can only effectively be done by grants in aid of local rates which Central Authority can withhold in the event of administration being unsatisfactory. (Addison papers, quoted by Chandler with emphasis as in original document, p.129).

So it was that the idea of direct Government grants to local authorities for housing projects was mooted as an essential component of any solution to the housing issue. But, despite his misgivings about local authority commitment to working class housing Addison rejected the idea that central Government rather than local authorities should have direct responsibility for the construction of such housing. Far better, that local authorities, with their local knowledge and organisation, be the instrument for organising the construction of the new housing schemes. The inertia and lack of commitment of many local councils to social housing would be overcome with strict oversight by central Government. It should be added by way of clarification that local council involvement in housing construction at this time did not necessarily mean that such housing would be constructed through local authority direct labour schemes – as we have seen earlier the direct labour Works Department of places like the LCC had been abolished in 1907. What it meant was that the local authority would have the power to commission, oversee, and supervise, the building of the housing schemes from resources that would now be significantly enhanced by the central Government grants for such schemes. 

In the end it was Addison’s and Lloyd George’s pragmatic approach that won the day over the more ideologically committed free-enterprise position of Hayes-Fisher. In November 1918 Hayes-Fisher was moved from his position as President of the Local Government Board and ceased to have any direct influence over housing policy. Addison in turn became President of the Local Government Board in January 1919 as part of a plan to subsume it under a new Ministry of Health – something that Addison had long campaigned for. This emerged for the first time in June 1919 with Addison as the first Minister of Health and it represents the emergence of housing and health under the same Ministry that was to last for almost fifty years.

In the Spring of 1919, while head of the Local Government Board, Addison had prepared his Housing and Town Planning Bill and Lloyd George adopted the main tenets of this Bill to form the basis of the 1919 act of that name. However, this was not without opposition from within the Lloyd George coalition Government. The free enterprise elements as well as instinctive resistance from the Treasury formed the main obstacle to the state-subsidising components of the new Housing and Town Planning Bill.  

In order to overcome that opposition Lloyd George invoked the Bolshevist threat. He put the issue as follows to a Cabinet meeting in 1919 in an exchange with Austen Chamberlain, the Conservative Chancellor of the Exchequer:

“Russia has gone almost completely over to Bolshevism . . . and in a short time we might have three-quarters of Europe converted to Bolshevism. None would be left but France and Great Britain. Great Britain would hold out but only if the people were given a sense of confidence – only if they were made to believe that things were being done for them. . . . We must give them the conviction this time that we mean it, and we must give them the conviction quickly. . . . We were 300,000 houses below our normal level, and that level was itself far below what it should be. . . . Even if we could do all we wished to do during the coming year, it would cost us £71,000,000. Even if it cost £100,000,000, what was that compared to the stability of the State? (Quoted in: Housing Politics in the United Kingdom, by Brian Lund. Published. By Policy Press, University of Bristol, 2016, pp.151-152).

As a result, Cabinet opposition evaporated and Addison’s Housing and Town Planning Bill became the Act of the same name (also known as the Addison Act) when it was passed with Parliamentary approval at the end of July 1919. The Act included “the quite new principle of a Treasure subsidy to cover the difference between the capital costs and the income earned through rents from working class tenants, over and above the penny rate levied by the local authorities” (see: his DNB entry). No longer were local authorities compelled to restrict their house-building programmes to what they could generate by way of capital from the rates combined with the rents from existing properties and loans. With the new arrangement the cost of construction was subsidised by central Government and this opened up the prospect for local authorities, not only to build on a scale previously not possible but also to set rents at levels that were now affordable for many lower-income members of the working class. In providing these subsidies the Government hoped it would release the economic restraints that previously inhibited local authorities from a more expansive commitment to working class housing and in the process enable them to meet the target of 500,000 new homes within seven years. 

Reflecting Addison’s belief that many local authorities were not committed to the housing of the poor the Act contained clauses that could compel them to provide housing at the discretion of the Government. This provision was introduced in order to overcome the continued political and ideological hostility of the many local councils that continued to be dominated by free enterprise thinking. In response this the 1919 Act imposed on local councils the obligation to identify the housing needs of the working class in their areas and compile a strategy for engaging meaningfully in house-building programmes to meet those identified needs.

However, all legislation has to take effect in the real world and post-war circumstances was to reveal that other factors were operating to impair the impact of the 1919 Act. These factors initially took the form of labour shortages in the construction industry which meant that private builders and developers had now to be directly enlisted in the housing programmes and consequently a further Act was passed in December 1919 called the Housing (Additional Powers) Act. This, among other things, was to guarantee private developers a direct Government subsidy of £150 for every house they built as part of a local authority programme.

But this did not alleviate the situation to any great extent. The war-time shortage of skilled manpower in the construction industry was to take a number of years to work through the sector after the end of the war and in the meantime the building trade unions remained reluctant to admit unskilled workers to fill the shortage. On top of that the supply chains for building materials were also only beginning to be re-established (the licencing of building materials was lifted in 1918). Further obstacles included the fact that many local authorities were led by people who continued to be ideologically opposed to the perceived threat that the new legislation represented to private enterprise. As well as that, even those local authorities with the inclination to implement the Act in many cases found it difficult to effectively incorporate their new expansive housing responsibilities into their wider post-war responsibilities. And to top it all there was the continued opposition from elements within the Treasury and sections of the bureaucracy in the Department of Health which meant that the procedures for availing of the housing subsidy were not always made easy for local authorities to navigate. All these factors meant that the immediate impact of the Addison Act was not as dramatic as first hoped. In 1920 only 29,000 houses had been built under the terms of the Act. 

Despite this, gradually more local authorities, particularly those under Labour control, with an ideological commitment to working class homes, began to overcome the initial difficulties. But this brought with it a political problem. Because the Government subsidy was designed to cover the shortfall between the cost of each house above what a local council could invest in its construction, the cost to the Treasury would rise in proportion to the cost of the house. By 1920 the cost of house construction had almost quadrupled from what it had been before the war and the growing charge on the Exchequer became the focus of those who had never been comfortable with the terms of the Addison Act. The soaring costs were claimed by its opponents to be evidence of widespread waste and leading to open-ended state subventions. Consequently, Addison, who continued to defend the Act, became a target of a right-wing ‘anti-waste’ campaign to which Lloyd George increasingly gave way. 

This resulted in Addison being moved from the Ministry of Health to the anomalous post of Minister without Portfolio in March 1921. Shortly afterwards the Treasury subsidy was effectively ended for new homes and the funds available for slum clearance reduced. On 14 July 1921 Addison resigned from the Government in protest and in 1922 published a pamphlet called “The Betrayal of the Slums” and joined the Labour Party the following year. 

However, before the subsidy was formally ended many local councils had entered into contracts for the construction of housing estates and these had to be honoured by the Treasury. This meant that by the time the last arrangements between local councils and house builders were completed under the terms of the Addison Act nearly 214,000 new council homes were built in the three years of its operation. Although this was way below the 500,000 planned, given the circumstances in which the Act was forced to operate, it was more successful than it otherwise might have been. 

The Addison Act proved to be significant for a number of reasons. It was the first housing act to come into operation under a Ministry of Health and it embedded local government housing subsidies as a central Government responsibility. It also introduced the reciprocal responsibility of local authorities to comply with a central Government plan for housing construction albeit in tandem with private builders and it produced an unprecedented number of working-class homes in a relatively short period of time. 

The Conservatives’ post-First World War housing policy 

The post-war assault on the 1919 Addison Act was based on the belief among free enterprise advocates that it was wasteful of public money and operated to the detriment of private contractors who, if left to their own devices, would provide a better outcome in terms of the supply of working-class houses. The Act was also deemed responsible for pushing up the cost of house construction in the way in which the subsidy by the Treasury was not defined in absolute terms but on the basis of filling the shortfall between local authority resources and the eventual cost of the house. As a result of this perspective gaining the initiative within a few years of the end of the war this type of subsidy-driven housing provision increasingly lost ground. 

However, it continued to be acknowledged that working class housing still remained dependent upon some form of subsidy. This was something that was realised even within the Conservative Party with the result that after Neville Chamberlain was appointed Chancellor of the Exchequer by Stanley Baldwin in August 1923, he re-initiated the policy of subsidising house building. But this time it was a subsidy that did not seek to fill the gap between the resources of a local council and the eventual cost of the house.

“In the 1920s, council housing policy was marked, firstly, by the reduced space standards and subsidies of the 1923 Housing Act implemented by Conservative Minister of Health and Housing, Neville Chamberlain. Its intended thrust was to boost, by means of a subsidy to building contractors, the private housing market, but where local authorities could persuade the ministry of the need for council provision, a small subsidy of £6 per house per year was offered for twenty years. The Chamberlain Act was also deliberate and explicit in reducing the design standards required for grant support. Nearly all these later homes were non-parlour and their floor area fell from an average of 900 sq. feet under Addison to between 750 and 850 sq. feet. The requirement that all homes have a fixed bath represented a small advance.” (Municipal Dreams: The Rise and Fall of Council Housing, by John Boughton. Published by Verso, London, 2019, pp.41-42).

Chamberlain’s subsidy unlike Addison’s subsidy which was a deficit subsidy – it paid out according to the shortfall between what the local council could afford and the eventual cost of the built house – Chamberlain’s subsidy was a fixed, limited subsidy. Furthermore, it was primarily targeted at private house builders and only available to local authorities if they could show that they could produce homes where private enterprise was failing to meet an identifiable need.

Chamberlain’s policy on subsidies was constructed on the understanding that Addison’s deficit subsidy had the effect of pushing up the cost of house construction and consequently by lowering and defining the limits of the subsidy the cost of house construction could be reduced. Addison’s failure, according to Chamberlain’s perspective, was not only that his policy provided an over-generous subsidy that tended to increase the cost of house construction but it had been made subject to a compliance with an over-generous and therefor over-costly house design. The belief of Chamberlain was that if the cost of housing could come down then the rent it was necessary to charge the tenants would also be reduced and his 1923 Housing Act was constructed accordingly. 

Chamberlain’s Housing Act of 1923 went on to produce a little over 75,000 new homes before its operation was superseded with the first Labour Government coming to office in 1924. The fate of housing under that Government and beyond will be explored in the next instalment.