Eamon Dyas

The demise of the “general needs” housing consensus

The removal of the Labour Party’s Land Values Tax from the statute book by the Conservative-dominated National Government in 1934 represented the final dismantlement of the legislative structure that the Labour Governments of 1924 and 1929 had attempted to put in place in the service of local government housing. While the removal of that tax represented a final dismantling of that structure, the structure itself had been abandoned the year previously when the same Conservative-dominated National Government passed the 1933 Housing Act. By then the issue of local government housing had come to revolve around the associated issues of housing standards and subsidies. 

What the Labour Party had set out to achieve in terms of its post-First World War housing policy took place in the context of a public opinion that had first emerged during the war and continued to influence politics in Britain for over a decade after it. That opinion, coming as it did from the atmosphere generated by the necessity of mobilising the entire population for the war effort as well as the establishment’s fear of the forces of Bolshevism that the war had in essence created, was one that was conducive to the emergence of a more socially aware political outlook. That outlook fed into the question of the Britain that was to emerge in the aftermath of the war and, in terms of housing, by the time of the appointment of the Government’s Second Reconstruction Committee in February 1917,

“a national housing programme came to be regarded as the pivot of post-war social policy, and from the first the problem was seen as both a quantitative and qualitative one – it was not just a matter of providing enough houses but of building enough good houses for the men who had suffered and their children who would restore the depleted strength of the nation.” (A Social History of Housing 1815-1985, by John Burnett. Published by Routledge, London, 1991, p.202).

Then, in August 1917 the Ministry of Reconstruction’s Advisory Housing Panel, under the chairmanship of the Fourth Marquess of Salisbury, on the advice of one of its members, Benjamin Seebohm Rowntree, (son of the chocolatier and social reformer, Joseph Rowntree) stated that 300,000 new houses would need to be built in the first year of peace alone. The Panel further recommended that the State and local authorities should take responsibility for building those houses with the State providing the subsidy and the local authorities taking ownership of the houses. 

Before that, and irrespective of whether the post-war houses were to be built under private or public control the question of the quality of these houses had been addressed by the Local Government Board. Before the emergence of the Department of Health in 1919 responsibility for housing rested with the Local Government Board and as part of its post-war planning strategy the Board commissioned a committee to establish the minimum quality of such houses. That Committee was appointed in July 1917 with responsibility for advising on the building standards and design specifications for post-war working-class housing. The Committee was under the chairmanship of Sir John Tudor Walters MP (with Raymond Unwin, the champion of garden suburb housing, a member) and it produced its report in October 1918. The recommendations in the report were radically different from anything that had gone before in terms of housing specification. This was reflected in the size of houses (minimum square footage, height etc.), their layout (the number and arrangement of rooms), how the houses were to be sited in terms of density (it was recommended that no more than twelve houses to the acre in urban areas and eight to the acre in rural areas), and also how they looked in terms of their appearance with a recommendation that housing schemes should avoid the appearance of “sameness” by consisting of a variety of designs.

By the time of the Armistice the estimate of the number of required homes had risen to between 400,000-500,000. However, the idea that these houses should be built to the higher standard continued to be acknowledged and not restricted to the constraints of cost. It was this mixture of quantity and quality that was seen at the time to be beyond the capacity of private enterprise alone to deliver. From the perspective of the private builder that burden of scale and quality was added to by the high cost of money, men and materials at the end of the war. Another factor was that the rent controls that had been introduced during the war continued in existence after the war with the result that by the 1920s rents in real terms were 25% to 30% lower than they had been in 1914. This meant that, from a purely commercial point of view, when it came to building houses for rent, it did not make sense to commit capital to large-scale house-building projects in such an uncertain and unfavourable environment (see: The Housing Debate, by Stuart Lowe. Published by Policy Press, Bristol University, 2011, p.78). 

It was this combination of circumstances that led an influential cross-section of society to come to the conclusion that it was not possible to rely upon private enterprise alone to meet the housing shortage particularly when it came to that aspect of the housing shortage that impacted the working-class. The view then was that the State had no other option but to get heavily involved in the task of house-building. Consequently, the direct involvement of the State through the use of subsidies became an intrinsic part of successive Governments’ post-war housing strategy as the only means to encourage house building both on the part of private builders and the local authorities.

The subsidy as a tool in the struggle between public versus private house building

This did not of course mean that the strategy represented a shared world view across the political divide when it came to solving the housing crisis. While those of the socialist and left liberal sentiment might have seen the strategy in terms consistent with a long-term commitment to it, those whose natural instinct was to favour private enterprise did not. For them it was the unique circumstances created by the war that compelled them to acknowledge that private enterprise was in no condition to solve the pressing issue of post-war house building to a scale and time-frame that was required. The post-war strategy was merely in place until such time when private enterprise was in a position to once more take over from the State in the building of houses. In the meantime, they were prepared to favour subsidies as long as those subsidies were also available to those who sought to build for the market.

The recommendations of the Tudor Waters Committee were put into practice at the end of the War by the Lloyd George Liberal-Conservative coalition and took the form of the Housing and Town Planning Act of July 1919, also known as the Addison Act (after Christopher Addison, the man who framed it and the first Minister of Health). But, in an early recognition of the divide at the core of post-War housing policy, the free enterprise interests were acknowledged in the passing of the Housing (Additional Powers) Act in December 1919. Among other things, this Act provided private builders with a guaranteed Government subsidy of £150 for every house they built as part of a local authority programme. Thus was born the idea of the “general needs” housing policy that all governments were to pursue for the next fourteen years. This was based on the idea that subsidies were to be supplied on the basis of their contribution to the solving of a general housing need – in other words, as a need that was not exclusively a need of the poorer section of the working-class. In that context such subsidies, if they were required, should be available to build homes, not necessarily on the basis of class but on the basis of where and by whom they were needed if such homes could only be built with the aid of subsidies. 

The scheme initiated under the Addison Act was intended to build 500,000 council houses and it represented the first occasion where Government subsidies were used on a large scale to encourage the construction of local authority working-class housing. However, in the event only 170,000 were built before the scheme was abandoned in July 1921, a mere three months after Addison was replaced by the industrialist, financier and Zionist, Alfred Mond as Minister of Health on 1 April 1921. (It should be noted that Mond later resigned from the Liberal Party and joined the Conservatives in January 1926 on account of Lloyd George’s plans to nationalise agricultural land and as will be seen later he was not the only liberal associated with the housing policy who resigned on that issue). 

The political opponents of the Addison scheme had not been inactive during the two years of its operation and subsequently went on to criticise it for failing to meet its targets. The scheme had been met with hostility by the free enterprise elements in the Treasury and by many local authorities who were led by people of the same way of thinking. The impact of that hostility can be gauged from the fact that in the first year of its operation only 29,000 houses were constructed, and under the circumstances, it was quite an achievement for the eventual number to have risen by170,000 in the last of its two years in operation.

By the time of the approaching general election of October 1922 many of the free enterprise advocates who had been prepared to acquiesce in the subsidy arrangement represented by the Tudor Waters Report and the Addison Act of 1919 began to coalesce with those elements that had opposed them from the start. This tendency then became more assertive in the wake of the Conservative victory in that election. By now the shortages in things like steel and building materials had begun to lessen with production of these items having successfully switched from a military to a civil purpose. The demobilisation of the armed forces also freed more men to serve the construction industry and these factors combined with easier access to mortgages created an expanding market for home ownership. The result was a dramatic fall in the cost of houses. We see that in the way in which the cost of a non-parlour, three-bedroomed house fell from £930 in August 1920, to £436 in March 1922, and to £397 by 1927. 

Thus it was that the perceived need for subsidies began to lose influence in governing circles and be replaced by those who viewed the housing issue as one in which private enterprise was now fit to participate as the major building component. It was in response to these developments that Neville Chamberlain, the new Minister of Health in the incoming Conservative Government, introduced his Housing Act in 1923. The primary objective of the 1923 Act was to encourage private enterprise house building. It was not yet politically expedient to abandon local authorities when it came to subsidies but in essence his 1923 Act represented an attempt to marginalise them through the discriminatory use of subsidies. Under the terms of the Act local authorities were only eligible for what were now much reduced subsidies if they could convince the government that the same work could not otherwise be done by private enterprise builders.

“The Act therefore constituted a complete reversal of the policy, began in 1919, of encouraging the local authorities to become major providers of working-class housing, and even the role of state aid was strictly limited by fixing a low maximum contribution and by making it available only until October 1925. After that, it was confidently assumed, houses would be built by the unaided efforts of private enterprise.” (A Social History of Housing 1815-1985, by John Burnett. Published by Routledge, second edition, London, 1991, p.231).

Chamberlain’s Act of 1923 had sought to eradicate what was viewed as an over-reliance on local authority subsidies to solve the problem of working-class housing. Instead the Act encouraged private builders to take advantage of the fall in the cost of men, materials and credit. Alongside these factors the Act’s subsidy scheme favouring the private builder was designed to act as a further inducement for the construction of low-cost housing that would in turn facilitate the letting of such houses at a lower rent – something that was meant to be beneficial to the working-class tenant. However, part of this arrangement also necessitated the abandonment of the standards and specifications that had been an inheritance of the Addison Act of 1919. In practice this took the form of reducing the superficial areas of houses qualifying for a subsidy from the average of 900 sq. ft. that had been the case recommended in the design and specification manual associated with the 1919 Act – specifications, that in practice, were often exceeded by local authorities. The effect of this was that after 1923 the majority of local authority houses possessed a reduced superficial area of between 750 and 850 sq. ft. It was all these factors taken together that explains the fall in the cost of house building after 1921.

Although it included the possibility of local authority eligibility for the subsidy Chamberlain’s 1923 Act used subsidies in a way that diminished the role of local authority-built housing and increase the reliability on private builders for the production of working-class housing. That object was originally deemed achievable by 1925 with the subsidies only planned to be available until October 1925 when the normal action of the market would make them unnecessary.

“In fact, the unreality of this optimism was soon apparent, and the subsidy was extended until 1929, though a lower rate of £4 a house after 1927. In total the Chamberlain Act yielded 438,000 houses over its six years of life, 363,000 by private enterprise and only 75,000 by local authorities. Private house-building was undoubtedly stimulated to some extent by the subsidy, which local authorities were permitted to pay as a lump sum, varying from £75 to £100, but probably to a greater extent by falling building costs after 1920 and an expansion of home-ownership made possible by easier mortgages.” (A Social History of Housing 1815-1985, by John Burnett. Published by Routledge, London, second edition, 1991, pp.231-232).

(It should be noted that the subsidies introduced under the Chamberlain Act continued to operate beyond the arrival of the first minority Labour Government of 1924 and into the second Baldwin administration). Although the houses built by private enterprise under the Chamberlain Act included those built with the help of local authority commissioned housing, by 1924, with the arrival of the first minority Labour Government, it was generally acknowledged that the shortage of working-class houses was greater than it had been in 1919. Consequently, the incoming minority Labour Government of 1924 was eager to make significant inroads into that shortage. With the 1924 Housing Act, also known as the Wheatley Act (after John Wheatley the then Labour Minister of Health) the party lost no time in re-positioning subsidies at the centre of local government housing. If the arrangements under Chamberlain’s Act could be seen as a reversal of the 1919 Addison Act then the arrangements under Wheatley’s Act of 1924 could in turn be seen as a reversal of Chamberlain’s Act of 1923. The Wheatley Act saw the solution as being a long-term one extending over a fifteen-year programme where agreements with local authorities and the building workers’ trade unions would enable the then annual output of 60,000 houses to be raised to between 150,000 and 225,000 a year.

Under the terms of the Wheatley Act, local authorities no longer needed to demonstrate a housing need that could not be met by private builders in order to get building permission and be eligible for the subsidy. The Act also increased the subsidy introduced by Chamberlain from £6 per dwelling over 20 years to £9 per dwelling over 40 years and private builders were only eligible for this subsidy if they could show that they were building housing for rent. The purpose of the subsidy was to ensure a reduced cost burden to the local authority  for every house built. This in turn allowed the house to be let at a rent that was affordable for a wider expanse of the working-class. In 1924 that affordable rent was set at 7s. 9d. exclusive of rates for a three-bedroomed non-parlour house – the commensurate rent for a similar house at pre-War levels. 

In effect the Wheatley Act never came near fulfilling its fifteen-year objective. Although it was retained by the Conservative Government of 1924-29, that government reduced the subsidy from £9 per dwelling to £7 10s. in 1926 making it less effective. It survived into the Conservative-dominated National Government of 1931 but abolished by that Government in 1933. By the time it was abolished in 1933 the Wheatley Act was responsible for the construction of a total of 508,000 houses – 493,000 of which were provided by local authorities and 15,000 by private builders. This total for local-authority provided houses constituted nearly half the entire production of inter-war council housing. The stark contrast in the outcomes of the 1923 Chamberlain Act and the 1924 Wheatley Act can be gauged by the following: Under the Conservatives 1923 Act (which extended from 1923-1929), 383,000 houses were built by private builders and a mere 57,000 by local authorities; under Labour’s 1924 Act (which extended from 1924 to 1933) 15,000 houses were built by private builders and 493,000 were built by local authorities.

However as one housing analyst has pointed out:

“this figure needs to be seen in the perspective of the total of 2,459,000 houses built in England and Wales between 1919 and 1934, equivalent to one-third of all the houses available at the end of the war. The significant point is that out of those 2.5 million new houses, only 31% were built by local authorities, and of the 69% built by private enterprise only one quarter had the assistance of a subsidy. The need which had been identified in 1919 for a great increase in working-class houses for renting had not, therefore, been met. Between 1919 and 1934 there was an increase of ordinary working-class houses with rateable values up to £13 of only 19%, while more typically ‘middle-class’ houses rated at £14-£26, the majority of which were built for sale, increased by 60%, and houses rated at £27-£78 increased by 48%. (Burnett, p.233).

These figures include houses built without the assistance of any subsidy and therefore by definition outside the influence of subsidies so they offer no guidance as to the impact of subsidies on the creation of the type of housing they were meant to encourage. What they do show however is that the production of new housing between 1919 and 1934 not only perpetuated but accentuated the prevailing division between working class needs and the rest of society with the majority of new housing being built to accommodate the growing home-owning middle class rather than the needs of the working class for rental accommodation.

Subsidies and the concept of “general needs” housing

The prevailing sentiment that motivated the all-party approach to housing since the First World War was that local authority housing was seen as a crucial part of supplying a ‘general need’ for housing. Lloyd George’s “Homes for Heroes” initiative was designed to provide a minimum common standard for newly build houses designed to meet that general need whether they were built by private or local authority effort. Consequently, 

“Throughout the 1920s the policy behind local authority housing was that it ‘should bridge the gap’ between what private enterprise could produce and the housing requirements of the area – that is to say, it should be for ‘general needs’, not only for the poor, and certainly not only for the poorest. In practice, council houses went largely to a limited range of income groups – small clerks and tradesmen, artisans and the better-off semi-skilled workers, with average-sized families and safe jobs.” (Burnett, p.238).

The idea of “general needs” housing was one that included subsidies for privately built housing and such subsidies had been provided by all the post-War governments until 1933. It was privately-built housing that constituted the other side of the gap that needed to be bridged. From the perspective of the free enterprise camp, subsidies expended on the basis of “general needs” housing were meant to include the prospect of making such privately-built housing available to those components of the working class who could afford it. This was part of the motivation of those from the free enterprise camp who continued to accept the need for subsidies beyond the point where the costs of housing had diminished the original purpose allocated to them in the immediate aftermath of the First World War. From the perspective of the free enterprise camp, this was something that could be fitted into the “Garden Suburb” ideology of those who were influential in the formulation of post-war housing policy while retaining an affinity with private enterprise.

The subsidies made available to encourage the construction of such housing was dependent upon those houses meeting a minimum standard as discussed above. In other words, while subsidised housing could be built by private builders or local authorities, the houses built would represent an acknowledgment that decent housing should be available to the working-class as well as others. Aside from the obvious difference in the quality of housing available to the working-class and the more affluent, the existence of a minimum housing standard encouraged by the housing subsidies continued to ensure that those houses would be acceptable to some of the social strata above the working-class poor whether they were privately owned or rented via local authorities. 

By such means, as long as this view of housing as a “general need” prevailed the subsidies dispensed by central government ensured that local authority housing remained free from the stigma of such housing being the exclusive preserve of the poor and impoverished working-class. The reality of course was somewhat different. Although housing supplied with the assistance of “general needs” subsidies included both private and local authority housing the standards associated with this housing were less likely to be exceeded by local authorities than by privately produced housing. This was because private enterprise built relatively few houses for rent and were more likely to be able to absorb the costs of higher specification housing at the point of sale than local authorities who continued to rely on government funding to supply housing for rent. Consequently, there was always a tension between the two components in terms of the supply of “general needs” housing and as the late 1920s and 1930s progressed that tension became more pronounced due to growing unemployment (it reached 3 million by 1931) and the expanding market for privately built houses that emerged as a result of the growth in the middle-classes and its taste for home ownership in the suburbs which occurred on an unprecedented scale during this period. 

From the perspective of the poorer element of the working class, despite the weighty subsidies that had been provided through the Wheatley scheme it was not enough to ensure that rents of council houses came within the reach of this group. That element had remained untouched by all the post-war housing acts and were compelled to continue to reside in old rent-restricted property much of which, if not already slums, were rapidly turning into slums. This is the context of the 1930 Housing Act (the Greenwood Act) which provided subsidies to local authorities for eliminating slums in their areas and imposing an obligation on them to rehouse those displaced by slum clearances. In an attempt to address the issue of local authority housing being beyond the reach of those currently residing in slums the Greenwood Act had also introduced the idea of “differential rents” which has been covered in part 14 of this series.

Such plans however, were thrown into turmoil as a result of Ramsay MacDonald’s determination to commit to an austerity programme in collaboration with the Conservatives and the Liberals when he dissolved the minority Labour Government and established the National Government in August 1931. His actions had been made inevitable by his commitment to the recommendations of the report of the financier-dominated May Committee of the previous month. That report addressed the question of the Government’s commitment to “general needs” housing in the following terms:

“We view with deep concern the steadily growing charge upon the Exchequer . . . for the housing of the working classes. There is a serious danger of the nation . . . finding itself committed to the principle that a man’s wages are not normally intended to enable him to pay fully for his housing.” (May, 1931, p.220. Quoted in Housing Politics in the United Kingdom: Power, protest and planning, by Brian Lund. Published by Policy Press, University of Bristol, 2016, p.155).

The unelected National Government of August 1931 was subsequently democratically endorsed by the general election of the following October which resulted in an overwhelming and unprecedented Conservative majority in the House of Commons. Although they possessed an enormous majority the Conservatives, for the sake of maintaining the pretence of it being a National Government, retained Ramsay MacDonald as Prime Minister. Despite its commitment to the austerity programme advanced in the May Report the large Conservative component of the National Government did not make any immediate move against the idea of “general needs” housing presumably for the same reason that they retained Ramsay MacDonald as Prime Minister. To have shed that aspect of the previous Labour position on housing – one that Arthur Greenwood and even Phillip Snowden had favoured – would have been tantamount to an open admission of the dominance of the Conservative view on the subject and that was something that neither Baldwin nor MacDonald would have welcomed at that time. As it was, MacDonald appointed Neville Chamberlain as a replacement for Arthur Greenwood as Minister of Health with responsibility for housing – a position he only held from 25 August-5 November 1931 when he was succeeded by Sir Hilton Young. 

And with the appointment of Hilton Young as Minister of Health the days of “general needs” housing were numbered.

Opening up working-class housing to the market

Sir Hilton Young’s view of politics emerged from a strong association with the world of finance and a deep antipathy towards Socialism. Before the First World War he had been a financial journalist with a career that included being assistant editor of the Economist between 1908 and 1910 and then as City Editor of the Morning Post, 1910-1914. He resumed this career in the late 1920s as Editor of the Financial News between 1926 and 1929. Alongside his military career during the War he had entered politics as a Liberal and was elected as a ‘free Liberal’ in the 1918 general election where he supported Lloyd George. This led to his appointment as Financial Secretary to the Treasury in Lloyd George’s coalition government in April 1921 and he continued in that post until the fall of Lloyd George in October 1922. Thereafter he was chief whip of the Lloyd George Liberals and helped reorganise the party’s finances. Like Alfred Mond mentioned above, he too resigned from the Liberals in 1926 over a disagreement with Lloyd George’s land policy (which he viewed as socialistic) and joined the Conservative Party. As indicated above, his next governmental post was as Minister of Health in Ramsay MacDonald’s National Government where he had responsibility for housing.

On 7 December 1932 he introduced his Housing (Financial Provisions) Bill to parliament for its first reading and explained its purpose in the following terms:

“The object of the Bill is to bring an end to the power of the Minister of Health to grant subsidies under sections 1 and 3 of the Housing Act, 1923, and the Housing (Financial Provisions) Act, 1924, and to enable him to undertake to make contributions in certain cases towards losses sustained by authorities under guarantees given by them for facilitating the provision of houses to be let to the working classes.” (House of Commons, The New Housing Bill, The Times, 8 December 1932).

The Bill was read a second time on 15 December 1932 and during his introduction Hilton Young expanded on the purpose behind it. 

“In order to grasp the basis of the problem, let us look at the origin of the subsidy as we know it, an origin in the abnormal conditions which followed from the War, when, owing to the decrease in the supply of houses, there was a wide economic gap between the price which the wage-earners could pay and the economic rent at which houses could be built. To cover that gap, subsidies were introduced;  if I may put it in this way, we erected a powerful engine to pump by subsidies capital into the supply of houses. Further consideration has shown that that engine is an expensive one, and that it is only necessary to keep it running as long as the capital has to be driven uphill, but if capital will find its way by natural gravity to supply houses, the use of the engine is no longer necessary”. (Hansard, House of Commons Debates, 15 December 1932).

But, while Sir Hilton Young’s reasoning may have encapsulated the thinking of the pro-market advocates, it was not how the Labour Party viewed the question of subsidies. Although the Labour Party attached a high importance to the use of subsidies as a means of maintaining rents within the reach of a significant section of the working-class, the party had a wider view of subsidies. In effect, subsidies were also seen as a way of ensuring the extension of local authority control over the provision of working-class housing. Subsidies provided the local authorities with the means of supplying houses that could subsequently be rented at a rate that would otherwise, if provided by private enterprise effort, be beyond the economic reach of the working-class. Consequently, to the Labour Party it was never a simple matter of the possibility of affordable houses being built by private enterprise even if that was later to become the case as such an outcome was not to be relied upon as a permanent solution to the provision of such housing. Rather local authority control was seen as a more reliable means for supplying such housing over the long term while at the same time ensuring that houses supplied through those means would remain within the public sphere and thus continuing to provide a social need in the future. As local authorities were not commercial entities and had no private source of funds they were always going to rely to one extent or another upon public funds to carry out their perceived responsibilities to working class housing and this meant a reliance on central government subsidies.

This of course was never a consideration on the part of the constituency that Sir Hilton Young represented and as such he viewed subsidies as a hindrance to the operation of the market as a more efficient mechanism for the supply of working-class houses. He argued that local authorities by their ability to construct large housing schemes have the advantage of scale and this advantage translates into “preferences and facilities in regard to obtaining supplies, and so on.” This then meant that,

“the subsidised efforts of local authorities can always undersell the private builder and the private investor, and so long as you had that force of subsidised competition you could never expect private enterprise really to take up the business of house building.” (Ibid).

In essence what Hilton Young was saying was that local authorities can operate to scale when they embark on housing schemes. This provides them with a leverage over suppliers of building materials etc. which is not available to the private builder and that the subsidy they receive from central government inflates this advantage. The effect of this, according to Sir Hilton Young, was to disincentivise the private builder from becoming active in the supply of working-class houses. He further stated that:

“There are certain things needed to make sure that we shall get a supply of small houses from private enterprise. The first that we recognise, of course, is that we must have investors ready to come in and hold the houses. What we want is houses to let, and we cannot have them unless there is some investor who has bought them to hold them to let. I believe it is a matter of common knowledge to all those acquainted with the investing public and the conditions of investment at the present time, that there is a strong demand on the part of investors, small and great, for working-class house property as an investment. All over the country one hears the same thing that investors are ready to come in as they were before the War to invest. The reason is not far to seek. The reason is the fall in the return on gilt-edged investments, and the difficulty of finding any other safe investments. That naturally drives people to seek this form of investment.” (Ibid).

As Sir Hilton Young saw it, by the end of 1932 the fall in the cost of material, the availability of labour and cheaper credit, alongside the unavailability of alternative areas of safe investment, had combined to produce a situation where investors were poised to commit strongly to such house building. The only thing standing in the way of this private investment surge was the obstacle represented by local authority housing subsidies. 

Remove that disincentive and the potential return on investments in the construction of small houses would attract the necessary capital. However, he went on to say that he did not rely on that capital being advanced by the normal banking channels alone. The Government was to be an active agent not in directly supplying such capital, as had previously been the case with regards to subsidies, but by facilitating the flow of capital from other sources. That source of cheap capital was to be the building societies. This was explained in the second clause in his Bill:

“There is a scheme which I have to submit to the House in the Second Clause. It is a scheme under which the building societies will be encouraged to find the money which is needed for the building of the houses, to finance the housing. What are the conditions? The building societies have very large funds, more than enough to meet the whole needs of the situation, for which they are in need of reasonable investments. They are used to lending only to the owner-occupier on mortgage. That demand is saturated. The demand now is for houses to let.” (Ibid).

He admitted that this proposed channel of funds was not an essential or vital part of the scheme but rather a “most useful aid”. Nonetheless, he had been negotiating with the building societies with the object of encouraging them to provide capital to investors for the construction of houses to let. Part of those negotiations had revolved around the need for the building societies to provide a higher percentage of the cost of the house than they had previously done with regards to mortgages. Instead of their usual limit of lending up to 70% of that cost they were now to loan up to 90%. They were also to loan the money for terms of 30 years at a 1% discount on the rate they charged on interest for ordinary loans. In return the Government was to provide a guarantee to the building societies against losses.

These arrangements were also to be available to the local authorities and the Housing Committee of the Association of Municipal Corporations, as well as the Federation of House Builders, had assured him that they would make use of the building societies’ funds provided on that basis.

The removal of the local authority housing subsidy was meant to release the pent-up eagerness of private builders and investors to get more actively involved in the construction of working-class housing. At the same time the scheme developed with the building societies to supply cheap capital for those willing to invest – including the local authorities – would ensure an ongoing and improved supply of working-class houses without the Government having to provide subsidies. The only remaining involvement of the Government with housing subsidies was to be in the area of slum clearance.  

Hilton Young’s Housing Bill was given Royal approval on 18 May 1933 as the Housing (Financial Provisions) Act and it represented the end of the all-party consensus around what had been known as “general needs” housing that had existed since 1919. It also represented the end of what had been the influence of Labour Party housing policy on government actions between the wars.