Policy Papers


The housing crisis as the long-term casualty of austerity politics, 1918-2018

Brian Lund |

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Executive Summary

  • The 1919 Housing, Town Planning, &c Act supplied central grants to local government to build houses, but these subsidies were ended in 1921 under the Geddes Axe, the original ‘austerity’ policy of the twentieth century. Subsequent financial crises have also led to reductions in local authority housing supply.
  • Although the requirement for austerity in difficult economic times has been used to justify cutting local authority housing provision, promoting the market and homeownership have also underpinned this rationale.
  • New Labour attempted to improve the council house image by amalgamating local authority housing with housing associations under the banner ‘social housing’ but Blair also reduced investment in the ‘social housing’ sector.
  • A housing status hierarchy has been constructed over many decades, with finely graded owner-occupation at the apex and subsidised local authority housing at the base.
  • Viewed over the long-term, local authority housing has never been supported by a consistent policy of government subsidy and yet it can make a significant contribution to ending the current housing crisis. It is also a policy that can be entirely cost-efficient if the appropriate long-term accounting framework is adopted. However, it continues to have a low policy profile in England and in Westminster.

31st July 2019 will mark the 100th anniversary of the 1919 Housing, Town Planning, &c Act. It had a short life: 500,000 homes were to be delivered by local government under the Act but subsidies were ended in June 1921 when tenders for 175,000 houses had been approved. Given the enthusiastic Parliamentary support in 1919 from all political parties, its sudden demise appears surprising, but, in the context of mainstream political attitudes to housing subsidies until 1916 and housing legislation post 1919, subsiding local government to boost overall housing supply was an aberration, to be abandoned whenever economic conditions supplied a pretext. The requirement for economy supplied the rationale for subsidy elimination but underlying this justification was an ambition to return to market forces in housing supply. The 1921 scenario reoccurred in the late 1970s and in 2010 with the austerity agenda again providing the immediate raison d'être for cutbacks in social housing supply and thereby asserting market supply supremacy in housing delivery as the long-term objective and policy continuity, except without actually having to argue for it on each occasion.

As the current housing crisis has spread, its political repercussions have intensified, becoming manifest in the 2016 European Union Referendum and the 2017 General Election. Prime Minister Theresa May has declared the housing market ‘broken’ but the role of housing supply by local government has a low policy profile.

The 1919 Housing, Town Planning, &c Act

Before the 1919 Act, most Conservatives denounced subsidised state housing as a possible prelude to demands for all consumption to be state aided, and for ‘crowding out’ private enterprise. The Liberal Party, as a matter of principle, was against state subsidies for local authority houses. Leonard Hobhouse, a prominent liberal theorist, declared:

The function of the state is to secure conditions upon which its citizens are able to win, by their own efforts, all that is necessary to a full civic efficiency. It is not for the State to feed, house or clothe them.

(Hobhouse, 1911)

The Liberal Party solution to the housing affordability problem was higher wages and even Lloyd George’s 1913 potentially radical land enquiries did not include subsidised council housing as a possible solution to the housing issue.

Reconstruction

Reconstruction involves planning and the Fabians were the expert planners. Sidney Webb viewed reconstruction initiatives ‘as harbingers of a new collectivist Britain’. He set out his reform ideas in a 1917 New Statesman series under the heading 'The rebuilding of the state', advocating large Exchequer grants to replenish the nation's housing stock. Invited to serve on the government’s reconstruction committee, Beatrice Webb promoted Sidney’s ideas arguing that local government involvement was essential because the working class did not trust private enterprise to solve its housing problems. Raymond Unwin, a Fabian Socialist, wrote the Tudor Walters Committee report on post-war housing standards. Delivered in November 1918 Unwin made the point that the new houses would need to meet the superior requirements of future generations, hence the recommendations that a bath in a separate bathroom should be a standard fixture, each house should have a garden and some include parlours.

Despite support for state-supported council houses from the reconstruction planners, local government’s role in building houses was uncertain. Before the 1918 General Election Lloyd George promised to ‘make Britain a land fit for heroes to live in’ not to ‘build homes fit for heroes’ and his joint manifesto with the Conservative Party mentioned state land acquisition for houses but not subsidised local authority housing. Nevertheless, Lloyd George gave his full support to a subsidised local authority housing programme in 1919, perhaps because he was preparing the groundwork for his own political party’s play for more working-class votes and wanted to restore his reputation with the Labour movement, which had been tarnished during the war by his dilution of skilled labour through curbing so-called ‘restrictive practices’ in arms manufacture. To counter Treasury resistance, Lloyd George raised the Bolshevik threat at a Cabinet meeting in 1919. In an exchange with Austen Chamberlain, the Conservative Chancellor of the Exchequer, he declared:

In a short time we might have three-quarters of Europe converted to Bolshevism... Great Britain would hold out, but only if the people were given a sense of confidence – only if they were made to believe that things were being done for them…. We must give them the conviction this time that we mean it, and we must give them that conviction quickly….

Treasury defiance evaporated and plans for 500,000 subsidised local authority houses were approved.

Austerity

Beatrice Webb claimed that Lloyd George exaggerated the Bolshevik threat for political reasons but, by 1921, the threat — if it ever existed — had vanished. Following a bank base rate increase to 7% in preparation for a return to the gold standard, between April 1920 and April 1921 output fell by 15% and unemployment increased from 2% to 12%. In 1921, the budget deficit as per cent of GDP was 28% higher than in 1920. Lord Rothermere, the founder of the Daily Mail, set up the Anti-Waste League to denounce high spending at central and local level, a media campaign that appears to have been successful in two by- elections. Christopher Addison, the Liberal MP responsible for implementing the 1919 Housing, Town Planning, &c Act, was the Anti-Waste League’s principal target. Its ammunition was the argument that houses were costing £1,000, compared to £400 in 1913 (of course ignoring the fact that they were being built to a higher standard). In fact the cost was rapidly falling and had reached £600 when the subsidy was axed. There was no substitute for the 1919 scheme and the Geddes Committee, wielding its infamous ‘Axe’ on all forms of public spending, condemned ‘general needs’ subsidies (directed towards boosting total house production by local government rather than at slum clearance) as ‘wasteful’, recommending a ‘vigorous policy of sale’ of the homes built under the 1919 legislation. Moreover, there was an attempt to restore the market in rented houses. The 1920 Increase of Rent and Mortgage Interest (Restrictions) Act allowed private landlords to increase rents by 40%, phased over three years; and ‘creeping decontrol’, under the 1923 Rent and Mortgage Interest Restrictions Act, allowed market rents to be charged on vacant possession.

The ‘Housing Problem’ By-Elections

Pathé News (1923) described the March 1923 Mitcham by-election as ‘The Housing Problem By-Election’. With rents increasing and more hikes in the pipeline, rents were by far the most important issue but Labour also campaigned on council housing demise. The Conservative vote in Mitcham plummeted by 30% on the 1922 General Election outcome. Labour’s Chuter Ede won the seat from the Conservatives. Labour also took Liverpool Edge Hill from the Conservatives and Willesden East was won by the Liberals with housing the dominant issue in both these by-elections.

Commenting on the three by-elections in March 1923, the Spectator (1923) said:

On all three constituencies the housing trouble presses very keenly....Tenants who feel more or less under a sentence of homelessness; tenants who feel that they may be at any moment asked to pay more rent than they can afford; tenants who are still looking for houses — all these people fail to take long views [eventually decontrol will produce more houses for rent] and can hardly be expected to take them.

A Property-Owning Democracy

In a series of Spectator articles published in 1923, Conservative MP, Noel Skelton, advocated a ‘property-owning democracy’, asserting that a conservative vision was necessary to counter socialism rapidly capturing the moral high ground amongst working class opinion leaders. Baldwin adopted the ‘property-owning democracy’ idea in 1923 but with an emphasis on owner-occupation rather than the broader property notion — including share ownership and profit sharing — advanced by Skelton. Neville Chamberlain, Minister for Health and responsible for housing, made some tentative steps towards a ‘property-owning democracy’ in the 1923 Housing Act. A low fixed rate subsidy for private enterprise and local government was introduced but local authorities could only build after demonstrating that private enterprise could not meet local housing requirements. Moreover, the long-established Small Dwellings Acquisition Acts were amended to allow local authorities to issue more mortgages to better paid workers to buy the private sector houses.

The 1923 General Election

After the 1923 General Election Labour was the largest party in Parliament. Indeed, Labour would have performed better had it not downplayed the housing issue by instead choosing to contest the election on Baldwin’s chosen territory of tariff reform.

Having lost the Conservative Party majority, Baldwin was in political danger. Called before the Conservative Party Executive in early 1924, he delivered a speech heralded as the birth of a ‘New Conservatism’. He claimed that the Labour Party was now the chief opponent and the property-owning democracy vision was vital to Conservative success. After 1924, the emphasis on owner-occupation was stepped up both in rhetoric and action. The strategy was to semi-detach the ‘respectable’ working man — called the ‘good class artisan’ in Cabinet minutes — from the labour movement. The ‘good class artisan’ and his wife were courted into owner-occupation via the hope of social inclusion. Baldwin declared that the Conservatives ‘differ profoundly from the Socialists [in wanting] the people to own their own homes’ and linked this aspiration to the promotion of ‘self-respect and independence’. The building societies promoted social acceptance via homeownership. They ran advertising campaigns on homeownership virtues with a prominent advertisement featuring Mr Tenant and Mr Owner with Mr Tenant anxious about always paying rent and unable to make improvements to his flat. During the 1934 to 1939 house building boom more manual and lower-paid non-manual workers became homeowners, accounting for up 50% of the new owners (Scott, 2013).

The ‘slum mind’

A housing status hierarchy was constructed with finely graded owner-occupation at the pinnacle and subsidised local authority housing for former slum inhabitants at the base. The Eugenics Education Society continued its late nineteenth-century attack on people living in unfit dwellings. In The Slum Problem, Bernard Townroe (1928), at one time a senior official at the Ministry of Health, asserted ‘There is unfortunately a type of tenant who always makes a ‘slum’ and can only be prevented from wrecking a house by discipline’. The Report of the Departmental Committee on Sterilisation (which recommended a policy rejected in Parliament only by virtue of the votes of Labour MPs), chaired by L.G. Brock, declared ‘defectives drift to the slums’ and ‘the chances of two carriers [of defective genes] mating is many times greater than it is in any other section of the population’. This negative perception of slum residents was held even by some Labour politicians. For example, Clapson has documented the furore created by Ian Mikado, Labour MP for Reading, when he condemned the people of the Whitley Estate, built to house former slum residents, for their slum habits.

The homeowner/council house tenant dichotomy had physical manifestations. Homeowners in Oxford built the notorious Cuttleslowe Wall, topped by barbed wire, to separate their territory from a council estate. Hilton Young, Minister for Health in the 1930s, denounced inner-city areas as ‘radiating centres of depravity and disease’. In contrast, owner-occupation was ‘normal and natural to the economic life of the country’. The Exchequer grants to local government, introduced by the 1923 Labour government, were gradually reduced until they were ended in 1933, leaving only slum clearance and flat subsidies concentrated on inner-cities. The new homes for former slum residents were mainly four- and six-storey walk-up flats, surrounding a central courtyard. Branson and Heinemann have commented that their austere exteriors ‘seemed to emphasise that they were rough places for rough people’.

Local authority housing 1945-2010

After World War II Aneurin Bevan’s new vision was for local government to be the dominant supplier of good quality housing for all and thereby replicate the Welsh village with its ‘living tapestry of a mixed community’. To achieve this, private sector construction was contained by building material licensing, generous ‘general needs’ central subsidies were introduced, and the existing low-quality prefabricated housing programme was axed. The Dudley Committee recommendations — including that local authority homes were to be built up to 16% larger than before the war — were adopted, local authority direct labour organisations were encouraged and the phrase ‘for the working classes’ was removed from housing legislation.

With the Conservatives back in power from 1951 until 1964 Harold Macmillan continued the local authority housing programme but, in 1953, he started to prepare a new ‘grand design’ for housing involving restricting local authority building to meeting the requirements arising from inner city slum clearance, restoring the market in private renting and promoting homeownership. This strategy was implemented via ending general needs subsidies in 1954, and by the 1957 Rent Act — decontrolling private lets on vacant possession and abolishing Schedule A tax on the imputed rental value arising from homeownership but retaining tax relief on mortgage interest.

The Labour governments—1964 to 1970 and 1974-79 — increased general needs subsidies, (in fact originally restored in 1961 at a low level by the Conservative government in an attempt to counter a developing housing crisis). However, the Labour leadership became increasingly sceptical about local government as a mainstream housing supplier. Richard Crossman’s 1965 housing white paper, recognising the growing popularity of homeownership, stated ‘The expansion of building for owner-occupation ... is normal; it reflects a long-term social advance’. Subsidies, with additional support for high rise, were increasingly concentrated on inner cities. Dunleavy has commented, ‘if Labour’s strategy was successful in terms of the number of public housing completions, it contained the seeds of its own demise in the type of housing being completed’. In the early 1950s, 10.5% of the accommodation constructed by local authorities was in flats, by 1966–70, it was 50.6%, rising to 90% in inner cities. Anthony Crosland’s 1971 Fabian pamphlet, Towards a Labour Housing Policy deemed the local authority role in housing supply as catering for homeless, overcrowded and households living in slums. During the 1976 financial crisis, Crosland declared ‘the party’s over’. UK house building by local government declined from 146,000 in 1975 to 86,000 in 1979 and Labour’s 1977 green paper endorsed homeownership as a ‘strong and natural desire’ that ‘should be met’.

Margaret Thatcher was delighted to embrace Labour’s retreat from council housing. In Thatcher and Sons Peter Jenkins records ‘When Thatcher was briefly an Opposition housing spokesman in 1974 I offered to show her examples of London’s good and bad council estates. She cut me short, “No, there are only bad ones”’. Thatcher’s mission was to eradicate local government as a housing supplier — a task continued by John Major and aided by the design problems in many of the mass housing schemes developed from the late 1950s. The Thatcher/Major governments reduced the role of council housing through a variety of stratagems: right to buy; ‘tenant’s choice’; Housing Action Trusts, severely limiting local government’s financial capacity to build new homes, pushing council rents towards market rents with Housing Benefit ‘taking the strain’; and curtailing the role of local authority direct labour organisations.

New Labour

New Labour amalgamated local authority and housing association housing supply under the banner ‘social housing’. In part this was an attempt to improve the image of council housing but it also reflected New Labour’s negative view of local government as a service provider. In 1998 Blair announced ‘The days of the all-purpose local authority that planned and delivered everything are gone. They are finished’. Although New Labour restricted the right to buy in 2004, nevertheless 566,000 houses were sold between 1997 and 2010 and, under stock transfer, 900,000 local authority homes were transferred to housing associations. This strategy helped to reduce the proportion of social housing classified as ‘non decent’ (defined, inter alia, as without a kitchen 20 years old or less; a bathroom less than 30 years old and lacking a reasonable degree of thermal comfort) but, under New Labour, investment in new social housing declined. From 1997 to 2010 there were 19,293 social housing completions per year in England, compared to 31,902 in the previous 13 years of Conservative governance. By 2010, 17.8% of the housing stock was social housing — half  supplied by local government — and private landlordism was meeting more of the demand for rented accommodation with 16.3% stock share in 2010, up from  9.6% in 1997.  

Cameron and Council Housing

Coming into power in 2010 the Coalition government’s Our Programme for Government announced:

We will significantly accelerate the reduction of the structural deficit ...with the main burden of deficit reduction borne by reduced spending rather than increased taxes.

At 50%, the Department of Communities and Local Government — recently renamed the Ministry of Housing, Communities and Local Government in 2018 — received the highest percentage budget cut. All New Labour’s programmes targeted on deprived communities were axed and central government support for new social housing was reduced from £6.8 billion in 2010 to £2 billion by 2015 with output from social housing providers maintained by setting rents for new homes at up to 80% of the market rent and also allowing social suppliers to let vacant properties at 80% of the market rent.

Under the ‘pay to stay’ programme current social tenants with a £60,000 plus income could have to pay a market rent. Council tenants were granted a ‘reinvigorated’ right to buy with greatly enhanced discounts and a ‘bedroom tax’ was imposed on social tenants by limiting Housing Benefit to a specified number of bedrooms.

Cameron’s 2015 government stepped up its attack on social housing. George Osborne asserted ‘social housing is subsidised because the price of private rental stock is the real price, reached by the logic of the market’. ‘Pay to Stay’ was to become compulsory and, in London, the policy was to apply to all households earning more than £40,000 and, outside the capital, the threshold was £31,000. Housing association tenants were to be given a right to buy on the same terms as council tenants, financed by forcing local government to sell its higher value stock. The devolved governments rejected these initiatives with Scotland boosting local authority housing supply.

The ‘politics of humiliation’

Undermining local authority housing finance in England was accompanied by stigmatising social housing tenants. The ‘politics of humiliation’, as political theorist Steven Lukes has defined it, was applied. In a 2008 Centre for Social Justice paper, Iain Duncan Smith claimed ‘The levels of dependency among social housing renters is quite staggering … How can we expect different from people who never see anything different?’ and, when Secretary of State for Work and Pensions, he redefined poverty away from relative income measures towards indicators based on ‘family breakdown, debt and addiction’. In announcing an initiative to demolish 100 council estates, Cameron said he wanted to ‘really get to grips with the blocked opportunity, poor parenting, addiction and mental health problems’. The advisory panel set up to oversee demolition and replacement did not include a tenant representative. Tenant’s Voice, established by Gordon Brown to ensure that social housing tenants had a say in shaping policy, had its central government support withdrawn. According to David Laws’ Coalition Diaries, 2012–2015, Cameron wanted to push all social rents to market levels. Between 2009/10 and 2015/16 mean council house rents, after Housing Benefit, increased in England by 37.7% and housing association rents by 38.6% .

The 2016 European Union Referendum and the 2017 General Election

Housing per se had a low profile in the 2016 European Union Referendum but ‘the economy’ — involving perceptions of living standards — and immigration were major public concerns. A 2016 Ipsos/Mori poll revealed that 33% of the population strongly agreed with the statement that Britain is ‘in the throes of a housing crisis’ but 54% attributed the crisis to immigration.

Writing in the Guardian, John Harris claimed the referendum was ‘...about class, and inequality...’ and, Brendan O’ Neill in the Spectator said ‘if a deprivation index was needed, then just count the Brexit vote'. Housing association tenants voted 68/32 to leave and local authority tenants favoured exit by 70/30, perhaps an indication of how they had been stigmatised and neglected. Theresa May seemed to recognise the salience of the economic divide. She promised government policy would concentrate on ‘just about managing’ families but, although aspects of Cameron’s policies, such as ‘pay to stay’ and financing a right to buy for housing association tenants  by selling council houses, were put on the backburner, action has not matched rhetoric. The benefit freezes and cuts directed mainly at Universal Credit and affecting both working and non-working ‘just about managing’ families continued. The 2017 White Paper Fixing Our Broken Housing Market expressed support for local authority housing companies but did not relax overall borrowing constraints on their activities.

The 2017 General Election outcome showed a large swing to Labour amongst private landlord tenants. Labour’s lead over the Conservatives was up from 11% in 2015 to 23% — the Conservatives had had a 4% advantage amongst private tenants in 2010 — indicating generation rent’s growing dissatisfaction as it moves up the age scale. However, Labour’s lead over the Conservatives amongst social tenants was down by 1% on 2015, an indication of the continuing impact of Brexit and, perhaps, the failure of Corbyn’s Labour to connect with its ‘traditional’ Labour voters.

Conclusion

Naomi Klein’s The Shock Doctrine includes examples of how financial crises have been used to restructure economic and social life towards the neo-liberal paradigm but, as demonstrated in 1923 and again in 2016/17, reliance on the market can produce a backlash. There is now deep concern in Conservative circles about housing’s impact on the party’s fortunes. Writing in the Telegraph, Allister Heath (2017) warned ‘the option is either Tory house-building or Marxist social engineering’ and the Spectator (2018), echoing its 1923 anxiety, said:

If you are stuck in a rented flat, frustrated at your in-ability to afford your own home, the housing policies advanced by Jeremy Corbyn at last year’s general election are far more appealing

         (Spectator, 21st April 2018)

Labour’s 2018 Green Paper Housing for the Many (2018) set out a programme to build 100,000 ‘genuinely affordable’ homes per year over ten years, but such is the precarious state of local authority housing finance that local government only features towards the end of the ten-year programme. That at least reflects policy realism due to the fact that half of local authorities do not have a housing stock asset and the capacity to exclude borrowing from the public debt definition is uncertain.

The Conservative Party problem is that housing supplied by local government is not part of ‘fixing our broken housing market’. It is a direct challenge to the market, delivering homes at historic cost, repair and improvement expenditure, plus a fund for capital investment. The Tudor Walters report claimed that, although subsidies were necessary in the short term, ‘ultimate economy in the provision of dwellings will depend on the relation between the average rental secured over a long period’ and the initial dwelling cost. Despite Treasury asset-stripping under the right to buy — £42 billion up to 2015 — local authority has more than paid its way. Between 1995/6 and 2015/6 the Treasury gained an average of £250 million per year from local authority housing.

Viewed in the longue durée, £600 per house in 1921 was a bargain.


Further Reading


Boughton, J. (2018) Municipal Dreams: The Rise and Fall of Council Housing. London: Verso Books.

Clapson, M. (2012) Working Class Suburbs: Social Change on an English Council Estate, 1930–2010. Manchester: Manchester University Press.

Department for Communities and Local Government (2017), Fixing Our Broken Housing Market: London: Department for Communities and Local Government.

Dunleavy, P. (1981) The Politics of Mass Housing in Britain: A Study of Corporate Power and Professional Influence in the Welfare State. Oxford: Clarendon Press.

Labour Party (2018) Housing For The Many: Labour Party Green Paper, London:  Labour Party.

Ministry of Housing Communities and Local Government (2018) Live tables on house building, new build dwellings

Olechnowicz, A. (1997) Working-class Housing in England Between the Wars: The Becontree Estate. Oxford: Clarendon Press.

Scott, P. (2013) The Making of the Modern British Home: The Suburban Semi and Family Life between the Wars. Oxford: Oxford University Press.

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