A review of The Housing Debate by Stuart Lowe
There are plenty of books on the history of housing policy but few are as readable or as short as this one. It has other advantages, too. The author Stuart Lowe makes frequent international comparisons, asking questions like ‘why did Britain and Germany, with massive housing shortages during their industrial revolutions, go about solving them in such different ways?’
Lowe’s main purpose isn’t to retell housing history, but to put it into its political context, and especially to show how political decisions reflect ideas about the welfare state and views about property ownership. As he says, most books about the welfare state either ignore housing or treat it as not really part of the welfare state at all, even though it was one of the post-war Labour government’s ‘five pillars’ of welfare. Lowe not only wants to restore housing to its proper place, but to argue that it’s key to understanding how we are starting to finance pensions, health and education, and our attitude to taxes. Housing is just as vital to Cameron as it was to (say) Bevan and Macmillan, but in very different ways.
For Lowe, a turning point in housing policy came in the 1970s when almost one third of the population lived in council housing and Britain had a strategic choice to make. Council housing was popular, had low rents at a time when many people couldn’t afford to buy and private renting was in rapid decline, and had paid off many of its historic debts. Its low running costs meant that it could have an assured future if government continued to promote it – and if the sector continued to grow to provide for people on middle incomes not just the poor.
We all know what happened, of course. Not only did investment dry up from the mid-1970s, but Thatcher sold much of the stock without replacing it and thus ensured that there were only enough houses for those in greatest need. Every government since 1979 has vigorously promoted homeownership (with Gordon Brown famously advocating it should rise to at least 75%).
Lowe says that this has changed housing policy and the welfare state in fundamental ways. First, in the 1970s Britain could have continued with a more diverse housing system – indeed, one more like those of our European neighbours. Instead, we started down the road which (with exaggeration) he calls the ‘slow death of council housing’ but also towards a system in which homeownership became dominant.
Second, not only have the majority become homeowners since then, but the wider financial changes that began in the 1980s gave homeownership a double importance. Once someone saw their mortgage costs fall through inflation, or actually paid off their mortgage, they could start to tap into the rising value of their home to finance other things. As well as increasing their buying power, this meant they could pay for their own care costs in old age, and even perhaps pay for private health care or their grandchildren’s school fees. So they became less dependent on the welfare state and governments started to promote ‘asset-based welfare’ as an alternative to services and benefits paid for from taxes.
Third, Lowe argues that homeowners’ priorities – paying their mortgages and therefore if possible paying lower taxes – were the ones that set the political agenda as homeownership became the dominant tenure. Both the state and the two-thirds of households who are homeowners have an active interest in maintaining house prices and minimising taxes, both of which act against the interests of tenants and of would-be or marginal homeowners who find it difficult to get onto or stay on the bottom rung of the ownership ladder. The minority who don’t have an asset base to help pay for their welfare still need publicly funded services, just as the majority have much less interest in helping pay for them.
How this will play out now that homeownership is actually in decline, remains to be seen. Following Lowe’s analysis, it’s not the needier one-third of the population who will call the shots, it’s the two-thirds who since the 1980s have signed up to a different vision of welfare that gives the state a much smaller role. Many people probably aren’t conscious of having done this, but when push comes to shove will opt for smaller taxes even if they can see that the NHS is deteriorating, there’s enormous pressure on council housing waiting lists and welfare benefits are being unfairly cut. Measures like social housing investment cuts, reduced security of tenure, the revived right to buy and the general demonising of council tenants are all designed to shore up the prejudices of the homeowning majority and keep them on message.
However, governments are playing a dangerous game (as perhaps Gordon Brown belatedly realised). The transformation of homeownership was a product of a one-off tenure shift through the right to buy, and its financial advantages were massively augmented by an even greater transformation of the banking system which involved (among other things) the integration of personal finance into international markets. If this radical liberalisation didn’t come to an abrupt end in 2007, it was certainly curtailed. First-time buyers find it much more difficult to get mortgages (unless of course they have access to the bank of mum and dad – see above). While a quarter of households own their homes outright and no longer need to worry about their mortgages, the extent to which they can draw down equity depends both on lenders’ willingness to allow them to do it and on house prices staying high.
Lowe points out that, apart from market liberalisation, a key factor in the growth of homeownership was that many households for the first time had two earners. And a lot of people who are still paying their mortgages still require two salaries but perhaps now only have one. Add to these the 100,000 households each year who can’t enter the market, and the growing number of people who are tenants, and the attractions of asset-based welfare start to wane. It’s going to be very hard to recreate social housing’s role of the 1970s, but perhaps it’s still too soon to condemn it to ending up as the limited ‘ambulance service’ that the present government seems to have in mind.