Z2K is proposing a Royal Commission on Housing, which touches the heart of the UK economy and the well being of our citizens. It provides an opportunity to address the intrinsic inequality in the distribution of wealth and incomes governing the ownership of land and the provision of housing, which produces poor, sometimes even disastrous, social and economic outcomes. We are advised by Peter Ambrose, Visiting Professor of Health and Housing at the University of Brighton.
It is apparent that the UK has a financial crisis of its own making. The deficit, currently expected to be £165 billion in 2011, and the housing benefit cost of £21 billion are the consequences of governmental action and inaction since 1979. It is necessary to understand how we got to where we are.
The financial deregulations of the early 1980s allowed house purchase lending to spiral out of control thus driving house prices to unprecedented levels in a market in short supply, and with them rents, which by various mechanisms reflect house price movements and consequentially the annual cost of housing benefit. Simultaneously, the Housing Act 1988 allowed landlords to charge a market rent, thus allowing rents to spiral after 15th January 1989. This removed rent controls from the Rent Act 1977 scheme, yet again inevitably increasing housing benefit and the cost to the tax payer.
One cause of the problem was the huge house-purchase lending ‘spike’ from 1997 to 2007 with gross mortgage lending rising to £363 billion leaving the total housing debt outstanding at around 18 times the 1980 level. Upswings of this nature are not new – they have happened several times in recent history so one should not be surprised. This one was additionally fuelled by new financial products reaching deep into a ‘market’ of sub-prime borrowers in a ‘get on the housing ladder at all cost’ atmosphere promoted by government. One distressing consequence of this has been increased repossessions.
None of the rise in the price of houses or rents is the responsibility of housing benefit claimants, but they are being punished for the errors of successive governments by the requirement to pay the balance of rents above arbitrary caps on housing benefit out of means tested wages or unemployment benefits, or be threatened with eviction and consequent misery. The Local Housing Allowance, introduced by the last government, began this policy of ignoring the means test when paying housing benefit; the cap continues it. These are the deeply unjust and regressive consequences of bad housing policies introduced by the 1979 government, allowed to continue by the 1997 government and then blamed on the most vulnerable members of society.
This is a result of a regressive effect in housing finance, support and fiscal regimes. For at least three decades buying a house has been much more heavily supported than renting a council house or RSL. The 70% who were better off to start with, and capable of buying and building up an asset base for their children, have received more help from public finances that the 30% who cannot possibly enter into purchase. This trans-generational effect is self-evidently regressive and may help to explain the persistence and worsening of our incidence of inequality and poverty. It is likely that anti-poverty measures designed to reduce inequalities are being more than outweighed by the regressive effects of housing finance and fiscal regimes.
The financial hardships and insecurity generated by the HB cap, and currently by the Local Housing Allowance, will adversely affect health, children’s capacity to progress at school, family stability, labour mobility and produce other adverse outcomes from indebtedness that will produce huge cost increases on the NHS mental health services , policing and educational budgets. The pain will be non-existent among those who profited from the boom and extreme for those who did not, particularly adults of working age and pensioners receiving housing benefit, whose families have left home, who are living in accommodation with rents above the caps.
There has to be something wrong with 30 years of housing policy which produces a huge bailout of the banks, a consequently severe public finance deficit, a very large housing benefit bill, five million people in overcrowded housing and five million on local authority waiting lists, the lowest output of housing in all sectors for 70 years – and then asks the poorest citizens to pay rents they cannot afford.
Therefore the time has come for a careful examination of the entire workings of the housing system by a Royal Commission which can propose a coherent housing policy which will prevent another financial crisis similar to the present one and protect the poorest citizens from carrying the cost.
The examination must be on the linked grounds of social equity and economic cost-effectiveness in the use of public funds.
The Commission should examine the following issues and make appropriate recommendations.
- The balance of need for both home ownership and rented accommodation.
- Changes over the last three decades in the supply/demand balance of total housing support and consideration of what would be an optimally cost-effective balance.
- Rent-setting regimes in the LA and RSL sectors that could achieve rent rises below the rate of inflation
- The regulation of lending institutions to ensure responsible lending and the avoidance of serious financial crises.
- The continual decline over two decades or more in the funding of LA and RSL construction which inhibit a rapid increase the supply of affordable rented housing including the promotion of community land trusts. .
- The amount of unused land and empty housing and the use of land value tax in other countries to encourage the productive use of unused properties. .
- The reasons why the UK house building industry is out-performed by that of, for example, Japan.
- The combined redistributional effect of local and national taxation regimes and housing benefit and allowance arrangements on the various tenure groups and on households at different points on the income scale, and their regressive or progressive consequences.
- The relationship between poor, overcrowded and insecure housing on the educational achievement of children.
- The relationship between household debt (much of it related to housing costs) and mental illness and the consequent cost to the health service.
- The failure over a very long period to enunciate a set of aims for housing policy and consequently the lack of any coherent and holistic set of policies.
- The effect on labour mobility, recruitment and retention – and thus on the efficiency of the economy – of the drastic shortage of genuinely affordable rented housing.
Until the commission has reported and the government decided on a policy the Local Housing Allowance and the Housing Benefit caps should be suspended and the means test rules applied in full.
Rev Paul Nicolson, Chairman,
Zacchaeus 2000 Trust,
34 Grosvenor Gardens, London SW1W 0DH
Office Phone 0207 259 0801 Office Fax 0207 259 0701
Home Phone and Fax 020 8376 5455 Mobile 07961 177889
Peter Ambrose, Z2K Housing Adviser.
Visiting Professor in Housing and Health
University of Brighton
Mayfield House, Brighton BN1 9PH
Phone 01273 643914 Mobile 0777 621 8200