Fairness and housing
Everyone has a right to affordable, secure and decent housing. Living in poor quality housing exacerbates other inequalities and can lead to a cycle of deprivation and missed opportunities. The state should guarantee that everyone can exercise this right, by providing sufficient amounts of social housing and by regulating the private sector rental market and managing house price affordability.
Homes as commodities
However, the housing market in the UK is under-regulated and over-commoditised. Successive governments have prioritised home ownership at the expense of good quality council and social housing and have failed to regulate private rented accommodation. Housing has become an asset class and a means of accumulating wealth, resulting in rampant speculation and price appreciation to the point where few people can afford to buy a home without access to inherited wealth or mortgage debt, and those who own property have seen their own wealth increase enormously over recent decades, often ‘earning’ more from house price appreciation than from work while others have no such opportunity to watch their capital appreciate.
Land monopoly is not the only monopoly, but it is by far the greatest of monopolies - it is a perpetual monopoly, and it is the mother of all other forms of monopoly. Unearned increments in land are not the only form of unearned or undeserved profit, but they are the principal form of unearned increment, and they are derived from processes which are not merely not beneficial, but positively detrimental to the general public.
Winston Churchill, House of Commons, May 1909
A lack of social housing
For generations, low-cost social housing met the needs of millions of people in Britain, providing affordable, secure and decent accommodation that was often unavailable in the private sector. But the amount of social housing in Britain has shrunk significantly in recent decades and continues to decline today, meaning that it is tightly rationed and cannot play the same role. Councils lack the powers or funding to increase the supply of social housing to the levels needed.
The private rented sector
In the absence of sufficient social housing, and with house prices at unaffordable levels, millions of people have no option but to turn to private rented housing. Here, however, increasing demand for a limited supply of housing stock has pushed rents up and quality down, condemning millions of people to live in insecure, inadequate and unaffordable accommodation, and forcing governments to spend billions every year to pay rent to private landlords through housing benefits.
Learning from other countries
Few countries share our obsession with home ownership (and our resulting stigmatisation of both renting and social housing). For example, in Denmark, many people live in social housing, private rented accommodation, or ‘co-operative housing’ (a half-way house between renting and owning).
What needs to change
While there is a debate about the type of housing most needed in Britain, there is a broad consensus that we need four million more homes urgently, and we estimate that three million of these new homes need to be provided at social rents, given the huge decrease in the amount of social housing.
The state should provide social housing on a much larger scale and make it available on the basis of need to a larger proportion of the population, while those who prefer to rent or buy in the private sector can do so. Providing more social housing will reduce demand for private rented accommodation, thus decreasing rents, which will reduce the amount of public spending needed to fund housing benefits to pay rent to private landlords.
The state should also regulate the private sector more effectively. For example, it should prevent developers from land banking to artificially inflate prices, and improve the quality of private rented accommodation. It should finally ban no-fault evictions and limit rent increases for existing tenancies (linked to RPI inflation).
We are not suggesting that social housing should be allowed to destroy the private sector rented market, and we recognise that the state will not have the resources to build social housing for everyone.
To provide the necessary funding to build large amounts of social housing, we should:
- Lift council borrowing caps for residential building immediately
- Scrap ‘help to buy' and other subsidised home ownership schemes, which cost the taxpayer money, push up prices and do nothing for the less well off in society
- Enable local authorities to acquire land for development at the value determined by existing planning consent and to gain the bulk of the uplift in value derived from changes to those consents, repealing the 1961 Land Compensation Act
- Sell planning permission to developers rather than giving it away for free
- Tax unused planned consents or force developers to build, develop or sell within a set number of years
We should also reform council tax with a tax proportional to the property value, regularly updated valuations and the capitalisation of the tax for elderly residents, with the balance paid out of the estate (although this is likely to be revenue neutral).
And we should prevent offshore trusts and companies from buying property or land unless the beneficial owners are disclosed, the funds are proven to have come from legitimate sources and all taxes due have been paid in full.
Unless we act now, we face a future in which a generation of young families will be trapped renting privately for their whole lives, where more and more people will grow old in private rentals, where billions more in welfare costs will be paid to private landlords – and hundreds of thousands more people will be forced into homelessness.
Shelter, Building for our Future