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

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

You know boatlady thinking back they were lovely days were they not, always borrowed each other cups of sugar if you were short, it always got paid back too.
Or five ciggies or half a loaf, community spirit it was called was it not love.

I was offered 50k by my mother a few years back to help to buy my council home and i refused out of principle.

The Tories now want to extend the scheme to housing association tenants. My partner and i currently live in one of these properties.

We don't normally display Labour party window bills but when the Tories announced this proposal i got one and put it on our window.

Everyone buying their council houses changed their attitude overnight, they thought of themselves better than you because you were still in your rented one, yet the people inside had not changed had it? that is what I said about the loss of community spirit after that happened.

stuart torr wrote:Everyone buying their council houses changed their attitude overnight, they thought of themselves better than you because you were still in your rented one, yet the people inside had not changed had it? that is what I said about the loss of community spirit after that happened.

Yea and they put a new front door on!

I would suppose that it would depend on which area that you live in? My brother bought an ex council house in the North of England, it's all very friendly there with a good mix and the community spirit still exists!

I think the further north of England you go Phil the community spirit still exists, it may be because of in yorkshire the old mining spirit, or the steelworks that had a similar kind of community spirit did it not?

stuart torr wrote:I think the further north of England you go Phil the community spirit still exists, it may be because of in yorkshire the old mining spirit, or the steelworks that had a similar kind of community spirit did it not?

Probably.

My brothers were both brought up in the south east of England and both of them have migrated back to the town of Newcastle where my mothers side of the family was born. It's always been very friendly up there!

Just a bit too cold for me though!

I am ok just a t-shirt whatever the weather.

stuart torr wrote:I am ok just a t-shirt whatever the weather.

Brrrrrrrrrrr!

I'm a heat monkey! My partner hates the central heating and it's the main cause of arguments. I got him a tower fan for the bedroom though..It's all about give and take, so i freeze to death at other times!

Never mind phil the summer will soon be with us.

"Right to buy" was popular at the time it was introduced, but the typically Tory sting in its tail was that Councils were forbidden to spend the proceeds on replacing the houses thus lost to the poor souls still on the waiting list for accommodation.

In 2001 a new record was set when almost 70% of British homes were "owner-occupied" but only 191 Council Houses were built nationwide.

Hence OW there was not one for myself or my partner when waiting for one, so we had to live with her parents for what seemed like an eternity.

Well if they sell that flat at that price Ivan, they are going to make a tidy little profit on it are they not?

There's never been a worse time to sell off council housing

Extracts from an article by James Murray:-

"Extending the right-to-buy to housing association tenants, particularly in the midst of a housing crisis, is exasperating. The fact the government intends to fund this by forcing the sell-off of council homes in high demand areas is absurd.

Just to be clear what the Conservative manifesto pledges: councils will be forced to sell 'high-value' homes on the open market whenever they become vacant, with the money funding the new right-to-buy discounts, being spent on replacement properties, and going into a brownfield development fund.

In Islington, more than a third of our existing council homes and all the new ones we're building could have to be sold off under the Conservative manifesto plans. Other boroughs, particularly in inner London, would see large swathes of their homes disappear on the open market too. And this dwindling of affordable housing in the inner city means lower-value areas in outer boroughs would see rents and housing benefit costs up, with public services under greater pressure, as people get forced out to somewhere they can (at least initially) afford.

When you start to think through the implications of the policy, it's hard to believe the government is seriously going to do this. It's arguably even more immediately damaging than right-to-buy – at least in that case, the tenant-come-leaseholder continues to live where they are for a while. With the forced sell-off, the effects of there being fewer homes will be felt from day one."

For the whole article:-
http://www.newstatesman.com/politics/2015/07/theres-never-been-worse-time-sell-council-housing

The Tories' half-baked ideas are a disaster-in-the-making, but they had made no secret of those plans before the election, so the people to blame must be the ones who elected them.

Britain needs to build 150,000 affordable domestic properties every year for rent, but it won't.

An ex-council house has been sold for £1.2m – nearly 10 times the original price when it was purchased under right-to-buy rules.

http://www.msn.com/en-gb/news/uknews/ex-council-flat-in-covent-garden-sells-for-%c2%a312m-10-times-its-original-price/ar-BBlIVZU

Why right to buy has been a definitive disaster

Extracts from an article by Owen Jones:-

"According to an Inside Housing study, almost four in 10 ex-council houses sold off under 'right to buy' are now being privately rented out by landlords. What was once a social rent the non-privileged could afford is now out of reach: rents are up to seven times higher than the average social rent. Many of these properties are either inhabited by middle-class professionals or by families struggling to afford rents.

The point of right to buy was to promote home ownership in Britain, but that's collapsed to its lowest point in nearly three decades. There are now 11 million private renters; many are people who would be in a council house in a previous era but are now expected to pay far more. And the often unaffordable private rents mean an exploding housing benefit bill, with up to £24bn splashed out a year. One in four London households now claims housing benefit; many of them are low-paid workers who cannot afford the rents. Meanwhile, the failure to replace the stock that has been sold has led to social-housing waiting lists of up to 5 million.

So while right to buy has proved a resounding success for private landlords, for those who need social housing it has been a disaster. With the extension of right to buy to housing associations, the situation will deteriorate. At the very least, social housing that is sold off should be replaced, but in 13 London boroughs, while 2,877 properties have been sold off, not one socially rented house has been built. Rip-off private rents, scarce social housing, increasingly out-of-reach home ownership: here is the true legacy of right to buy."

For the whole article:-
http://www.theguardian.com/commentisfree/2015/aug/14/right-to-buy-scheme-disaster-housing

Revenge evictions definitely seem to be on the up

The right to buy: the housing crisis that Thatcher built

From an article by Andy Beckett:-

"Right to buy was not a right available to all. Those who could not afford to exercise it tended to be lone parents, younger tenants, people living on their own, or Thatcherism’s economic losers: the unemployed or low-skilled. There were also psychological barriers. Non-buyers tended to be afraid of mortgage debt, or of taking responsibility for repairs. Or they didn’t think property ownership was for the likes of them. Or they simply didn’t like their home enough to buy it. Even after five years of the right to buy, almost a tenth of council tenants were completely unaware of the scheme at all.

Thatcherism liked to present itself as a rejection of the postwar, state-driven, more profligate way of doing things. But in housing, her administration was actually the postwar state’s beneficiary, selling off the assets it had built up. A similar dependency lay behind her social and economic reforms generally. Her freedom to make Britain more risk-taking and individualistic in some ways only existed because the country she had inherited, for all its flaws and tensions, was a relatively stable, unified place underneath: more equal in the late 70s than it had ever been and largely at peace – there had been few riots in Callaghan’s Britain. Her administration partly lived off this social capital that stodgy old social democracy had produced.

Meanwhile rents for remaining council tenants were 55% higher in 1991, relative to average earnings, than they had been 10 years earlier. Home ownership was made possible for wealthier council tenants through discounts paid for by their poorer neighbours."

For the whole article:-
http://www.theguardian.com/society/2015/aug/26/right-to-buy-margaret-thatcher-david-cameron-housing-crisis

Telegraph report
http://www.msn.com/en-gb/money/news/buy-to-let-landlords-could-threaten-britains-economic-stability-warns-mark-carney/ar-AAeMToA?li=AA54rU

Bring back proper council houses - the only way to ensure adequate housing for the masses - the buy to let bubble is bound to burst

Council tenants lose lifetime right to live in property

People will no longer have the right to live in their council home for life in future. In a move condemned by Labour as likely to break up communities, the government has quietly tabled an amendment to the housing and planning bill that sets a maximum of five-year terms for new secure tenancies.

For the whole story:-
http://www.theguardian.com/society/2015/dec/09/council-tenants-lose-lifetime-right-to-live-in-property

Horrifies me - didn't see that coming - and I'm working with advice workers (god save the mark) who see this as a GOOD thing - beginning to despair

The end of council housing

From an article by John Harris:-

"Quaker Court is just a stone’s throw from the City of London. Whereas its residents were once all long-term tenants, in the 35 years since Thatcher encouraged people to buy – and therefore sell – their council flats and houses, the population of places like this has become ever more transient. Homes that were once council properties are now often owned by buy-to-let landlords who rent them out on a short-term basis.

Labour sees the new housing and planning bill as the work of a government set on the end of council housing as we know it. The Tories want to end permanent council tenancies and replace them with arrangements that will be reviewed every two to five years, meaning that for new tenants, council housing will no longer represent anything secure or dependable. And councils are to be forced to sell their highest-value homes as soon as they become vacant.

Just under 8% of us now live in council housing; in 1979, the figure was 42%. Living in a council house was perfectly normal. All that changed when Thatcher rolled out the right to buy, with huge discounts, 100% mortgages, and the insistence that councils should use the 50% of the receipts they were allowed to keep to pay down their debts rather than building new houses.

Government investment in social rented housing was cut by two-thirds when the Tory/Lib Dem coalition took power. In 2012, jump leads were put on the right to buy when the maximum discount for tenants was doubled to £75,000. The government accompanied this with a pledge to replace every home that was sold, but at the last count, for every nine houses sold, only one was being replaced."

For the whole article:-
http://www.theguardian.com/society/2016/jan/04/end-of-council-housing-bill-secure-tenancies-pay-to-stay

Google air bnb for a disturbing new aspect of former local authority housing now in the control of BTL landlords.

I can understand that those in the most need should be looked after regarding housing and that council houses should not be sold and then bought by the to let people.

However, choose who actually owns the houses makes no difference to the actual number of houses available for occupation.

So far as I am aware if a council tennant sells the house for profit within five years they have to pay the council a figure to offset their profit.

When a council tennat sells a property they have to find another so it in no way actually eases the problem of numbers.

The ideal way of course would be to limit the number of properties any individual can own.

I am sure Tony Blaire would be the first to vote for this.

In most markets, scarcity drives up the price. Builders can earn money on the land they own just by waiting. Mortgage lenders like the way property securing the loan goes up in value, reducing their risk, and Buy to Let landlords cash in pension schemes to add to their portfolio.

Who, apart from a Socialist government, is going to kill the golden goose by building "enough" homes?

Ivan wrote:Figures show that replacements for homes sold under the right-to-buy scheme fell by 27% last year, worsening the housing crisis

The right-to-buy scheme allows low-income tenants to buy their council-owned home at a sizeable discount to market value. Since it was launched by Thatcher in the early 1980s, almost 2 million properties have been sold by councils across England....

About an estimated three-quarters of those former council houses are now owned by BTL landlords operating in the private rental sector.

Many occupied by tenants in receipt of housing benefit to pay the rent.

But we can trust Tories with the economy.

So once again the "Law of unintended consequences" could be about to intervene.

A new single-issue pressure-group is emerging:  Renters.  
Insurance company Aviva confirms the private rental sector has doubled since 1997 to about five million households - while according to Barclays, home ownership declined from 71% in 2004 to 64% in 2015.

That makes around one-in-five of the voting public with no particular reason to admire recent Tory policies (or the lack thereof).