Homes Are For Life, Not Profit

Homes Are For Life, Not Profit

Posted: 03/01/2014 | Author: The Political Idealist | Filed under: Uncategorized | Tags: aspiration, development, economics, growth, homes, housing, Labour, market, new towns, Politics, social housing, social justice, socialism, society, tenants, Thatcherism, work |Comments Off

When the Thatcher government came to power in 1979, it was eager to reduce the size of the state as much and as quickly as possible. Most of its spending cuts and privatisations never enjoyed majority support, but were tolerated by an electorate pleased with the tax cuts and increased personal consumption they allowed. They were also tolerated because no better alternative, as they saw it, was on offer. However, there was one mass privatisation that seemed to have no losers: the “Right to Buy”- a scheme by which council tenants could purchase their own homes at discounts of up to 75% to the market value. Previously, council tenants wishing to buy had no option but to move house. It won over swathes of the working class to the Thatcherite fold- creating hundreds of thousands of lifelong Conservatives out of Labour’s key electoral base.

Over the 34 years the policy has been in place, it has been changed several times. New Labour quietly reduced the maximum discount to £32,000, but left the policy broadly intact. The Conservative-led coalition has ramped up discounts to 70% or £100,000 (whichever is lower), in a bid to accelerate the sale of council homes. Unfortunately, the consequence of the sales is that the social housing stock has drastically shrunk, with tenants cherrypicking the larger, higher quality accommodation. It’s perfectly understandable: If I could buy a 3 bed semi for £150,000 and sell it for over £250,000 a few years later, I would. The only problem is that the heavy discounts on Right To Buy have made it impossible for councils to replace the sold properties on a like-for-like basis, with the result that families are now queuing for years for social housing.

The trouble is, the “property owning democracy” that Thatcher envisaged the policy creating couldn’t exist given the de-regulation of the housing market her government simultaneously pursued. We now have a situation in which easy mortgages, money grabbing buy-to-let landlords and legal changes have made house prices absurdly high, with rents even more unaffordable on a proliferating private rental sector in which tenants’ rights are negligible. We need a new system in which the spirit of “aspiration” that created Right To Buy is realised whilst everybody is entitled to a secure, affordable home.

We could start with the establishment of a Rentals Exchange. This service, provided by local councils, would function as the lettings agency through which every private let would have to be advertised and arranged. In order to register (and therefore in order to let out a property) landlords would be required to certify the good state of repair of the property, together with the setting of a Living Rent (in line with bands set by the council). Landlords guilty of poor practice would be barred from the Exchange.

Whilst allowance would be made for premium and larger properties, tenants would be able to move into a home that meets their needs safe in the knowledge that they will be charged a fair rent affordable to a family of the size occupying the property. The Rentals Exchange would protect them from inflation-busting rent increases, and it would ensure that good practice is observed by the landlord. Crucially, tenants could only be evicted for misconduct or falling into arrears: as long as a tenant meets her/his responsibilities, s/he is guaranteed the right to live in the house for as long as they like. Tenants might even be permitted to pass on their “Right to Reside” to a relative, if we are serious about the importance of security to tenants.

To this we add a radical change to Right To Buy. All tenants, be they council, social, or private, would have a statutory entitlement to buy their home at the market value: the discount would be abolished, but the right would be universal. Almost everybody would have a true sense of ownership of their home, which would have important social and psychological benefits. These changes would be almost revolutionary, but I don’t think this ‘Universal’ Right To Buy (URTB) would be used too often, for the disadvantages of renting would have been all but eliminated. In any case, the balance of housing stock could be protected by requiring councils and social landlords to replace sold homes on a like for like basis, whilst private landlords could be offered exemption from all taxes associated with URTB sales if they reinvest all of the proceeds in a replacement.

Lastly, two or three state-owned (or even mutually owned) companies would be set up to boost supply and competition in the private rentals sector. They would seek to make a profit, like their privately-owned counterparts, and would compete for the same customers in the Rental Exchanges. The only differences would be that a) they’d have the financial firepower to build the large, mixed tenure developments that would constitute a third wave of New Towns and b) profits would be invested in new council or social housing. These superlandlords would seek to compliment their private counterparts, not replace them.

It’s true that these proposals would discourage non-professional landlords from entering the market, and individuals may stop becoming landlords altogether. This is not necessarily a disadvantage. Tell me what improvements the army of middle-class unqualified landlords armed with buy-to-let mortgages have brought to the housing market, other than crowding out and exploiting would-be owner occupiers, and I will reconsider. What this does offer to landlords is a fair deal in which they can operate in a stable and sustainable market and make a reasonable profit in exchange for allowing tenants to live in security. It’s not much to ask.