The Housing Crisis and How to Solve It

Gavin Barwell, Croydon Central MP and grandly titled Minister for Planning and Housing is not expected to solve the housing crisis with the government’s White Paper due later this week. In all probability, he will follow the pattern of neglect and naked electioneering set by successive New Labour, Coalition and Tory governments and just make things worse. The crisis is, nevertheless, extreme. Social housing is disappearing into government coffers and buying is unaffordable except for a privileged few – house prices in 122 local authorities are now ten times local median earnings (Source: ONS figures quoted in the Guardian) while the briefest of tests on the money advice service affordability calculator will confirm that lenders won’t lend much above three times earnings. This leaves most young people facing the prospect of never leaving home, a lifetime renting on short-term contacts in the unregulated private sector, a job in the armed forces or a life on the streets. This is a somewhat restricted set of choices from a government that says it believes in choice.

The housing crisis can, of course, be solved, but not in ways that would be agreeable to Mr Barwell and his paymasters. Instead of nibbling away at the green belt and further inducements to speculative builders, we need

  • an immediate extension of council tax banding upwards as a prelude to introducing a comprehensive Land Value Tax.
  • appropriate taxation of second homes, holiday homes and empty commercial property
  • Councils to be empowered to borrow to finance such social (council) housing and compulsory purchase of existing properties as are needed to meet all their local needs.
  • an end to the bedroom tax.
  • mortgagors to be entitled to convert mortgages into affordable rents rather than face eviction
  • recognition that housing has a central role to play in the environment and the fight against global warming
  • proper regulation of the private rented sector, with an end to short-term tenancies, rent control where appropriate and certification of “good” tenants by landlords and “good” landlords by tenants, this certification being required for continued participation in the sector. I have been told that this approach is successfully applied in Germany, but if anyone knows more about it, please let us all know.

These are not revolutionary demands. They are the minimum reforms needed to alleviate the current crisis. If they are beyond the capacity or imagination of our ruling class to implement, the sooner we overturn them the better.

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Note of our meeting on 20 October

Discussion on Housing

The meeting reviewed Jeremy Corbyn’s Housing Policy, published as part of his Labour leadership campaign, and concluded that it had much to commend it. In particular, the aims of building one million new homes during the next five year parliament and providing new safeguards for tenants in the private rented sector in the form of three year tenancies and blocks on “unreasonable rent increases” were welcome and politically attractive. The CP should certainly maintain its support for Corbyn and endorse these proposals. The meeting did, however, conclude that they would ameliorate but not eliminate the housing crisis. For this the fundamental problems with UK housing had to be addressed. It needed to be recognise that treating homes as investments benefitted home owners – those already on the so-called housing ladder, but Marxists understood that, outside the productive process, asset ownership and exchange was a zero sum game. The gains accruing to home owners from owning property – essentially land value – didn’t materialise out of the ether: they were transfers of value  from those who who didn’t own their homes to those who did. One solution would be a Land Value Tax. It also had to be recognised that land and houses were currently over-valued when they couldn’t be afforded by working people. A fall in prices should be encouraged and welcomed, not feared – but it had to be matched with restrictions on banks’ rights to foreclose and requirements on them to write down the amounts they could recover from mortgage loans. For too long banks had made essentially speculative loans secured on land and buildings. passing on the risk associated with these speculative loans to the borrower. The aim of housing policy, the meeting concluded, should be to separate the provision of homes – a basic human need – from the creation of speculative investment.

The anomaly of allowing home owners to build up a capital gain which was then appropriated by the private sector providers of care homes was also discussed.

The meeting went on to discuss how to support the Axe the Act Campaign and their wish to expose Gavin Barwell, the Tory MP for Croydon Central and newly appointed Housing Minister, for having no intention of addressing the housing crisis. Barwell had a majority of only 165 at the last general election having spent almost up to the statutory limit according to his election expenses returns. There were allegations that he had falsified these returns, but the police had now concluded their investigations without bringing a prosecution. The meeting was not impressed with this outcome. Barwell also had a poor record as a Labour Councillor on housing matters, appearing to be keener on sweetening his constituents than pressing ahead with housing development in the south of the borough. It was also noted that the Nestle Building in Central Croydon had stood empty for four years, mostly under his watch, and was not now scheduled for redevelopment until 2018 – probably for luxury flats. The similarity with Centre Point in Central London, left empty for decades while its value increased, was pointed out. The problems of empty property and second homes both needed to be addressed in any comprehensive policy on housing.

Other Business

Ben Stevenson was appointed our delegate to Party Congress on the weekend of 19-20 November at Ruskin House. Members were encouraged to attend as visitors, volunteer as stewards and offer beds for delegates on the nights of Friday 18th and Saturday 19th November. Please make offers to office@communist-party.org.uk

The Party’s Big Red Appeal is up and running. Members are encouraged to donate what you can – cheques made out to CPB and mailed to the Party at Ruskin House or by credit transfer to the Party account – details from the acting branch secretary.

Members were encouraged to attend the Croydon Assembly at Ruskin House on Saturday, 26 November

Next meeting

7 pm at Party Centre on Thursday ,17 November –our usual third Thursday of the month.

 

Right to Buy or Just Plain Wrong?

It was disappointing that, while Ed Miliband was prepared in the BBC leaders’ debate last night to oppose the new Tory wheeze to grant housing association tenants the right to buy, supposedly financed by further syphoning from the dwindling council housing stock, he was not prepared to condemn the original Tory rip-off or its continuation under Tory and Labour governments. A recent study found that a third of ex-council homes sold in the 1980s under Margaret Thatcher are now owned by private landlords, many of them resident in off-shore tax havens. Another study found that in one London borough almost half of ex-council properties are now sub-let to tenants.  Anyone gullible enough to think that Tory politicians do not feather their own nests should reflect on the fact that Charles Gow, son of Mrs Thatcher’s Housing Minister who drove through the policy, now owns with his wife at least 40 ex-council houses. As Paul Kenny, General Secretary of the GMB, said about this outcome: “You couldn’t make it up”.

Neither Labour nor the Tories has any coherent idea on how to address the housing crisis. While both speak about building more houses, both would lack the means to ensure this actually happens. Instead of direct public investment in housing, the government spent £35 billion in 2012-14 on Housing Benefit, a subsidy paid directly to landlords which ensures that house prices stay high. The cost of this support has risen a third under the coalition and will continue to rise as our kids increasingly find that the choice facing them is staying with Mum and Dad into middle age or renting in the private sector. Yet neither party has an alternative. Not so the Communists. Only we appear to be clear sighted enough to recognise that there is a need to de-couple people’s need for a secure home from their desire to invest and accumulate even when this accumulation tends to be at the expense of those who do not own their homes and tends to benefit the banks even more than the borrowers. What would communists do? Invest in council housing, albeit with more democratic control than has applied in the past – for example no more bedroom taxes! Our Economic Commission has called for the implementation of Land Value Tax, initially at a low level so that it simply replaced Council Tax, but with a view to raising the rate over time so that, in effect, land would become a socially owned asset. Communists would end the scandal of 80,000 young people experiencing homelessness every year when there are one million empty or second homes out there.

Impracticable? We don’t think so. Visionary? Unapologetically!

The Crisis of Capitalism – banks and housing

The collapse of the banks in 2008 and the cuts then implemented by the coalition government to bail them out is only one aspect of the crisis facing capitalism. Another is housing.

It should not be overlooked that the banking crisis was itself triggered by reckless mortgage lending in the USA housing market. These dodgy debts were then packaged up and sold to banks and other financial institutions across the world. Whatever the shortcomings of New Labour – and they were many – the banking crisis was not due, as the Tories would have us believe – to excessive spending on the NHS and social services.

Returns on those who invest in property to rent using mortgages from these same banks have been, so far, insulated from the financial crisis. These returns are estimated to have averaged 16.3% over the past eighteen years – a period that spans the banking crisis. They have been generated by inflated rents: in May these averaged £765 per month in England and Wales and are still rising. Such rents are becoming increasingly unaffordable by those who must work for a living. In response, the government paid out £35 billion in 2013-14 in housing benefit – money that goes directly to landlords and supports the banks that provide the mortgages. The increase in rents that supports this edifice has only been made possible by an almost total lack of regulation and control of private landlords and the absence of security of tenure for tenants.

Once upon a time, ordinary working families could turn to Council housing. This was undermined by ‘right-to-buy introduced by Thatcher and continued under Labour. By 2013 up to a third of all council houses purchased under ‘right-to-buy’ had been sold on to rich landlords. A shocking example is provided by the son of Ian Gow, the Tory minister who presided over implementing Thatcher’s policy. He is now a housing tycoon, owning more than forty ex-council houses in one London estate alone! What remains of the council house stock is now subject to lengthening waiting lists, hardening criteria, diminished security of tenure and now the bedroom tax.

With people on average salaries and wages unable to afford mortgages even at current interest rates depressed by so called quantitative easing, i.e. printing money to support the banks, the housing prospects for the working population in Croydon and elsewhere across the country look bleak. Even those of us currently enjoying good housing can have little confidence that the next generation, i.e. our kids, will be so fortunate. Jobs are becoming less secure, unions are shackled, and well paid jobs are only accessed by those who can bear the huge burden of debt from student loans – bankers and those whose parents are wealthy enough to pay them off. Only the wealthy elite can flourish in such a world, albeit behind gated communities.

The solution? Mere tinkering advocated by the Green Party and, modestly and belatedly, by Labour is no longer enough. Regulation of landlords and abolition of the bedroom tax would be welcome, but cannot address the mess we are in. Tory and Tory-Light (i.e. Labour) solutions such as assistance for first time buyers will simply add to the inflation of rents and make buying by the rest of us even less accessible. The only recovery under capitalism will involve, as Thomas Picketty argues in his well publicised book Capital in the Twenty First Century, greater inequality and eventually the impoverishment of the entire working class – i.e. everyone except the super-rich. But while Picketty appears to believe that capitalism can be reformed, the only viable path out of the mess we are in will involve the appropriation of the wealth of those who exploit us. In a word – communism.

Martin Graham