(A). BACKGROUND

An Englishman’s home is his castle, so the saying goes. Or, as we should say nowadays: an English person’s home is her/his castle. The saying, of course, means many things: we can do as we please in our own home – our home is our safest refuge – no one may enter a home unless by invitation – we, as home-holders, are the appointers of our own circumstances. All things which for decades now people have begun to take for granted. Today, however, in the United Kingdom we appear progressively to be returning to a situation which prevailed in earlier times, when few of these advantages obtained, to a situation where hundreds of thousands of men and women in our land would be glad to have somewhere to call home at all. For millions of others, as we shall presently see, their rented accommodation is far from being a safe refuge or a place where they are able to be the appointers of their own circumstances.

No other policy area has fallen victim to more manipulation and misrepresentation than the housing sector in total disregard of the public interest and good. The deepening dysfunction of its market, fuelled by self-serving finance and banking sectors focused exclusively on maximised returns, has now brought to a head a housing crisis of major proportions with repercussions across the entire economy and a mounting tide of human destitution, stress and suffering, as untold as it is unnecessary.

We in Democafe-Camden believe that none of this is inevitable and that the housing crisis compounded by low-wage levels and insecurity of employment is producing levels of unfairness and inequality that are as unsustainable as they are morally unacceptable. Our country is working, in other words, with a broken political and economic system and housing is both a symptom and major cause of this state of affairs. In what follows we attempt to explain why this is so and how, through radical reform of the UK housing sector and its market, a solid start can be made to tackling the overall economic dysfunction that most people (except perhaps for the fortunate minority) would now agree besets our land.But before we turn to the housing crisis as such, let us be clear about one thing. Starting in the early 1980s, successive UK governments, far from seeing in decent housing for all a basic need or right (on a par with education and health care), have failed to arrest, and at times have even encouraged, a highly destructive trend which has turned the UK housing sector into a refuge investment for the better-off with savings (buy-to-let) and, for the global super-rich, a playground for speculative activity (buy-to-leave). As a result, we live in a divided land where acquisition of an investment asset for some is effectively preventing many others from acquiring or even renting an affordable place wherein to make a home.

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(B). TESTIMONIES

But first, seen from the standpoint of some of those affected, how does it feel in 2015 to be trying to make a home in the UK? Here are some testimonies taken from the Guardian’s “Generation rent” article (25-07-2015)

Edinburgh
I don’t think that making renting the norm will help much … the quality of properties and landlord vetting needs to be improved (Scottish laws preventing illegal premiums have been a massive help) … people who rent deserve to live somewhere safe and secure without the threat of eviction. After 7 years of renting I have nothing, having paid approximately £35,000 in rent. Our generation in addition has to pay tuition fees (£50,000), has to chip in to help with our elderly parents’ end-of-life care, and fund our own, has been told it can’t rely on state pensions (decent work-place pensions are being phased out) and, believe it or not, we may want to raise children – there’s simply not enough lifespan to pay for all this (even with the accumulated wealth that comes with property ownership it’s a stretch). Rent is often more expensive than a mortgage. I spend half my monthly income on rent … I could be asked to leave at 2 month’s notice at any point, and the list of repairs my landlord “means to get around to” could fill an A4. Rent is OK for landlords and when you are starting out, but over a lifetime it beggars you.

Blackburn
With a history of 15 years of horrendous lets behind me, I want to get a mortgage. My gross income is £14,000 per annum, my rent £390 per month. I cannot get a mortgage without a large deposit, at least £7,000. I have neither family nor friends who can help. I am frustrated because the mortgage repayments on a suitable home would be less that the monthly rent. Why does 15 years of rent not make me eligible for a 100% mortgage?

Hampshire
I worked in Toronto and rented an apartment there. There were no fees, rents were reasonable (i.e. no more than 40% of my wages, including bills and “city tax”), the quality of housing was high, pets no problem and we could redecorate. I moved back to the south of UK. I paid almost £500 in fees alone. Rent for houses in the area where I had found a job was about 60% of my monthly wage (not including bills and council tax). We couldn’t redecorate and our 2 cats made it impossible to find anywhere. A shock to the system – I want to be able to put down roots and not to be moving constantly … I want to use my money to build a future for myself and not pay someone else’s mortgage … many in my generation don’t have a stake in society … the rental market in the UK is out of control … buying a house is no where near an option but renting is not viable either.

Manchester
If renting were a long-term option with decent rights, many people would feel more secure, more settled. We have had awful service from agencies who seem incapable of sorting out emergencies quickly. We had no boiler from January to March (our landlord didn’t get around to installing a new one) … we were showering at friends’ houses … we were told by the Citizen’s Advice Bureau to sit it out, since, if we broke our contract, we’d be out within the month. Contracts seem only to work one way. Some landlords and agencies forget there are real people living in these houses.

Lancaster
House prices continue to rise but our pay does not.

Brighton
What I find most frustrating is the sense of being trapped … I cannot even begin to make progress on saving for a deposit … the rent eats up most of our money. We feel that its alright for landlords/ladies to rent our properties for an extortionate amount because (a) they can and (b) this is their retirement fund … but, what about our retirement?

Surrey
How can I get on the property ladder unless I switch from a career in education to banking? My rent is £600 a month, half my monthly earnings. I’m looking for somewhere more central but will have to pay a £1500 deposit up front, estate agents fees and the first month’s rent. This is money I don’t have.

East Sussex
We pay for basic repairs ourselves as we don’t want to upset the landlord. We have requested a longer lease – 2 to 3 years – but the landlord has refused our request. Every year we don’t know whether our landlord is going to sell … we are restricted in the area in which we can look for alternative accommodation without moving our child to a different school.

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(C). HOW HAS THIS SITUATION ARISEN?

Post-war, Britain’s answer to homelessness was straightforward – build more council houses. It wasn’t perfect, particularly when entirely serviceable terraces were knocked down in favour of problem-generating tower blocks and low-rise estates, but it did the job. Until the 80s, that is, when, in a climate of mounting unemployment and eroding job security, the applecart was upset by a barrage of new Government regulations, whereby Councils began rolling back their building programs while larger and larger chunks of their existing stock were taken over by Housing Associations independent of local councils, or were socially cleansed by gentrification, all triggered by the new rights for council tenants to buy their own homes at an attractive discount.

Before Councils knew it, said discounts had been made transferrable to any residence to which tenants had moved, regardless of how long lived in, whether newly-built or renovated. That a large chunk of past rents paid had come from housing benefit didn’t seem to matter. Could this be the reason why this extravagant experiment was never copied by other countries and, as soon as they got the chance, was summarily scrapped in Scotland and Wales? Had our Scottish and Welsh friends seen what we could not see: that the “Right to Buy” miracle was no miracle at all, and, if not a covert attempt to buy votes, was an invitation to unbridled individualism, and over time would put an end not only to social housing but to social cohesion along with it?

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(D). SO, WHERE HAS THIS LEFT US?

(a) Overall demand for housing in the UK far outstrips the housing market’s ability to meet it. In November 2011, according to the Chartered Institute of Housing, the number of new households being created stood at 230,000 per year and the number of new dwellings completed at 109,020. Of those only one in five were social housing completions. Since 2011 this supply situation has steadily worsened. And yet, by some accounts, there already exists more than sufficient housing – unused, underused or unusable – to accommodate all of Britain’s thousands of homeless people.

(b) This imbalance between supply and demand is felt most acutely in all localities where work is available, that is, in the South East of England and in most large cities across the UK. In other areas, where affordable housing is still available, secure employment is difficult to find. A chronically uneven distribution pattern of employment and housing is therefore to be observed, with an increasing number of people having to negotiate costly and exhausting commutes in order to join home with workplace.

(c) The purchase-price of such houses as are available and, to a considerable degree also rent levels, have been allowed by unregulated market-forces to rise out of all reasonable proportion to an average annual wage. For the “lucky few”, current mortgages, if you can find a bank that will give you one, can mean a life-time of indebtedness, where previously home purchase could be paid off over a period of 20 years or so. Of the houses that are being built precious few are within the financial reach of young would-be first-home buyers. For the majority, therefore, purchase of affordable housing of any sort is quite out of the question and, in many places, one’s chances of finding affordable accommodation to rent vanishing small.

(d) For the growing population of those without a roof, homelessness, intergenerational crowding, insecurity of tenure and subsidised temporary B & B accommodation are the only options. Meantime, thanks to a rocketing housing-benefit budget, monies continue to flow from the public purse into the pockets of landlords and developers who already have more than enough. And the Government’s recent response: cut benefits rather than cap rents. Does this, we ask, make any sense?

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(E). WHAT SHOULD BE DONE? – WHAT CAN BE DONE?

Rory Coulter of Cambridge points out in his letter to the Guardian (25-07-2015): Long-term trends suggest that “generation own” – those who have in recent times been lucky enough to get a foot on the housing-ownership ladder – constitutes an anomaly that cannot be repeated. We should stop obsessing about home ownership and concentrate on dramatically improving the quality, affordability and security of renting, and this will involve asking and attempting to answer some hard questions about the wisdom of moving from social to private landlords.

At the bottom line, the disgrace of would-be homes being used solely as currency or a laundry service for dirty money cannot go on. Governments of whatever political colour have a duty, we believe, to come up with a menu of renting-out options and incentives, carrots and sticks, that will move the housing sector from where it currently stands – a playground for speculators and “concerned” savers – to where it should be – a place where you, I and our neighbour can find a secure and affordable home. Political will – a belief that it should and can be done – needs to precede any action. Democafe-Camden offers this Current Thinking Paper No 1 as a modest but consensual contribution to creating that political will. Its members, mindful that the necessary radical reform of the housing sector and market in our land will require new fit-for-purpose policies, suggest that the following options be considered, and in varying combinations, in the knowledge that no single option of itself will suffice:

(01) A Land Value Tax (LVT) In parts of Britain two-thirds of the cost of a home is due to the price the developer paid for the land. It should be possible for the government through the establishment of a national Land Bank or equivalent entity effectively to pocket the uplift in land value created by removal of spatial restrictions or by change of use authorisation and employ the cash to fund more affordable house-building;

(02) Repeal of regressive “Right to Buy” legislation

(03) Establishment over time of a national Housing Development Board (HDB) or equivalent local entities which would act as an all-purpose house-builders and landlords. Under this scheme, householders would own their homes leasehold, with the HDB as freeholder. The latter could also finance home-buyers at preferential rates. Any Housing Associations or Developer-builder Co-operatives thus established would be mandated to work with local authorities;

(04) Introduction of “smart” Rent Caps or Controls (which reflect a reasonable multiple of the average annual wage) and security of tenure for tenants. Renting should be encouraged as a more egalitarian form of home provision – it counteracts an individual’s desire to own a rapidly appreciating asset, which risks inflating the sort of price bubble that has beset the housing market in the UK. To take the German example: renting there is cheap and secure. Rent controls are stringent and tenancy law and the court system ensure strong security of tenure. In Germany it is hard for landlords to sell rented properties to an owner-occupier. This means that rented housing is ring-fenced and landlords are prevented from trading properties for capital gain, a practice which currently hobbles the rental sector in the UK;

(05) New legislation to deter developers from “sitting on” land;

(06) Criteria of “established UK residence” to be met before entitlement to property purchase can be granted;

(07) Safeguards to protect “good” landlords against property abuse by rogue tenants;

(08) New Lease-Holder Rights (rules for any changes to free-holder ownership or service changes to be approved by leaseholder-dwellers, and the latter’s right to first refusal to be established in law);

(09) New Legislation on Repossession. Councils to be given right of first refusal in taking over defaulted mortgages thus obviating (1) pressure from greedy landlords on vulnerable debtors, (2) the trauma of eviction and (3) council responsibility for re-housing;

(10) Major Disincentives Against Owners Keeping Property Empty for lengthy periods (including waiting for children to come of age). Out-of-control squatters’ rights were reformed, now out-of-control owners’ rights need reform;

(11) A Comprehensive Welfare System (especially health and old-age dependency care – whereby property assets will play a less prominent role in wealth accumulation to provide for old-age or for the inevitable “rainy day”) coupled with the institution of a

(12) Basic or Citizens’ Income.

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(E) WHAT’S HAPPENING ELSEWHERE?  HOW DO OTHERS SEE US?

In Switzerland at present more than 200,000 homes (housing approximately 10% of the nation’s population of around 8 million) are managed by not-for-profit housing cooperatives (Coopératives d’habitation). The size of such cooperatives varies enormously, but some comprise up to 2000 homes, each with a participating interest. Such associations are eligible for start-up support from the Swiss Confederation, and rents are typically from 20 to 30% below current market rates. Armoup (the body responsible for social housing development in French-speaking Switzerland) currently offers a complete two-year course in housing cooperative management. Similar cooperative housing associations exist elsewhere: in Quebec (where they have been in operation for 30 years), in Norway where 13% of the housing stock is managed in cooperatives and in Sweden 18% with as much as 27% in Stockholm itself. (1)

London, where property has become a refuge for stock-shy investors, is by far the most expensive European capital. The average purchase price there is now topping 10,000€ per sq metre compared to 8140€ in Paris. Tenants have been hit by the “buy or die” disease, average monthly rents in London being as high as 2100€, while elsewhere in the country they are approximately half that amount. London brick has become the international investment of choice with funds flooding in … “Even so,” complains Cameron, “we don’t want London to become the dumping-ground for the world’s dirty money” … Room for new-build is practically zero, yet there are at present no plans for rent controls … According to Georges Verdis: London has become “la capitale du capitalisme”. Madrid, whose inhabitants now hope that the worst is behind them, was offering rented accommodation at an average of 11,80€ per sq metre as compared with 12,90€ in Barcelona. The average purchase price in Madrid is around 4000€ per sq metre, approximately half that in Paris and broadly comparable to the going rate in a French city like Lyon. Madrid expects to be able to take advantage of the economic rebound. Its mayor is planning to build 17,000 new homes in the north of the capital at a cost of 6€ billion.

In Berlin, where accommodation can be rented at an average of 8,55€ per sq metre (or at 10€ in the posher areas of the city), the purchase price per sq metre is around 2,700€ as compared with 4,000€ in Hamburg and 6,000€ in Munich. Currently the city’s housing deficit stands at 15,000 per year. Most of Berlin’s householders (85%) are in rented accommodation, but are beginning to feel market pressures. On June 1 national rent controls came into force – opinion is still divided as to their efficacy.
In Brussels average rents rose by 20% between 2004 and 2013 from 578€ to 695€ per month. Purchase prices hover currently around the 2600€ per sq metre mark. At present between 15,000 and 30,000 properties stand vacant which is pushing prices up since demand from the international organisations remains keen. The spokesman of the Brussels City Tenants Association estimates that around 60% of tenants are spending more than half their monthly income on rent. (2)

France is about to bring in nation-wide rent controls (as part of the “Loi Alur” on Access to Accommodation and Urban Renewal) with a view to mitigating sharp rent rises in areas “under pressure”. The measures will it is hoped be effective in places like Paris where only 33% of householders are owner-occupiers as compared with 60% elsewhere in France. Rents have risen in the capital by 8% on average per year over the last decade, but controls are not expected to bring rents down across the board … “we expect only 10% of tenancies to be affected” says one observer … “the measure will above all affect the smaller properties occupied by young persons where rents are highest” comments another. On the other hand, a number of large long-standing family tenancies will see rents moving in the other direction – upwards. When asked: “Will this idea be copied elsewhere?” a third observer, a researcher, replied: “Had these controls been brought in 10 years ago they’d certainly have had a significant impact. But now, with prices beginning to fall, to be controlling rents might mean we end up keeping them where they are.” (3)
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(1) La Croix: La cooperative d’habitation, un modèle à importer (30 July 2015)
(2) La Croix: Les loyers à la hausse dans les capitales européennes (31 July 2015)
(3) La croix: A Paris, l’effet de l’encadrement des loyers est encore incertain (31 July 2015)
We are grateful to Trevor Griffiths of Renaissance Britain for his invaluable input.

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COMMENTS by Trevor & Janos and Michael’s Responses (25th Sept):

I take note of useful comments by Janos and Trevor (DCC Notes 5 September) and of Trevor’s Summary (11 September).  I suggest that all of the latter be incorporated into the existing DCC Current Thinking on Housing with suitable adjustments to both comments and paper.  But, for the time being, to comment on their comments:

LVT being a whole-system issue should be separate from immediate concerns and remedies  –  put out the fire and then look for the arsonist  

Point taken. But, together with another whole system issue – Basic Income (Section 5 (12)), should we not briefly allude the potential impact of these issues on home acquisition.  For example, the existence of LVT would surely discourage speculators from acquiring land and property for purely speculative (as opposed to economically and socially functional) reasons and do nothing with them?  Would not this bring downward pressure to bear on the housing market?

Define “affordable” 

Affordability is obviously a variable of time and place.  For property purchase, an affordable price would be one that is a “reasonable” multiple of the yearly average per capita income nationally or regionally, and for rents, a “reasonable” percentage of a tenant’s monthly income.  “Reasonable” in both cases would need to be defined by democratic consensus and would doubtless need to vary overtime with changing economic circumstances.

Differentiate between planners/developers and builders

What do Janos and Trevor have in mind here?  Differentiate, yes, but on the basis of what criteria?  It seems to me that the only differentiation that really needs to be made is that between, on the one hand, publicly-funded affordable social housing (with developers and builders working to large-scale – and thereby economically viable – stringent public sector remits) and, on the other, a housing sector thrown to the tooth and claw of a free market which has singularly failed to deliver.   The idea here is that social housing (as has been the case with public health-care in France) is made to constitute a portion of demand so stable and so enormous that private-sector supply, if it is to survive, simply cannot afford to turn down, even though the latter means accepting terms and conditions that they have thus far described as “uneconomic”.   In this way, as the French would say, social housing becomes the economic load-bearer (“porteur”) that carries the entire housing sector.

Strategies  –  social housing (not for profit)

See above.  But not-for-profit enterprise needs to be firmly reinstated on the economic map.  It is probably high time that, in addition to social housing, all the basic utilities (aka “natural” monopolies)  –  telecommunications, internet, water, gas, electricity etc – be run on this basis, with such parts of the health and education sectors which have already been released into the private sector being reigned in or made subject to stringent public-sector remits.  The “cherry-picking” must stop!

Damage caused by right-to-buy (now right to invest and leave empty)

It seems to me that Trevor’s summary deals pretty comprehensively with this.  However, is the public money lost with R2B as enormous as Trevor claims?  And should we be using the sale of existing social housing-stock to fund, even if only  in part, a nation-wide new-build program?  Explain, please.

Enfleld Council’s response

Could Trevor and Janos supply a brief summary of what this is?

Estimate housing benefits going to private landlords

Do such estimates exist and, if so, could we have them?

And one other more general point on Trevor’s summary:  he states that there is a natural separation between the shortage of social housing and the dearth of affordable accommodation in the commercial sector.  I’m not quite sure in what sense exactly the separation is “natural”.  And should we be separating them at all? Aren’t they closely connected?  A massive increase in the provision of social housing will automatically decrease pressure on the commercial sector which in turn will translate into downward pressure on prices and so make “buying to let or to leave” a much less attractive proposition for speculators which is the real root of the problem.   And this is the real reason why neo-liberals have fought so hard to suppress social housing by promoting R2B  – not because they believe that the private sector will deliver a better deal for the homeless, but because they know, as we all now do, that adequate provision of affordable housing will be the death knell of “unbridled” speculation in property.  So it is ultimately a matter of “political will”.  Far from each proposal making a case for itself, if we are to change the economic ethos (and radical reform of the housing sector will make an enormous contribution to achieving such change) we need a package of mutually supportive policy proposals.  It is my contention that section 5 of the Housing Paper “What should be done?  What can be done?” is a modest step towards defining such a package  –  but there is still ample room for clarification, improvement and completion.  Over to you!

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