Tom Tabori – Now starts the rebuilding: Labour and the new housing policy

There is a flat near where I live that is shared by two single mums and their children. It is a one-bedroom flat, but they are pooling their resources whilst the younger sister waits for one to become available. Housing benefit pays their rent, but when it is capped, they are going to get a third in. Inspectors turn a blind eye, sensible to the reality of the women’s situation, but ultimately are unable to provide alternative accommodation.

The Universal Declaration of Human Rights contains the right to adequate housing[1], but everywhere you turn in Britain that right is unaffordable or inaccessible.

In the constituency surgery where I work, I heard a man speak fearfully of his £3,000 rent arrears: his brother and cousin had moved out of his front room and he had not found replacements. He did not want to; taking lodgers meant his children squeezing into smaller spaces in the house. He did not want his children to have to grow up eating their meals in bed, doing the homework in bed, often sharing a bed. His dilemma was typical: either face possession proceedings for the rent arrears or endure overcrowding.

1.5 million adults in the UK live in homes with overcrowded conditions.[2] A quarter of overcrowded families have children sleeping in living or dining rooms. Cramped living conditions harm family relationships, negatively affect children’s education and cause depression, stress and anxiety.[3] The Government classes 250,000 social homes as overcrowded, yet according to the Government, 5 million people are still waiting to get in, stuck on waiting lists.

For those who do have a flat, social or privately rented, then comes the second divide: the widening wealth gap between homeowners and the UK’s 4 million tenants. 60 per cent of the country’s £6.5 trillion wealth is tied up in property.[4] The average homeowner has £90,000 in equity, whilst the average social housing tenant has £800 in savings[5]. No wonder the dream of home ownership retains cult-like status in Britain. If you are in it, you’re in on the act. If you’re not, you can do the lottery.

Labour’s opportunity

Housing minister Grant Shapps does not attend cabinet meetings as a matter of course. It is not for lack of experience: he served as shadow housing minister from 2007 to 2010. Rather, the Tory/Lib-Dem government has performed a very public downgrading of housing as a priority. The housing industry has cottoned on to this and recalled the advantages of Yvette Cooper, Caroline Flint, Margaret Beckett and John Healey negotiating as ministers of equal rank.[6] As the Government slashes the budget for building affordable homes from £8.4 billion to £4.5 billion, the housing industry is witnessing how its sector has lost out.

Then there are the 5 million people on the social housing waiting list and the 3 million people who will be stuck in overcrowded housing by 2013.[7] Add to these numbers the growing numbers of people renting property for record prices because of the housing shortage[8] – forced to rent because homes are unaffordable and mortgages unobtainable. Now factor in the rise in single-person occupancy and the projected growth of Britain’s population from 60 to 70 million over the next two decades, and a credible policy for providing affordable homes will give Labour a potentially enormous and highly sympathetic audience. It is common to talk about policies in terms of ‘the pound in your pocket’, but the ones that put a roof over your head are the epitomic vote-winners.

Above all, Labour should see in the housing crisis the Party’s very reason for being. This is what we are here to do. If the housing situation encapsulates the fundamental inequalities in society in terms of access to basic resources, then by presenting solutions, Labour will find itself again. To do so whilst the coalition government are very publicly relegating housing from the cabinet would send an equally public message that Labour’s policies are a credible alternative to the dismal politics peddled by the Tories.

The solutions

1. Refereeing investment

Institutional investors such as Aviva Investors, BNP Paribas Real Estate and Aegon Asset Management should be encouraged to put money into investment funds specifically geared to increasing social housing supply. Under the last government, the Housing and Communities Agency (HCA) began this process, but the investment stream needs to be channelled to the areas of greatest need. Councils would not develop swollen housing departments but would play the role of referee, steering investment drummed up from the centre by the HCA.

Together with the HCA, local authorities could map the areas for potential development, whether brown-field site, disused space above shops, the underexplored option of double-decking over railway land or freeing up some of the 70 per cent of British land owned by 1 per cent of Brits.

The sites would be packaged and put out to tender, with building specifications tailored to the council’s particular need. For example: photovoltaic solar panels able to supply the building or even benefit from the feed-in tariff, thus returning councils more than rent. The developer would be required to use local skills and materials where possible, giving work, apprenticeships and contracts to local people and companies.

The kudos of winning such progressive schemes would have knock-on benefits for developers and investment funds alike. The sub-market rents would be lower than the 5 per cent to 7 per cent yields of purely private rentals, but with a guaranteed return and an enormous market. Low-yield but guaranteed investments might become the marker of investment portfolios’ credibility, not to mention ethics. With even this government (Vince Cable lingering) moving to curb the excess ratios of leveraged financial mechanisms, investors may seek to take onto their books a greater proportion of such less risky assets as ballast amongst the riskier investments.

The more the investors get a feel for this new market and its rates of return, and grow used to dealing with local authorities, the more this fruitful relationship would develop. Ultimately, councils could petition these institutional investors themselves, without the HCA matchmaking.

2. Let councils keep their receipts

The right to buy is often blamed for the erosion of the social housing stock, but the problem is less the right to buy than the failure to replenish. Currently, government takes 75 per cent of right to buy sales and councils get the remaining 25 per cent. In theory, the Government uses most of this money to cover the cost of repaying loans used to buy land and build homes. However, the Government is not in fact building nearly enough homes to match the scale of the council house sales. Rather it is using the receipts to service the wider national debt, thereby levying a tax on council tenants to which no one else is exposed.

Let’s say we swap those percentages around. Imagine local authorities were given three-quarters of the right to buy revenue, rather than central government. Not only could social housing be repaired, managed and maintained to a higher standard, but councils could also reinvest the difference back into new build. An increased asset pool would provide collateral for social investments in other areas, whilst allowing for more creative asset management, such as letting some properties for market rents to pay for acquisitions in other neighbourhoods, bucking the wealth-arranged geography. It would also take the pressure off council tax as local authorities’ main means of raising revenue, now heightened by the freeze in rates.

3. Tax more wisely

Tax policy should be used for its ‘nudge’ factor as much for its revenue-raising. Removing the tax relief on the interest on loans available for buy-to-let landlords would lessen their upwards force on market rents. The reduction of this distortive pressure would outweigh any short-term rise in rents caused by landlords passing the increase in their net tax costs onto their tenants.

Another fiscal option that would nudge the housing market in the right direction would be an annual land-value tax on all land, which would attach a stigma to letting land lie idle, dissuading speculators from sitting on empty property. It would also more accurately capture the reality of wealth distribution than the council tax it could replace. It would be simple enough to assess: determine the value of the site less the value of buildings and any improvements, and levy as a percentage of those assessed values. You cannot hide this asset off-shore either.

Tax-relief should be applied to loans to buy land and set up a Community Land Trust (CLT). Pioneered by the housing action team at London Citizens, the CLT holds the land in perpetuity, holding at bay the cost of land that makes housing in the UK so expensive. This would etch out a space where house prices were beyond the reach of the market, rather than the market putting homes beyond the reach of people.

After purchasing the land, the CLT forms a limited liability partnership with a housing co-op, which builds the homes and sells them not for profit. Overall, the model would halve the cost of buying a home and do so repeatedly. The size of the CLT grows with time, as new properties are acquired.

The knock-on effects are active citizenship, as members of the CLT decide what sort of housing they need, and democratic stewardship of the community is encouraged by the co-operative’s building, management and letting. A housing strategy that included CLTs would also reclaim the ‘Big Society’ initiative from its parody in ‘Free Schools’, whilst creating invaluable community assets.

4. Create greater returns on work

The poverty trap faced by the unemployed who risk losing Housing Benefit upon their return to work is a shortfall that low-wage work barely covers. Sub-market rents thus make that return feasible. However, this benefit of social housing is counteracted by the current week-by-week adjustment, through which Housing Benefit falls away upon entry into work. If Housing Benefit were fixed for longer periods regardless of change in circumstances, as has already been trialled with lone parents receiving ‘benefit run-on’ as they move into work, it would be less difficult and costly to administer and provide greater stability to the recipient.

For families living in temporary accommodation, privately leased by local authorities for a much higher sum, the effects of jeopardising Housing Benefit through taking up work are particularly perilous. 30 per cent of households leaving temporary accommodation in 2009 had stayed there for a year or more, and the majority of these had been there for two years or more.[9] A solution may take the form of the ‘Working Future’ pilot project in East London led by the Greater London Authority and the East Thames Group, championed by the LSE’s Professor John Hills. Here, a block grant is paid to allow local authorities to charge those staying in temporary accommodation rents at social housing levels. This requires no extra money overall and it lessens the perverse disincentive to work contained in the combination of high rents and Housing Benefit withdrawal.

The current system is too obsessed with rationing: whether you are eligible for Housing Benefit or not. Inevitably, people fear ‘burning their boats’. For Cameron, the ‘enabling’ solution is simply to burn their boats for them. For Labour, Housing Benefit that works in tandem with the stability and sub-market rents of social housing can be what helps people make the transition to work.


Whilst the Tories fan the flames of the deficit, throwing infrastructure onto its insatiable flames, Labour can quench it for good by rebuilding Britain and its depleted housing stock. It would be a clear statement of intent, a flagship policy in marked difference to Cameron’s austerity politics.

The political dividends are clear. The last Labour government won a decisive battle in stopping the banks from dragging us into the abyss. The next Labour government will win the peace by rebuilding British housing.

My neighbours, and the stream of people visiting the constituency surgery, and everyone in Britain living on top of each other in dilapidated accommodation, cannot ‘aspire’ their way out of ghetto conditions; those conditions must be swept away.

Article image by Mike Wilson

[1] UDHR, Article 25(1).

[2] According to the Office for National Statistics’ General Housing Survey.

[4] Office for National Statistics’ annual round up of UK’s financial and non-financial assets.

[8] LSL Property Services: survey October 2010. Rents reached a record high of £689 per month in September after eight consecutive months of rises.

[9] Statutory Homelessness England, Statistical Releases, updated March 2010.

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