Asked to write a very short introduction for a special issue on the UK of a German tenants’ magazine Mieter Echo. This has actually been very hard to do and I’m nervous about their response. This is what I sent them:
Background to housing in the UK
It is always very hard to make sense of the housing situation in another country because the social relations surrounding housing and land everywhere incorporate historical legacies which we take for granted.
Britain never had an effective revolution or land reform so it still has elements of feudal society: kings, queens and aristocrats remain very powerful and are land owners on a massive scale: they own forests and mountains, agricultural land (so, for example, members of the royal family are the biggest recipients of EU farm subsidies) and urban land in London and other cities. The nation’s richest man, the Duke of Westminster, owns much of Mayfair and Belgravia. These old-style ownerships operate alongside large-scale ownership of land by pension funds and other financial institutions and investors so economic power in the country is heavily based on the collection of rents and the accumulation of value through these ownerships.
Privileges for landlords against tenants
Part of this heritage is that the standard conditions which govern relationships between landlords and tenants for commercial and housing property are very favourable to landlords at the expense of tenants – in terms of security, insurance and other liabilities, rent escalation in times of inflation etc. Some social democratic reforms in the early 20th century shifted the balance of power a bit in favour of tenants’ security and rent controls for housing but those reforms have been reversed as part of the neo-liberal project started in the late 1970s and pursued most strongly by Margaret Thatcher and now again by our present government.
As pioneers of industrial and financial capitalism, the British had their fastest urbanisation much earlier than most European countries – in the 18th and early 19th centuries. This took place on terms which produced appalling housing conditions for the urban working classes (best described by Frederick Engels from Wuppertal, writing for a German audience in 1849). These housing conditions festered for decades but eventually led to struggles through the labour movement producing left-wing municipal governments in most industrial cities and parts of London. These left municipalities became major builders and landlords of “council” housing in the 20th century, supported by new national law and policy (and by centre and right politicians) in the aftermath of both World Wars. This combination of working class pressure and ruling class appreciation of the need for “homes for heroes” led to “Council housing” being the dominant form of housing in many cities and fairly important everywhere. In the post-war decades Council housing was about half of total production.
A distinctive feature of British capitalism has, for centuries, been the great power of banks and other financial institutions relative to manufacturing interests. In a country where land rents and land value growth were important avenues for capital accumulation, mortgage loans to help people buy housing have represented an important field for lenders, fuelling major booms in private speculative housing construction, especially in the 1930s and again in the 1970s and 80s onwards. Individual families, including many better-paid working class people, thus became owner-occupiers with mortgage loans and by 2006 represented about 70% of all households.
Meanwhile the stock of social (Council and other non-market) housing was shrinking through the privatisation of estates and the forced sale of individual flats and houses to their tenants, with heavy discounts on market value, under the “Right to Buy” policies favoured by Margaret Thatcher and maintained ever since. The sector of private renting from individuals and companies had almost disappeared, crushed by rent controls, the better alternatives available in Council housing and the easy availability of mortgage finance for individual ownership.
Today’s problems are the result of these long-established conditions and some more recent changes.
Housing production in Britain fell sharply after Councils stopped building in the 80s and has never recovered, even with modest outputs from the non-profit Housing Association sector.
Thus an inadequate supply has confronted steady growth of demand – coming from population growth but above all from rising incomes (at least of half the population) and the consequent appetite for larger and better dwellings (and second homes for some). This escalating demand led to periods of rapid growth in market prices: windfall capital gains for owners and severe affordability problems for young households entering the market. This escalation of market prices has been the fastest in Europe (contrasting with Germany where it has been the slowest). The escalation is strongest in London and the South East which suffer from a self-reinforcing spiral as individuals and investors compete to buy appreciating assets and in turn drive prices up more. This aspect of unequal regional development is another contrast with Germany where economic growth is spread among many city-regions.
In this situation we have seen a remarkable return of the private rented sector as large and (especially) small investors buy houses and rent them out to the growing numbers of households who cannot afford to become owners and can’t secure tenancies in the shrinking stock of social housing.
Britain is thus now a country where housing standards for low- and middle-income people are getting steadily worse, land rent and land costs represent more than half the cost of new production (especially in cities), homelessness is growing, space standards are among the worst in Europe and the national budget for subsidies to landlords (bridging the gap between low wages and high rents) is escalating out of control despite savage recent cuts.
British working people confront a disastrous housing situation, subject to market relations dominated by landed and financial interests. The details are different from experience elsewhere in Europe but the underlying forces are similar: good housing for everyone is not compatible with liberalised market relations.
Diagram by courtesy of Shelter, based on government statistics