The biggest transfer of wealth to the working class in our history - why right-to-buy is a great policy.

The first thing they did was change the front door, replacing the dour municipal plank with a bright new door. Shortly they replaced the old windows with clean, warn doubled glazed plastic units and maybe paved part of the front garden for a drive. You could walk round the estate and point to the houses that had be bought under right-to-buy and you'd hear just how happily excited were to join the home owning democracy.

Between 1979 and 1995, 2.1 million council homes were transferred from state ownership into private ownership under the 'right-to-buy'. One of the biggest transfers of wealth to the working class in English history, a welcome transfer opposed by the Labour Party and many within the state housing sector (municipal trade union NALGO tried to get its members not to process right-to-buy sales). After all the transfer of ownership didn't just usher millions of people into home ownership, it also reduced the power of councils, housing officials and councillors to control who lived where.

I recall a Labour councillor in Bradford bemoaning the changes to council housing allocations policies because they removed what he called "management discretion". What the councillor really meant was that him and housing officers couldn't sidestep the allocations process any more - part of the councillor's power was lost as he could no longer pay back a political favour by getting someone a council house. What these changes had done, rather as did right-to-buy, was mean that people were no longer dependent for housing on the largess of the state and the benevolence of its agents.

Today it is still, however, almost a requirement for people in the housing sector to believe that right-to-buy was a terrible policy even to the point of claiming that it is responsible for today's housing crisis. Housing waiting lists are too long? Blame right-to-buy. The rent's too damned high? Blame right-to-buy. House prices are through the roof? Blame right-to-buy.

While there are people who remain ideologically opposed to the idea of home ownership (or at least home ownership by the working classes), the more common criticisms of right-to-buy relate to the loss of social housing stock and the numbers of former council proporties that are now rented privately. There are (mostly unevidenced and unsubstantiated) further claims that investors are encouraging tenants to use right-to-buy so they can get the property for private renting - even to allegations that this results in former tenants becoming homeless.

When right-to-buy was introduced the expectation was that we wouldn't need large amounts of new social housing. After all the fact of a home transfering to the ownership of the former tenant didn't reduce the total amount of housing, it only reduced the stock of council housing. With a stable population the view taken was that new social housing (other than specialised provision of one sort of another) would not be needed. This expectation turned out to be wrong as, from the mid-1990s the UK population grew (largely as a result of immigration) significantly. Compounding this growth, the success of London as a city meant that after a long period of population decline that city began to grow rapidly.

The problems now laid at the door of right-to-buy (high rents, lack of social housing stock, waiting lists) were not, in reality, a consequence of the policy but rather a consequence of wider housing policies as well as a more liberal attitude to immigration. As population grew from 1995 onwards, the supply of housing didn't especially in London and the South East. The period from 1995-2010 saw some of the lowest rates of new housing provision since WW2 and, coupled with a national policy of low interest rates, this resulted in a house price boom. Because the provision of new social and affordable housing is largely tied into the planning system (a proportion, determined in the local plan, of new homes have to be affordable), the result was higher rents, increased homelessness and growing waiting lists. Horror stories about sub-letting, illegal rentals and living in sheds began to emerge as London simply couldn't meet the demand for housing that the success of the city's economy produced.

As anyone who has watched TV programmes like 'Homes Under The Hammer' will know, the private rental sector has transformed UK housing markets. The majority of the homes featured in these programmes are bought and refurbished for rental. In large part this trend reflects the problems with housing supply across all tenures, a problem largely created by unaffordable housing markets created by the lack of new supply. For young professionals in London, renting is now the norm whereas the previous genneration of young people were able to buy. It is a nonsensical idea that sorting out the social problems that flow from high density rented accommodation (most notably the delay in family formation) requires large amounts of essentially similar social housing featuring state-subsidised rents.

It may well be the case that right-to-buy should have featured more new build social housing but remember that demand for social housing, especially in London, didn't take off until some 20 years after the right-to-buy policy was introduced. Similarly, the shift of property into the private rented sector didn't occur during the main period of right-to-buy sales but was a consequence of later dysfunctional housing markets. And even so, around 60% of homes sold under right-to-buy remain owner-occupied (very often by the people who bought them in the 1980s).

Right-to-buy was a huge transfer of wealth and that the use of discounts to incentivise transfer enabled that transfer. Given subsidised rents, this discount can be seen as, in effect, a net present value of that subsidy (I'd note that this doesn't hold up well in places where the margin between social and market rents is low). Some people have, however, done very well from right-to-buy (and that house price boom of the 2000s):

As north London security guard John Holland put it in an interview with the BBC: "There's no way we'd be property owners now if it wasn't for her. It was perfect, absolutely perfect." The discounted home he bought for £39,000 31 years ago is now worth around £600,000.

The principle that people should be able to own a stake in the nation remains a great principle, and right-to-buy enabled millions to do just that. Attacks on the policy come from those who think providing homes is the job of the state and its agents rather than the market, those with an interest in keeping lots of people dependent on local state housing management, and those who mistakenly blame the policy for the problems within today's housing markets.

We urgently need a new programme designed to get more people out of rented property and into home ownership. At the heart of this is a housebuilding programme only possible with significant reforms to the planning system but we should see programmes like right-to-buy as contributing to this process. Blaming right-to-buy for problems that arose twenty years after the policy was introduced is wrong. As is a sort of rosy-hued nostalgia for council housing and the belief that the only way to meet housing need is to create a new generation of state-dependent tenants.

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Housing should be a national priority but we don't need loads more council houses.

Council housing is 100 years old. Well actually it's quite a lot older than that and social housing provision goes back to the middle ages but let's stick with the anniversary of the Housing and Town Planning Act, 1919 which provided subsidy to local councils wanting to build houses - the original "Homes for Heroes". Local councils quite rightly celebrate their contribution to better homes for working people - from Bradford's Chain Street, built for Irish labourers to the massive Beacontree estate in outer East London.

People point to later actions such as the decision by the 1950s Conservative government to build new houses at a time when, despite its promises and commitment to socialism, Attlee's Labour government had failed to respond to an acute post-war housing shortage. Our 1950 manifesto proclaimed:

Housing is the first of the social services. It is also one of the keys to increased productivity. Work, family life, health and education are all undermined by crowded houses. Therefore, a Conservative and Unionist Government will give housing a priority second only to national defence.

It was a great achievement to oversee the building of more than 300,000 homes each year from 1952-55 and it met the post-war need and the related desire to use the opportunity to build new towns - better places to live in the manner of Ebeneezer Howard's 'garden city' ideal. So it's understandable that, looking back into this history, people cry out for a new generation of council homes to meet today's housing need - even down to a fêted TV architect going back to his roots with a campaign for these new council homes. After all the market hasn't provided these homes so government must step in again and spend billions on new homes - £146 billion according to the Chartered Institute of Housing and housing charity, Shelter.

The two examples above were driven by the consequences - and the economic disruption - of war. The 1950s housing crisis was largely caused by the Luftwaffe but was captured early on by social engineers who saw it as a chance to end what they saw as the tyranny of private rental and provide working class people with those 'homes for heroes'. The passion of these social engineers continued into the 1960s and 1970s as 'slums' were cleared to be replaced with grand cities in the sky - rows of walk-up blocks interspersed with huge tower blocks. Millions of people changed tenure from private rented property to council housing. And millions of kids - like George Clarke, our TV architect - were brought up on these estates.

But while George and others were growing up something else happened - more people began, despite the limitations of mortgage finance, to buy their own homes. Why move from one rented tenure to another when you could buy your own home. Alongside those newly built council estates, people saw rows of private homes being built, each filling with clerks, supervisors and administrators, with the growing lower middle class of an expanding service economy. Home ownership became the aspiration of most people, an aspiration that those living in council housing felt cut off from. In twenty years from 1958 to 1978, UK home ownership levels doubled leaving Britain as a country with two tenures - council housing and owner occupation.

The widespread view in the 1970s was that the next generation would not need council housing as rising incomes would enable them to buy their own home. The problem was that over a third of the UK's housing stock was council housing and, if future families weren't going to need those council houses, what would become of them? In London the GLC and some boroughs like Bromley and Hillingdon began to look at selling council homes to their tenants (this has been Labour Party policy in 1959) both as an effective political pitch and to begin resolving the mismatch in supply between councils housing and private housing. Right-to-buy was born and quickly became the Conservative Party's flagship housing policy - over 2 million people switched from being council tenants to living in a home they owned, as Michael Heseltine remarked, "no single piece of legislation has enabled the transfer of so much capital wealth from the state to the people".

Councils - or most of them - hated right-to-buy and hated the mission to remove government from the provision of housing for a mass population. During the 1980s and 1990s Councils dragged their feet, finding ever more creative means to delay right-to-buy sales. Despite this, right-to-buy was a huge success - by 1987 over 1 million homes had been sold to their tenants, billions in state assets transferred to the people.

With other legislation encouraging councils to transfer all their housing into new associations, there was a further reduction in council housing stock as housing associations became the government's preferred means of providing social housing. While some authorities retained their housing, by the 1990s the age of council housing as a monolithic tenure - the only alternative to buying a home - had finished. Councils could concentrate on their strategic housing role - making sure land is available for new housing, providing services and support to the homeless, and working to ensure that the quality of the overall housing stock remained good.

So what has changed? Why do we now have people advocating another massive splurge of council housing building - 300,000 a year for ten years is George Clarke's campaign target? It's not that, as many tenants in my experience could attest, councils were brilliant landlords, quite the opposite. And council housing seems to be a step backwards from a world of home ownership especially given the scale of economic betterment since the 1950s. The answer lies in those numbers, in the fact that from the end of the 1990s to today we have built fewer homes than we needed as a nation with the result that, from 1997, house prices rocketed and people whose parents bought a home no longer feel able to do so. Once again we have a large and problematic private rented sector with the same exploitative practices ended by a combination of regulation and council house building in the 1960s and 1970s.

The problem here is that, for all that we could build nicer council housing than the flats thrown up in the 1970s, people want to buy their own house. The shortage, in most places, isn't a shortage of social housing but a shortage of affordable homes for families to buy. Building lots and lots of council houses reduces the pressures but doesn't resolve the problem especially if, as Clarke and his fellow campaigners want, right-to-buy is abolished. A more interesting argument might be to call for councils to build on an explicit rent-to-buy basis but this wouldn't suit the municipal authoritarians who dominate public housing policy in the UK.

This isn't to say that councils shouldn't build new homes but it is to argue that if there's £146 billion in public subsidy knocking about, using it to buy already overpriced land so as to build homes to let as subsidised rents isn't a great strategy. Indeed, if councils want to contribute to solving the housing supply problem they have the ability to do so now through their local plan process. Land prices are high because there isn't enough housing land to meet demand - a dramatic increase in housing land supply would reduce those land prices and have a beneficial effect on housing costs all without the government having to cough up a penny in subsidy. As we've seen in Sydney, once the poster child of inflated housing costs, once you allow development at scale, you get development at scale - and housing costs fall.

The nostalgia for council housing is understandable but the reality for many who lived in it wasn't the idyll that some make it out to be and it featured poor, slow maintenance, lengthy waiting lists with obscure points systems, management 'discretion' allowing councillors to deliver political favours through queue jumping, and rising levels of crime and disorder as the more successful moved into the private sector. To suggest that the only way to resolve our current housing problems is the mass building of council homes is to acknowledge that councils - and councillors - don't have the balls to face down the NIMBYs, put a rocket under the planners and apply some creativity to meeting housing need. It's so much easier to simply say; "here's billions of taxpayers cash, go build some houses" and then build homes that people don't want (they'd rather buy), in places isolated from work and where folk would rather not live.

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Why council housing isn't any sort of solution to our housing problems

From Randall O'Toole talking about Denver, Colorado:

Affordable housing is meant to help low-income people who can’t afford housing in a free-market environment, not to bring down the price of housing for everyone. Even helping 125 families is not going to make a dent in the overall housing market, which has been rendered unaffordable by government interference in the land market.

It's the last part that matters - by making land scarce through urban containment, government makes that land expensive. And, as night follows day, the result is more expensive houses and higher rents.

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Quote of the day - why council housing isn't the answer

Worth remembering this:

The underlying problem has often been misdiagnosed by politicians who yearn for an uncontroversial and immediate solution. A lack of public housing is emphatically not the cause of our plight. About a fifth of all homes are owned by councils or housing associations, placing us towards the very top of the European league table. This amounts to about four times as much social housing as they have in Germany and is considerably higher than in France, Denmark or Sweden. If the quantum of state housing were the key driver of housing affordability, the UK would be one of the cheapest places to live in the western world.

We've spent the best part of four decades not building enough housing (for London and the South East it's about six homes built for every ten new households) and this is why we have a crisis. Not funding. Not state investment. Not tax incentives. Just urban containment.
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Housing - an issue waiting to bite us all

Two stories I’ve run across today suggest that over coming months and years there’s a really big an important issue that will bite politicians – an issue that has barely merited a mention in the “great debates”, hasn’t registered at all in the frothy new media campaigning and yet concerns one of the true basics of people’s lives – housing.

The first story is a report from the New Statesman (that I found suitably fisked by JuliaM) on Margaret Hodge’s campaign in Barking:

“There are 11,695 families on Barking and Dagenham's housing list and local anger has been directed at the new faces they see down the street. As I follow Hodge canvassing, complaints about housing crop up again and again. We hear tales of families that have had to wait three, five or even more years to get a home. One man has spent eight years living in a one-bedroom flat with his wife and four children.”

Now Labour machine politicians like Hodge want to blame all this on right-to-buy – on the wicked Tories. But that’s only part of the story – yes right-to-buy had an impact on the stock of social housing. Yes, right-to-buy has led to an increase in private rented property on formerly mono-tenure estates. But local authorities like Barking have not replaced the shortfall and more importantly have created the situation where only people in “priority need” get access to social housing.

The result of this is precisely what the residents of Barking interviewed by the New Statesman were saying – houses in the area are simply not available for the working sons and daughters of current residents. Not because they’re white but because they aren’t in “priority need”. Which brings me to the second story where Victoria Derbyshire interviews a soldier wounded in Iraq and who cannot get a home (a pre-requisite for getting a job) because he is not in “priority need”.

In truth our housing system – I can’t credit it with the positive term “market” – is almost entirely dysfunctional. Constrained by stifling rules and regulations, battered by politicians and simply not delivering good homes for hard working people like it should. And, unless something changes, it will get worse – already in London so-call “affordable” rents are not really affordable for low paid workers and this will be the case in Leeds and other cities in the next few years.

As I said, be prepared for housing to become a really big issue some point soon.

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Making innocent people homeless doesn't solve our housing problems, Mr Denham

Sometimes things just make me cross as they are so pointless, so obviously about ministerial willy wagging rather than addressing any real problem. The announcement by John Denham, Secretary of State for Communities, of the:

“...the first-ever national crackdown on tenancy cheats to recover up to 10,000 council and housing association homes fraudulently sublet, and release them to those in real need.”

OK it looks pretty good – bad people are making “thousands” from sub-letting a council house they have a tenancy for but don’t need. And the sub-letting families “do not qualify for a council or housing association home”.

But Mr Denham.....

There are over 1.8 million people on housing waiting lists and there is not enough social housing for them. In most places the only lettings go to those in the very highest categories of need – nationally this is at about 70% (and is probably 90% once specialist housing types like sheltered housing are taken out). So what the minister means by qualifying is simply being either at serious risk of homelessness, fleeing violence or having very specific medical or social needs. These people get housed.

Instead of worrying about “illegal subletting” ministers should worry more about the following:

1. Affordability: a study by Huw Jones at re’new for Leeds Housing Forum showed that on current trends in rents we will reach the point where Council rents are unaffordable to those in low paid work

2. Supply: public sector landowners fail to release land for developing social housing – and when they do suggest development of land they demand full market value making provision only affordable with public subsidy (i.e. national government housing funds are siphoned through local authority, NHS and other public land sales to be spent on something other than housing)

3. Use of commuted sums: councils up and down the country are sitting on millions gathered from developers – they should be given a time limit to spend this or have the cash handed over to housing associations for them to develop and this would be linked to release of land

Evicting a load of poor (often immigrant) families so as to house some other deprived families solves nothing, creates a new problem of homelessness and serves no obvious purpose in improving housing outcomes. Seems to me that this action is about stock control rather than helping to house the poorest and most needy in our society.

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