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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Crisis – what crisis?

The call this week by Lynda Blackwell, Head of Mortgages at the Financial Conduct Authority, for older people to downsize their homes in order to alleviate the housing crisis demonstrates just how out of touch the ruling class have become. Her employer quickly distanced itself from her lame attempt to blame the housing crisis on ‘last time buyers’ refusing to shuffle off to the care home quickly enough but it was unable itself to come up with anything better to solve the housing crisis than to “look at the products and markets that are developing to ensure they work for consumers.” This regulator’s gobbledygook translates as ‘Crisis – what crisis?’ I doubt, however, whether we have heard the last of Ms Blackwell’s analysis. After all, it is already being applied as the bedroom tax in the fast diminishing social housing sector. Ineffective as that policy has proved in solving the housing crisis, it does help the ruling class (or the 1% if you prefer) to stir up inter-generational strife and thereby draw attention away from the real cause of the housing crisis.

It is certainly true that the generation born immediately after the end of the Second World War have been exceedingly fortunate. Benefitting from free education and full employment, they were offered secure social housing to rent or could buy their homes with cheap, tax deductible loans from building societies. The next generation were deprived of access to such cheap finance – the government having abolished the tax relief on mortgages and allowed the banks to gobble up the building societies (the few that remain being forced to adopt the same profit driven strategies). Many in the next generation were, however, also able to build up significant equity in their homes, but this was more the result of escalating house prices than any sustainable policy. For the current generation of young people other than those born into the privileged 1%, conditions are much harsher. While some will benefit (eventually) from inheritance inflated by the sale of their parents’ homes, this benefit is eroded by too many siblings and step-siblings, increases in life expectancy and exorbitant care home costs. In the longer term this benefit too will melt away. For young people today, facing a ratio of national house prices to male average full-time earnings of 5 and average house prices in London of 33 times the annual full time earnings of £7 an hour, the first rung of the so called housing ladder is completely out of reach.

From the perspective of the 1%, this doesn’t matter. Housing is simply a valuable and valued part of their capital. Provided the rest of us can afford to rent in the private sector, however inadequate and insecure this may be, topped up where necessary with subventions to landlords to house those who cannot afford the ‘market’ rent, what’s the problem? These are secure investments, underpinned as they are by interest rates manipulated by an unaccountable Bank of England. Provided the rich on the way to the opera can still step over the homeless or, failing that, have them washed away with Mayor Boris Johnson’s water cannon, who cares?

One way to analyse the mess we are in is to compare it with how things would be done in a socialist society – one on the way to building communism where society is rich enough to meet everyone’s needs and class antagonisms and exploitation has melted away. In a socialist society, housing would be assessed by its usefulness, not as an investment to owners seeking a profit. An adequate stock of housing would be a social priority and provided by collective effort. Security of occupation would be ensured; and democratic control would be exercised by those living in a local community, whether it be a tower block or local neighbourhood. The continuity of local communities and familial ties would be prioritised.

What could be achieved under the existing social and economic structures? A massive programme of council house building, financed, as Jeremy Corbyn has proposed, by a peoples’ quantitative easing would be a start. Tough regulation of the private rented sector and more security of tenure for tenants would help. A ban on foreign ownership of London housing would help. Perhaps most important of all, attention should be given not to “looking at the products and markets that are developing to ensure they work for consumers” as the FCA fatuously proposed but to removing the props that underpin sky high prices in UK property and ensuring that when prices come down we are not asked once again to bail out the banks who were responsible for these prices in the first place.

If this cannot be achieved under capitalism, there is always the alternative solution.