For the new year I just wrote a letter to the Guardian, finding myself irritated by the recent splatter of letters they have had on housing, triggered by CPRE etc people a couple of weeks ago. It’s probably too long for them to publish. [later: it was. ] This is it:
You have carried a great deal of material on the housing crisis this year and since Tristram Hunt’s tear-jerker on the protection of green belts (17 December) there have been sporadic responses in the letters page. Most of the coverage and correspondence, however, has been piecemeal and trivialising of a complex field. Can we start the new year, please, by taking a more comprehensive view which sees the dire housing situation as the outcome of lots of different aspects of the neo-liberal project?
Globally, the starting point surely has to be the financialisation of the economies in western Europe and North America: banking and financial activity, and the pursuit of rising asset values becoming more important while genuine investment in productive activity dwindles or shifts to authoritarian regimes and to cheap labour continents. In this process it was the pursuit of rent which drove the placement of funds into property here, including housing: self-fulfilling while expectations remained positive, but equally liable to spiral downwards as we have seen in the last year.
This has all been a counterpart to static real wages for the average working person, and falling earnings for the poorest, for some decades. Thus we have only been able to maintain a rising standard of consumption by borrowing. That was secured against rising house prices for owner-occupiers but unsecured for other borrowers. Banks and other lenders scrambled for that business, throwing caution to the winds and hiding behind the fig leaf of ‘self-regulation’. The growth of financial assets and of property prices was further fueled by our compulsory savings in pension funds and by those distrustful of pensions, or without pension schemes, who so often bought larger houses, or second or other houses as a primitive attempt to accumulate personal and family wealth. While it lasted, the owner-occupation system was a very powerful mechanism widening the gulf between social classes in the UK and many other countries, transferring incomes from tenants and new purchasers into un-earned wealth for established owners (and their families) and for developers, landowners and institutions.
Demand pressure (and thus house price inflation) have also been driven by demographic changes, rising student numbers, inward migration and by fiscal policy. Although the UK finally phased out mortgage interest tax relief (unlike the Netherlands and some other countries), we still have privileged tax treatment for dwellings and for landlords and last year’s introduction of Real Estate Investment Trusts (REITS) was partly designed to attract more investors into the private rental market. On top of all that, governments have poured petrol on the fire by subsidising ‘intermediate tenures’, key-worker housing and so on. Now they propose guarantees for the mortgages of first-time buyers.
Successive governments have pursued their obsession with owner-occupation, pushing it to lower-income populations most likely to default and thus most likely to experience it as less secure than the social housing from which they were enticed by the wealth-accumulation prospects and other inducements.
With the right-to-buy steadily reducing the stock of council housing, council renting became the last resort for those with fewest choices (rather less so in London) and could thus more easily be stigmatised. Attempts to eke out the resources of the Housing Corporation through pressure on private developers to co-finance housing association development were insufficient to replace the losses of social renting even during the boom. Now that source of funding is drying up completely as private developers cut production and refuse to play. Furthermore some housing associations are disabled because their development schemes could break even only if part of their output could be sold on the owner-occupier or intermediate markets. Much of this diagnosis and a powerful set of proposals to deal with it are in a recent pamphlet by Duncan Bowie free from Compass.org.uk
The one justification for the house price boom would have been an equivalent surge in output: if house-builders had responded like textbook manufacturers and matched supply to demand. Their failure to do so was a major setback for the neo-liberal rhetoric about markets solving problems. The interpretation of this outcome has yet to mature and remains at the level of ping-pong between opposing camps. On the one side welfare economists, both government and academic, blame the planning system for constraining land supply – either through restrictive policies or slow decision-making or both – while the CPRE, the RTPI and others deny this, pointing out that developers don’t implement anything like all the permissions they have.
An adequate explanation has to take elements from the myopic versions of both the “economists” and the “planners”. The anti-development culture of suburban and rural England, enshrined in green belt and countryside protection policies since 1946, has undoubtedly produced an endemic shortage of land for development, thus high prices, low space standards, poor thermal performance and the destructive pursuit of rents. And as Alan Evans pointed out (Letters 23 December) it has given us a ‘spaced out’ settlement pattern in which unsustainable amounts of traveling are necessary. But it is also true that housebuilders have quite rationally exploited this situation by honing their skills in managing their land banks, trickling dwellings onto the market in limited numbers, maximising profits but not output. A few large developers have become dominant in this process, making it hard for small suppliers to enter the market and even harder for self-builders as Valerie Bearne pointed out here (Letters 27 December). If this composite view is accepted, then it would make no sense simply to dismantle restrictive plans and ‘release’ more housing land onto the existing market: it would be like handing our North Sea oil to Opec. Instead we would have to make new plans, designed to get homes, jobs, education, shopping and services much closer together and organise the land supply with the objective of lowering the land cost component of housing dramatically. The necessary techniques are well known, from British, Dutch and French experience. It would mean facing down both the CPRE and the ‘volume’ housebuilders.
It would also mean mobilising architecture. Much of what gets built in the UK embodies such meanness in building and neighbourhood design that it is widely despised, even by those with no vested interest in keeping land undeveloped. Despite the heroic efforts of CABE, this remains the case almost everywhere and any government wanting to challenge the English anti-development culture would have to be bold and take direct measures to foster projects which actually enhance the landscape. It’s a tall order but surely possible as part of an inspirational national recovery campaign.
New building, however, contributes only a tiny proportion of the dwelling stock each year and the main focus of policy must be on the whole stock. If my composite analysis is right then we have to take action at many points. Increasing wages for low- and middle-income earners will be a more effective way to reduce housing inequality than expanding credit. As the Governor of the Bank of England said a year ago we need to get rid of the expectation that house prices will grow in real terms – and that can’t be done with interest rates alone but needs fiscal and other measures too. Investment in productive industry (including construction) needs to be privileged over the speculative pursuit of asset values, and pensions need re-thinking in this context. The built environment probably employs a quarter of us in its production, management and control. It houses all of us and our activities. It does it badly for the most part, and unjustly. So dealing with it is a central issue as we enter a new economic period and we have to tackle all its aspects together, not piecemeal.