A Solution to Thatcher’s Housing Legacy

Mortgages are hard to get, rents keep rising, and being a landlord is becoming even more attractive to those with capital. Sixty per cent of Housing Benefit recipients are in work, as are all recipients of Tax Credits, and both these schemes look like a subsidy to employers for paying low wages. However, most of these subsidies end up in the pockets of the landlords!!

It is not the first time that wages have been subsidised – and failed to solve the imagined problem. The Speenham Land System, introduced in 1795, allowed the Speenham Parish in Berkshire to subsidise the wages of farm workers, and the system soon spread to large parts of England. While farmers then – just like employers today – took advantage of being able to pay low wages, it was not these low wages that were the real problem. It was the price of corn (essential for bread!) and it was only when the Corn Laws were repealed in 1846, and cheap corn could be imported into Britain, that the problem was solved.

Britain, like many countries, found that migration from the countryside to the towns, as the agrarian economy changed to an industrial one, produced a housing problem. The really sub-standard housing in the towns and cities of the early industrial revolution would probably have lasted longer if it hadn’t proved dangerous to health – everyone’s health – including the wealthy. Sanitation and sewers solved that problem, but overcrowding, sharing toilets and using council bathhouses was still rife after the 2nd World War.

The 1945 election produced a Labour government that offered more than the empty rhetoric of Lloyd George’s post-World War1 slogan of ‘a land fit for heroes’. After launching the NHS, the government began a most ambitious programme for getting rid of the slums by massively expanding council housing.

Successive governments, both Labour and Conservative, had a consensus – often called a mixed economy – and that included building council houses. A roof over your head was seen as much a right as education, the NHS and full employment.

Thatcher, a populist, ended this consensus, offering instead greed and selfishness, epitomised in the 1980 Housing Act that forced councils to sell off council houses to their tenants at big discounts. The Act also specified that councils must pay off all debt before they could use the proceeds of these sales for building new council homes. Since most councils had debt, this was the death knell for council housing.

Today, the cause of the housing crisis can be traced directly back to Thatcher. The pity is that Thatcher could not have lived to see this disaster unfurling. Her economic ideas were based on the free market and monetarism, and she equated controlling the money supply with balancing the weekly household budget! Sir Alan Walters, her Chief Economic Advisor from 1981-1983, was a monetarist, but monetarism has long since fallen out of favour, even though its disastrous effects are still being felt. This simplistic idea – that running a country is the same as balancing the weekly household budget – still finds favour with Frau Merkel and David Cameron but with very few others.

Since 1980, around two million council homes have been sold and, as can be seen in Appendix A below (www.gov.uk ) only 1.2 million built. All the council houses sold are now lost from the social housing stock, giving a net loss of 800,000 homes over the last 30 years. And this over a period where the population has been rising!!

The figures also show that the mantra of reducing the public sector, in order to set private enterprise free, does not apply to house building, since the number of units built by the private sector in the boom years – 2000-2008 – were less than in the 1960s, when council house building was also at its height.

Any solution based on building more houses – private and/or social housing – will take many years to come to fruition. There are, however, solutions that do not take years.

Firstly, the vast majority of landlords use borrowed money to purchase properties, because this is tax efficient for them! Why? Because, there is tax relief on the interest paid on the loan, so that the taxpayer is subsidising buy-to-let landlords and pushing up house prices and rents.

Secondly, one of the last acts of butchery that Thatcher performed on society before the Poll Tax rebellion toppled her was to abolish rent control and security-of-tenure for tenants in privately-rented properties. The reintroduction of proper rent controls, coupled with security of tenure, would take the pressure out of the rental market and see rents being reduced. Less being spent on housing benefit and tax credit and there would be time to produce a genuine housing policy not based on the economics of the madhouse.

Why will the Government and the Opposition not consider this? Yet again, the political will isn’t there, and as long as governments continue to ignore the people who have elected them – and get away with it – Thatcher’s legacy will continue to blight the lives of the less fortunate in society and, increasingly, young people looking to make their way in life.

It is time to stand up be counted.

Appendix A

UK House Building 1946-2011

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