Housing in hindsight

After 18 years in opposition, Labour might have been expected to be brimming with good new ideas on housing. But we are unlikely to look back on the green paper of 2000 as a defining moment, a key turning point in housing policy in England. Why, then, is it such a damp squib?

One approach would be to say that it was always a mistake to expect big changes in housing from a Labour government. In this context it is instructive to compare the green paper of 2000 with that of 1977, which was also produced by a Labour government. On that occasion, two and a half years of work failed to produce any radical change, and instead ended up warmly endorsing the status quo. But at least the government of the time had the defence that it lacked the necessary votes in parliament to secure major reform.

Looking back at the 20th century as a whole, it is clear that none of the most important housing policy developments occurred under Labour: the introduction of rent control (1915) and housing subsidies (1919), for example, came before Labour’s first government in 1924. It is true that the Labour government of 1945-51 gave council housing a great boost, but in the following 13 years the Conservatives were able to cut back council house building by 50 per cent, and to promote home ownership to such an extent that the Labour governments in the 1960s were unable (or unwilling) to revert to their earlier policy.

In the 1970s it was a Conservative government that began to reform rent and subsidy policies, and, although Labour subsequently unpicked key parts of the 1972 Housing Finance Act, it had nothing to put in its place. It was left to the Conservatives to have another go at rents and subsidies in their 1980 Housing Act, this time sheltered behind the high profile of the right to buy: a policy innovation more radical than anything ever attempted in housing by a Labour government. Once the right to buy began to run out of steam in the 1990s, the Tories seized on stock transfer as a means of pressing ahead with demunicipalisation. Even the reform of mortgage interest tax relief, for so long resisted by Margaret Thatcher, was begun under the Conservatives in the early 1990s.

Another approach is to recognise that any government – however large its majority – has only limited scope to change established policies and that change tends to come only slowly as a result. According to this sort of analysis, for more than 50 years after World War I, housing policy in Britain was developed within a consistent framework. From the 1970s, this came under increasing stress, and by the end of the century a new framework had been established. The outcome of the 1997 general election has not changed this.

For most of the 20th century we had a highly protected housing system, characterised by:

• private sector rent control
• subsidised production of social rented housing (and from 1919 to 1929, private housing)
• tax relief on mortgage interest
• sub-market mortgage interest rates, maintained by the lenders’ cartel.

Housing policy at that time was also concerned with facilitating the transition from a predominantly private rental system to mass home ownership. Council housing was also about meeting the needs of the unionised, skilled labour force –precisely the group that were so successfully targeted by the right to buy in the 1980s.

The strains began to become apparent within the old framework during the 1960s, when, for example, ministers started to say that there was no longer an overall gross shortage, merely a series of local problems.

But it was in the 1970s that the cracks really began to show. Changes since ROOF was first published in 1975 saw old certainties abandoned and prepared the way for policies that would have been unthinkable in the past. By 2000, housing consumers were much less protected from market forces and the image of social renting (particularly council housing) had suffered serious damage.

Three key developments of recent years have helped to crystallise and clarify the extent of change:

• Taxation. The housing system is now characterised more by taxation than subsidy. Mortgage interest tax relief has now gone completely, and as ROOF recently showed, the home ownership sector in Britain will be subject to taxation of nearly £3 billion in this financial year. The council housing revenue account has been in increasing surplus and the sector as a whole is, in effect, taxed by nearly £1 billion. Registered social landlords’ surpluses and reserves have become sensitive issues. The revenue surpluses of non-charitable associations are now subject to corporation tax.
• Modernisation. The promotion of home ownership is now more or less complete. Private renting has become stuck at about a tenth of the stock. So policy action is now focused instead on the modernisation of the social rented sector via stock transfer. It is now only a matter of time before associations overtake local authorities as owning the majority of the rented stock.
• Demand. Population projections imply a building programme on a scale equivalent to that following World War II, but now the basic assumption is that the private sector can meet the bulk of this need. Meanwhile in the social rented sector, the problem of demand is about hard-to-let homes in some parts of the country. The old assumption that the role of social housing is to allocate homes to people in an orderly queue is being replaced by acceptance of greater consumer choice and the need for marketing strategies.

Whilst it might be tempting to see the 2000 green paper as marking the start of something new, the reality is that its policies owe more to events of the 20 years before May 1997 than to anything that has happened since.

Peter Malpass, professor of housing policy at the University of the West of England, has been on ROOF's editorial board since 1989