Has ‘the Right to Buy’ and lack of rent controls caused most of the UK’s housing problems?

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The Housing Act of 1919 made housing a national responsibility, and local authorities were given the task of developing new housing and rented accommodation where it was needed by working people. The Housing Act of 1924, passed by the UK’s first ever Labour government, gave substantial grants to local authorities in response to the acute housing shortages of those years. Local councils built a total of 1.1 million homes between 1919 and 1939.

Throughout the 1950s and 1960s, those people who could not afford to buy a house could go on a waiting list for a council house, and if they had children, they probably wouldn’t have to wait long. In the new towns built after the Second World War, a variety of housing was available at reasonable rents, and plenty of private houses were built for those able to buy.

Then the Tories ruined everything. When they controlled the Greater London Council of the late 1960s, Horace Cutler, the housing chairman, created a scheme to sell council houses to tenants at a discount. Cutler disagreed with the concept of local authorities as providers of housing and supported a free market approach. 7,000 houses were sold to their tenants during 1970, but that figure soared to more than 45,000 in 1972. Sales were not allowed during the Labour administration of the GLC in the mid-1970s but picked up again once Cutler became the council leader in 1977.

Cutler was close to Thatcher (a London MP) who made the right to buy council housing a Tory Party policy nationally. After she became Prime Minister in May 1979, the legislation to implement ‘the Right to Buy’ was passed in the Housing Act 1980. It gave council tenants the chance to buy their council house at a discounted price, depending on how long they had been living in the house, with the proviso that if they sold their house before a minimum period had expired they would have to pay back a proportion of the discount.

Council house sales proved extremely popular to the tenants and provided a win-win scenario for the Tories. Naomi Klein (‘The Shock Doctrine’, p.135) explains:-

“Britain’s public housing, or council estates, which Thatcher opposed on philosophical grounds, believing that the state had no role to play in the housing market. The council estates were filled with the type of people who wouldn’t vote Tory because it wasn’t in their economic self-interest. Thatcher was convinced that if they could be brought into the market, they would start to identify with the interests of the wealthier people who opposed redistribution. With that in mind, she offered strong incentives to the residents of public housing to buy their flats at reduced rates. Those who could became homeowners, while those who couldn’t faced rents that were almost twice as high as before. It was a divide-and-conquer strategy, and it worked: the renters continued to oppose Thatcher, the streets of Britain’s large cities saw a visible increase in homelessness, but polls showed that more than half of the new owners did switch their party affiliation to the Tories.”

200,000 council houses were sold to their tenants in 1982 alone, and by 1987, more than a million council houses in Britain had been sold. Proceeds of the sales were paid to the local authorities, but they were restricted to spending the money to reduce their debt until it was cleared, rather than being able to spend it on building more homes. The effect was to reduce the council housing stock, especially in areas where property prices were high, such as London and the south-east of England.

Under the short but turbulent Tory government of Ted Heath, the average price of a house in the UK increased from £4,377 in 1970 to £8,395 in 1973. However, a crazy inflationary Tory budget introduced by Nigel Lawson in 1988 had the opposite effect. Interest rates soared to as high as 15% and some people saw their mortgage payments double in the course of a year. Many council tenants who gave up their security of tenure and bought their homes ended up losing them because they couldn’t keep up the payments; in 1991 alone, 75,000 properties were repossessed. For the first time in peacetime, house prices fell and continued to do so for seven years. The average price of a house in 1996 was £51,367, having fallen from £62,782 in 1989.

When Labour returned to power in 1997, it reduced the discount available to tenants in those areas where there was severe pressure on the housing stock; this included almost the whole of London. Then ‘the Right to Buy’ rules were changed in 2005 so that five years' tenancy was required for new occupiers to qualify, and properties purchased could no longer immediately be placed on the open market should the owner decide to sell. Such owners then had to approach their previous landlord (the local council or a housing association) and offer them “first right of refusal”. As of April 2012, the current government has increased ‘the Right to Buy’ discount to a maximum of £75,000 or 60% of the house value (70% for a flat), depending on which is lower.

The Labour governments of Blair and Brown did not have a good record on house building, but after the earlier Tory destruction of our social housing stock, they probably could see little point in replenishing it, just for a future Tory regime to use as bribes for votes yet again. Selling off council homes and not replacing them has caused a shortage of places available to rent. That in turn has resulted in much higher rents, which many working and non-working people are unable to pay, so they’ve needed to get housing benefit. It wasn’t very long ago that MPs were saying £23,000 a year was needed as a second home allowance for just one person, but now this despicable government is capping benefits without bringing in rent controls.

In Westminster alone, there are over four thousand households with rents above the benefit caps planned by the Tories and their Lib Dem stooges. Up to 82,000 households could be made homeless, in most cases people working in low paid jobs in London. They will be forced to move far out of the capital, in what is in effect social cleansing. Many of these low income people on housing benefit keep central London running in a variety of ways, yet the government seems quite happy about wealthier areas becoming rich ghettoes, with people in low paid menial jobs travelling miles every day to get to them. How does that convince people that work pays? The real problem is that central London housing and living costs are too high and central London wages are too low.

Maybe a progressive government could either move more of its functions out to the rest of the UK or introduce a minimum wage for London of around £15 an hour? I’m sure the preferred Tory alternative would be if the homeless get jobs ‘in service’. As the Tories try to rush this country back into the Victorian era, instead of moving out of London, those people who members of the cabinet regard as ‘plebs’ could occupy the attics and cellars of their ‘masters’. It’s no wonder that the Tories have done their damnedest to price working class children out of a university education.

The housing benefit system in effect transfers £20 billion a year of taxpayers’ money to private landlords. That money could build 400,000 new council houses a year (at an approximate cost of £50,000 per house) on council owned land. Renting these out at reasonable rates could provide a 10% return on investment for the taxpayer. It would also have the effect of reducing rents in the private rental market and increasing the money supply amongst the poor.

From 1995 until 2008, the UK economy had its longest period of uninterrupted growth in our history. During prosperous times, some lenders were issuing mortgages of up to 125% of the market value of a property and lending people five or six times their annual income. All this contributed to house price inflation, and by 2009 the average price of a property had risen to £160,159, nearly three times as much as in 1996. (All those people who claim that inheritance tax liability is “taxing hard-earned money that’s already been taxed” are being disingenuous, since much of it has accrued merely because of house price inflation. But that’s another story and another argument…). The issue here is that wages did not keep pace with house prices, so now fewer people can afford to buy, there are more people needing to rent, so up goes the price of renting still further. Isn’t it time to cap what landlords can charge, especially in places like London, rather than make people homeless?

This country needs public housing projects to build homes for rent with public money, along with some form of covenant to prevent them from being sold by a future generation of Tory asset-strippers. We would save a fortune in public money as housing benefit wouldn’t be going into the pockets of rent barons. We could also take people off benefits to help build these houses in the first place.

Those who think that ‘the Right to Buy’ was a good idea should think through what the repercussions have been. Commercially and socially valuable council assets have been, and are being, sold at below their market value or replacement cost. It gave a discount to some people buying their homes, but not to others who had rented privately and bought on the open market. The shortage of social housing stock has caused homelessness, enabled private landlords to massively increase what they charge and seen billions of pounds of taxpayers’ money transferred to them in housing benefits. Selling council houses satisfies the Tories’ ideological hatred of all things public and helps them to divide and rule, but it does nothing for social cohesion. Council houses were built from 1919 onwards to give security of tenure to those who couldn’t afford to buy a house, but like so much else that they privatise, the Tories sold them for party political advantage and as part of their ongoing destruction of the fabric of the nation.

Sources used:-

http://www.parliament.uk/about/living-heritage/transformingsociety/towncountry/towns/overview/councilhousing/

http://econ.economicshelp.org/2010/02/economy-of-1970s.html

http://www.housepricecrash.co.uk/indices-nationwide-national-inflation.php

http://en.wikipedia.org/wiki/Right_to_Buy

"Right to buy" has to be repealed before a single new Council House is built.

“At least 52,000 properties sold through Right to Buy in London are now let by private landlords.” Sorry Ivan that does not make sense to me

Bellatori. Are you being obtuse? Nobody has suggested that they were sold directly to them. Many of the houses probably changed hands quite a few times between being sold to their tenants (in London from as early as 1970) to being owned by private landlords now. I suspect that the buy-to-let market took off during the peak period of repossessions (1990-93).

But they did not have to wait 5 years to realise the equity through second mortgages etc...

I would have thought most council tenants who bought their houses had enough to cope with paying one mortgage, and when interest rates increased rapidly, many of them couldn’t manage that.

I had not bought my house at a 50% discount which would have been a very useful buffer against adversity.

I’ve said previously that the policy was unfair, both to those who rented in the private sector and didn’t have the opportunity to buy their homes on the cheap, and to all those ratepayers since 1919 whose money had helped to build up a public housing stock.

Not everyone received a 50% discount. The actual amount depended on how long you’d been a tenant.

I don't agree with you on this

What don’t you agree with? That Lawson overheated the economy causing inflation, which led to drastic rises in interest rates and meant that a lot of people couldn’t pay their mortgages? That a recession resulted from the high interest rates (which had to be maintained because of our entry into the ERM at a ridiculously high rate of exchange), and so unemployment rose and even more people couldn’t pay their mortgages?

As you say, we agree that Right to Buy was and is a bad policy. It was designed to satisfy Tory dogma and get rid of responsibility for public housing, and also to bribe working class people to vote for Thatcher.

According to property listing sites on the internet, former Council Houses in parts of London are now being marketed for £750,000. Three-quarters of a million.

Comment seems superfluous.

seems the plan was a success - I wonder how many of the original purchasers are still in situ?

Enfield tears up rules in radical attempt to ease housing problem

Extracts from an article by Aditya Chakrabortty:-

"After 30 years of right-to-buy and no new council houses, Enfield’s stock of homes has halved. To reduce its dependence on private rentals, the council has begun bulk-buying homes. It’s introducing a scheme to license private landlords so controversial that it’s being challenged in court. And for the first time in 30 years it is building council houses. Furthermore, in defiance of Eric Pickles, it is using a loophole that means it won’t give tenants the right to buy.

Conservatives initially promised that the cap on housing benefit would force landlords to accept lower rents, but rents in London are rising at double the national rate. There is an exodus of poor households out of inner London to traditionally low-rent neighbourhoods such as the eastern half of Enfield. Central boroughs, such as Westminster and Kensington, are also shifting families to cheaper parts of London’s periphery. Making things worse, big landlords and their agents are cutting down on long-term lets; they prefer the more profitable and insecure overnight rentals.

Rather than keep paying profiteering landlords, Ahmet Oykener and fellow Labour councillors established a company to purchase new houses, arranged a credit facility of £100m, and imposed targets for the number of units to be snapped up every month. They aren’t fussed about character or location, but affordability. To alleviate its housing crisis, the local authority is buying back, with public money, homes it was forced to sell at a steep discount under Thatcher’s right-to-buy scheme."

For the whole article:-
http://www.theguardian.com/cities/2014/sep/01/enfield-experiment-housing-problem-radical-solution

Well it just had to happen in the end did it not Ivan, the one thing that surprised me is that it has taken so long to happen.
I mean you just cannot keep selling off your housing stock without at some point reaching the crunch stage of having nowhere to house anybody.
It will be happening all over the country sooner or later, with local authorities spending the most of their monies on building new homes out of their yearly allowance, leaving very little for anything else.

Tony Blair's dream of "joined-up-government" is still far from becoming reality. Whilst Gideon Osborne announces help-to-buy initiatives, the Financial Control Authority issues blood-curdling threats to Lenders unless they comb-out applicants who might not be able to meet the repayments comfortably.

Politicians need to understand that housing is an essential utility, just like water

From an article by Alex Hilton:-

"65% of private renters want to own their own homes, but that doesn’t necessarily mean they want a lifetime of crippling debt so that they can prop up the house prices of an older generation. I’m terrified of help to buy, rent to buy, shared ownership and all the innovative schemes for helping people into massive debt when what they need and want is a home.

I wanted a commitment to a Secretary of State for Housing with a ministry holding the £1bn social housing budget and the £24bn housing benefit budget – the cost to the taxpayer of not having enough social housing. I wanted a new Housing Act to offer a fairer deal for tenants while making the regulatory regime simpler for landlords. I wanted a new squatter’s right to occupy empty homes, with protection for the owners of that property in terms of the maintenance and reclaim of that property if they are prepared to allow people to live there.

Housing is a pressure cooker and people are living in squalid conditions and being milked for every drop of rent they can produce. Politicians need to understand that housing is an essential utility, just as is water, and there would be riots if the water companies allowed faeces through the taps and simultaneously reduced supply so that prices would go up. Most of all I wanted a recognition that private property developers are not and cannot under the laws of mathematics be the answer to the housing crisis. They simply make more money when there aren’t enough homes."

For the whole article:-
http://www.newstatesman.com/politics/2014/09/politicians-need-understand-housing-essential-utility-just-water

Douglas Adams ended his "Hitch-hikers guide to the Galaxy" with the explanation that all of our Universe was merely an experiment being conducted by white mice.

If you ever feel that things are happening over which we have little control, you're probably right. Behind the scenes, faceless men whose names you have never heard act to ensure that 80% of the population exist mainly to support the other 20% in idleness and luxury.

How do some people have seagoing "yachts" as big as a cruise-ship? How can the chairman of a public company be "worth" a hundred times more than one of his employees? Where do some Bankers justify a "bonus" of several million pounds every year? Why can an internet company sell your personal details for a fat profit but pay almost no tax?

And, to get back on topic, who is most interested in the continuing rise in the cost of housing if not the Builders, and the Lenders who make funds available to desperate wannabe houseowners?

Oh so true OW.
They will not even let me move out of my chronic one bedroomed flat either because of my age.
So I'm stuck here til I die.

No exit: Britain’s social housing trap

From an article by Polly Toynbee:-

"The right to buy, the signature policy that swept Margaret Thatcher to power in 1979, has caused two million council homes to be sold at a discount. At the time it was hailed as a policy that endorsed working-class aspiration and promised upward mobility. But its long-term effect has been to deprive others of anywhere affordable to live.

David Cameron promised before the last election that any further council property sold off would be replaced one for one. Since 2012, however, when Labour’s programme for pre-financed social housing finally ran out, more council houses have been sold than built. Cameron has also increased the discount for tenants to 70%, making council flats even cheaper to buy."

For the whole article, containing individual cases of hardship caused by the housing shortage:-
http://www.theguardian.com/news/2014/nov/11/-sp-no-exit-britains-housing-trap

Exactly Ivan, plus over 50s etc are stuck where they live also unless they can find a swap, which in my case is impossible.

The Tories want to give away houses to make sure we have enough houses

From an article by Jonn Elledge:-

“Somebody in the Tory hierarchy has looked at which voters the party needs to win over to stay in government, looked at the fact there's a housing crisis, and put two and two together to make the square root of minus one. Now, the party's manifesto will reportedly include an extension of the right-to-buy to cover tenants living in housing association (HA) properties.

There are so many problems with this policy that you’d think at least one of them would have come up in the discussions at CCHQ. One is that it HAs aren't actually an arm of government, so the government is promising to sell things it doesn’t actually own. It can probably find a way of making them do so, but the bills that’ll result from the resulting legal wrangling seem an odd sort of thing to prioritise right now.

Another problem is that the policy will haemorrhage money, since that discount basically amounts to the state giving individual tenants a bung. ‘Sources’ claim it'll eat into the housing benefit bill; that sounds optimistic to me, but even if it does, it will have done so by handing out houses to a lucky few, and as a British taxpayer who isn't being offered a subsidised house I feel a bit miffed about that. And that is the biggest problem here: never mind the fact it’ll generate less cash that it costs us, or the fact that if the Tories really wanted to get the state building houses again they’ve had five years in which to do that.

The problem with Britain’s housing market is not that HA tenants can’t buy their own homes. It’s that we need to build more bloody houses.”

For the whole article:-
http://www.newstatesman.com/politics/2015/03/tories-want-give-away-houses-make-sure-we-have-enough-houses

Oh so true Ivan, there has been so many council owned properties sold where I live that they now have reduced the repair workers, so that we who still live in their flats that are falling down round our ears cannot get them repaired for months.

One might almost come to believe that the Tory Party don't care whether voters have a home to return to after they've been to the Polling Station.

Well if it falls down while I am out voting OW I will at least have a room in number 10 eh.

Half a million more people claiming housing benefit under coalition

From an article by Daniel Boffey:-

"Britain’s failure to build affordable homes has led to a soaring housing benefit bill – with half a million more people now relying on state handouts to pay their rent than when the coalition came to power.

The coalition’s crackdown on welfare has failed to prevent an explosion in the number of people relying on state help in recent years, with a total of five million people now claiming housing benefits. And with 1.8 million on waiting lists for social housing, hundreds of thousands more have, instead of escaping welfare dependency, fallen into the hands of private landlords charging increasingly exorbitant rents.

Spending on housing benefit has risen by £650 million a year on average since 2009-10, and at a faster rate than during Labour’s 13 years in power, a new analysis of official Department for Work and Pensions figures finds. The annual housing benefit bill is expected to hit £25 billion by 2017.

A major cause of the ballooning bill, according to experts, is the dearth of affordable housing. The number of affordable homes built in 2013-14 was the lowest in a decade – despite the UK’s population rising by five million over the past 12 years, a rate of growth unequalled anywhere in Europe. As demand has grown, private landlords have hugely increased rents. Commuter areas outside London such as Surrey Heath and Elmbridge saw rises of 14% last year."

http://www.theguardian.com/society/2015/mar/14/housing-benefit-coalition-people-claiming

Ivan wrote:Half a million more people claiming housing benefit under coalition

....half a million more people now relying on state handouts to pay their rent ."....

http://www.theguardian.com/society/2015/mar/14/housing-benefit-coalition-people-claiming

Or to put it another way, half a million more "investors" now rely on state handouts to cover their rent demands.

I don’t know if Tory housing policy is governed by stupidity or malevolence, probably both. Cameron and Osborne have firmed up Thatcher’s disastrous ‘Right To Buy’ policy, which decimated public housing stock, and we now have a second scheme from them to subsidise first-time buyers. But what will that actually achieve, other than maybe bribe a few people into voting Tory? It will increase the demand for the existing pool of homes but do nothing to increase the supply, so up will go prices!  

Meanwhile, spending on affordable homes is at its lowest since 2000, provoking ‘The Daily Mirror’ into labelling Cameron ‘Slob the Builder’. The Tories were so embarrassed by the figures that they waited five months – until the last day of this parliament – to release them. Nearly 12,500 more children are in temporary accommodation than five years ago, homelessness is up a fifth and the number of families housed in B&Bs for more than six weeks is up 550%. Yet the Tories have the neck to ask people to choose between “Conservative competence” and “Labour chaos”.

Incidentally, if Labour wins power it plans to build 200,000 new homes each year, which will help cut the housing benefit bill. That's yet another way in which the two main parties are more different than they’ve been for decades.

http://www.mirror.co.uk/news/uk-news/affordable-homes-spending-lowest-2000-5418836

Research by Savills estate agency has found that housing values in central London have risen by as much as 180% over the past decade to more than £1.6m - meaning that only the top 1% of earners are wealthy enough to live there. In a "middle-class migration" families are leaving Kensington and Chelsea for Chiswick and Clapham.
With the average house price in the capital now £460,000 most properties are out of reach for the majority of buyers on a normal income. Tenants in London are spending 43% of their income on rent, according to the campaign group Priced Out. The charity Shelter says that single working Londoners will have to save for an average 29 years before having enough to put down a deposit on a home.

Sunday Times 29.03.2015

Oh well OW, DIDN'T want to live in London anyway.

The London magnet is higher wages than elsewhere in our nation. Equality of opportunity throughout the nation would stem from the paying of equivalent wages in the rest of the country.

It's not only the wages, though - there's a sense that London's the place to be for access to political power, culture, fame, and a number of other intangible benefits that people seem to want.

I liked a recent suggestion of moving the Houses of Parliament to Hull, for example, which would instantly remove the 'pull' of London for at least one group of aspirational individuals, while providing a boost to Hull and environs

Plenty of water for the conservative M.P.s to be thrown in then boatlady.

Just needs the Thames Barrier to be overwhelmed by a tidal surge for much of that golden Real Estate to be downgraded to junk status.

Then perhaps the formerly wealthy Tory supporters might wish they'd voted Green a long time ago.

Hi OW the only colour that these rich bleeders would vote for is the colour of £50 notes, or their damned credit cards, as no other colour interests them my friend.

Has ‘the Right to Buy’ and lack of rent controls caused most of the UK’s housing problems? Anyone directly affected will know that "the UK's housing problems" will only be lessened by a massive construction programme of new homes.

But scarcity drives property market values ever upwards, and it's worth asking just who benefits from higher house prices?

Well the only people that would benefit IMHO OW would be conservative run councils or the councils that give the contracts out to their conservative building friends.

just who benefits from higher house prices?

As you say, an interesting question - as a house owner, I have never found I benefitted because although each time I sell a house I get more than I paid, I do of course have to pay more to get my next house - the profit is absorbed in the increased price of replacing the house.

I guess, for those who are willing to be mortgaged to the hilt and to trade up every couple of years, a profit can be made, but maybe the big winners will always be builders, land owners and large scale property investors

Not forgetting the building societies boatlady, who will get more interest when you have to remortgage.

When she was still PM, Thatcher went to Harold Hill to hand over the deeds to the 12,000th council house buyers, the Patterson family, who had bought their three-bedroom terraced home at 39 Amersham Road.

34% of former council houses in that area are now buy-to-let and are being rented out to private tenants. Private rents are usually well above the rates charged to council tenants.

Mrs Patterson is now living in a caravan.

Typical Ivan using it as a money making scheme are they not,the pattersons that is.

Can Tories increase supply of affordable housing?
Robert Peston BBC Economics editor

http://www.bbc.co.uk/news/business-32298696

Only so it leaves more people out on the street and probably at food banks aswell OW.

I would have thought the only way to increase the supply of affordable housing would be to increase the supply of social rented housing - that would mean letting local authorities and housing associations keep their existing properties and offering them incentives to build more - or am I just being a bit simplistic?

QUOTE: ".... am I just being a bit simplistic?"

No more simplistic than Tory dogma, boatlady. Conservatives believe that it is not a function of government to provide Housing. (Nor direct provision of health services, nor Utilities, nor railways, nor a postal service, nor civilian air traffic control, nor weather forecasting, nor any welfare which could be provided by private insurance, etc.)

Their only tenet is to allow private enterprise to fill those needs, encouraged by the profit motive.

People who agree will vote Conservative. The less avaricious may support a different Party.

I wonder what they do think a government is for?

I wonder what they do think a government is for?

The classic 18th century Tory belief - law and order and 'defence of the realm'.

Even though it's very clear that model doesn't work?

Wasn't it the case that, at the outset of the Boer War, most working class men were found, by reason of poor housing and inadequate diet, to be unfit to serve?
So, in order to defend the realm, doesn't a government need to ensure that its citizens have access to a decent standard of living which will enable working families to produce men and women fit to give service?

boatlady wrote:.... it's very clear that model doesn't work ....

The fitness of Army recruits is also a powerful argument for the ready availability of an NHS and ancillary welfare benefits which serve to maintain a healthy nation, in which the diseases associated with poverty are not a threat to what Doctors amusingly refer to as the herd.

Tory spiteful austerity may yet redound upon them.

Lovely article in the Guardian about the heyday of Council Housing - the benefits to children growing up and to working class communities - a very valuable thing destroyed by Thatcher's fire sale of council properties

Back in the mid-1960s, more than 65% of the population in the town was housed in council-owned properties, one of the highest percentages in the country. The house was warm (well warmish – we got central heating in about 1970), well-built and well-maintained; the estate, which would these days be labelled “sink”, was stable and generally content (almost everyone had a decent job in the local steelworks, which helped); the large greens in front of each block were communal, well tended and great for games of football, rugby and cricket, often involving 20 children or more. The smell of new-mown grass after the council gardeners had come round to mow the lawns lives with me still. Looking back, it seems idyllic.

http://t.co/OrTKvhqcPH