Social housing in Bermondsey, south London

Don’t forget – right to buy is also a directive to sell

I’m going to bang on about housing again. I’m probably going to bang on about housing until some Russian squillionnaire decides to launder his moolah by buying our east London maisonette (Crossrail’s coming soon, tovarishch!). At which point, we’ll be off and you’ll never hear from me on this subject again.

Almost everyone knows the government’s plan to force housing associations to flog off many more homes will make Britain’s (and especially London’s) housing crisis worse, not better. Almost everyone knows the replacement houses won’t get built – look what happened in Manchester, where only two out of 863 council houses sold off were replaced. Almost everyone knows less social housing will increase competition for privately rented hovels, forcing rents and prices ever higher for everyone.

So much for the consequences. But what about the policy itself? The effects will indeed be quite similar to the forced sale of council houses. But the politics behind it are quite different, and actually quite scary. “Right to buy” for council tenants was the state deciding to sell off a state asset for social policy reasons. The motives may have been suspect and the consequences disastrous, but it seems to me something a government with a democratic mandate was entitled to do.

Housing associations are charities. They are not arms of the state. The new policy amounts to sequestration of their assets because their aims and purposes differ from those of government ministers. Most housing associations were not set up to facilitate home ownership (however laudable an aim that may be), still less the profiteering that will follow as sure as night follows day. They were set up to provide affordable housing for people in need. That is what philanthropists give their money for and it’s what volunteers and housing association staff work for. The government is saying it doesn’t like those aims and is prepared to use the full force of the law to make housing associations serve the social policy objectives of the Conservative party instead.

It’s deceitful to call the policy “right to buy” without admitting that someone’s right to buy is also someone else’s obligation to sell. And in a democratic society, rights and obligations are supposed to be universal. So why won’t private tenants have a “right to buy” and private landlords a corresponding “obligation to sell”? (The fact that many Conservative MPs are buy-to-let landlords might have something to do with it.) Giving rights and public money to tenants who have enjoyed subsidised housing while denying it to people who have borne the brunt of Britain’s brutal housing economics is simply perverse.

But of course it is, because the policy has nothing to do with “rights” or extending home ownership. It’s about further reducing social housing, which Tories see as eating into the profits of private landlords and providing an electoral base for Labour and other dangerous lefties like UKIP.

It’s also a pretty naked attack on charities and social enterprise – the so-called “third sector”. Many Tories give money to the poor. Generally, they’re quite in favour of individual altruism, provided it’s on a modest scale. But the kind of grand, collective, entrepreneurial altruism which housing associations represent is beyond the pale. Charities that actually try to cure social problems rather than just alleviate the symptoms pose too much of a threat to their vision of a completely individualised and market-driven society.

Many people see social enterprise, self-help and community action as a democratic and non-statist way forward for the left. Perhaps the Tories agree. The government’s “directive to sell” policy for housing associations looks like their first attempt to block that way forward. It won’t be their last.

Cast from the new production of Rising Damp (2014). The guy being subsidised is the one in the middle by the way.

Subsidy Street

I’m going to propose something you don’t often hear from a socialist – I’m going to suggest we do away with a benefit. It looks like the government has its work cut out finding £12 billion of savings from the welfare budget so, in the spirit of post-election co-operation, here’s my contribution.

After pensions, housing benefit is the biggest element in the welfare bill, and is expected to top £27bn by 2018-19. Almost 40% – some £10 billion – of this is paid to private landlords.

Housing benefit isn’t really a benefit, it’s a subsidy. It enables landlords to charge rents that their tenants (i.e. customers) can’t afford to pay. If the government gave us money in order to buy a car we couldn’t otherwise afford, this would rightly be seen by everyone (probably including the EU’s lawyers) as a subsidy for the car manufacturer. To meet the social need to get about, we would expect the government to invest that money in better public transport.

What’s worse, it’s a subsidy that’s out of the government’s control. Landlords effectively decide how much subsidy they receive. They keep rents high knowing full well that the government will pay them on behalf of tenants (at least up to the ceiling set by the benefit cap). Rents aren’t set freely by the market; the market is “made” by the government. We don’t pay housing benefit because rents are high; rents are high because we pay housing benefit.

Of course, no good will come of withdrawing housing benefit overnight and on its own. It will simply lead to evictions and a collapse of the private rental sector. But that just shows how this is an economic sector dependent on state aid. Landlords are charging rents that are above what the market will bear because taxpayers are making up the difference.

If the government were to phase out housing benefit and invest all or some of the proceeds in social housing, tenants would gain security and (probably) better homes, while taxpayers would save money and acquire valuable assets which can be used to meet the housing needs of future generations. The social benefits of families being able to count on secure accommodation, rather than being shunted around from year to year on the profit-seeking whim of property speculators, are incalculable. (Of course, all this would be much easier to do in the short-term if we had a modern system of rent regulation, a policy unreasonably trashed during the election campaign by people who labour under the delusion – or pretend to – that we have a perfectly functioning housing market.)

The government knows this of course, but is happy to let the current situation continue because it doesn’t want a revival in social housing for ideological (and electoral) reasons. Right-wing governments always talk about getting rid of subsidies in theory, but are happy to pay them if the benefits are going to the right people – in this case landlords and property speculators, who are among the biggest supporters of the Conservative party. When the IPPR proposed something like this last year, it was endorsed by both London mayor Boris Johnson and Labour leaders. Nothing has been heard about it since.

Phasing out housing benefit, or even ending the practice of paying it straight to landlords, would cause rents to fall sharply, something which everyone knows has to happen sooner or later. Yes, some landlords will sell up, which would also reduce our stratospheric house prices. A lot of people wouldn’t like that. But that doesn’t mean it isn’t the right thing to do.

Tenement tales

Here’s a quick thought on Labour’s plans for rent controls.

Existing private landlords are presumably making a profit. If they’re not, they wouldn’t be in business or would already be in the process of withdrawing their properties from the market. So, if they’re making a profit at current rents and are still allowed to raise them by inflation, they’ll still be making a profit next year. In fact, in real terms, they’ll be making the same profit as this year. And the same the year after that. So why would they withdraw from the rental market? Would they prefer to make nothing at all than the same – presumably satisfactory – level of profit they’re making already?

The argument that rent controls will always reduce the supply of property is based on the fantasy that we have a perfectly functioning market for rental property where landlords are just about breaking even. If we did, then aggressive rent controls might force some landlords out of the business. But does anyone seriously think we live in that world?

Tory views on the rental market are about as realistic as monopoly board prices.

Tory views on the rental market are about as realistic as monopoly board prices.

In any case, Labour isn’t proposing to set rent levels, cut rents or even freeze them, just to limit rent rises to inflation for three years. In other words, to protect the profits landlords are making already. So the Tories are asking us to accept the deeply stupid argument that private landlords are making losses and just haven’t got round to adjusting their rents yet. They seem to think it’s landlords, not tenants, who are struggling to make ends meet.

What Labour’s controls will do is stop some landlords exploiting the housing shortage and people’s desperation to stay in their own homes by jacking up rents way above inflation, often with little or no notice. The balance of power in the rental market is very unequal, as anyone who’s tried renting in the last 30 years knows only too well. So who are the Conservatives really protecting here?

Two other points: first, most other Western countries use some form of rent control, including France, Germany and many parts of America. And housing for rent is generally much cheaper and more plentiful there than it is here. Second, rent controls are massively popular – a recent poll showed supporters outnumbering opponents by more than eight to one. If I were Ed, I’d stick with this one.