July 30, 2014

:

Austerity – It’s a lie & unnecessary! -

Tuesday, July 8, 2014

Austerity Blues -

Tuesday, June 24, 2014

Sex, Drugs & the EU -

Wednesday, June 18, 2014

The EU and TTIP – A Treaty Made in Hell!! -

Friday, June 13, 2014

Vodafone’s Tax Credit of £17.4 billion -

Sunday, June 8, 2014

Is Capitalism Evil? -

Saturday, May 31, 2014

Mark Carney – A Canadian View -

Saturday, May 31, 2014

UKIP Plays the Race Card -

Wednesday, May 28, 2014

In Sickness-In Health-In Profit -

Tuesday, May 20, 2014

Thatcher’s Housing Legacy -

Monday, May 19, 2014

A Solution to Thatcher’s Housing Legacy

social housing stock

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 and it was only when the Corn Laws were repealed in 1846, and cheap corn could be imported into Britain, that the problem was solved.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

Year Private Enterprise Housing Association Local Council Total
1946
1947
1948
1949 24,460 8,020 168,780 205,260
1950 30,240 7,290 167,900 205,430
1951 25,490 7,350 169,020 201,860
1952 36,670 10,130 201,520 248,320
1953 64,870 16,800 245,160 326,820
1954 92,420 22,120 239,580 354,130
1955 116,090 12,850 195,480 324,420
1956 126,430 9,850 171,390 307,670
1957 128,780 8,520 170,290 307,590
1958 130,220 8,220 140,200 278,630
1959 153,170 6,520 121,880 281,570
1960 171,410 7,240 125,620 304,260
1961 180,730 6,320 116,140 303,190
1962 178,210 6,030 129,410 313,640
1963 177,790 7,550 122,380 307,710
1964 221,260 9,790 152,140 383,190
1965 217,160 12,360 161,710 391,230
1966 208,650 14,890 172,470 396,010
1967 204,210 15,070 196,180 415,460
1968 226,070 15,320 184,450 425,830
1969 185,920 16,660 175,750 378,330
1970 174,340 15,210 172,670 362,230
1971 196,310 16,490 151,670 364,480
1972 200,760 11,220 118,960 330,940
1973 191,080 12,130 101,430 304,640
1974 145,230 13,870 120,540 279,630
1975 154,600 22,050 145,360 322,000
1976 155,300 23,100 146,440 324,840
1977 143,970 30,650 139,540 314,160
1978 152,230 26,,290 110,170 288,690
1979 144,120 21,390 86,320 251,820
1980 131,990 21,480 88,530 242,000
1981 118,590 19,700 68,330 206,630
1982 129,020 13,740 40,090 182,850
1983 153,040 16,820 39,170 209,030
1984 165,560 17,290 37,570 220,410
1985 163,400 13,650 30,420 207,470
1986 178,010 13,160 25,380 216,540
1987 191,250 13,150 21,830 226,230
1988 207,420 13,490 21,450 242,360
1989 187,540 14.600 19,320 221,460
1990 166,860 17,930 17,710 202,500
1991 159,140 20,820 11,060 191,020
1992 146,940 26,500 5,660 179,100
1993 146,380 35,910 3,360 185,650
1994 153,270 36,860 2,880 193,000
1995 156,930 38,760 3,430 199,120
1996 154,340 32,950 1,740 189,030
1997 161.230 28,340 1,540 191,110
1998 155,830 24,100 1,100 181,020
1999 157,930 23,730 330 181,990
2000 154,580 21,990 280 176,850
2001 152,650 21,090 360 174,080
2002 162,770 18,940 250 181,960
2003 172,620 17,260 250 190,490
2004 182,700 20,660 130 203,490
2005 185,850 23,490 230 209,580
2006 186,530 26,000 290 212,820
2007 198,480 27,660 280 226,420
2008 155,430 32,230 630 188,290
2009 122,520 35,050 840 158,410
2010 106,060 29,860 1,360 137,280
2011 106,620 32,200 3,090 141,920

 

Comments
5 Responses to “A Solution to Thatcher’s Housing Legacy”
  1. Mike, great analysis. Thanks

  2. Dave says:

    Agree with the short term measures + decriminalising most squatting. There are also some efficiencies to be gained in using unoccupied dwellings & putting charges on generally empty houses in Mayfair & equivalent places sufficient to build new or get them more fully occupied.
    Longer term, recall that there are 60 million acres in the UK and about 62 million people – roughly 1 per acre ( = 4840sq yds, just over half a football pitch, a square with sides of 70 yds). You can get about 30 reasonable sized semis or terraced houses with gardens to 1 acre. Assume average family size therein just 2.3 = c. 70 people per acre. Now let’s pessimistically guess there are 2 million people underhoused. 2 million / 70 = 30,000 acres (bit less actually) which is 0.5% of our land area. By controlling & modifying planning permission & taxing land-banks (or certain LVTs) you could minimise the land charge elements & build at a little over £100K per unit in London & somewhat less outside. Whether sold, publicly rented, housing association, co-ops or even landlord I don’t care much. (A mix would be best imo.) However this would lead to a deflation in house prices generally and a massive reduction therefore in the assets of the banks, which (without intervention) would crash again. So feel proud that your housing stress helps to maintain the security of the banks & finance systems.

  3. Dave says:

    So last year I was talking to a friend from childhood who now owns over 100 houses. He said that it was his best year since he began in the ’70s and he had never been able to cover his initial costs so quickly before, though he reckoned it couldn’t last. He was a bit miffed by how easy Parliament had made buy-to-let, because the smaller speculators were pushing up prices in competition with him, and attributed it to most politicians wanting to get in on the game (& making it ridiculously easy to evict). He wondered why nobody seemed to grasp that the land was stolen off the people in the first place.
    Isn’t capitalism beautiful?

  4. Toby says:

    Fine piece, but flawed conclusion.

    We need a Land Value Tax, not rent controls. LVT would bring the price of land down (to zero, eventually).

    Meanwhile, in New York, rent control sees tenants sub let to others for a massive fee (selling cheaper rent).

    LVT is the answer, not rent controls.

    • Michael Gold says:

      Toby,

      Thanks for your comment and there are many people coming round to LVT but like building new homes it is a long process. Therefore whatever the merits of LVT, the only practical short term solution is rent control and I think interest tax relief for buy to let landlords needs to be abolished at the same time. This would allow house prices to fall with rents.

      Michael

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