It’s hard enough now to find somewhere genuinely affordable to live and will be worse for your children and grandchildren.
Here I discuss how Housing Associations are as much to blame for the UK’s housing crisis of supply as the Thatcher, Major, Blair, Brown and Coalition governments. The Housing Associations who are correctly called Private Registered Providers have neither the capacity or the inclination to build new housing in the quantities the UK needs.
The housing association experiment that began in earnest from 1988 onwards has failed and failed miserably and today’s generation, tomorrows and the day afters generation will suffer for it in ever increasing degrees of severity.
Where will you, your children and your grandchildren live is the real question that flows from the housing crisis.
The Housing Association Experiment?
From the early 1980’s Thatcher’s RTB as well as selling off many council homes and the best ones too and for which the money went to central government not local councils introduced a cultural dynamic as ‘merely’ renting became second-class and non-aspirational.
In the mid 1980’s we saw the radical response to this from the ‘Militant’ council in Liverpool which built more council housing than the rest of the UK put together, good quality and much needed council housing too. While that is typically only seen in its political context it had a critical economic issue – that council borrowing went onto the Public Sector Borrowing Requirement (PSBR) that was then and ever since been a key issue.
In 1986 Thatcher guillotined the Single European Act through Parliament to see the UK join the single market and a condition of entry was the amount of public sector debt or PSBR. Councils were not allowed to borrow to build housing in simple terms.
In 1988 the interim fudge happened with the Housing Association experiment and the Large Scale Voluntary (sic) Transfer of over 1. 4 million council houses to Housing Associations began. HA’s by virtue of not being public sector – and why they are correctly called Private Registered Providers – could borrow and did so to improve the neglected council housing stock for which councils were unable to borrow against to improve the ailing condition of former council housing.
Yet housing associations both old and newly created did NOT replace the new house building that councils had been developing and the real cause of the housing crisis of supply today began in earnest.
Even in the late 1970’s councils were still building over 100,000 new properties per year while housing associations were building 13,000 or so and since then HA’s have built just 23,000 per year on average and so we have seen 30+ years of not building enough homes because councils are not allowed to build for a combination of PSBR and because of political ideology.
The same PSBR was a critical factor in the ERM (Exchange Rate Mechanism) and subsequent attempts at meeting criteria for the Euro and of course throughout the 1990’s and since the cultural issue that merely renting is non-aspirational and a second-class issue pervaded.
Yet in all that three decades housing associations were charging 13% more in rents which also increased by way in excess of inflation each and every year and until 2010 grant levels (the misnamed ‘subsidy’) levels were still largely maintained. However despite this cash cow with its excess rental income over and above what the remaining council landlords charged failed to translate into investment in new house building by housing associations.
The 80,000 homes per year shortfalls from 1980 were in part filled with private enterprise developing more and also by private landlords with buy to let but as the official figures below show at least 50,000 per year was added to the UK housing need that was not being met- a figure which has increased by 70,000 and more since the millenium.
The housing crisis then becomes so acute after the banking crash of 2007/2008 that it finally makes the political agenda AND private enterprise (Barratt, Persimmon etc) reduce their new house building by 50,000 units per year as shown in blue on the chart above while housing associations barely build more than they did through the 1990s, and of course councils are still not allowed to build.
Almost 50% of 1980 council housing stock is now in the hands of housing associations and its ownership has moved from the public sector to the private sector which means that decisions on whether to build or not are not based on local public need but on local private bottom line figures of Private Registered Providers.
Around 20% (at most) of housing associations develop new properties whereas a far higher number of councils did build before they were transferred by the LSVT construct and fudge of the Housing Association Experiment which as the numbers starkly show has failed the UK housing need.
The post 2015 government under Cameron are committed wholly to homes for sale and home ownership and largely because home ownership has fallen to 64% from a high of 71% under Blair, yet a report by HSBC today suggests that the Autumn Statement will see the May administration sanction a massive public sector house building programme.
This suggested Keynesian public house building is – coincidentally of course – precisely what Corbyn stated was his policy a week or so ago with the promise of 100,000 council houses being built per year and 500,000 in all under a Labour parliamentary term. As I said about that here it makes sense and gets the matter on the political agenda as the ONLY way to solve the housing crisis is for mass council house building. All of that also means the Housing Association Experiment has failed the country too!
The Corbyn Effect?
The housing association commentariat said I was wrong and Corbyn meant social housing in terms of 100,000 new builds per year. then when Corbyn confirmed he did mean 100,000 council houses the retort was its irrelevant as Corbyn will never be elected. I then said that Corbyn’s policy was right and the ONLY way to solve the housing crisis was mass council house building and he is getting the issue on the political agenda which of course led to more ridicule of that view from the HA commentariat.
Now we see in the reports about the HSBC view that the issue is not only on the agenda but that the May government will take a fundamentally different approach to the Cameron government and are considering mass public sector building and taking the same Keynesian approach of the Corbyn policy. HSBC say:
In the current environment, the case for public investment is compelling. Interest rates can’t go any lower, uncertainty is extreme and borrowing is cheap. Moreover there is evidence that fiscal multipliers (i.e. the GDP impact of fiscal stimulus) are larger when the economy is in a slump.
“We argue that increasing public sector investment may be the most effective form of stimulus and that there is no shortage of infrastructure investment opportunities, notably in transport and housebuilding.
This suggests the May government will finally accept that the Thatcherite Right to Buy experiment and the Housing Association Experiment it threw up by fudged consequence were failures.
Of course it will never be framed that way yet that is what it amounts to and I am equally certain that the Conservatives will avoid wherever they can new council house building and seek for it to be built by anyone but local government. That policy will also fail to solve the housing crisis, which is an issue that Corbyn has picked up and seen in simple yet correct terms of where will my children and grandchildren live that troubles today’s home owners and tenants who cannot afford to buy or to rent privately
The provision of housing and how a country houses its population has been left to the vagaries of the free market ever since Thatcher and that government policy which has been adopted by every government since Thatcher has failed.
The small but significant minority of housing associations who are aggressively private focused such as the G15 cabal that dangle David Orr as a puppet on a string as the CEO of the National Housing Federation will become ever more private and will shaft their public sector councils by evicting en masse with the Benefit Cap and refusing to accommodate the ‘benefit tenant’ in ever greater numbers because of it and will seek to wrest every last penny out of existing tenants with the pay MORE to stay policy too.
The perverse London house prices caused by the housing crisis of under supply which in turn was created by the failed RTB and Housing Association Experiments has unleashed this HA monster who do not give a stuff for the social purpose they ridiculously claim to have as their guiding ethos.
I am aware of a number of councils who have ALMOs – another construct to get around the LSVT HA experiment and who are all strongly leaning towards bringing those ALMOs back in house, or in simple terms becoming council housing again. They are right to do so as the benefits of this far far outweigh the potential negatives from existing and pending government housing policy and privately so many local council leaders say they regret the Large Scale Voluntary Transfer or the fudged housing association experiment as I correctly term it here.
The G15 puppet in David Orr and the NHF are seeking to blame everyone else for their failures and crying over funding cuts and moaning that private landlords have taken advantage of Housing Benefit and excuse after excuse which I dismiss as that here and are still saying to government give us the money without conditions and we will build the numbers you want when their past record and their lack of capacity to ever get near such figures are all on their past record … of failure … as the simple factual chart above shows.
What the chart doesn’t show is that Housing Associations get £1.1 billion more in Housing Benefit each year than the equivalent number of council landlords receive. That excess income alone equates to 55,000 lots of £20k ‘subsidy’ per year and was additional to the £1.125 billion per year in ‘subsidy’ received from 2011 to 2015 after Shapps reduced it to £4.5 billion over 4 years. Enough according to the NHF’s own benchmark subsidy figure for a further 55,000 new builds per year making 110,000 per year in all … yet the housing associations averaged just 30,000 per year or 80,000 per year less than they could have done per year in the last parliament.
The inclination not to build is strong now that housing associations have a PRIVATE Registered Provider ethos and no longer have a public sector ethos and public sector duties that over 50% of them once had when they were council properties and landlords.
In summary, housing associations have failed and do not have the capacity or the inclination to solve the housing crisis or even to stem the housing crisis either. It can only be solved through mass council house building which, political ideology aside, is just as much and a more important national infrastructure project than HS2. We will get there eventually and council landlords will make some of the same mistakes they did in the 50’s, 60’s, 70’s and 80’s and hopefully far fewer; yet what this will achieve is housing in sufficient numbers that is in the public interest and not in the private bottom line interest of wannabe private landlords in housing associations.
When that happens the government can finally start to address the two most important UK housing questions of the electorate in where will my children live and where will my grandchildren live. It’s way past time to swiftly hasten the demise of pretend social landlords called housing associations.