The housing affordability crisis in Britain has reached unprecedented levels, with average home prices soaring to eight times that of annual incomes. This has had profound implications for the working class, as housing costs have become increasingly prohibitive, forcing many to rely on private rentals. The consequences of this crisis include rising homelessness, the segregation of communities based on socioeconomic lines, and a growing divide between property owners and those who cannot afford to enter the housing market.
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To better understand the roots of this crisis, it is crucial to examine the historical context and political decisions that have shaped the housing landscape in Britain.
The post-war housing crisis
In the aftermath of World War II, Britain faced a severe housing shortage, with half a million homes destroyed and many more in dire condition. Recognising the urgency of the situation, Clement Attlee’s Labour government embarked on an ambitious program of public home-building. The goal was to provide equal access to affordable homes that met the needs of working people. The Town and Country Planning Act of 1947 nationalised the right to develop land, allowing local authorities to regulate new property development. This approach aimed to ensure that land was used for the benefit of the community rather than for speculative purposes.
The Conservative vision of a property-owning democracy
The Labour Party’s radical agenda of public home-building and land regulation alarmed the Conservative Party, which saw it as a threat to individual property rights. In the 1950s, Conservative politician Anthony Eden popularised the concept of a “property-owning democracy” as a counter to Labour’s socialist advances. Eden’s vision, rooted in the belief that expanding the number of property owners would neutralise the appeal of socialism, gained traction within the Conservative Party.
Harold Macmillan and the expansion of homeownership
In 1951, the Conservative Party came to power with a promise to build 300,000 houses per year. Housing Minister Harold Macmillan, despite initially championing the role of the private sector, soon realised that public home-building was necessary to meet this ambitious target. Simultaneously, the Conservative Party introduced policies to encourage homeownership, such as making cheap mortgages more readily available and easing restrictions on private home construction. These measures kick-started a dramatic rise in homeownership that would continue for decades.
The emergence of the Right to Buy
Some Conservatives began advocating for public housing tenants to own their homes during the 1970s. Although Macmillan himself was initially sceptical, restrictions preventing the sale of public housing were gradually removed under subsequent Conservative-led governments. The breakthrough came with Margaret Thatcher, who saw the Right to Buy as a means of transforming Britain into a “property-owning democracy.” The Housing Act of 1980 introduced the Right to Buy, granting public housing tenants the legal right to purchase their homes at a discount of up to 50 per cent. This move was seen as a way to empower individuals and promote social mobility.
Financial deregulation: Fuelling the housing boom
Thatcher’s housing revolution was not limited to Right to Buy. Her government also pursued financial deregulation, which profoundly impacted the housing market. The removal of lending restrictions and the incentivisation of commercial banks to engage in mortgage lending transformed the role of banks in the economy, leading to a flood of credit into the housing market. This, in turn, fuelled a house price boom and incentivised households to take on larger mortgage loans.
Thatcher’s policies, including the Right to Buy and financial deregulation, not only reshaped the housing market but also had a profound impact on the ideological outlook of the working class. These policies eroded socialist sentiment by giving more people direct access to private property and unearned wealth. Homeownership became the primary source of wealth for the majority of households, further entrenching the appeal of a financialised housing market.
The housing crisis in Britain is not a natural or inevitable phenomenon but the result of carefully planned political projects spanning several decades. Policies such as the Right to Buy and financial deregulation have exacerbated inequality and social divisions. The working class, who historically benefited from social housing, have switched allegiance after buying their council homes. Their children and grandchildren may never be housed by the local authority because those who purchased via the right to buy have effectively pulled the ladder up behind them.
Impact and consequences of the Right to Buy
The Right to Buy had an immediate and profound impact on the housing landscape in Britain. It led to the privatisation of valuable homes once owned by the state. More than two million publicly owned properties were transferred into private hands between 1980 and 1995, drastically reducing public housing stock.
The increase in privately owned rental properties has driven up rents, making housing unaffordable for many low-income individuals and families. This has resulted in a heavy reliance on housing benefits to cover the cost of rent, with approximately 40% of the budget now going to private landlords. The Right to Buy has inadvertently contributed to the skyrocketing housing benefit bill and perpetuated the cycle of poverty for those in need of affordable housing.
As council tenants exercised their right to buy, the number of available affordable homes decreased significantly. Most of those homes have not been replaced. Consequently, the number of social housing units available has fallen due to inadequate public sector funding.
The Right to Buy not only forced local authorities to sell their properties to existing tenants at a heavily discounted price, but the government also banned councils from using the money from the sale of housing stock to build new housing. Half the proceeds of the sales were paid to the local authorities, but they were restricted to spending the money to reduce their debt until it was cleared rather than being able to spend it on building more homes.
This depletion of social housing stock has contributed to the current housing crisis in the UK, with a severe shortage of affordable homes for those in need.
The policy also concentrated the poorest and most disadvantaged households in public housing, while wealthier tenants were better positioned to take advantage of the Right to Buy. The quality of public housing suffered, and taxpayers ultimately bore the costs of the policy through subsidies and increased spending on housing benefits.
Cash incentive scheme
Running alongside the Right to Buy was the cash incentive scheme, where council tenants were given a grant to buy a home in the private sector, thus releasing a home for people on the waiting list. This helped tenants just short of the money they needed to buy a house to become homeowners. The size of the grant was dependent on the number of bedrooms in the property to be released. So, a tenant living in a three or four-bedroom property would receive a bigger grant than someone giving up a one-bedroom property. Tenants giving up a house would receive an additional grant.
In many ways, this scheme was much better than the right to buy, as tenants living in flats could buy homes with gardens or move closer to family. The obvious benefit of the scheme is that councils retained their housing stock.
Right to buy facts
- More than two million homes were sold under Right to Buy between 1980 and 1995.
- Homeless households in England during the 1980s trebled from approximately 55,000 (1980) to 165,000 in 1990.
- Labour realised that scrapping the Right to Buy policy would lose votes; instead, when they came to power in 1997, they reduced the maximum discount from £50,000 to £38,000 in 1999. This helped to slow down the number of properties sold.
- Labour also reduced the proportion of Capital Receipts from sales of council housing that local authorities were required to retain, releasing £3 billion.
- By 2002, many people were warning that the Right to Buy was making the developing housing crisis worse in many areas. The policy was diminishing affordable housing stock, making it harder for many to get onto the housing ladder.
- Local authorities are frequently forced to rent their former homes back at market rates to discharge their statutory homelessness duties.
- In 2000-2001, 53,000 homes were sold under Right to Buy, but only 18,000 new affordable homes were built.
2012 Revamped Right to Buy
David Cameron launched a revamped version of Right to Buy in 2012, increasing the cap on the maximum discount to £75,000 or £100,000 for London. This meant a quadrupling of the discount in London and a trebling for most parts of Britain.
The government pledged that every home sold would be replaced. For the first time, the receipts from additional Right to Buy sales would be used to support the funding of new affordable homes for rent on a ‘one for one’ basis. They claimed this would deliver up to 100,000 new homes and support 200,000 jobs.
By 2013, council homes were being built for the first time in 30 years. However, the promise of 100,000 new homes has not been fulfilled, as only one home is being replaced for every five sold. Furthermore, the replacements primarily consist of unaffordable “affordable” homes, which do not adequately address the loss of social rented housing. This blatant disregard for the public’s trust and the failure to provide suitable replacements showcases the flawed implementation of the Right to Buy policy.
The proposed extension to housing association properties
Recently, there have been proposals to extend the Right to Buy to housing association properties. This would have severe consequences for both the housing sector and vulnerable tenants.
Extending the Right to Buy to housing associations would virtually dismantle these organisations, leading to the loss of thousands of jobs and the potential collapse of social housing provision. This would be detrimental to the millions of individuals and families who rely on social housing for stable and affordable accommodation.
By granting tenants the right to buy their social housing properties, housing associations and local authority housing departments would no longer have a purpose. The expertise and resources they bring to the table would be lost, leaving a significant void in the provision of social housing.
Many social housing tenants are vulnerable individuals who would struggle to shoulder the responsibilities of homeownership. The costs associated with maintaining a property, such as repairs and upkeep, would become their responsibility. This could lead to a decline in the quality of housing and exacerbate the nation’s housing crisis.
Ideological basis and failure to protect public assets
The implementation of the Right to Buy is rooted in ideology rather than reason. Some politicians on the right view social housing as a socialist concept that should be eliminated. However, this perspective needs to recognise the importance of social housing in providing affordable homes and ensuring the well-being of vulnerable individuals and families. The government is neglecting its responsibility to protect and preserve resources for future generations by selling public assets.
In light of the flaws and consequences associated with the Right to Buy, it becomes crucial to advocate for the importance of social housing. The case for social housing must be made with greater force and clarity, emphasising the role it plays in creating inclusive communities, addressing homelessness, and providing stable and affordable housing options for all.
Despite its initial popularity, the Right to Buy policy has proven to be flawed in both economic and social terms. It has led to the privatisation of social housing, exorbitant rents, and a failure to replace the homes sold.
The proposed extension to housing association properties would only exacerbate these issues and create additional problems for vulnerable tenants. It is essential to recognise the economic and social fallacies of the Right to Buy and advocate for the preservation and expansion of social housing to address the housing crisis and promote a more equitable society.