Sunday, 14 November 2010

Social housing vs the free market

Right I’ll try some pseudo academicky stuff for a change.

Social housing; while the housing element of the term is straightforward enough to conjure up images of high density housing units clustered into secondary and tertiary urban locations, the social, especially now, is a politically contested notion. The use of the word “social” rather than “council” in itself reflects the fundamental shift in government policy with responsibility for the provision of housing having been moved from local authorities to housing associations. Ironically, “social” has arguably been a more accurate description given it reminds us of how social housing originated in explicitly socialist politics that in turn highlight how competing ideological notions of the social have played a part in shaping the very geography and architecture of social housing, most obviously via the influence Welwyn Garden City had on the first generation of social housing. However, rather than any idealised notions of communal or "proper" living, right now the terrain is shifting once again, becoming seemingly narrower in the process as “social” becomes largely a matter of eligibility.

The origins of this partly reside in the Thatcher years when the housing acts of 1980 and 1988 started unpicking then historic constraints on private sector rental accommodation. These originated in WWI as a response to rent strikes along Clydeside that threatened to undermine the war effort. Confronted by this the government chose to sacrifice the petty capitals tied up in the private rental sector to the interest of the nation and the big capital of munitions manufacturers; it did so by introducing rent controls (for which read constraints) that, in an age of galloping inflation, squeezed private providers out the market by limiting their ability to charge profitable rents. The resultant hole would in turn be progressively filled by the invention of mass council housing that over the subsequent decades saw the state become the landlord not so much of the working poor as of the working class.

However, while Conservative governments started the process it was the last Labour government that fundamentally changed this relationship. The graph on housing tenure presented above neatly shows how the decline in social sector renting was matched by increased renting from private landlords, a transition driven by the successive tightening of eligibility criteria used to ration a shrinking social housing stock. Put simply this graph tracks the emergence of today's situation where being able to afford private sector rents in itself largely disqualifies people from social housing. Instead, social housing, for new tenants at least, has been rendered almost entirely an issue of social need, a safety net instead of a universalist aspect of the welfare state.

With this as context the take off seen in the buy to let (B2L) market over the 10 years to 2008 makes even more sense. This was partly a consequence of a cheap credit fuelled housing bubble to be sure, with small-scale investors seeking to prove their financial acumen by riding a passing wave. However, the take off in B2L was also integral to the deeper reworking of the relationship between the state and its citizens. Indeed, I would argue every B2L investor who borrowed to buy a 2 bed newbuild city centre flat is as much the embodiment of Labour policy as any right to buy former council tenant is of Thatcherism. Unfortunately for Labour's electoral fortunes, this was too tacit a process and too predicated on market signals as to have largely gone unnoticed. Unfortunately, for us the ConDems either don’t understand what happened or frankly couldn’t give a damn.

To be fair to Labour they did try quite cleverly to exploit the housing bubble. New housing developments over a certain size had to include and/or pay for new social housing units. Plus, they actively encouraged housing associations to borrow more to build more in the now passed NICE decade. And that is the problem we now have; Labour part-hardwired the provision of new social housing to a property bubble that has long since burst and is unlikely to re-emerge, if at all, for the forseeable future. To give a brief example, encouraging housing associations to borrow to build is all very well, but it's no longer clear banks actually want to lend to them given the relatively low returns on offer.

So what we now have is a situation where the number of households in Britain is set to increase faster than the actual housing stock with no sign of anything or anyone stepping in in response what with government focused on avoiding any form of capital spending and bank led credit constraints limiting the scope for B2L investors to re-emerge in especially significant numbers. This is especially unfortunate given the reworking of social housing policy now underway, most obviously the (re)introduction of caps on the rents government is willing to pay. As I understand it the current government view is that if it pays less rent, then rents will fall. Except, that was tried before, in 1915 in fact, and it simply didn’t work. Rather, what we are going to see in an already crowded nation is more people being squeezed into ever shabbier accommodation.

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