It has been reported that if the rise in the cost of housing over the last 30 or so years was the same for everything, a loaf of bread would be £10, a litre of petrol £13, an oven ready chicken £50. Imagine the outcry, rioting… but many seen to just accept with resignation the scandalous cost of buying or renting a home, an equal or greater need. Partly because, I suspect, many already own a home, and most of those bask in the satisfaction of seeing its vastly increased value.
John Harris in the Guardian: “It is, in other words, time we talked about our national predicament – and indeed, what might be at stake in the election, whenever it arrives – by acknowledging that housing is a central issue, and always has been. The nitty-gritty of politics is often reduced to the cliche of “schools and hospitals”. But think of the aftermath of each world war, and the great steps forward marked by the concerted building of council houses……. And let’s not forget: it was housing that tipped the world into the crash of 2008, when the banks finally confronted the lunacy of sub-prime mortgages, essentially a replacement for the public housing the US – and the UK – had forgotten how to build.”
“According to research commissioned by the National Housing Federation (which represents housing associations), 3.6 million people in England are living in an overcrowded home, 2.5 million are unable to afford their rent or mortgage, and another 2.5 million are in “hidden households” they can’t move out of – including house-shares, adults living with their parents, or people living with an ex. Rates of home ownership among the under-35s are at less than half the levels of 20 years ago. Homelessness, both visible and hidden, has become a grimly mundane part of life. A million families are stuck on council waiting lists; in 2017-18, a pitiful 6,463 units of social housing were built in England, down from 30,000 a decade before.”
Let’s look at arguably the strongest factor influencing this insane rise. Cast your mind back to the Thatcher era. If, then or now, you are a seller of goods that everyone needs, but there is a plentiful supply of those goods, and other successful sellers, then you are only going to make a modest profit. Now, imagine you are a large house-building company. You are making a profit, but a lean one, and you would like to bump that profit up.
Your biggest competition is the fact that millions of people can rent a good-standard home at a reasonable rent from their local council, so they don’t really need to buy one of your houses or flats. Suppose you hit on the idea of persuading the Government of the day to reduce the supply of these council homes. You make some big donations to ruling-party funds, and suggest council tenants be given the right to buy their homes at a discount. The bonus for the ruling party is that the lucky former tenants will be thrilled to be able at last to buy their own piece of real-estate, and will be grateful to that government at the ballot box. So Thatchers’s government does just this, making a soon-to-be-forgotten promise to build new social homes to replace those sold. (Actually, I’m not sure whether the developers suggested the scheme to the Thatcher Government. Or, some Conservative strategist came up with the idea as a vote-winner, and the developers said ”Wow, fantastic, happy days, here’s a helping hand for your campaign funds”. See note below. But, the result was the same.
Over the next 30 years the number of council houses built steadily declines, with a very rapid decline from 2010 as the Conservative government refuses to allow even Labour or other councils, or housing associations, to raise finance to build or acquire houses in any significant number.(Blair’s government,1997-2008, to its shame, did nothing like enough to counter this. It was too keen to continue with the nonsense of “budget constraints”).
Naturally, the price of houses and flats rises steadily, helped by a rise in the population and number of households in that population. Because now, there aren’t enough homes to go round. (This process was also made made even easier by Thatcher-era de-regulation of the banks, and global finance trends, which resulted in greater and cheaper mortgages being easily available.) It becomes highly profitable for companies, or individuals, to buy homes to rent out, because if the cost of buying homes goes up in a time of shortage, so does rent.
So, we now have a situation where the cost of renting or buying a home gobbles up a huge proportion of people’s income. Not to mention the misery of homelessness, or living in sub-standard accommodation. In Bristol, for example, today, there is strong competition to take even the vastly-overpriced flats offered for rent, which detracts from the ability of businesses to recruit staff there. They often either commute huge distances from cheaper areas, increasing traffic congestion and pollution, or live in the “grey” housing market. This is living in old caravans, vehicles, boats etc. Bristol is just one example of the problem in many cities in the UK, indeed in most of the South of England.
And, it’s worse than that, by a long way. If a large number of people are spending most of their income on their home, plus council tax, utilities etc, they have very little left to devote to even modest expenditure on clothing, eating out, cinema visits, other purchases, etc, etc. Hardly surprising that formerly successful and profitable large businesses, such as Sports Direct, House of Fraser, Pizza Express, Thomas Cook, and many others are either struggling to survive, seeing profits shrink, going under, or shedding staff. Those redundant staff, or those on zero-hours contracts, now have even less money to spend, so more businesses suffer. This has combined with ruthless suppression of public-sector wages over the last 9 years of Conservative Government, claiming “budget constraints”. If you have read my earlier pieces in this blog, you will realise that this is economic nonsense, a fairy-tale which the media have encouraged for many years.
By contrast, look at what happened under the Attlee Labour government of 1945-1951. A decision was made to bring about the building of hundreds of thousands of council houses, and a programme commenced that would continue well into the 1950s and beyond. This was partly because of the urgent need to house returning service-men and women, many of whose homes had been destroyed by bombing, or who had been living in squalid pre-war slums. The “baby-boom” was happening, (I was one of those babies!), and young families needed decent homes. But I believe that Attlee’s government also realised that a council-house building boom would mean thousands of good-quality jobs– the building trades, the designers, the administrators, the materials suppliers/transporters/merchants, etc, etc. And all those jobs would boost the economy generally, helping to create a prosperity which would benefit the mass of people, not just the already-rich. Those lucky enough to become council-tenants at reasonable rents, and with decent jobs, had some money left over each week or month to spend boosting businesses generally, which created more jobs. (Not, stash it away in the Cayman Islands.)
This is a prime example of how a government that chooses to create investment-spending can transform both the economy and peoples’ lives. Contrary to what the “experts” and media are always telling us, “deficits” need not be anything to worry about!
Note: re sale of council housing policy: the sale of council homes to tenants was not a new idea, it had been suggested by Labour in 1959, and by the Conservatives in 1970. (Here’s Dr John Docherty in a letter to the Guardian, “Andy Beckett describes right to buy as a “Thatcherite” policy. It was Hugh Gaitskell’s 1959 Labour manifesto that pledged that “Every tenant will have a chance to buy from the Council the house he lives in”. Then Ted Heath’s 1970 Tory manifesto promised to encourage local authorities to sell council houses to their tenants so that “tenants of today will become the owners of their own homes tomorrow”. But, as Dr Peter Estcourt replied to that, “Under Labour the money raised was to be used to improve existing stock and add new builds. Under Mrs Thatcher a large taxpayer-funded subsidy was granted and most of the money raised was diverted to the Treasury. Local government was forbidden to use what little money it was allocated in the council housing sector.”
For more information about the “National Debt”, see my piece #3 in this blog.