Aufheben's incredibly detailed and comprehensive history and analysis of housing and the working class in UK.
The housing question
For the vast majority of people living in a capitalist society housing is an ever-present concern.
Finding somewhere to live, finding the money to pay the rent or to keep up the mortgage repayments, negotiating contractual obligations with landlords or mortgage lenders, solicitors and estate agents, are all familiar and recurrent problems. Yet housing is not merely a basic necessity, it also provides an important reference point through which we come to exist in capitalist society. Where we live, what type of housing we have, what type of tenure we hold, all condition who we are, what we are seen to be and the environment in which we are able to live our lives. As such housing is a major material determinant of our social being.
However, the very ubiquity of housing in our everyday lives has often meant that the political and social importance of housing is overlooked by those interested in the social question. Yet, as one of the central elements in the reproduction of labour power, housing is above all a class issue. Not only that, with the ending of the housing bubble, that threatens the stability of the economy, and the looming shortage of housing, the issue of housing is rising on the political agenda in Britain for the first time for twenty years.
Whereas the US and much of Europe experienced a prolonged economic slow down following the dot.com crash three years ago, the UK has been able to sustain its economic growth. Indeed, having effectively skipped the last recession, Gordon Brown has been able to claim that the UK economy has experienced the longest period of uninterrupted growth since the industrial revolution! Britain now has levels of inflation and unemployment not seen since the end of the long post war boom of the 1960s.
An important factor that has allowed the UK to ride out the dot.com crash was the rather fortuitously timed expansion of public expenditure. But perhaps more important than this inadvertent Keysianism was the housing bubble. In the last five years the house prices have doubled. Borrowing against the rising value of their homes, house owners have fuelled an unprecedented consumer boom. As a result of this debt fuelled boom, personal debt has risen to over £1 trillion - that is nearly the value of the entire annual GDP of the United Kingdom.
What has become obvious is that house prices cannot continue to rise several times faster than wages. At the time of writing there is mounting evidence that the downturn in the housing market has begun. Whether the housing bubble is going to burst with a sharp fall in house prices or whether it will slowly deflate producing a long period of stagnation it is too early to say. Of course, housing bubbles are nothing new. As we shall see, ever since the deregulation of the financial system in 1970 there have been sharp rises in the price of houses followed by long periods in which prices stagnated. However, previous bubbles were short, lasting between eighteen months to three years. This housing bubble has gone on for almost five years.
Of course, it can be argued that previous bubbles were cut short by either rising unemployment or by a sharp rise in interest rates, neither of which has so far occurred to puncture the current bubble. However, there are reasons to believe that the current housing bubble marks the end of an era of housing provision that began in the 1970s.
Firstly, as the government has already recognised, it is becoming apparent that we are heading for a serious housing crisis. On the demand side, social and demographic changes are increasing the demand for housing. An aging population and increased divorce rates mean that there are a growing number of single households requiring their own accommodation. At the same time, the growing dominance of London is drawing the population South. Hence the housing stock is not only insufficient to meet demand but also much of it is in the wrong place. On the supply side, the building industry has failed to make up for the dramatic fall in the public construction of houses since the late 1960s. Over the past 30 years the building of new houses has barely kept pace with the growth in demand for housing let alone been able to provide replacements for the old housing stock. As a result Britain has aging, and increasingly decrepit, housing stock1 .
The current prolonged housing bubble can be therefore seen as an early symptom of the housing crisis. As the chronic failure to build enough houses over the last few decades comes up against the increasing demand for housing, house prices are being forced up.
Secondly, there seems to be a wider economic transition that has an important bearing on the housing market. Since the 1970s we have been in a period of high inflation and, as a consequence, high nominal interest rates. Now, with the growing competition from low wage economies such as China, it seems likely that we have entered a period of low inflation and consequently low nominal interest rates. Lower interest rates mean that house buyers can afford to borrow more to buy a house. As a result lower interest rates mean higher house prices. Thus the housing bubble can be seen to have been prolonged by the adjustment to the new low interest rate regime.
If it is the case that we are in a transition to a new era in housing this is likely to have wider political and economic implications. However, it is perhaps too early to make predictions on how the working class will react to the new housing regime.
In this article we shall confine ourselves to placing the current housing situation in its historical context. In doing so it will be necessary to employ the rather controversial category of the ‘middle classes’. The notion of the ‘middle class’ is often criticised as a sociological category, which too often escapes an adequate and well-founded definition. This is undoubtedly true. However, this does not mean that the notion of a middle class is merely an illusion or merely an ideological construct made up by sociologists. The notion of the ‘middle class’ is drawn and systemised by bourgeois sociologists from the real perceptions and experiences of people living in contemporary capitalist society. For us the middle class is a category of real appearance that emerges at a more concrete level of analysis than the more essential relations of production, which give rise to the categories of capitalist and proletarian. As such, middle class, and its opposition to the category working class, is constituted by a complex of historically contingent factors, many of which lie outside the immediate process of capitalist production. As a consequence, the definition of middle class varies across time and place. As we shall argue, in Britain during the twentieth century housing tenure became an important, but far from exhaustive material factor in the constitution of a distinct middle class, which had important political and ideological effects.
However, before examining the history of housing in Britain we shall first consider some general issues regarding housing under capitalism.
Housing under Capitalism
Housing has proved to be particularly problematic in the development of capitalism. The production of housing as a commodity as such has failed to provide adequate, secure and affordable housing for the working class. As a consequence, the state has been increasingly obliged to intervene in the provision of housing over the last hundred years or more.
To gain an understanding of why this has been the case we shall, at the risk of simplification, briefly look at how the production and sale of houses occurs in the absence of state intervention given the continued presence of private property in land. 2
For more than 200 years the provision of housing for the private sector in Britain has been the preserve of 'speculative builders'. Houses are not built to order but for sale on the housing market. As such housing is no different from any other capitalistically produced commodity that enters the means of subsistence of the worker.
In general the market price at which the worker buys a commodity is determined by its production price. The production price is in turn determined by the costs of production - made up of the costs of labour directly and indirectly employed in producing the commodity and the means of production used up during the production process - together with the average rate of profit on the total capital advanced for production. If the market price rises above the production price then this will raise the capitalist’s rate of profit above the average. Capital will be attracted from other industries increasing the supply of the commodity. This will then lower the market price. Similarly, if the market price falls below the production price then capital is withdrawn from the industry reducing the supply and thereby raising the market price. Hence, the free movement of capital produces a tendency for market prices to gravitate around the production prices, at which capitals obtain the average rate of profit. As a result, capitalists in each industry tend to realise surplus value in proportion to the capital they advance.
However, houses have to be built on land. Before a capitalist builder can build houses they have to buy land. Private property in land therefore acts as a barrier to the investment of capital into the construction industry, which allows the landowner to extract a payment for surrendering the ownership of land. Thus, although land is not produced by labour - and hence has no value in itself - the landowner can appropriate value. As a consequence, the production price not only includes the costs of labour and means of production used in the construction of the house but also the price of the land on which it stands.
Furthermore, the price paid for a house is only a part of the cost of housing. Firstly, there are of course, the costs of repair and maintenance necessary to keep housing habitable. In the case of owner-occupiers this will be usually paid directly. For those renting the cost and maintenance will, at least in part be paid indirectly through the rent.
Secondly, there are transaction costs, which are particularly significant for those buying their own home. The buying and selling of housing involves costs much greater than most other commodities a worker might buy. Estate agents, solicitors and surveyors all demand their fees and commissions adding to the eventual sale price of a house. But more importantly the cost of housing also includes the interest paid in order to borrow the money to buy the house. Since the price of a house is usually several times the annual wage of a worker, it cannot be bought outright. Either a landlord borrows the money to buy the house and then rents it out to the worker or the worker has to take out a mortgage. Either way the interest will amount to a substantial part of what the worker will eventually pay.
Thus the cost of housing the working class, whether it is paid in the form of rent to a private landlord or mortgage repayments to a bank or building society, includes not only the cost and profits necessary for the construction of the house, but also substantial payments to bankers, landowners and housing professionals.
Of course, the costs of housing are part of the value of labour power. To the extent that the working class is able to pass these costs on in the form of higher wages then they will come out of the total surplus value produced in the economy as a whole. Surplus value that would otherwise have gone to capitalists under the heading of profits will now be pocketed by bankers, landowners and housing professionals in the form of interest, land rent or commissions. This squeeze on profits may potentially undermine capital accumulation. However, to the extent that the working class is unable to pass on housing costs, then the reproduction of the working class may become impaired through inadequate, insufficient and substandard housing.
As we shall see, these conflicting interests in the provision of housing have meant that housing has often been an important site of class conflict. To understand such conflicts we must consider how housing enters in the reproduction of the worker’s labour power.
Housing and the reproduction of labour power
Housing is a vital element in both the material and social reproduction of the working class. Of course, in all but the most benign climates shelter from the natural elements is a basic human need. However, under capitalism shelter assumes the fixed and social form of housing, which serves to reproduce individuals and families - households - as integral members of bourgeois society. Housing not only functions to maintain the physiological and psychological health and well-being of the household members but also serves to enclose a distinct private space out of which household members are constituted as consumer/citizens. As a home, housing is the primary site for the consumption of commodities. Housing not only protects the members of the household from the natural elements but it also physically protects what they own. Hi-fis, televisions, beds and sofas are all venerable to wind and rain. But more importantly housing also protects what they own from others outside the household.
Housing becomes the physical expression of the separation of the public and private. The walls of a house separate the personal relations within the home from the impersonal relations of the market and the state outside them. Commodities are bought in the market and then brought home to be consumed. In selling their labour power the household will usually need to supply an address to their prospective employers. At the same time, an address of a fixed abode is the first requirement in any interaction with any agency of the state whether this is the police, tax office, benefit offices or health service.
Hence housing is central for the integration of the individual within bourgeois society. To be homeless is not simply to be deprived of adequate shelter but to be socially excluded, to be rendered a non-person. For this reason the threat of homelessness has been a particularly potent weapon for capital in its efforts to impose work. After all, the need to pay the rent or to maintain mortgage repayments, the need that is to prevent eviction and homelessness, is ultimately the strongest objection to strike action.
However, while capital as a whole requires to maintain a minimum level of homelessness as a warning to the working class of the consequences of shirking labour, for the most part, it requires a well housed working class. Of course, as we shall see, from an early stage of industrial capitalism it was recognised that good housing was central for the health and thus the productivity of the working class. It was also recognised by several philanthropic employers in early nineteenth century that good housing helped to produce ‘good workers’ by integrating them into bourgeois society as responsible consumer/citizens.
However, while this may be the case for capital considered as whole this is not necessarily the case for the individual capitalist. For the individual capitalist what is of concern is that his workers are able to turn up in a fit condition for work on a week-to-week basis. The fact that the worker may live in damp, insanitary and overcrowded conditions that may lead to the ill health of the worker or his family in ten years time is of little concern to an individual capitalist. Furthermore, under the immediate pressure of competition the individual capitalist has little concern for the impact of housing conditions on the next generation of workers or those that he does not presently employ, such as the sick or the unemployed. As a consequence, in circumstances where the capitalist employers have the upper hand, and wages are pressed below the value of labour power, the full costs of housing the working class is unlikely to be met.
Yet in the reverse situation, where workers have the upper hand, capital faces a problem of spiralling wage costs. The housing costs of workers can vary considerably. Housing costs will vary substantially according to the size of family and with locality, and in the case of owner-occupiers, with when the house was bought. If workers are able to make the capitalist pay the full costs of those living in the most expensive accommodation, wages will more than cover the housing costs of the majority of workers. As this becomes incorporated in what is deemed an acceptable standard of living the value of labour power - and hence wages - will be ratcheted up.
Housing cost is therefore not only a substantial and vital element in the value of labour power, but also a problematic one for capital as a whole. For those groups of worker who are in a strong bargaining position the incorporation of housing costs can lead to spiralling wages, on the other hand workers in a weaker bargaining position may have wages that are insufficient to meet the cost of adequate housing for the long term reproduction of their labour power. As a result the state has been obliged to intervene in the provision of housing.
Yet it is often not enough to overcome bad housing by simply insisting that capitalists raise wages, for instance by imposing a legal minimum wage. A rise in wages does not necessary lead to more or better housing. Rising wages may lead to an increased effective demand for housing but this is often swallowed up by rising land prices. This, as we shall see, was particularly true in the nineteenth century under the English landed system. However, it is still the case today when speculative house builders can expect to make a large part of the profits from the speculation in land rather than in the actual construction of houses.
What is more the problem of housing has become progressively worse as housing has come to represent an increasingly larger part of the value of labour power. In the late nineteenth century the typical mortgage taken out by a skilled worker would take ten to twelve years to pay off. Now the standard length of a mortgage is twenty-five to thirty years. The increasing relative costs of housing have been due to the low growth in the productivity of house construction. Although labouring work has been largely mechanised in the last few decades the skilled work of bricklayers, carpenters, plasterers and plumbers etc. has changed little over the last hundred years. Indeed, over all, the production process of house construction is not very different from what was in the Victorian era.
To some extent this slow growth in the productivity of house construction has been due to the inherent nature of house building that has prevented the application of mass standardised production techniques. But more importantly it is because of the social nature of the private speculative building industry, which has dominated housing construction. There are two principal reasons for this3 .
Firstly, speculative builders have tended to construct housing in relatively small batches that has prevented the exploitation of economies of scale. House construction takes months and ties up a considerable amount of capital that can only be realised once the houses are finished and sold. By the frequent construction of small numbers of houses at a time, the amount of capital tied up can be kept to a minimum. This not only means that builders can operate with a smaller amount of working capital but also that they are able to minimize the risk of overproduction. Housing that is not lived in will rapidly deteriorate both physically and, more importantly, in terms of value. Facing a volatile market that may well change between the decision to begin construction and the date of completion, producing in small batches allows builders reduce the risk of being left with a large number of unsold houses, which have cost them a considerable amount of capital to build.
Secondly, there has been little competitive pressure on builders to innovate. In general, industrial capitalists seek surplus profits through the continued revolution of the production process that raises the productivity of labour. An innovative capitalist, by introducing new techniques of production, will be able to lower costs and, by selling at the prevailing market price, will make larger profits than competing capitalists. However, seeing the surplus profits to be made from this new technique, other capitalists will soon adopt it. It will then become the new normal technique of production. With its generalisation, the new technique will lower the value and hence the market price of the commodity produced, and hence the surplus profits earned on adopting will be eroded. If the innovating capitalist is to maintain surplus profits a new innovation in production will have to be found. Hence there is a continued competitive drive to increase the productivity of labour in any particular capitalist industry.
However, for speculative builders this competitive drive is far weaker than it is for most other industrial capitalists. The profits on the actual construction of housing have usually been squeezed by the claims of bankers, landlords and housing professionals. Speculative builders have therefore relied far more on land speculation to make up their profits and it has been through land speculation that they have sought to make surplus profits. As a consequence, the success or failure of speculative builders has depended far more on their ability in wheeling and dealing in land, and their influence on the planning process, than it has on their efficient management of the construction of housing. Thus there has been little drive to innovate and the productivity of labour in the construction industry has lagged far behind that in most other industries.
As we shall now see, this problem of low productivity in the construction of housing, and hence the increasing relative cost of housing for the working class, has led to recurrent crises in the provision of housing in the last hundred years in Britain.
The History of Housing in Britain
Britain is marked out from much of the rest of Europe by its high rate of owner occupation. Around 70% of householders are owner-occupiers. Owner occupation is now regarded as the norm, if not the ideal, form of housing tenure by most of the population. Council or social housing is now seen very much as second best, being allotted to those unable to afford to buy their own home, while privately rented accommodation is usually seen as suitable only for the young, the poor and the marginalized.
Yet the dominance of owner occupation in Britain has not always been the case. Before World War I 90% of households lived in privately rented accommodation. The middle class were just as likely to rent as the working class; and the working class was just as likely to own their homes as the middle class. Class differences were expressed exclusively in terms of the quality, size and location of accommodation not in the form of tenure.
Following the crisis in the nineteenth century housing regime, which was brought to a head by the Glasgow rent strike in 1915, the private rented sector went in to decline. The private rented sector became squeezed between the growth of owner occupation on the one side and council housing on the other. Tenure now came to express clear class distinctions. Council housing came to be identified as the tenure of the working class; it was the tenure of collectivism and social democracy. In contrast owner occupation became identified as the tenure of the middle class, the tenure of individualism.
This regime of housing provision, which had dominated much of the twentieth century, went into crisis in the 1970s. The result of this crisis was the triumph of owner occupation. With the retreat of social democracy came the demise of council housing.
We can therefore identify three distinct housing regimes: the period of the dominance of the private rented sector before World War I. The regime from World War I to the 1970s, in which owner occupation competed for dominance with council housing, and the current housing period dominated by owner occupation. As we shall see, these housing regimes were closely associated with both the constitution of class and class struggles of each period. We shall begin with the situation before World War I.
Housing in the Nineteenth Century
The nineteenth century saw the rapid urbanisation of Britain. Between 1801 and 1911 the urban population grew almost tenfold. Already by 1850 more than half the population of Britain lived in towns or cities. By the eve of World War I four out of five of the population lived in urban areas. The driving force of this urbanisation was the emergence of industrial capitalism. The development of large-scale industrial production required the concentration of the workforce in new industrial towns and cities.
In the early stages of the industrial revolution the need to locate mills and factories in under- populated areas, in order to take advantage of water power or to be close to coal deposits, led many capitalists to see the provision of housing for their workforce as part of the necessary costs of setting up production. The provision of housing not only served to attract workers by providing them with somewhere to live but also offered the capitalist the advantages of combining the position of landlord with that of employer to wring out the last extra penny from his tenant-workers. However, the advantages of being an employer-landlord only remained so long as the capitalist was the principal local employer. Once the single-employer industrial village grew into a multi employer industrial town or city, and it became possible, and indeed necessary, for workers to switch employers, then it became far too troublesome for each capitalist to act as a landlord, particularly for other employers' workers. As a consequence, the provision of housing for the working class became, like that of the middle classes, the preserve of speculative builders.
Speculative builders would buy or lease land, build a few streets of houses and then sell them in small batches to local housing landlords. At that time, before the development of the stock exchange and modern financial institutions, there were few investment opportunities for those with small amounts of capital. Buying up a few houses and renting them out to respectable middle class tenants offered a very modest but secure return on the investment of small amounts of capital. Furthermore, as the town or city grew, the landlord could expect the price of his houses to rise, and he could expect to be able to raise his rents accordingly.
Renting to the working class was a different matter. Wages were so low that workers often could barely afford to eat let alone pay rent. However, if the landlord was ruthless enough to cram enough families as possible into his houses, cut back on repairs and maintenance and extract every penny that was due in rent, it was possible to make a handsome return on the capital invested in bricks and mortar. As a consequence, the working class in both London and the new industrial towns and cities were condemned to housing conditions, which even by the standards of the time, could only be described as appallingly overcrowded and insanitary.
At a time when there seemed to be an inexhaustible supply of labour that could be drawn in to industry from the countryside, the industrial capitalist was not particularly concerned with the reproduction of the working class. In the early stages of accumulation the overriding concern was to keep wages to a minimum in order to maximise the rate of exploitation and hence the rate of accumulation. However, the appalling housing conditions of the working class were not simply due to the ruthless pursuit of profit that pressed wages to a minimum, nor to the ruthless extraction of rent by the petit-bourgeois housing landlords. A further cause was the English landed system that both restricted the supply of land for house building and kept the price of land high.
Industrial capitalism in Britain had emerged within the pre-existent political and economic structures of agrarian capitalism, which had been established in England (and South Scotland) since the end of the seventeenth century. Land was concentrated in large family estates of the aristocracy and the untitled landed gentry. These landowners rented their land to tenant farmers on short leases who then employed agricultural wage-labourers to produce agricultural commodities for the market. The customs and laws of primogeniture and entail ensured that these large landed estates were not broken up. Landed wealth was seen as belonging to the family estate not to any particular individual, who only had a ‘life interest’ in the family property, and the right of any individual landowner to dispose of land was severely restricted. As a consequence, through the customs and laws of primogeniture and entail, a class monopoly was maintained on land. The amount of land that could be sold was limited and this placed the landed owners who were able to sell or lease land to speculative builders in a strong bargaining position.
Land owners could not only demand high prices for the their land they could also insist that land was sold as a leasehold. This would ensure a regular payment of 'ground rent' to the landowner that could be periodically reviewed as the price of land rose due to further urban development. 4 Then at the end of lease (commonly ninety-nine years), the land together with all improvements, including any buildings built on it, would revert to the family estate of the landowner. Thus the landowner could not only demand a good price for his land, but also ensure a share in any increase in its price in the future.
As a result of this class monopoly in land, speculative builders sought to pass on the high price they had to pay for land in higher house prices, and by increasing the density of housing they built on the land they were able to obtain. As a result any amenities that might go with the building of houses, such as streets, parks and gardens, were reduced to a minimum.
By the middle of the century middle class reformers and philanthropists had become increasingly concerned at the state of working class housing. They saw working class slums as the breeding ground for discontent, social disorder and of diseases that knew no class distinctions. They called for public intervention by both the state and charitable bodies to improve the living conditions of the working class. As consequence, efforts were made to clear the worst of the slums. Building regulations were introduced. Public amenities were provided; such as parks, public baths and washrooms. Streets were paved and provided with lighting, and, perhaps most importantly of all, sewage systems were constructed.
At the same time, for those sections of the working class that were able to organise in trade unions, wages began to rise, particularly from the early 1860s. As a result, these sections of the working class were able to afford to pay higher rents and rise out of the slums, allowing them sufficient space and comfort to claim to be respectable members of bourgeois society, not so different from the middle class.
Growing economic prosperity generally combined with rising wages for the organised working class led to a boom in housing construction in the late 1860s and 1870s, which for a time helped alleviate the chronic housing shortage and ease the conditions of overcrowding, at least for the better off sections of the working class.
As consequence, the housing and living conditions in Britain's large towns and cities saw a distinct improvement during what has been known as the mid-Victorian boom. However, public intervention to improve the living conditions in the cities was left mainly to the local initiatives of charities and the municipal authorities. As a result, the provision of public amenities was always limited by the pockets of wealthy benefactors and the willingness of ratepayers to pay 'onerous' rates. 5 While attempts to impose building regulations or to buy up and clear away slum housing always ran into concerns of the rights of private property.
Despite the improvements and reforms made from the middle of the century onwards, the majority of the working class, most of whom remained on low wages and in irregular employment, were condemned to live in damp, dilapidated and overcrowded accommodation. Indeed, if anything, in the three decades leading up to the First World War the housing conditions of the working class became worse.
As the productivity of labour in the construction industry lagged behind the rapid advances in other industries the relative costs of building steadily rose. At the same time, the barriers of land ownership continued to constrain urban expansion. As a result the decades leading up to World War I saw a continued shortage of housing, and steadily rising rents. Following the end of the building boom of the late 1860s and 1870s the building of new houses fell sharply and remained low until the 1890s. A short construction boom occurred at the turn of century but was soon cut short by a sharp rise in land prices. House building then fell back to levels even lower than those of the long depression of the 1880s.
Through most of the late Victorian era the general level of prices of the means of consumption fell. This was particularly the case for food, due to the worldwide depression in agriculture and improved transportation. During the same period money wages remained stable. However, the gains from falling prices were for the most part offset by rising rents. As rent became an increasing proportion of workers expenditure housing became a growing source of social tension at a time when the working class was becoming increasingly well organised. As the price of new houses rose, housing landlords put up the rents on all their houses, not just new ones. This led to conflicts either between workers and landlords over rents or else resulted in conflicts between capitalists and workers as the workers sought to gain higher wages to pay their rents.
Housing and the class monopoly in land
The Reform Act of 1832 and the repeal of the Corn Laws in 1846 can be seen as decisive victories of the emerging industrial bourgeoisie over the landed aristocracy. However, they can also be seen as timely concessions that served to preserve and prolong the political and economic dominance of landed wealth. Following the Reform Act of 1832, and the subsequent Corporations Act, the industrial bourgeoisie were allowed control of the local administration of their own industrial towns and cities, and gained increased influence at a national level, but national affairs remained firmly in the hands of the landed aristocracy.
In the short term, the repeal of the Corn Laws was a substantial economic blow against landed wealth. By lowering the price of corn, the repeal of the Corn Laws reduced the rents paid on corn producing land. However, the lower price of corn reduced the price of bread and allowed the industrial bourgeoisie to cut wages and raise their profits. Increased profits led to a faster accumulation of capital, which served to consolidate Britain's position as the 'workshop of the world', and led to what has become known as the mid-Victorian boom. During this boom landed wealth was able to prosper.
The economic growth of the towns led to an increase in demand for agricultural produce. British agriculture shifted production to those agricultural products that were not so easily imported, such as fresh meat, vegetables and milk. As a result rents on agricultural land grew. But not only this, the accumulation of industrial capital led to demand for minerals that lay beneath the land, particularly coal and iron ore, allowing landlords to charge increased royalties for their extraction. Also industrial accumulation led to an increase in demand for land for urban development and for the construction of railways. Thus in the longer term the repeal of the corn laws, by laying the foundations for the mid-Victorian boom, served to sustain the economic dominance of landed wealth.
In the 1870s the mid-Victorian boom ended as British industry began to face increased competition from Europe and the USA. At the same time there began a prolonged world depression in agriculture that depressed agricultural prices and hence land rents. The economic basis of the landed aristocracy began to be undermined. At the same time, the political dominance of the landed aristocracy began to face renewed opposition.
Throughout the nineteenth century middle class radicals had argued that the political and economic power of the landed aristocracy was ultimately a block to social and economic progress. From the time of Ricardo it had been argued that capital accumulation would lead to rising rents that would lead to falling industrial profits and eventual economic stagnation. With the end of the mid-Victorian boom, these concerns began to regain their former resonance. But added to such concerns of economic stagnation were fears resulting from the growing power and militancy of the working class.
Middle class radicals sought to unite the middle and working classes against the political and economic power of the landed aristocracy. Radicals argued that Britain’s economic prosperity had been achieved by the hard work and enterprise of workers and capitalists. Yet, since growing prosperity led to rising rents, the landlords could cream off much of the fruits of increased wealth that was created by workers and capitalists. For them, rent merely represented an ‘unearned increment’ that fell to the landlords with little or no effort on their part. Through taxation, or even land nationalisation, middle class radicals proposed to appropriate for society as a whole this 'unearned increment' that resulted from urban and industrial development, and which up until then had been pocketed by the landlords. This 'unearned increment' it was then suggested could then be used to finance social reforms to alleviate the material conditions of the working class. 6
Middle class radicals sought to direct the hostility of the working class away form the 'wealth creating capitalist' towards the landlord and the 'idle rich'. For these middle class radicals the main targets of anti-landlordism were the grouse shooting and fox hunting dukes and earls, with their country estates and their seats in the House of Lords. For the urban working class, as the radicals recognised in their political programmes, the more immediate target of anti-landlordism was also the petit-bourgeois housing landlord who sat back and grew rich on rising rents and skimping on repairs and maintenance. In addressing the housing problem the radicals rejected higher wages as a solution and instead recommended the compulsory purchase of slum housing and their replacement by subsidized municipal housing.
Anti-landlordism had an important influence on the emerging Labour Movement. Indeed, it may be said that the theories of Henry George, which used the political economy of Ricardo to argue for the taxation of rents and land nationalisation, had far more influence in the formation of the British Labour Movement in the 1880s and 1890s than did those of Marx.
However, despite the undermining of its economic position during the agricultural depression and the political challenge of radicalism, the political and economic dominance of landed wealth remained intact up until the First World War. The industrial revolution had been brought about by 'self-made men' drawn from the lower orders such as small tradesmen and artisans. Having hauled himself or herself up into the middle class this first generation of the industrial bourgeoisie bequeathed their accumulated wealth and family firms to their descendants. By the late-Victorian period the second and third generation of the industrial bourgeoisie were now beginning to break away from the middle class. They sought to ingratiate and assimilate themselves within the aristocratic establishment. They sent their sons to public school and Oxbridge, they married into titled families and bought up country estates. This assimilation of the industrial bourgeoisie brought with it an infusion of much needed new money into the landed aristocracy. It also led to a growing conservativism amongst the industrial bourgeoisie as they came to identify with the existing political and social order based on landed property. The industrial bourgeoisie were increasingly inclined to see an attack on landed property as an attack on all property and were suspicious of radical programmes, seeing them as being tantamount to socialism.
From the 1870s onwards the industrial bourgeoisie began to abandon the Liberal Party, which had once championed their interests, in favour of the Conservative Party. They saw jingoism and the gains of an aggressive imperialist policy a better route to containing the working class than that offered by anti-landlordism, which only served to whip up class antagonisms.
In the first half of the nineteenth century the industrial bourgeoisie had been obliged to fight against the political and economic dominance of the landed aristocracy and with the accumulation of industrial capital had succeeded in undermining it. Now, towards the end of the century, the industrial bourgeoisie ended up propping up the political and economic position of landed wealth. It was only with the increasing intensity of class struggle in the years leading up to the First World War, which saw the emergence of the British syndicalist movement and the use of the army to crush strikers, that the British ruling class began to look for the solutions offered by the Radicals. It was thus only with the ‘New Liberal’ programme of Lloyd George that any concerted attempt was made to press home the attack on the privileged position of landed property.
In 1909 Lloyd George introduced his famous 'People's Budget' that increased taxes on the rich in order to finance old age pensions and other social reforms in an effort to head off growing working class discontent. When the House of Lords voted down the budget the Liberal Government forced through reforms limiting the Lords powers to obstruct legislation. However, although the 'People's Budget' established the precedent for redistributive taxation, and as such can be seen to have laid the basis for the subsequent development of the welfare state, it was modest and fell far short of demands of many Radicals. Further attempts by Lloyd George to push through land taxation and land reform were either watered down or else abandoned after stiff opposition from both Liberals and Conservatives. Indeed, Lloyd George's reforms might have amounted to little more than a timely concession that would have served to prolong the political and economic dominance of the landed aristocracy for another generation if it had not been for the political and economic impact brought about by the First World War, which was to breach the old English Land System and, in doing so, transform the housing regime in Britain.
The Housing crisis of World War I
War intensified the housing crisis for the working class that had been building during the Edwardian period. Yet, at the same time, war increased the bargaining strength of the working class.
Workers were obliged to migrate to meet the needs of war production. As a result, those towns and cities that produced the materials of war saw a large influx of workers looking for accommodation, creating an acute shortage of housing. At the same time, although the trade unions had agreed to hold down wages as part of their contribution to the war effort, full employment meant that wages were more regular and workers could afford to pay higher rents. Taking advantage of the housing shortage and the ability of workers to pay higher rents, housing landlords forced up rents.
The extortionate rents demanded by housing landlords became the focus of wider concerns amongst the working class about war profiteering. Growing conflicts over rents and the housing shortage culminated with the citywide rent strike in Glasgow in 1915. 7 With more than 20,000 tenants in the city on rent strike, and faced with the prospect of the rent strike leading to a general strike in Glasgow munitions factories, which would have severely handicapped the production of munitions vital for the war effort, the Government decided to defuse the situation. Overriding age-old objections concerning the rights of private property and freedom of contract, the Government rushed through legislation introducing rent controls.
The introduction of rent controls in 1915 marked the beginning of the long-term decline in the private rented sector. With rents held down by legislation and with the subsequent legislation increasing the tenants’ security of tenure, buying houses to rent became increasingly unprofitable. The expansion of the private rented sector slowed down. As landlords cut back on the repairs and maintenance of the houses they still owned, the housing stock in the rented sector deteriorated. With the subsequent rapid growth of both council housing and owner occupation, the private rented sector, which had dominated the nineteenth century housing provision, was to steadily decline as a proportion of housing.
Council housing in the inter-war years
At the end of the war the then Prime Minister, Lloyd George, called a snap election. For the British ruling class times seemed perilous. It was only a year after the Russian Revolution. A wave of revolutionary upheavals was sweeping across Europe. While at home the shop stewards movement was threatening industrial peace. Even the most conservative members of the ruling class now saw the need for major concessions to the working class.
Lloyd George, at the head of the wartime coalition of the National Liberal and Conservative Party, promised wide-ranging social reforms. The centrepiece of such reforms was to deal with the housing crisis. Under the slogan 'Homes Fit For Heroes' Lloyd George promised to build 500,000 new affordable homes. In redeeming this pledge the Addison Act was passed in 1919. This Act provided government subsidies for the building of houses but perhaps more importantly it provided for generous open-ended subsidies for Council Housing.
As the threat of revolution receded and demands for restraints on public expenditure grew the rather ambitious house-building programme was cut back. Nevertheless, while less generous, subsidies for council housing continued through the inter-war years. Between the construction of the first municipal housing in 1869 and 1914 the proportion of households that were council tenants had grown to 2%. By 1939 10% of households were living in council housing.
Owner occupation and the development of suburbia.
Yet while inter-war years saw the emergence of council housing as a major form of tenure this was overshadowed by the great transformation brought about by the rise of owner occupation and the associated development of suburbia.
Before the First World War the main preconditions for the subsequent explosion of both suburbia and owner occupation were already in place. Firstly, the development of local road and rail networks had already made it possible for those who had regular and secure employment to live outside the urban areas and commute into work. Secondly, building societies, which had originally emerged as temporary and often rather speculative ventures beset by scandals, were becoming permanent and reputable institutions that could reliably provide housing finance to those on modest but regular incomes.
Yet, although the late-Victorian period had seen the drift of the middle classes away from the city centres, and the consequent beginnings of suburbia, this development had been restricted by both the shortage and high price of land. Only the more prosperous sections of the middle classes could afford to escape from the cities. The urban population remained hemmed in by the class monopoly of land.
As we noted, the 'Peoples Budget' of 1909 at the time had fallen far short of an all out assault on the landed wealth. However, the economic impact of the war and its aftermath was to amplify the budgets legacy. The war had led to the rapid inflation of both prices and wages. As a result the costs of running the great landed estates had risen sharply by the end of the war. However, rents and revenues of the estates lagged behind. With the worldwide agricultural recession that set in after the war, it became difficult to raise agricultural rents sufficiently to recover the increased costs of running the estates. In these difficult economic circumstances the burden of increased income taxes and above all death duties, which had been introduced before the war, often proved to be the final straw. As a consequence, the inter-war years saw a revolution in land ownership. Many of great landed estates were broken up and sold off, mainly to their tenant farmers. Whereas before the First World War nearly 90% of agricultural land was rented, by 1939 this had fallen to little more than 40%.8
Facing low prices for agricultural commodities, those farmers that had bought out their tenancies, were often more than willing to sell on their land for urban development. The increased supply of land offered for sale led to a fall in land prices. It now became feasible for speculative builders to build cheap good quality low-density housing on the outskirts of towns and cities, which could be afforded even by those on modest but secure incomes.
However, if the builders were to realise the ample profits to be had from the new plentiful supplies of cheap building land they had to be sure of being able to make quick sales. They had to find people who were able to come up with the ready money to buy at least one house. As we have seen, in the past speculative builders would have expected to sell small batches of houses to prospective landlords drawn mainly from the petit-bourgeoisie. They would have looked to small businessmen, who had accumulated some spare capital or who were sufficiently respectable and creditworthy to borrow money from the bank or close business associates. But the development of capitalism was squeezing out these strata of the petit-bourgeoisie. The pool of such potential landlords was limited and diminishing. Furthermore, with rent controls, and the prospect of further legislation protecting the rights of tenants, even those who may have once considered buying to rent were now likely to see it as risky and troublesome investment. Given the potential rate of house construction that the new supplies of cheap land held, selling to the private rented sector was nowhere near sufficient.
Of course, the problem of selling the houses directly to prospective occupiers was that few individuals had the ready money to pay up front. Building societies were able to solve this problem by providing the necessary finance for individual households to buy their own homes. Individual households hoping to buy their own home would begin by joining a building society. They would make regular deposit savings in their building society account that would eventually provide for the 'deposit' on their new home. Such regular saving demonstrated to the building society the ability and willingness of the household make the future repayments that would have to be made on the mortgage. Once assured, the building society would then lend the household the extra money needed over and above the 'deposit' that had been saved up to buy their home, the house acting as security for the building society in case of non-repayment of the mortgage. The inflow of savings of those intending to buy in the future, combined with the repayments of mortgages taken out to buy houses in the past, served to fund the mortgages advanced to buy houses in the present. Building societies were thereby able to ensure that the money used to finance owner occupation was recycled to allow the further expansion of this housing sector.
But not only this, as they established themselves as reputable institutions building societies were able to attract savings from those amongst the middle and working classes who did not intend to buy their own home or who had already done so. Indeed, for the middle and working classes a building society account became one of the main ways of saving small amounts of money. As a consequence, building societies were able to channel the small personal savings into the financing of the expansion of home ownership.
However, building societies were not merely financial institutions that facilitated home ownership. They saw themselves as a popular movement. From the mid-nineteenth century building societies had become closely associated with middle class Non-conformist radicalism. Armed with the Victorian middle class virtues of self-help, prudence and thrift the building society movement saw itself as a means for the people to reappropriate land from the aristocracy. They presented themselves as a pacific alternative to those radicals who proposed to use the state to forcibly expropriate landed wealth through nationalisation or taxation. But of course, the building society movement had always been hindered by the fact that landed wealth was not prepared to give up its monopoly of land voluntarily. Yet once the barriers of landed property was breached after the Great War the building society movement led the charge. The urban population that had for so long been hemmed up in the towns and cities could now spew forth into the surrounding countryside. By the 1930s the advocates of the building society movement were able to proclaim they had brought about a ‘silent revolution’ in property ownership.
At the beginnings of the owner-occupation boom, home ownership was promoted as a return to the countryside; a return to the rural idyll, so popular amongst nineteenth century middle class radicals, of the proud and independent English Yeoman of the time of Shakespeare, before the appropriation of the land by the aristocracy and landed gentry. An appeal reflected in the prevalent mock Tudor housing styles of the 1920s. With the reappropriation of land by the people, every Englishman’s home would now be his castle, and every Englishman would have his own landed estate - even if it was only a small garden. But the new homeowners in their semidetached ‘cottages’ were not yeoman farmers, but commuters who worked in the cities. The exodus from the town centres did not recreate the rural idyll of a romanticised sixteenth century but instead created the vast swathes of suburbia that still surround Britain’s towns and cities.
Suburbia and the consolidation of the lower middle class
In the decades leading up to the First World War there had been a steady growth in the numbers of white-collar workers as administrative and clerical work expanded with the growth of finance and the public sector. White-collar workers were in an ambiguous social situation. They had nothing to sell but their labour-power - they were wageworkers. Their wages were often not much higher than many skilled manual workers, and often less in the early stages of their careers, and their work was usually repetitive and routine. Yet, at a time when, despite mechanisation, most immediately productive work still required physical labour, they were distinguished from the bulk of the working class by their mental labour. They were also paid in accordance with seniority rather than output, and while their pay was not high it was usually secure compared with most blue-collar workers.
White-collar workers, like the middle class, distinguished themselves from the working class on the basis of their superior education and their upholding of the middle class virtues of individual self-help, prudence and thrift. As such, along with lower salaried professionals (such as teachers) and technicians, white-collar workers had become recognised as part of the lower middle class.
However, with the development of universal state education, and the consequent growth of numeracy and literacy in the population as a whole, the position of white-collar workers was by the First World War being steadily undermined. White collar workers began to identify themselves with the working class and in the early 1920s leading Tory politicians began to fear that the ‘lower middle classes were ‘going over to Labour’ on mass.
Yet, as the boom in owner occupation proceeded in the inter-war years it was the lower middle classes that increasingly became the main source of expansion. Although the salaries of the lower middle class were modest they were above all secure and were likely to rise with age. As such the building societies could be reasonably assured that the lower middle class would be willing and able to keep up their mortgage repayments. Home ownership provided the material conditions for the reintegration of white-collar workers into the lower middle classes.
In the early 1920s Conservative Party politicians had been lukewarm towards home ownership. After all the Tory Party had always been the party of Anglicanism and landed wealth and the building society movement’s close association with Liberalism and Non-conformist radicalism could only serve to raise suspicions regarding owner occupation. At that time, most Conservative politicians while accepting the need to provide public housing, had favoured a return to a housing regime denominated by the privately rented sector and had concentrated on attempts to roll back the rent controls conceded during the Great War. However, by the 1930s the Conservative Party had come to embrace home ownership. Middle class suburbia was to provide the electoral basis for the dominance of the Tories that was to last for the rest of the twentieth century.
Housing post-World War II
The pattern of housing provision in the two decades after the Second World War was broadly similar to that which had occurred in the inter-war years. The immediate post-war period saw a burst in the construction of council housing as the State sought to rapidly resolve an acute housing crisis caused by the war, and which threatened an intensification of class conflict. This was then followed in the late 1950s and 1960s by a further expansion of owner occupation. However, in contrast to the inter-war years, the expansion of council housing was far greater and more sustained than it had been in the wake of the First World War, while the subsequent boom in the construction of housing for owner occupation fell far short of what had occurred in the inter-war years. Indeed, much of the expansion in owner occupation in the 1950s and 1960s was the result of conversions from the private rented sector, which now went into an absolute decline.
As we have seen, unlike the decade leading up to the First World War, the 1930s had been a period of unprecedented housing construction. However, the mass bombing of the Second World War had destroyed substantial amounts of the housing stock, particularly in London and the main industrial cities. With the demobilisation of the armed forces at the end of the war an acute housing shortage began to arise.
With the end of the war in Europe thousands of soldiers, sailors and airmen returned home to find that there was no where to live. The first reaction was the mass occupation of army encampments. The squatting movement then moved on to take over empty houses in London and other towns and cities. At the height of the movement it was estimated that there were more than 35,000 squatters.
As a result of the post war squatting movement, housing was pushed up the political agenda and became a central element in the establishment of the post-war settlement. The post-war Labour Government launched a massive programme of council house construction, which was to dwarf the 'homes fit for heroes' of twenty years before. Although the immediate programme of council house construction was scaled back due to the austerity measures brought about by the dollar shortage in 1947, it remained at high levels throughout the 1950s and 1960s. Indeed, in the 1950s the two major parties sought to outbid each other in promising the construction of more homes. Since the construction of council housing was the only means of ensuring such promises were realised, even the Tories were obliged to maintain relatively high levels of council house building. As a result, by 1970 more than a third of all householders were council tenants.
It may be said that the post-war expansion of council housing merely realised the proposed solution for the problem of working class housing that had been put forward by middle class radicals sixty years before, and which had been only partly implemented after World War I by Lloyd George's 'homes fit for heroes' policy. The expansion of council housing not only resolved the post-war housing crisis, which threatened to stir up working class discontent at a time when the spectre of Stalinism haunted the bourgeoisie across Europe, it also eased the transition to the high wage-mass consumption economy of the post-war era. During a period of near full employment, which strengthened the bargaining position of even traditionally low paid workers, subsidised housing costs alleviated upward pressure on wage rates.
Having said this, the expansion of council housing undoubtedly marked a substantial material gain for the working class. Furthermore, without the political mobilisation of the working class, and its representation in the State through the Labour Party at both a national and local level, it is unlikely that the expansion of council housing would have been sustained on such a scale as it was during the post-war era. Alongside the National Health Service, the extension of free education and the welfare system, and the commitment to full employment, the expansion of council housing represented a major concession wrung out of the bourgeoisie by the post-war settlement, and was duly recognised as one of the crowning achievements of Atlee's first majority Labour Government.
Yet, like the other concessions won in the post-war settlement of 1945, the expansion of council housing ultimately led to the political demobilisation of the working class and the hollowing out of social democracy. The removal of bad housing not only removed what had been an important mobilising issue of working class discontent in the inter-war years, it also served as a means to break up old working class communities. Many of the old working class communities of the inner city areas, which had grown up over several generations, had been marked by a high degree of proletarian solidarity and vigorous street politics, which had provided much of the basis for the advance of the labour movement in the first half of the twentieth century. With the 'slum clearance' programmes these old working class communities were systematically swept away.
It is true that in the new council estates the working class experienced common housing conditions and as such were far more likely to act collectively to address them than those amongst the working class who were to become owner-occupiers. But they no longer confronted private landlords driven to extract higher rents and cut maintenance and repairs by fair means or foul. Instead the landlords they now confronted were 'democratically accountable' local councils. Usually the best way of maintaining low rents, high standards of repair and maintenance and the expansion of housing to meet the housing needs of their sons and daughters was not by direct action but simply to vote Labour. To the extent that the Conservative councillors came to accept the need for subsidised council housing, and were prepared to leave the issue of housing to the managerialism of council officials adhering to the post war consensus, even voting Labour was not strictly necessary, particularly in more wealthy areas where the demand for council housing was less and the 'burden on the rates' of rent subsidies could be spread across more well-off rate payers.
Council estates, particularly in the old industrial towns and cities of the North, became the heartlands of the core Labour vote. Council housing became one of the most important material bases for the consolidation of the social democratic representation of the working class in the State.
The renewed expansion of owner occupation
Even before the Second World War had brought it to a complete standstill, the inter-war expansion in owner occupation had begun to run out of steam, as it exhausted the numbers of households who had sufficiently high and secure incomes to obtain a mortgage. However, after the war, and the subsequent period of post-war austerity, conditions emerged for the further expansion of owner occupation.
Firstly, particularly with the growth in the public sector, the post-war period saw a rapid expansion in the numbers of white-collar workers and professionals on secure salaries. Secondly, full employment not only meant that workers could extract rising wages, it also meant that prolonged periods of unemployment were far less of a risk. As a consequence, building societies could now lend to increasing sections of the traditional manual working class. Thirdly, Keynesian policies of post-war governments restricted the autonomy of financial capital and kept interest rates low, allowing building societies to maintain cheap mortgages. Fourthly, from the late 1950s, the government began to promote home ownership through generous tax concessions. 9 As a result, after the end of rationing in 1955, the expansion of owner occupation began to gather pace. By 1970 more than half of all householders were owner-occupiers.
The ideological and political implications of owner occupation had been well understood by the propagandists of the building society in the inter-war years. As Bellman, a former building society president wrote:
The man who has something to protect and improve - a stake of some sort in this country - naturally turns his thoughts in the direction of sane, ordered and perforce economical government. The thrifty man is seldom or never an extremist agitator. To him revolution is anathema; and as in the earliest days, building societies acted as a stabilising force, so today they stand, in the words of the RT. Hon. Barnes as a bulwark against Bolshevism and all that Bolshevism stands for.
However, whereas in the inter-war years the expansion of owner occupation had served to forestall the proletarianisation of the lower middle classes, a stake in the country was in the post-war era also being offered to increasing numbers of what had been the traditional working class.
Yet, it was not only that owner-occupiers were property owners that had important ideological implications, but also the fact that owner occupation individualised the homeowner. The economic position of each home owning household with regard to housing was different. It depended crucially on when they had bought their house. With rising house prices, the housing costs of a first time buyer who had just taken out a mortgage would be very different from that of a neighbouring home-owning household who had all but paid-off their mortgage.
All that united owner-occupiers were common fears as to what might possibly 'lower the value of their properties' and their common status as 'rate payers'. These commonalities were seized upon both by the Tories and the owner occupation lobby, inscribing a political division within the working class along tenure lines.
With the delivery of health, education and welfare all either centrally controlled or else largely circumscribed by national regulations, housing was the main policy area in which local authorities had a large degree of discretion. As a consequence, for the local grass roots Labour activist the expansion and improvement of council housing was one of the principal areas where they could make a difference and advance the condition of the working class. But, with the regressive character of local rates, the costs of such expansion and improvement of council housing, as the Tories and the owner occupation lobby were keen to point out, fell disproportionately on the increasing numbers of working class 'rate payers'. This as we shall see contributed to what was to become an increasing crisis of council housing, which highlighted the limits of British social democracy.
However, while the empetit-bourgeoisment of owner occupation undoubtedly had an important ideological and political impact in limiting the advance of social democracy, it should perhaps not be overstated. Owner occupation, particularly in a period of low inflation like that of the 1950s and 1960s, can easily be seen as a mill-stone for those whose incomes are unlikely to rise much over their working lives. Indeed, for many of the working class homeowners, the need to pay off a mortgage was little different from having to pay rent. Indeed, with the onset of the crisis in council housing and the decline in the private rented sector, owner-occupation was far from being the choice it was often presented to be by the owner-occupation lobby; it was the only option.
The housing crisis of the 1970s
The crisis in council housing
For the left and social planners in the 1940s, council housing had seemed to offer the ideal form of housing provision, if not for the population as a whole, at least for the working class. Although in many town centres the high cost of land and the urgency of the housing shortage had required the construction of high density blocks of council flats, the semi-detached house, built to high construction standards and with its own garden, typified the council housing of the immediate post-war period, and presented a vision for the future of housing in general. But the vision of high quality public housing expanding to meet the needs of the vast majority of the population soon ran into hard economic reality. High quality housing was expensive. As council housing expanded so did government spending on subsidies that were necessary to make them affordable to low-income households. With full employment and rising wages, low productivity growth in the building industry led to rising construction costs, further exacerbating the burden on central and local government funds.
The response to the rising burden on the public purse of council housing was firstly to reduce the construction standards of new housing. Secondly, there was a shift away from building low-density council houses to the construction of higher density council flats. Thirdly, the expansion of council housing was targeted towards the needs of urban regeneration schemes.
The 1960s saw the beginnings of the transformation of Britain’s urban centres. Over next two decades the old, predominantly Victorian, town centres were to be torn down and replaced by highly profitable shopping centres and office blocks, replete with ring roads and multi-storey car parks. However, for such urban regeneration to take place the first step was the rehousing of the largely working class populations that still lived in the old city centres. This required the continued expansion of council housing. In order to contain the costs of these major rehousing programmes, local and national government readily adopted a strategy of high-density high rise building, which was being vigorously promoted by large-scale construction firms and modernist architects. It was hoped that modern building techniques would contain building costs, while the high densities allowed by high rise housing would reduce the amount of land required by the rehousing programmes, thereby saving land costs. As a consequence, the 1960s became the decade of the high-rise blocks of flats, which sprang up across Britain’s towns and cities
However, it was not long before the adoption of the high-rise strategy proved to be a monumental economic and social disaster. The new, and often untried, building techniques failed to contain the rise in construction costs. Instead, to remain within budget and under pressure from property developers pressing for an early start to the urban regeneration schemes, local authorities sanctioned crude cost cutting. The vertical communities, replete with communal facilities, which had been envisaged by the modernist architects of the 1950s, were reduced to little more than vertical dormitories. Cutting corners led to shoddy construction. In 1967 the high-rise boom was brought to a sudden halt by the collapse of the Ronan Point tower block, which killed four people.
Many urban councils now found themselves saddled with huge debts and with new housing that was condemned as uninhabitable or else, being shoddily built, required unexpectedly high levels of repair and maintenance. In order to cut back on their housing budget, councils were obliged to reduce the construction of new housing. Given that much of council housing construction since the 1950s had been targeted at urban regeneration schemes, and as such simply replaced old housing stock with new, the expansion of council housing had barely kept pace with the growing needs for cheap and affordable public housing. As a consequence, the fall-off in construction by local authorities from the late 1960s soon led to a severe shortage of council housing. The waiting lists for public housing grew and the bureaucratic allocation of such housing became increasingly irksome for those waiting. At the same time, strapped for cash, particularly with the onset of the economic crisis of the 1970s, Local Councils were led to cut back in repairs and maintenance. Council tenants had now to wait longer for repairs to be done and postponed maintenance led to the deterioration of the council's housing stocks. Many of the bright new housing estates, that had replaced the old Victorian slums, soon became the sink estates that still exist today.
The election of a Conservative government in 1970 saw the beginnings of a decisive shift away from meeting the housing costs of the working class through rent subsidies to that of direct payments. With the policy of 'fair rents' local councils were obliged to charge rents closer to market levels. Those tenants who could not afford to pay such rents would have their income increased by means tested social security payments by national government and by rent rebates administered by the local authorities.
Facing increasing difficulties in even obtaining it in the first place, higher rents and problems ensuring even the simplest of repairs when they had it, working class tenants could no longer consider council housing as the part of the New Jerusalem to be built in England’s green and pleasant land as it had been a generation before. Council housing increasingly was seen as a form of second-class housing. But the housing crisis was not merely confined to council housing.
The crisis in owner occupation
The 'Fair Rents' policy had, in part, been introduced as a result of pressure from the owner occupation lobby. By the late 1960s the expansion of owner occupation was beginning to run out of steam as both the rising building costs and prices of land made it increasingly difficult to attract the less well-paid sections of the working class into home ownership. However, with the onset of economic crisis in the 1970s, the Tory policy of making council housing less attractive through higher rents proved to be insufficient to counter the slow down in the expansion of home ownership, at least in the immediate term.
Falling profitability in manufacturing, inflation and rising unemployment all served to undermine the expansion of home ownership. As profits fell in manufacturing and inflation accelerated, money capital began to flood into land and property speculation forcing up the price of land. At the same time the end of the post-war era of full employment began to undermine the job security necessary for repayment of mortgages. As a result, despite above-inflation rises in house prices, the construction of new homes to buy fell sharply in the 1970s.
The upward pressures on house prices was further exacerbated by financial deregulation that inaugurated an era of house price bubbles that have become a standard feature of the housing market over the last thirty years.
The housing market is susceptible to price bubbles. This is due to two inherent factors in the selling of houses. Firstly, in the short term the supply of housing is fixed by the existing housing stock and it takes a considerable time for supply to respond, if at all, to rising demand. As a result, at least in the short term, the market price of housing is determined by the effective demand for housing i.e. the demand backed up by money. Secondly, this effective demand for housing is not determined by what buyers can pay immediately out of their wages, or other income, but by the amount they can borrow. This in turn depends on the ability and willingness of mortgage lenders to advance mortgages to potential house buyers.
To the extent that the mortgage lender seeks to maximise its profits, it will be eager to advance mortgages since with each mortgage it will make a profit out of the interest repayments. However, this eagerness to advance mortgages must be tempered by the risk that borrowers may default on their repayments. As a consequence, during a time of static house prices, any mortgage lender, even if they have the funds, will be reluctant to advance 100% mortgages. If the borrower were to default on the mortgage repayments, and the mortgage lender was obliged to repossess the house, the mortgage lender would be unable to recover its full price of the house and hence the loan advanced. Firstly, the repossession and subsequent sale of the house is costly in terms of legal fees and conveyance commissions and administration costs. Secondly, and perhaps more significantly, the mortgage lender would usually have to sell the house quickly. A house not lived in soon deteriorates and will loses its exchange-value unless kept in constant repair. But in order to gain a quick sale the mortgage lender will be obliged to sell at a discount.
Thus the repossession price of a house for the mortgage lender will be less than the market price paid by the homebuyer. Consequently, the moneylender will not lend the full market price of a house and will insist that the buyer pay a 'deposit' to make up the difference. The proportion of the market price covered by the mortgage will then lie between the market price and the repossession price and will depend on the mortgage lender’s calculation of the risk of default both generally and for each individual case.
The need, particularly for first time homebuyers, to 'save up for a deposit' acts as a brake on rising house prices. Homebuyers cannot simply borrow the current market price and then add money out of their own income to outbid each other. They also have to save up out of their current income money to put towards the deposit. However, if market prices of houses begin to rise then the repossession price will begin to rise and the amount of money the mortgage lenders are prepared to lend rises. This increase in mortgage lending then serves to increase the effective demand for houses allowing a further increase in market prices. As a consequence, the market price of housing begins to spiral upwards.
But not only this, the rise in market prices reduces the costs of any default to the mortgage lender. What is important to the mortgage lender is the repossession price at the time of default. If market prices are rising fast then, on average, the repossession price at the time of default may well be equal or even greater than the original market price paid for the house. In such circumstances, mortgage lenders may well be prepared to lend the entire market price of house knowing that by the time of any default the repossession price will more than cover the outstanding mortgage debt.
Hence, rising market prices for houses leads to easier credit that then gives a further twist to spiralling house prices. The ultimate limit to the house bubble is the ability of homebuyers to meet their mortgage repayments. Yet this limit is rather elastic. Faced with the prospect of prices accelerating beyond their means homebuyers will seek to stretch themselves to the limit to get on the property ladder while they still can. With mortgage lenders falling over themselves to advance virtually risk free mortgages the guidelines applied to access affordability of mortgages become stretched to the limit.
However, up to the 1970s financial regulation had restricted mortgage lending to building societies and, to a lesser extent, local authorities. The ability of building societies to advance mortgages was limited by their ability to attract the small personal savings. With a limited pool of savings at their disposal, building societies lacked the funds to finance spiralling house prices. Indeed, in the face of an increased demand for mortgages, building societies were obliged to ration the funds at their disposal by restricting mortgage advances and insisting on larger deposits. A policy that fitted in with their traditional ideology of prudence and mutual self-help.
However, the financial deregulation of 1970 allowed the big clearing banks to enter the market for mortgage lending. With access to the world's capital markets the big banks effectively had unlimited access to funds to advance as mortgages. Unrestrained by the mutualist ideology of the building societies, the banks lent aggressively. By the mid-1970s more than half of all mortgages were being lent by banks. Faced with the competition of banks, building societies were obliged to abandon much of their mutualist ideology and take advantage of financial deregulation to become more like banks themselves. 10
Rising construction costs and financial deregulation meant that first time buyers were being priced out of the housing market. But in addition, the general acceleration in price inflation in the 1970s brought with it higher interest rates. Since in the early years of the repayment of a mortgage much of the repayments go towards paying off the interest on the outstanding debt, high interest rates tend to lead to a ‘front loading’ of mortgages, placing a further barrier to first time buyers. As a consequence, even relatively well-off first time buyers faced repayments approaching half their income after tax in the first few years of their mortgage.
Yet with a declining private rented sector and lengthening waiting lists for council housing there was often little alternative but to buy. The only solution for most young working class and lower middle class families was to accept a decline in housing conditions compared with what their parents had tolerated, at least for a few years. This occurred in three ways.
The first option was to buy a cheaper but more cramped flat, rather than a house as their parents might have done. As a result, the 1970s saw the large-scale conversion of large Victorian houses into small flats.
The second option was to buy an old and run down house and do it up, taking advantage of government improvement grants to pay for the materials. This meant spending most of the spare time working on the house and living in a virtual building site for perhaps a year or more.
The third option was to buy a 'Starter home'. 'Starter homes', which began to make their appearance as a response to the housing crisis by the construction industry in the late 1970s, were cheap, shoddily built, small housing. Built on inadequate foundations, with paper thin walls, 'starter homes', often had bedrooms that could barely fit a double bed and living rooms that were only big enough for a couple of armchairs. But 'starter homes' were relatively cheap, allowing first time buyers a chance to obtain a ‘foot on the property ladder’.
The squatting movement
As we have seen, the 1970s saw a sharp fall in the construction of housing both in the private and public sectors, which resulted in rising house prices that priced first-time buyers out of owner occupation. This occurred just at the time when the post-war baby boomers were coming of age, leading to an acute housing shortage and rising homelessness. As a result, housing became a major political issue throughout the decade.
At a time of falling profits and rising inflation, capital began to flood into property speculation. Residential areas, particularly in London, were bought up to be knocked down and be replaced by office blocks, which now offered escalating returns on investment. In 1974, shortly after the property bubble burst leaving large numbers of empty office blocks, Centre Point, one of the brand new but empty office blocks in the centre of London, was squatted to highlight how property developers were exacerbating the housing crisis. However, what started as a political stunt soon became a movement. When the property bubble burst, streets of houses that had been bought with the intention of being cleared away for office development were left empty. At the same time, economic crisis was leading to cutbacks in the maintenance and repair budgets of local authorities. This led to many council flats and houses also being left empty, as there was now insufficient public funds for their renovation.
With thousands of empty flats and houses, squatting became a preferred option for many of the growing numbers of young unemployed. Buying meant finding, and then knuckling down, to a well-paid secure job, while council housing was in short supply and was directed mainly towards the needs of the working class family with children. Often the only alternative to squatting was a dilapidated bedsit in the private rent sector.
At its height, in the early 1980s, there were an estimated 30,000 squatters in London alone. Squatting offered the space and freedom to develop 'alternative lifestyles' based on the refusal of work. Squatting communities emerged that sought to overcome the atomisation of bourgeois society through the organisation of self-organised communal facilities; such as cafés, crèches and community centres. As such, the squatting movement can be seen as a practical critique of social democracy and the post-war settlement. The material gains of secure good quality housing provided via the state in return for the acceptance of wage-labour was rejected in favour of the direct appropriation of housing and the social environment.
However, the squatting movement failed to provide a serious challenge to the existing order. Unlike in many other countries on the continent, in Britain squatting was not a criminal offence and, as a consequence, there was less need for organised resistance to evictions and set piece battles with the police. Indeed, it can be argued that the authorities came to tolerate squatting as a temporary solution to the housing crisis. The squatting movement remained largely isolated both from workplace struggles and the wider working class and was unable to provide a viable solution to the housing crisis. Squatting was not only time consuming and required the rejection of modern conveniences but was also only feasible in areas where there were sufficient numbers of empty properties. Outside London, squatting rarely was able to reach a critical mass that meant that the courts were swamped by repossession orders and where the bailiffs could expect to meet stiff collective resistance to evictions. Whereas in London squats could last years, in most other towns and cities squats were lucky to last more than a few weeks before eviction.
The Thatcher and present era of housing
The new housing regime
Thatcher and the demise of council housing
Thatcher recognised that council housing had become the Achilles heel of social democracy. One of the leading issues of the Conservative election campaign in 1979 that brought Thatcher to power was the sale of council houses. With the carrot of generous discounts for long standing council tenants and the stick of a full transition to market rents for all public housing, the 1980s saw the large scale sell-off of the better part of the municipal housing stock. Strict regulations imposed on local councils meant that the money gained from council house sales had to be used to pay off local council debt and made it difficult for local authorities to build more housing. Instead, more money was provided for housing associations to build more ‘social’ housing but this was far from being sufficient to replace the loss of council housing. As a consequence, in the last twenty years the proportion of households that are council tenants has almost halved. Local authorities have been left with housing that no one wants to buy.
For those unable to afford to buy or pay market rents, Thatcher introduced housing benefit, which was paid out of central government funds but administered by local authorities. This shift from subsidizing ‘bricks and mortar’ to paying means-tested benefits to individuals on low incomes to meet their housing needs had the advantage that such benefits could be targeted.
However, because housing benefit was open to everyone on low incomes who rented their homes, including politically sensitive groups such as old age pensioners, it was difficult to restrict payments. In a situation of a chronic shortage of rented accommodation, and where a large proportion of tenants were on low incomes, private landlords found that they could raise rents and the state would pay. As a result, housing benefit became a generous subsidy for private landlords. 11 Housing benefit became by far the largest item in the welfare budget, and despite repeated attempts to restrict payments, has proved the most difficult for successive governments to ‘reform’.
The effect of subsidising landlords was far from being an unintended result of the introduction of housing benefit. The Conservative government had hoped that funding rising rents, together with the abolition of most remaining rent controls and a reduction in tenants rights, would stimulate a revival in the private rented sector that would promote labour mobility in a period of mass unemployment and help offset the decline in council housing. However, although such measures helped to arrest the long-term decline in the private rented sector it did little to expand it. The landlords have simply pocketed the increased rents.
Thatcher’s housing policy served to consolidate the new housing regime that emerged after the crisis of the 1970s. Owner occupation was established as the normal, if not the ideal form of tenure to which everyone was expected to aspire. Council housing and privately rented housing was reduced to being very much second best for those unable to join the property owning democracy. Yet, while Conservative housing policies succeeded in diffusing housing as a political issue, they had far from resolved the underlying problems of housing that had come to the fore in the housing crisis of the 1970s. Indeed, they had made them worse.
There was no revival in the construction of new houses in the private sector to offset the decline in the construction of new council housing. At the same time, after peaking in the early 1980s, the various home improvement grants offered by central government to councils, private landlords and homeowners to rehabilitate housing were steadily cut back. As a result Britain continues to have an aging housing stock that is increasingly in a bad state of repair. In 1996 7.5 % of the total housing stock, and 25% of the private rented housing, was considered as unfit for human habitation. Nearly one and half million homes are considered to be in a serious state of disrepair.
The Conservatives not only presided over a continued deterioration of housing conditions but also to rising homelessness. Under Thatcher, for the first time in more than a generation, it became common in most towns and cities to see homeless people begging in the street. With the sell-off of council housing and growing unemployment homelessness increased reaching a peak in the early 1990s. In 1980 there had been around 62,000 homeless families registered by local authorities, by 1990 this had more than doubled to 137,000. By 1996 this had fallen back as unemployment began to fall. 12
Yet, perhaps rather ironically given her commitment to fighting inflation, Thatcher was able to both diffuse housing as a political issue and establish the dominance of owner occupation because of the transformation of the prospects of home ownership that had been brought into being by the high inflation of the 1970s.
Snakes, ladders and escalators
The housing professionals, who of course profit from the frequent buying and selling of houses, and the owner occupation lobby in general, have long promoted the idea of the ‘property ladder’. The idea of the ‘property ladder’ closely reflected the ideal middle class career path and life cycle. Unlike the ‘feckless working class’, the middle class were expected to put off marriage until they had saved up enough to put a ‘deposit down’ on a house. As the middle class household ascended the career ladder and increased their income, they would be able to ‘trade up’ by buying a large and better house to accommodate their growing family and reflect their enhanced social status. Then, after their children had left home they would be able to trade down to a cheaper house, obtaining as a result a ‘nest egg’ to provide for a comfortable retirement.
Of course, up until the 1970s many owner-occupiers could not expect to go beyond the first couple of rungs of the property ladder. The promotion prospects for most lower middle class owner occupiers was limited, while many manual workers would be fortunate not to see their wages decline in the latter years of their working life. However, in the high inflation era of the late twentieth century all this was changed.
As we have seen, high interest rates and rising house prices had led to many first time buyers in the 1970s having to pay out almost half their income in mortgage repayments. However, those who were able to stick it out were to be well rewarded. Rapid price and wage inflation in the 1970s meant that mortgage debt was rapidly eroded. By the early 1980s, even for a household whose wages had only managed to keep pace with the general rise in the level of wages, the repayments on a mortgage taken out ten years before would have fallen to less than 10% of their income. At the same time the house or flat they had bought would have quintupled in price. Those first time buyers who had managed to put up with an old dilapidated house, a small flat or a ‘starter home’ for a few years, were now in a position to sell their first home, take out a larger mortgage and buy a larger home.
As a consequence, with the high inflation era that began in the 1970s, the ‘property ladder’ had become a ‘property escalator’. Even those households whose income would do well to keep pace with the general rise in the level of wages, could now expect to see the value of their home rise and their mortgage payments fall as a proportion of their income, allowing them to ‘trade up’ to better housing as they became older, and eventually gain a nest-egg for their retirement when they came to trade down.
The property escalator has brought about a continuous transfer of wealth, not only from the young homeowner to the old homeowner, but also from non-homeowners to homeowners. Indeed, the property escalator has widened the gap between the home-owning majority and the renting minority that cuts across the working class. For tenants, whether in the public or the private sector, rents remain a high proportion of their income. Most tenants, being on below average incomes, are entitled to claim some means-tested housing benefit in order to pay high rents. Yet the high withdrawal rate of housing benefit means that for every extra pound earned sixty pence is lost from withdrawn benefit. As a result housing benefit contributes to the 'poverty trap' that leaves tenants stuck in the same place and the same conditions with little prospect of escape - in stark contrast to owner occupiers who can expect to rise in wealth and fortune on the 'property escalator'.
To avoid being left behind it has become imperative to obtain a foothold on the 'property escalator'. For the young working class, who were once often the most militant section of the class, the sensible course has become to knuckle down, and to work hard in order to become homeowners. Indeed, in the last three decades owner occupation has proved a far more assured way of improving one’s standard of living than collective action, particularly since the defeat of the labour movement in the 1980s.
The 'property escalator' has become a conveyer belt into individualistic middle class values leading to the petit-bourgeoisment of the working class and countering the tendencies towards the proletarianisation of the lower middle class. A house is now not so much a home as a 'property', an 'appreciating capital asset' whose exchange-value must be protected and enhanced. Hence the obsession with home improvements', DIY, and interior design, which is not so much to make a better home but to enhance its exchange-value.
As a consequence, the 'property escalator' has provided one of the most important material conditions underlying the electoral success of first Thatcher, and then Blair, and the consequent advance of neo-liberal ideology in the past two decades.
In pursuing her policies to promote the restructuring of British capitalism in the 1980s, Thatcher had been careful not to launch a wholesale attack on the working class as a whole. Alongside isolating and then attacking one by one the entrenched sections of organised labour, Thatcher offered significant concessions to the rest of the working class as individuals in order to build support for her ideal of a 'popular capitalism'. Thus, at the same time as abolishing high rates of tax for the rich, Thatcher also cut the basic tax rates of the vast majority of those in paid work. In selling off nationalised industries at a cut price, she ensured that the huge giveaway was not merely confined to the financial institutions of the city but was extended to anyone who had a spare few hundred quid.
Yet for many in the working class the gains from tax cuts and cut-price shares were at most of marginal significance. The sale of council houses at large discounts to sitting tenants was a far more important concession. The sale of council houses not only represented a substantial transfer of wealth from the State to working class families, but also opened the prospect for their escape from the condition of 'being working class'. By promoting material security and equal opportunities, the post-war settlement had led to the break up the old rigid class identities and had led to a surge in social mobility in the decades after the Second World War. The sale of council houses, by making the middle class aspiration of home ownership possible for those who would not have otherwise attained it, both harnessed and furthered this increased social mobility.
In 1979 Thatcher swept to power with the pledge to expand owner occupation through the sale of council housing. Yet it was with the realisation of the downside of owner occupation that was to lead to her downfall. In 1988 the housing bubble of the late 1980s was punctured when interest rates were doubled in little more than six months in order to prevent a collapse in the pound. Hundreds of thousands of owner occupiers, particularly first time buyers, who had stretched their finances to the limits to buy their homes in the expectation of ever rising prices suddenly found themselves working all hours to pay off a mortgage greater than the price of the house. Unable to sell their homes without making a substantial loss they were trapped by what became known in financial jargon as negative equity. For many in such a position the Poll Tax was the last straw that focused their anger against the government and drew them into a temporary alliance with the less well-off sections of the working class that were to face the brunt of the Poll Tax.
However, disillusionment with the ‘property owning democracy’ did not last long. In a period when wages were rising close to 10% a year, house prices could begin to recover while at the same time continuing to fall relative to wages. As a result, in a period of continued high inflation, negative equity soon began to evaporate, and the ‘property escalator’ gradually eased the plight of those who had been first time buyers at the height of the housing bubble. Nevertheless, the persistence of high unemployment and the policy of high interest rates during the Major years kept the housing market subdued. It was only after the election of New Labour that the housing market began to take off again.
As we pointed out in the introduction, the current housing bubble has played a major part in sustaining the economic expansion under New Labour, particularly following the dot.com crash of 2001. To an unprecedented degree homeowners have borrowed against the rising value of the homes. With rapidly rising house prices this has allowed consumer-spending to rise faster than wages. Increased consumer demand, combined with the expansion of the public sector, has contributed to the maintenance of high levels of employment, which in turn has helped sustain rising house prices. This virtuous circle of economic prosperity has served to consolidate New Labour’s electoral coalition.
However, to the extent that the last seven years has seen the beginning of a new era of low inflation, it also marks a period of transition in the character of the housing market. Many of those who took out mortgages in the high inflation era of the ’70s, ’80s and early ’90s, are now sitting on a small fortune. But the prospects for those taking out mortgages for the first time now is likely to be far less rosy. With lower inflation rates have come lower interest rates. Unlike the low interest period before the 1970s there is no mortgage rationing by the building societies to check rising prices. Instead a fall in interest rates has been offset by prices being bid up to the maximum of what buyers can afford. This has given a further twist to the speculative price bubble that has effectively priced out many first time buyers to an unprecedented degree. Whereas in the past 50% of all house transaction involved first time buyers, this has now fallen to little more than 25%.
Of course, once the current house price bubble bursts or deflates house prices will either and then for a time stagnate or else will fall sharply. This will make houses more affordable for first time buyers as wages rise. But with the growing shortage of housing, particularly in London and the South, in the long-term house prices are likely to rise faster than wages. Sooner or later there will be another house price bubble that will again price first time buyers out of the market. As a consequence, for many it will become increasingly difficult to buy their own home.
This is likely to become exacerbated by the introduction of higher education tuition fees. With the expansion of mass higher education some form of higher education will become necessary for even the most mundane of white-collar work. Yet the introduction of tuition fees and the absence of maintenance grants for anyone other than those coming from lowest income groups, will mean that many young people from working and lower middle class backgrounds will be burdened with substantial student debts before they can even consider taking out a mortgage.
But perhaps more significantly, the prospects for those who are able to overcome these barriers to become owner occupiers will be far less bright in the future than they have been in the last three decades. In an era of low inflation, the ‘property escalator’ will slow down. The mortgage debt will no longer be eroded by inflation. Instead, having paid a high price and taken out a large mortgage, the current generation of first time buyers will find that they are paying a considerable part of their income for many years to come. Hence, not only will home ownership become less affordable but also for those who do manage to buy their own home it is also more likely for them to find themselves on a treadmill than an escalator.
New Labour and the housing crisis
In its first two years of office New Labour was able achieve what the Tories had failed to achieve in all their eighteen years in government - they managed to cut the overall levels of central government spending. Given New Labour’s commitment to sustain real increases in spending on health and education, this meant particularly severe cuts in other low priority areas of public spending. Housing was one such area. Government grants for the rehabilitation of housing, which as we have already seen had steadily declined since the early 1980s, were slashed. At the same time subsidies for social housing to replace the declining Council housing stock were cut back. As a result the numbers of homeless families in temporary accommodation has doubled since Labour has been in power.
In its first years New Labour’s main concern was on reducing the visibility of homelessness. Whereas the Thatcher government had been content to have the homeless on the street as a visible warning to the working class as to the importance of working in order to pay their rent or mortgage, for New Labour this was far too distasteful for their vision of ‘cool Britannia’. Instead, Blair’s solution was to drive the homeless off the streets by providing cheap rule-infested hostels and by criminalising those who refused to leave the relative freedom of the streets.
Yet sweeping the problem of inadequate housing under the carpet can only be a short-term palliative. As the government has come to realise, the problems of a growing shortage of housing can no longer be exclusively borne by the poorest sections of the working class but is already affecting both the lower middle class and the better sections of the working class. In the current housing bubble, essential workers and professionals can no longer afford to live in London and many other areas of the South East. Rising house prices are forcing up wage demands and creating growing industrial discontent.
As a result housing has begun to gain a higher priority. With the expansion of public spending following the 2001 election the government has begun to provide funds for the expansion of affordable housing. Yet, with health and education still the overriding priorities, money is still short. As a result the government, like elsewhere in the public sector, has sought to draw in private capital to finance public investments. Following the policy introduced under the Tories, but which had always been inhibited by lack of public funds, the government has sought to transfer the remaining council houses that have not been sold to their tenants to housing associations and other ‘social landlords’. Private capital is then given an opportunity to invest in the management, repair and maintenance of public housing and in return gain a secure income from the rents, with the government providing subsidies to ensure that private capital is well rewarded.
However, this attempt to off-load the remaining stock of council housing has led to concerted opposition on the part of council tenants. Despite government attempts to blackmail tenants into voting to approve the transfer of their housing to ‘social landlords’ by threatening to cut all the funds for repair and maintenance, tenants groups have scored a number of notable victories over the governments plans. The transfer of council housing is now becoming a major political issue, particularly amongst old Labour MPs and Councillors who are seeking to ‘reclaim’ the Labour Party.
Yet as the government has recognised, the policy of rehabilitation of existing social housing is far from being sufficient in itself to avert the looming housing crisis. As a stopgap measure the government has introduced a ‘key workers’ scheme in which those deemed to be essential workers, such as teachers and nurses, are to be able to obtain cheap mortgages in certain areas where they are in short supply because of high housing costs. Of course, by itself this will only push up the house prices for not so key workers. As the government has been forced to recognise the only long term solution is to build more housing and this cannot be simply left to the free operation of the market.
The second term of new Labour has not only seen a substantial expansion in public spending but also housing rise in the governments list of priorities. In 2002 John Prescott, the Deputy Prime Minister, announced plans for the construction of 200,000 affordable homes in London and the South East alone, to be achieved through generous subsidies to housing associations and a concerted effort to relax local authority planning controls. With a further £1.3 billion provided for the housing budget over the next four years, this target has recently been raised to 400,000 affordable homes.
Yet while Prescott’s plans represent a sharp reversal in Government housing policy of the last 25 years, this expansion of social housing is far from being ambitious. The target of building 400,000 houses in London and the South East is not to achieved until 2016. In the next four years the expansion of social housing will amount to no more than 30,000 new homes a year. This pales into insignificance when compared to the 200,000 council homes constructed each year in the 1960s. As the government itself admits, its plans to expand social housing fall far short of the projected increase in the demand for new housing.
Throughout much of Europe in the last century the preservation of a property owning peasantry served as an important conservative bulwark to the advance of collectivism and social democracy. In Britain, however, the peasantry had long since been expropriated with the emergence of agrarian capitalism and the establishment of the English landed system in the seventeenth and eighteenth centuries. Instead, it was to be the advance of owner occupation that was to provide a far more effective material basis for conservative liberal individualism that was to hold collectivism at bay in Britain.
With the relaxation of landed wealth’s stranglehold over landed property after the First World War, home ownership and the growth of suburbia not only consolidated but served to radically redefine what it was to be middle class in Britain. Further, with the subsequent expansion of owner occupation to sections of what had been the traditional working classes, home ownership not only limited the expansion of collectivism and social democracy but ultimately played an important part in their downfall. Indeed, taken as a whole the twentieth century can now be seen as the forward march of home ownership under the banner of liberal individualism that was to triumph in the current period in which owner occupation is the ideal and dominant form of housing tenure.
However, as we have pointed out, there are clear signs that the current era of housing has reached its limits. The contradictions of the present regime of housing provision are coming to the fore and threaten to break out in a looming housing crisis.
As we have seen, in the 1970s the expansion of home ownership was already running out of steam. For the most part the expansion of home ownership in the last twenty years has been sustained by the sale of council housing. But the amount of council housing that can be sold is limited and the state can only sell council houses off once. At the same time, the construction of houses for sale has been running at historically low levels.
With cuts in public spending falling particularly heavily on housing budgets, Britain is facing the problems of an increasingly inadequate, aging and substandard housing stock. Yet these problems can no longer be shifted onto the poorest sections of the working class. The shortage of adequate housing in the right location has forced house prices up to levels that even those in the higher income tax bracket can no longer afford. Even if house prices fall sharply, with the bursting of the house price bubble, it is still likely that only those with above average incomes will be able to buy a house.
Yet it is not only that the proportion of households that are homeowners is likely to decline. What is perhaps far more important is that with the transition to an era of low inflation, but high house prices, the attitudes induced by home ownership are likely to change. As the ‘property escalator’ switches off, those who do manage to become house owners will face years of heavy debt with little prospect of escape. For many, home ownership will become more of a treadmill leading nowhere. Home ownership will no longer be such a conveyer belt into the middle classes. As such the transition to a new era in housing is likely to lead to major class realignments.
- 1It has been estimated that, with the present demand for new housing, at the current rate of construction it would take a thousand years to replace Britain’s housing stock!
- 2Marx’s theory of rent was developed in relation to agriculture. Attempts to apply this theory to urban rents has proved to be highly controversial see for example ‘The Political Economy of Housing’ in Political Economy and the Housing Question by S. Clarke and N. Ginsberg. We do not propose to enter this controversy here.
- 3For a far more extensive analysis of this point, see Housing Policy and Economic Power: The Political Economy of Owner Occupation, by M. Ball.
- 4With the leasehold on the land being transfered with sale of the houses built by the speculative builder, it would be the housing landlord that would be responsible for the payment of the landowners ground rent on the lease. This would have to come out of the rent the landlord charged his tenants and any increase in his house rents would be in part offset by the upward revision of ground rent. Thus, in part, the gains the housing landlord could expect from future rises rents would end up in the pockets of the landowner.
- 5The rates were a form of local property tax that was levied against an imputed ‘rentable value of a property’. The rates for residential property were finally abolished in 1990 with the introduction of the short-lived Community Charge - better known as the Poll Tax. After the Poll Tax riots, it was replaced by the current Council Tax - which is a hybrid between a property tax and a poll tax.
- 6See for example, J. Chamberlain’s ‘Unauthorised Programme’ produced for the 1885 election campaign. Republished as The Radical Programme, by J. Chamberlain and T.H.S. Escott, Havester Press, 1971.
- 7See Rent Strikes: Peoples’ Struggle for Housing in West Scotland 1890-1916. by J. Melling (1983).
- 8The inter-wars years saw a breach in the class monopoly of land but it did not destroy it altogether. The revival of agriculture after the Second World War, aided by generous subsidies particularly after Britain joined the European Common Agricultural Policy in the 1970s, came to the rescue of many of the landed estates that had managed to survive. As the recent land campaign launched by the New Statesman has highlighted, ownership of land is still highly concentrated in Britain and still serves to place limits on the expansion of housing, although not to the same degree as it did in the nineteenth century. For what is now a little dated analysis of landed property in Britain see Capital and Land by D. Massey and A. Catalano.
- 9Up until the 1960s homeowners were taxed on the notional rental income they could receive if they rented out their house. This was abolished in 1963 and tax relief was introduced on the interest paid on mortgages.
- 10Eventually, taking advantage of legislation introduced in the 1980s, most building societies abandoned their legal status as mutual friendly societies and turned themselves into banks.
- 11For the unemployed, who had the time both to queue up in the over stretched housing benefit offices and to fill out the arduous all-encompassing forms, housing benefit often proved far more generous and flexible than the old housing allowances administered through the Department of Social Security.
- 12See Housing Policy, 4th Edition. P.Balchin and M. Rhoden. (2002)