Housing crisis 1984 (1984)

From the March 1984 issue of the Socialist Standard

Apart from a few exceptions such as tied accommodation and institutions, there are three types of homes open to the working class today — private rental, local authority rental and what is called owner-occupation. Since 1918 there has been a large shift in the relative shares of these types as Martin Pawley tells us in his book Home Ownership (The Architectural Press, London, 1978):

In 1918, a year within the living memory of our grandparents if not our parents, less than 10 out of every 100 homes in England and Wales were owned by the families living in them. Out of a population of 38 million less than 14,000 were council tenants. Out of 8 million dwellings more than 7 million were owned by private landlords whose tenants paid a weekly or monthly rent. The building societies, 1300 separate savings and loans establishments, boasted total assets of less than £70 million and only 600,000 shareholders and borrowers.

Today 55 out of every 100 homes in England and Wales belong to the families occupying them. Out of a population 10 millions greater there are 5 million council tenants. Out of 17 million dwellings only 2½ million still belong to private landlords. The building societies, their number reduced by more than two thirds, have nonetheless grown into mighty financial institutions whose total assets rival those of the banks and dominate any other repository of savings — their value in 1977 exceeding £30,000 million. Their total membership, shareholders and borrowers combined, now embraces nearly 20 million persons.

Since 1961 National Census returns have included information on household tenure. For earlier years figures have had to be deduced in a less direct manner and are not so reliable. The message is clear. Many maybe surprised at the dramatic slump in private landlordism, still more perhaps at the tiny number of council tenants in 1918. Much fewer will be surprised at the rise of "owner-occupation". which has been given such fanfare treatment by the news media. How ever because the lower paid workers are still mainly tenants and can be expected to show a larger than average number of persons per tenancy, the number of workers who are “buying” their homes is somewhat overestimated in the above figures. Remember that almost all the capitalists (roughly 10 per cent of the population) are also, and genuinely, owner-occupiers. Against this even the recession has not yet completely halted the upwards trend, and much pressure is still being applied to reduce council tenancies still further.

There is obvious confusion inherent in the term “owner-occupier”, although not so much in the occupier bit. Most owner-occupiers hold right of tenure only through loans — in most cases from building societies — which they have to repay with interest at regular intervals. While they are doing so, commonly over a period of 20 or 25 years, the title deeds are held by the loan making body, who are clearly the effective owners for the duration of the loan. Yet the law states that the building societies cannot become owners of real estate! The occupier thus has all the responsibilities of ownership like rates and repairs, while in reality looking after someone else's property. His/her status only differs significantly from that of a tenant if the debt has actually been redeemed, by which time the property may well have depreciated enough for maintenance costs to eat up as much money as the mortgage repayments. But in this article the term “owner occupier" will be used in its current sense, to cover mortgage repayers as well as outright owners.

It appears that 1918 represented a low point in owner-occupation. Before the 1884 Reform Act extended the franchise to all householders irrespective of mode of tenure, the qualification for the vote was ownership of freehold above a stipulated value. Consequently the Freehold Land Society Movement arose in the 17th century and became prominent in the 1840s. These societies operated on friendly society principles, but with the object of financing the purchase of plots of sufficient value to create voters and they were the forerunners of the building societies. After the passage of the Reform Acts the incentive to occupy freehold disappeared. It appears that the percentage of owner-occupiers actually dropped slightly between then and the First World War.

The Great War arrived with private landlords apparently unshakeable in their stranglehold on the supply of housing. What happened to loosen their grip? Simply that for a number of reasons, this form of investment in housing ceased to be as profitable. Those years were the high noon of the British Empire, with overseas investment attracting much capital previously employed at home. The war caused the government of the day to strike the first major blow. Military mobilisation and a massive increase in armaments production had led to large population movements. At the same time housing construction had almost ceased, leading to rapid rent increases with consequent evictions: in Glasgow there were rent strikes and then rioting. The government then passed the Increase of Rent and Mortgage Interest (War Restriction) Act. popularly known as the Rent Control Act 1915, which held rents and mortgage interest rates to their level at 3 August 1914. The original intention had been that the Act should lapse six months after the end of the war, but by November 1918 prices had risen 225 per cent above the level of 1914, thus making rent increases of this order politically impossible. Some form of rent control had to continue and has been operative in Britain ever since. Along with restrictions on rent increases went some legal curbs on the landlords' right to evict tenants whenever it suited.

The government's imposition of these controls, and the possibility of similar action on other occasions, had alarmed many rentiers. Their answer was to sell. In some instances to their former tenants. In others they sold when the property became vacant and invested the proceeds in building for sale. This withdrawal from house ownership. incidentally, was not matched by a corresponding decline in landownership. Massey and Catalano (Capital and Law: Landownership and Capital in Great Britain, Edward Arnold. 1978) reveal that what they term "former landed property” (covering the Church, the crown estates, the landed aristocracy and the landed gentry), together own 36 per cent of the acreage in Britain. The landowning interest, of course, controls the scarcest of all resources for the supply of housing, the building land itself. However the decline of the house renting landlord left a gap. the filling of which was to cause many problems for governments and local authorities.

The 1890 Housing of the Working Classes Act included a section which allowed local authorities to build, convert and manage dwellings. A requirement that such housing be sold within ten years was dropped in 1909. These powers, as we have seen, were little used up to 1918. In the aftermath of the Great War. however, a boom in council housing construction saw 174.000 built in just over a year before the Geddes axe fell in the autumn of 1920. At the same time a boom developed in the building society mortgage business. Rent controlled houses could be bought cheaply and sold expensively to "owner-occupiers". The pattern of the inter-war years had been set. The gaps in the market for working class housing created by the diminution of the private rental sector were to be filled at the lower income end by council housing and at the upper end by mortgage owner-occupation.

According to the definition we have adopted, about 26 per cent of all households could be described as owner-occupied in 1945. Then came the 1945-51 Labour government and perhaps the only sustained attempt to boost council housing. The Labour Party is in an awkward position politically on housing as it relies to a much greater extent than the Tories on the votes of those workers unable to be other than tenants. This explains such differences as arise between the housing strategy of the two major parties. In 1945 the Labour government, like the government of 1914-19. had its policy largely dictated to it by the situation it found. As Pawley (op cit) relates: "By the end of the war 200,000 houses had been wiped out, 250,000 so badly hit that they were evacuated, and over 3 millions listed with the War Commission as having sustained injury of some kind". This damage had to be repaired. In addition while the physical fitness of potential army recruits was slightly up on the desperately low levels of the Boer and 1914-18 wars, once again the concern of the ruling class about the health and housing of the workers was at an unaccustomed peak. In these circumstances any government would have had to place a high priority on the construction of working class housing.

Within the constraints imposed by capitalism the Labour government tried hard to provide cheaper rented homes for the workers. The need for more investment in export-oriented sectors following the balance of payments crisis of 1947 reduced the funding available and the number of houses built was below expectation. Aneurin Bevan in particular was contemptuous of the private sector, stating that “The speculative builder was not amenable to planning a rational allocation of resources" (J. R. Short. The Post-War Experience — Housing in Britain. University Paperbacks, 1982), and castigating the building societies as “mere moneylenders" (Pawley op cit). Except for its last few months the government stuck to the recommendations of the Dudley Report (1944) which called for larger floor space and better equipped kitchens, even if this meant fewer completions. Those on the waiting lists probably took a different view and their discontent may have contributed to the defeat of the Labour Party in 1951. Between 1939 and 1951 only about 250,000 private houses were built (Pawley op cit).

The Tories came back to power in 1951 committed to building 300,000 dwellings a year. For the first three years (1952-54) council house completions were over 200,000 each year, but this figure was never to be achieved again. The Tories made an attempt to revive the private landlord; with the 1957 Rent Act by which all dwellings with a rateable value of over £30 (£40 in London and Scotland) were decontrolled. Apart from giving a handout to the landlords it was felt that increased rents would lead to more repairs being carried out. The dire consequences predicted by the Labour Party never fully came to pass and the Act largely backfired. Houses which were decontrolled were sold for owner-occupation rather than for reletting and landlords carried out very few repairs. The decline in the private rental sector continued, although even today the idea that it can be revived is still held by some Tories. But after the failure of the 1957 Act the Tory Party committed itself to extending owner-occupation the much heralded “property-owning democracy” they were allegedly creating. Present Tory policy is to encourage as many workers as possible to join the mortgage queue and to reduce council housing to what Short (op cit) brutally describes as the “residual tenure category". There is of course a still lower category — the homeless. In 1978, 53,100 families were accepted by local authorities and 57,200 in 1979, showing a rising trend (Short op cit). Attacks are still being launched on the better off council tenants in an effort to make them move out into owner-occupation. This has led to considerable stigmatisation, with its sniping at "scroungers" who are supposed to be parking their Jaguars outside their council homes as they live off the backs of the poor ratepayers! The 1972 Housing Finance Act aimed to reduce government subsidies so that rents would have to rise. The policy of encouraging the sale of council houses to sitting tenants was then introduced. Public spending on working class housing was to be cut if at all possible.

By the time the next Labour government was formed in 1964, the tide of owner-occupation had come in so far that they had to go along with it although the need to retain their traditional support meant that they were not as enthusiastic about it as the Tories. Labour controlled councils tend not to be too keen to sell council houses as, particularly in inner city areas, they have to bear the brunt of the problem of housing the homeless, and naturally don't wish to see their stock depleted. As might be expected, it is the best council houses which are most likely to be sold.

The earliest building societies were known as temporary societies. Members saved together and when enough was raised for one “share" this was allocated to one member to buy, rent or build accommodation. This member continued to pay his subscriptions until all had received a share, whereupon the society disbanded. From the mid-1850s permanent societies were formed. Now members could withdraw money at any time and borrowers paid back over a set period. They were given corporate status by the 1874 Building Societies Act.

The early societies were small and speculative in character. Inevitably their aggregate size increased as their numbers reduced through amalgamations and collapse. Even so from the passing of the 1874 Act up to the First World War the movement went through a rough time as the house market slumped and a number of scandals shook the confidence of potential investors. On occasions the state had to intervene to regulate matters. One of the largest, the Birkbeck, was saved by a government loan in 1892, promoting another Act of Parliament which compelled societies to publish details of members in arrears on their mortgages. The Birkbeck collapsed in 1911.

A few skilled artisans, the labour aristocracy of the time, were members of the earliest societies. However, it will already be clear that these bodies were not concerned with providing working class housing, as Frederick Engels noted in The Housing Question (1887). Kirkman Gray (A History of English Philanthropy, London 1905) notes that;

. . . societies afforded no training school for democracy; on the contrary the maintenance of the poor in a subordinate position was far from being an unimportant part of the aim of those who founded them. The charitable school bank, provident club, or friendly society was for the poor, but was not started or managed by them; it was under the control of the well-to-do.

E. J. Cleary (The Building Society Movement, Elek, 1965) adds the following: "The fact that the Droylesden Society (1792) collected subscriptions quarterly suggests that its members were scarcely weekly paid workers". Even more significant is Cleary’s passage concerning the reaction of the societies to the Rent Control Act of 1915:

It is an indication of the ambiguity of the building societies with regard to rental at this time that their reaction to a piece of legislation which, more than any other, launched the owner-occupation boom which has continued till the present day, was to describe it as “The gravest act of injustice ever inflicted by the British Parliament”. The author of that statement being not merely the Manager of the Temperance Building Society, but also a director of a property company owning 7,000 rented houses. (Cleary op cit p. 173.)

This does more than show that the building societies were profiting from private landlordism. It strongly suggests that much of the capital invested in this activity was before too long to be transferred to the construction of houses for “sale" on mortgage, to the benefit of the self same building societies! That the main concern of these bodies is with the interests of investors is shown by the following table quoted by Short (op cit). showing how share accounts are increasing quite a bit faster than either mortgage accounts or advances.

Short also reveals that in 1977, although 80 per cent of the share accounts held less than £2000. the remaining 20 per cent held by much larger investors constituted nearly three-quarters of the total balance. Also the ten largest societies out of the total of 287 registered in 1979 held 69.2 per cent of the total assets.

Further inequalities arise from the way the building societies allocate mortgages. Inevitably they tend to avoid risky propositions in order not to discourage potential investors. Good risks are those borrowers in salaried positions with good prospects. The bad are those not on salaries and with fluctuating incomes. There is also discrimination against older applicants, who receive shorter terms with higher repayments. The societies are not keen to lend on converted property, older property or property in industrial areas. Short (op cit) cites his personal experience in an interview with a branch manager. “He pointed to the St. Pauls district of Bristol and said ‘There are certain areas of the city where we won't lend’". Black workers and single mothers also encounter obstacles, even when they manage to raise the necessary cash, because their presence can “lower the tone” of the neighbourhood — and the selling price of the houses in it!

It is clear from all this that there are significant differences even between one mortgage-paying worker and another. Governments have at various times tried to counteract this through measures such as 100 per cent mortgages designed to push owner-occupation further down the pyramid, and reduce “public" spending on council housing.

E. C. Edge