The Birkbeck collapse. (1911)

From the July 1911 issue of the Socialist Standard

We are always being told about “the savings of the working classes” and the vested interest they have in the banks and allied institutions in this country. But when the Birkbeck Building Society’s Bank closed its doors, another story was told by our good capitalist Press.

We then heard of the hundreds of pounds being lost by this investor and that one, and day by day the story was continued of 10s. in the £ amounting to one, two and three hundred pounds, being carried away.

Much was written about the struggle of this shopkeeper and that professional man, etc., to save up his little hoard.

Once for all, then, the anti-Socialists give the lie to their own cry. that it is the savings of the workers invested in these institutions. They themselves amply prove that the banks are filled with the money of others than members of the working class

Even the small savings of the working class are at the mercy of the capitalist financiers. The workers do not control the money, which comes into the hands of the capitalists, who use it to exploit the toilers.

The sequel to the bankruptcy supplied backing to the Socialist contention that the control over capital concentrates into relatively fewer hands as this system develops.

The business of the Birkbeck was acquired by the London County and Westminster Bank, one of the premier banks, with a capital of 14 millions. That is the usual way—the small concern dies the large one grows greater at its expense.

Adolph Kohn

News from the madhouse (2003)

From the June 2003 issue of the Socialist Standard

Tony Blair and God

Tony Blair is expecting an interview – in due course – with God: he told a journalist (as the Times, of 3 May, phrased it) that “I’m ready to meet my Maker and answer for those who have died or who have been horribly maimed as a result of my decisions”. This, of course, is the get-out of rulers down the ages. Rulers have always told the ruled, we will judge you here and now, and execute sentence upon you; if you ask who will judge us, it will be an old boy with a long beard in the sky after we’ve died. But if you’ve been charged with failing to pay your council tax, or parking on a double yellow line, don’t tell the judge you will answer for your actions in a few years’ time, when you have popped your clogs: he won’t wear it. Only rulers get away with that line.

Line of least resistance

People criticise Blair for his new slogan in foreign affairs: “find what George Bush wants, and do the same”. But Blair has his reasons. To start with, it simplifies matters; but also, since Blair has to do his best for the British ruling class, it may work out best for them as things stand in the year 2003. Kids at school sometimes do the same: find the biggest bully in the playground, and suck up to him.

Mortgages

“Mortgages should come with a public health warning because the struggle to keep up with payments is making millions of people sick, said the British Medical Association yesterday” (Times, 7 May). “Many who fall behind with their mortgage payments become so fearful of losing their home that they drink and smoke too much, their relationships break down and they even have more car crashes because they are so preoccupied, one contributor to the BMA report, Housing and Health, said.” While repossession is at its lowest level for years – “only” about a hundred people a week are still losing their homes – any slump in the housing market could trigger “a return to the traumas of the 1990s, when more than a million people had their homes repossessed”.

A sad commentary on what was sold to us as a “home-owning democracy”. But in every way, the present organization of society inevitably involves money worries for millions. Capitalism means the wages system, and that means that those who have to work for their living are dependent on their next pay-packet to buy in the necessary supplies – or sometimes, just to pay the interest on their credit cards, overdrafts, mortgages and all the other borrowings that capitalism imposes on its workers. The “struggle to keep up with payments”, which makes “millions of people sick”, will continue until capitalism makes enough of us sick to bring about a different system. It isn’t only mortgages that need a public health warning: it’s capitalism.

Property is death

People aren’t only made sick by capitalism, they die from it, as you can see in all the many conflicts going on at this moment round the world. But private property kills on a small scale, as well as a large. At a pawnbroker’s shop in north London, a Securitas cash box was being delivered recently. To keep this instalment of private property sacrosanct, the box was fitted with “a small explosive device”, which “released smoke and dye” if anyone tampered with the box (Times, 7 May). As a further protection, the box was handed over through an airlock. Two women assistants were in the staff-only part of the shop, where the valuables were protected “by barred windows and a locked fire exit which needed four keys to open it”. The explosive device malfunctioned, setting fire to the premises, but the women could not get through the locks and bars which surrounded them, and they both died. Firefighters couldn’t get in soon enough. The brother of one of the women called her on his mobile phone, and had to listen helplessly as she choked to death. The inquest jury were told how one of the women put her hand through the bars of the customer’s window, and a fireman held her hand until she died.

Why do people go on supporting capitalism?

Well endowed (2002)

From the June 2002 issue of the Socialist Standard

The market system continues to demonstrate its incapacity to efficiently provide people with a home. On 15 May the media was filled with reports of a crisis in endowment mortgages. Some 3.6 million people in the UK are facing a shortfall in their home mortgages, out of the some 6 million policy holders.

Endowment mortgages are a way of paying a mortgage by investing in the stock exchange. They enable policy holders to reduce their monthly repayment flow by only paying off the interest, while their policy matures in stock market investments to repay the original advance in a lump sum at the end of the loan period. Effectively, they allow people to buy houses by gambling on the state of the stock exchange.

These mortgages were very popular in the 1980s, a period when the Government were lauding the stock exchange and encouraging people to become home-owners. Poor results on the stock exchange, after the fallout from the speculative dot com bubble, have seen returns on endowments dwindle. A sample 25-year endowment maturing in 2001 would have fetched £93,145, whereas one maturing in 2002 would fetch some £77,096, a shortfall of £16,049.

Although the mortgage holders have benefited from recent low interest rates, many will still face a distressing and uncomfortable time finding the necessary money to keep a roof over their heads. Many are calling for investigations into possible mis-selling of endowment mortgages, with lenders being accused of playing down the risks involved in the policies.

Corporate perfidy is at most a symptom of the problem. As the master class continues to try to shape society into its own image, it encourages the workers to try to behave like capitalists: investing the resources they have to live on into the market casino. From their perspective, this both binds the workers to the interests of capital, and provides a source of money to manipulate for profit.

Without the reserves of resources that capitalists themselves have, though, workers leave their necessities of life exposed to the vagaries of competition. Where a capitalist just sees the magnitude of their fortune shrink, workers see their money becoming insufficient to maintain them. The distinction between the exchange value of money and its use value threatens the very homes of millions of workers, and very firmly sets out the barrier between the interests

Pik Smeet

Your home as ‘fictitious’ capital (2024)

From the April 2024 issue of the Socialist Standard

In more recent times the opportunities to ‘make money from money’, so to speak, have expanded for the ordinary person. For example, the 1980 Housing Act introduced by the Thatcher government in the UK gave council house tenants the legal right to buy their council homes at a discounted price. This, combined with the introduction of mortgage interest relief, significantly impacted on the property market and widened popular participation in it. Around the time of the First World War three-quarters of the UK population rented their homes; by the early 2000s the situation had reversed with over 70 percent of the population nominally owning their homes – although the percentage has since declined due to the increasing difficulty of would-be first time buyers to get on the housing ladder.

While rising house prices might put the idea of owning a home beyond the reach of some would-be first time buyers it is, paradoxically precisely these rising house prices that make the idea of buying a house such a financially attractive proposition. While house prices as a multiple of average earnings fell during the late nineteenth century (with the result that buying was not seen as a worthwhile investment, which explains why rented accommodation was such a widespread phenomenon in early twentieth-century Britain), that trend has reversed in the late twentieth and early twenty-first centuries, boosted by the relative stagnation in wages. The benefit of owning a home, steadily appreciating in value, instead of paying ‘dead money’ for some over-priced rental property, is all too obvious.

A few people with the financial resources to engage in the ‘buy to let’ business might find themselves in the position where they can comfortably live off the rents of their tenants. However, for the vast majority who have purchased a home, renting it out is simply not an option. Even taking in lodgers would be impractical in many cases.

Consequently, most homeowners continue to depend absolutely on some form of paid work since, with home ownership, come financial commitments such as mortgage repayments. True, you might manage to sell your home and realise a capital gain (particularly if the property market is booming) but you still have to find somewhere else to live. It is this that makes the idea of treating one´s home as (fictitious) ‘capital’ – as some commentators do – somewhat problematic. You cannot be without a home since it is a basic human need (unlike other forms of fictitious capital).

If you do sell your house at a time when house prices are rising then you have the problem of having to pay more for some other house. On the other hand, as well as going up, prices can also come down as occasionally happens after a property boom. Having to sell your property in a slump could very well plunge you into dire financial difficulties that you may never recover from, financially speaking.

The above qualifications notwithstanding, it is nevertheless the case that a fairly large percentage of the working class do indeed engage in the speculative buying and selling of property at some point in their lives. Normally, the primary means of purchasing a property is via a loan (mortgage) from a bank. Bank loans (in this case for consumption as opposed to the production of commodities) are, as we saw, a classic example of fictitious capital.

In the past, at least in the UK, it was building societies (or ‘mutuals’ controlled by their members) that had a virtual monopoly in the issuance of mortgages. This changed in a big way in the 1980s with banks entering the mortgage market and offering a variety of different mortgages to suit different customers. Mortgage loans as a percentage of total bank loans have subsequently grown very significantly.

These are ‘secured’ loans inasmuch as your home serves as collateral, meaning that if you fail to keep up with your mortgage repayments the bank can take possession of your home. The same is true of car loans. However, there are also various kinds of unsecured loans where collateral is not required, such as personal loans, student loans and credit cards. These are riskier from the standpoint of the lender and for that reason sometimes attract a higher rate of interest. With the growth in both the volume and diversity of consumer debt the exposure of working people to the machinations of fictitious capital has increased greatly in recent years.

However, when we are talking about fictitious capital what more likely springs to mind is not so much our monthly mortgage repayments or our credit card bills but an institution like the stock market. Most ordinary people would have little, if any, direct experience of dabbling in the buying and selling of shares. Essentially the stock market is the domain of the wealthy private investor or else (and to an increasing extent), institutional investors.

The stupendous wealth that can be made on the stock market rams home the point, again and again, that it is not through hard work that one can become incredibly wealthy. This breeds a kind of cynicism towards work born out of the belief that what is officially supposed to motivate us to work is precisely the lure of money. If we go along with that belief, how could we not feel cynical when we see fortunes being made by others who don’t have to lift a finger to do it? When we struggle to pay the bills on the meagre wages we earn it is perhaps understandable that some might feel resentment.

Sometimes, this can be misconstrued as ‘envy’. However, the ‘politics of envy’, as it is called, is an ideological snare and a trap for the unwary. To ‘envy’ someone is to covet what they have and, indeed, to want to become like them (and hence to perpetuate the very system they benefit from). However, it is structurally impossible, not to say nonsensical, for the majority in a capitalist society to find themselves in the same economic position as the minority of being able to live off the unearned income that the majority, after all, provides them with. It is not envy that this majority should feel but, rather, outrage.

Robin Cox

The Home Owners (1956)

From the September 1956 issue of the Socialist Standard

(Reproduced from the “Western Socialist," Boston Massachusetts, May-June, 1956).

This is the saga of American home-ownership and American home-owners—of that not inconsiderable percentage of theoretical homeowners in the United States who are a part of the working-class. Let us begin with a scientific generalization.

The working-class, we Socialists maintain, is a propertyless class which owns nothing but its labour-power, its ability to produce. In exchange for this labour-power which the workers sell to the Capitalist class they receive back on the average enough of the necessities and the luxuries to keep them producing and reproducing themselves as a class. Home-ownership is certainly not to be figured as a part of the cost of producing and reproducing labour-power.

In the face of appearances, however, this would seem to be rather a bumptious statement insofar as the American working-class is concerned. There is, without doubt, a mountain of paper in the form of deeds and titles of ownership to homes of all types which might be found in the possession of American working -people and the ledgers in the nation's registries of deeds will bear this out. On the other hand, however, there is another mountain of paper in the form of first and second mortgages. liens and attachments and so forth reposing in the nation's banks and finance companies which fairly well serves to uphold the validity of the Socialist claim and which exposes working-class home-ownership for what it is—an illusion.

The “Propertied” Working Class

Since the introduction of the G.I. Bill of Rights which arose out of World War II, nominal home-ownership among the American workers soared. Despite die astronomical heights to which the price of property rose since that conflict, it became possible for a G.I. to purchase a home with a down-payment which varied from nothing at all to a mere 5 per cent. of the selling price. The banks would put up a portion of the money and the Government through its Veterans' Administration would guarantee the rest of it.[1] Nor does the fact that the G.I Bill does not extend its benefits to non-G.I.'s excepting in the case of the numerous instances of artful transfer of such privileges by G.I.'s to others, exclude another large portion of the working-class from the ranks of home-owners. For in many cases at least a large part of a down-payment can be raised by the “buyer” by means of a second mortgage—in most cases a short term loan with a long rate of interest

And so we find that a large percentage of the American working class has become and is becoming “owners” of real estate, even landlords. Just how little average equity the worker has in his home is another matter, however, which does not need too much research to unearth. First of all, we have the first mortgage. An article in the Boston Sunday Globe for June 10, '56 tells us that there is an “unprecedented debt of nearly $90 billions on home mortgages . . ." This mortgage debt, we are informed, “is being repaid by American families with remarkably low rates of fore-closures." Be this as it may, the picture looks something like this:

Let us say our worker buys a home for $10,000 (a pretty shabby sort of deal at today's market) and that he gets his loan at 4½% interest. If he pays $60.00 per month for principle and interest it will take him 21 years and 11 months to pay off the loan.[2] But this is not the whole story by any means, for the city or town gets its cut and in most cases these taxes are added to the monthly payments making the total in this case more like $80.00 per, rather than $60.00, and which also means that the $10,000 home has within the span of a typical 20-year mortgage, just about doubled itself in cost. 

It never rains but it pours

“The course of true love never runs smooth,” they tell us, nor for that matter is the course of a 20-year mortgage any smoother. A home, like its owners, does not get any younger as time goes on. In fact, figures show that almost 50% of them are at least as old if not older than the workers who buy them and in the years to follow there is much to be done in the way of repair. This section is not required reading for those workers who are able, after a hard day's labour at the shop or where have you, to repair or replace the roof, paint the sides, instal or repair the plumbing, heating equipment or electric wiring, build a fence, grow and trim a hedge, etc. This applies rather to the overwhelming majority of our fellow-worker home-owners who are too exhausted, or too inexperienced to do the work of a dozen craftsmen in their spare time. These make the grist for the Home Improvement milk with their "easy payment” plans backed by the Government's Federal Housing Authority or by various Home Improvement Plans sponsored by individual banks. These can tie them up for periods up to five years in amounts ranging up to $2,500 plus interest. Providing, of course, one's credit still warrants such a loan. For those who have slipped and have fallen by the way-side, credit-wise, there are the second mortgage and other types of friendly finance companies which ask no more than an arm and a leg in return for the loan.

In the face of the continuing debt which confronts the worker “home-owner” in the years his mortgage has to run, fortunate indeed is the fellow who does not lose his status and revert to that of tenant in name as well as tenant in fact. In recent years there have been a fairly insignificant number of foreclosures—insignificant when compared with the vast increase in nominal home-ownership. According to the Statistical Abstract of the U.S. for 1955, pg. 457, estimated non-farm real estate foreclosures for continental U.S. ranged from 68,100 in 1926 to a high of 252,000 in 1933 and a low of 10,453 in 1946. The figure for 1954 was 26,211.

This data was taken from approximately 1,400 counties, cities, townships, or other governmental divisions. It represents the number of properties acquired through foreclosure proceedings but excludes voluntary deeds of sale in lieu of foreclosures or defaults on real estate contracts. And this last item is by no means inconsiderable. Anyone who has engaged in the so-called art of salesmanship in the home improvement field has become cognizant of the fact that a not insignificant percentage of "home-owners” become delinquent in their mortgage payments or their payments on the roof, side wall or combination storm and screen windows, with the result that they are either foreclosed or jump clear with a few dollars fa lieu of foreclosure.

That so-called Common Stake

The nominal home-ownership by American workers will no doubt continue and even to expand as time goes on. To a considerable extent and especially in the case of that large number of workers who "own” city tenements, they in effect act as rent-collectors and maintenance-men for the banks that hold the mortgage. It certainly works fine for the Capitalist class to have a working population, a large part of which has such a tangible stake in the nation as a real-estate deed even if the balance on the mortgages, the outstanding F.H.A’s, attachments and liens just about obviate the tide. Anything that adds to the feeling of a common bond between the workers and their masters is a wonderful thing—for the masters; especially when it costs them nothing. To the extent that such "ownership” exists the illusion helps to hold back worker class-consciousness. The working-class home-owner is less likely to favour strong action against his employers in a strike for example. His 20-year mortgage and his F.H.A. notes loom darkly before him and help influence his actions.

This sort of thing, however, can but help to hold back the tide. It can not prevent it from ultimately sweeping in to engulf the Capitalist system, to finally relegate it to the history of past societies. The vast majority of workers, even in America, may aspire to but will not be able to attain even the spurious type of home ownership we have been discussing. Capitalism is a system which provides real property ownership only for the Capitalist class.

Harry Morrison

[1] Last year 30% of all houses were bought with V. A. guaranteed private loans, although out of a total of 14.5 million G.I.'s of World War II more than 10 millions have taken advantage of this feature. (National Real Estate and Building Journal, May, 1956.)

[2] From a table published by “Changing Times" for February, 1956.

House price blues (1989)

From the February 1989 issue of the Socialist Standard

In the first few months of this year millions of workers will have to cut their personal spending in order to pay more interest on their mortgages. In other words, their standard of living will fall. All will have to cut back on food and holidays, some will even lose their homes. This, however, doesn't worry Nigel Lawson. As Chancellor he has not only welcomed this situation but claimed responsibility for it. While this is merely empty boasting (governments can't control interest rates at will), the fact that he should want to cut back on consumption illustrates that capitalism is not a system geared to meeting people's needs.

Lawson says he has raised interest rates (the price paid for borrowing money) in order to combat inflation. In fact it is the other way around: he has raised interest rates because of rising inflation. The capitalist institutions that lend money to the government are interested in what is accurately called the "real" rate of interest — the return they get after rising prices have been taken into account. So, if the general price level is rising, the government has to offer a higher nominal rate of interest to those lending it money, at least if it wants to maintain its level of borrowing.

The price level has been rising in Britain over the past year, partly due to the government continuing to inflate the currency by printing too much money but also because of the increased level of activity as the economy moves slowly out of the stagnation phase of the capitalist business cycle. Hence the repeated rises in the minimum lending rate (what used to called the Bank Rate) over the past year, culminating at 13 per cent last November.

Building societies are financial institutions which, like banks, survive by borrowing money at one rate of interest and then re-lending it at a higher rate. This means that when the general rate of interest goes up building societies, being no more able to “create credit" than the banks, are obliged to raise the rate of interest they pay those who lend them money (their depositors) and the rate they charge those who borrow from them. As their name suggests, building societies specialise in long-term loans — of twenty, twenty-five years — to house buyers. They operate by lending people the money to buy a house and then requiring them to mortgage it to them as security against repayment of the loan. In law this means that they become the owner of the house, although the person taking out the mortgage retains full occupation rights as long as he or she continues to repay the loan.

So, when we are told in a recent government publication, Britain: An Official Handbook, that at the end of 1986 there were more than 14 million owner-occupied dwellings in Britain, this is not strictly true. Those still paying off their mortgage — some 7.5 million — are only occupiers, not owner-occupiers; they don't become owners until they have repaid in full and with interest their debt to the building society. It is only after a lifetime of being in debt and occupying a house belonging to a building society that they finally attain the lofty status of "property owner", fit citizens of Thatcher's “property-owning democracy". In the meantime their position remains insecure. If ever they fail to keep up their payments the building society will evict them from its house and sell it to recover the amount of the loan, a fate suffered by tens of thousands of people each year and which can now be expected to increase. They also remain at the mercy of rises in the rate of interest, which the government can cynically welcome as a way of making them cut back on their personal consumption.

Since coming to power in 1979 Thatcher has pursued a policy of encouraging people to become homeowners, as part of her plan to eliminate Labour party-type reformism ("destroying socialism", as she misleadingly puts it). She hopes that people who own their own homes will believe they have sufficient a stake in the country to abandon traditional working class demands for higher wages and salaries and better state provision for health and welfare; that in fact they will oppose such demands and vote for the Tories for ever. For her, capitalist property will be more secure if surrounded by a mass of small house owners.

While a few social climbers may have swallowed Tory ideology, Thatcher's policy has been popular for quite other reasons. Many people want to own their own home simply because it gives them some control over part of their lives. They don't like to have to ask permission of a landlord, whenever they wish to modify or improve their home; they want to be able freely to exercise the creativity denied them at work.

Even if all workers owned their own homes, capitalist society would remain class-divided: the majority forced to live by selling their ability to work for a wage or salary and a minority of owners of the means of production living off unearned income in the form of rent, interest or profit. When socialists talk about inequality of property ownership being the basis of capitalist society in Britain we mean ownership of the means of production, of land, raw materials, factories, machines and other instruments for producing wealth. Owner-occupied houses are not means of production; they are not, and cannot, be used to produce more wealth. In this sense they fall into the same category as cars, washing machines and other household goods; they are consumer goods, means of consumption — workers have to consume accommodation, be it owned, mortgaged or rented, in order to keep themselves fit to work. Homeowners, therefore, are not capitalists and neither do they have any interests in common with capitalists.

This important distinction between property in means of consumption (houses, cars, household goods) and property in means of production, or capitalist property, is lost in the statistics of property ownership published from time to time. Even so, these figures show a considerable inequality: in Britain the top 1 per cent own 23 per cent of "accumulated wealth". This means that if property in means of consumption is taken out of the figures the level of inequality is far greater. Figures for West Germany in 1969. for instance, showed that while 1.7 per cent of private households owned about 35 per cent of "total private wealth", they owned 70 per cent of "private wealth invested in production". The proportions in Britain will be similar. Owners of capitalist property are, quite literally, in a different class from owners of means of consumption. To gain entry into this class you need to own a lot more than your home.

Besides, owning your own home in no way frees you from having to go out and sell your ability to work for a wage or salary in order to live. Workers who own, or who have mortgaged, their home have to sell themselves on the labour market just as much as workers who live in council houses or private rented accommodation. Nor, as the recent rises in mortgage rates shows, does it free you from the financial problems inextricably associated with being a wage and salary earner in capitalist society. “MORTGAGE BURDEN TURNS YOUNG INTO NEW PAUPERS" read the headline of a recent article in The Times (31 December) which featured a young couple in Hertford who had bought and mortgaged a home (a one-bedroomed maisonette, or sort of glorified Portakabin) in July. Their first monthly payment had been £360. From January they were going to have to pay £460 a month, leaving them just £55 a week between them for personal spending (food, car, gas. electricity, telephone).

Homeowners remain non-owners of the means of production and so remain members of the working class, with the same interests as wage and salary earners have always had under capitalism: to establish a system based on the common ownership and democratic control of the means of production and to press, while capitalism lasts, for higher wages and salaries. Thatcher has got it wrong. Home ownership does not give workers an interest in the continuation of capitalism.

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

Housing crisis 1984 (1984)

From the June 1984 issue of the Socialist Standard

In a previous article we saw that recent government housing policies have sought to make council tenancy the residual tenancy category, thus giving it the same stigma as the dole. However, below the council tenant there is a significant number of workers, many of them small family groupings, such as single parent families and young newlyweds with perhaps one child; others are immigrants suffering discrimination and ostracism. The present stock of council houses have quite a high proportion with three bedrooms and it is “inefficient" to place these small families there. While attempts to enforce minimum standards tend to be defeated by recurring drives to reduce “public" spending, when they are followed they can aggravate this “problem”. This happened to a certain extent under the 1945-51 Labour government.

The result is that these groups are thrown onto what is left of private rental. It also leads to the standard of this accommodation being well below that of council housing, 68.5 per cent being built before 1914 as against 3.7 per cent of the “public” sector and 30 per cent of “owner-occupied" (J.R. Short, The Post War Experience: Housing in Britain. University Paperbacks. 1982). While the standard of “owner-occupied" houses, taken as a whole, is above that of council accommodation, significant exceptions are developing, mainly in inner city areas. Here many older private sector houses have been abandoned as these areas have depopulated and the emphasis of housing policy has shifted from clearance to renovation. Demand for these has been particularly strong among immigrants, particularly Asians.

In the earlier article we said that we would use the term "owner-occupier" in its current sense, even though it lumps together capitalists with those who arc really anything but owners, having in some cases not one but two or even three mortgages to repay. On this topic Martin Pawley (House Ownership, The Architectural Press. London, 1978) has an unusual viewpoint:

  Compared to the property owners of history we might he tempted to suppose that today's owner occupier is hardly a property owner at all. In contrast to the great estates of the past, his property is rarely handed on from father to son and indeed on average remains in his hands for only five or six years before being exchanged for something better. The size of his possession too leaves something to be desired; both dwelling and plot of land being so small that the poorest yeoman of the Feudal era disposed of greater estates. Furthermore the triumph of the flexible interest mortgage means that his wealth is dependent on the vagaries of interest rates and employment: his home only being a castle to the extent that his credit card is a shield. Yet even this uncertainty has historical parallels: the Feudal knight or farmer enjoyed rights over his fiefdom only so long as his landlord could (with his compulsory aid) defend it himself. During the Wars of the Roses . . . numerous estates were confiscated and bestowed on others, only to be confiscated again according to the ebb and flow of advantage during the struggle . . . Like the modern mortgage holder the medieval land-owner had no absolute title to his property, only certain rights which a run of adverse circumstances could remove altogether.

The previous article also touched on the discrimination applied by the building societies in allocating mortgages. In their efforts to ensure that their money is safely invested they inevitably tend to make the largest loans to those least in need. In order to reduce expenditure on “public” housing, governments have introduced schemes to get round these mortgage restrictions, one of which gives powers to local authorities to enter the mortgage business themselves. In 1971 the Heath government laid down explicit guidelines on who these loans could be made to. As easier terms on initial deposit mean larger repayments, these dictates illustrate the difficulties faced by lower paid workers. Out of seven groups specified the following two are specially significant (quoted from Short op. cit.): (a) Applicants who are homeless, threatened with homelessness or living in overcrowded or unhealthy conditions, (b) Applicants who wish to buy older or smaller property but who are unlikely to get a commercial mortgage". It might have been expected that these would have been found council housing in the “residual tenure" category. And of course few workers “wish" to live in old small dwellings; they are forced to settle for them because that is all they can afford.

For workers with some measure of choice there are a few advantages to owner-occupation. For those who have been able to stay in one place for some time, repayments on a house “bought" 15 years ago for £4,500, but selling today at £22,000, would only be about £7.50 a week. This situation however can only continue if government policies of inflating the currency continue. In these cases the burden has been shifted onto first time buyers saddled with inflated prices and high rates of interests.

Tax relief on mortgage repayments was until recently considered a great benefit of the mortgage system. In fact the workers do not pay tax. The price of their labour power as a wage or salary reflects the cost of their means of subsistence. Of necessity it is the take-home pay which corresponds to this price so that any tax deduction is in reality a charge on the employer, not the worker. The increase in house prices since the war is again something which may not continue. Taking advantage of the situation is not easy, for the workers must have somewhere to live. Older workers whose children have left home can sometimes sell and take smaller accommodation. For most however any gain would be at the expense of moving into an inferior dwelling, or alternatively subletting rooms, a common practice among tenants also. High house prices reflect a shortage of cheaper working class dwellings which the building interests will be reluctant to change for fear of lowering prices. Housing is a commodity produced to make profits, not because workers require a roof over their heads.

Further evidence of the plight of the low paid is given by Mary Smith (Guide to Housing. Housing Trust Centre. London, 1977). The proportion of first time buyers has been falling for some time, from 63 per cent in 1969 to 47 per cent in 1975. More "owners" are now mortgagees, 58 per cent in 1975 against 52 percent in 1965, with correspondingly fewer outright owners. (Private landlords are included in this assessment.) In 1976 the number of mortgages allocated to first time buyers of new houses had fallen to 9 per cent.

These increasing inequalities within the mortgage paying bracket are illustrated by information given by Short (op. cit.) on the distribution of what he calls “economically inactive household heads”. Such a hybrid term encompasses capitalists, retired workers and the unemployed, a type of confusion-mongering which cannot be entirely accidental. We must therefore use Short's information with some care. First we find that over Britain as a whole 33 per cent of household heads are classed as inactive. However, among the “owner occupiers" only 4 per cent of those paying off mortgages come into this category, but as many as 57 per cent of outright owners qualify. The message here is pretty clear: attempted purchase is for workers who have steady jobs. If unemployment strikes the worker will probably have to sell. In contrast, outright owners comprise mainly capitalists and retired workers. From this we see again that most workers who do become outright owners are near retiring age, and retirement usually means a drop in income.

Just as interesting are statistics given by Short of housing assets as a proportion of gross personal wealth. Housing assets are calculated by subtracting outstanding mortgage repayments from the market price. The following table, which is based on 1980 figures, compares the percentage of housing assets and company securities for gross personal wealth up to £200,000.

This table shows that housing assets are a small portion for the impecunious mortgage repayer. Then as wealth increases so the value of the house increases considerably more, leading to more under-occupation of good quality housing when measured against human needs. When we come to the mansions of the very rich, we find that as a proportion of the whole they are actually less significant. Here the emphasis is on stocks and shares, perhaps a few works of art. with less importance attached nowadays to conspicuous consumption in housing.

Where workers are able to make a choice between tenancy and the mortgage game it is of little concern what they decide, but political actions aimed at altering tenure distributions, in whatever direction, are an entirely different matter. On an individual level, workers "buying" a home, preoccupied with DIY decorations (or to quote Pawley, with “balancing car port against loft conversion against kitchen modernisation") may be turning their attention from the class struggle. Socialist workers, whatever their form of accommodation, realise their subservient position and the similar plight of the rest of their class, irrespective of the type of dwellings they inhabit. Their attention cannot be distracted by the superficial. but is concentrated instead on how to end the housing problem once and for all.

E C Edge

Debt is a four-letter word (1990)

From the December 1990 issue of the Socialist Standard

In a speech which did not dominate the discussion in pubs and work canteens the Governor of the Bank of England recently revealed how anxious and angry he is about the state of the nation.

"Some people", he moaned, "are undoubtedly in difficult situations . . . they feel vulnerable and confused . . . The distress suffered by individuals and their families is obviously a matter of concern for all of us . . ." He was not talking about impoverished bankers with their begging bowls obstructing the free passage in the City of London nor about pathetic landowners developing claustrophobic tendencies when they are shut up in their stately homes with only a few thousand acres around them. What stimulates the anxiety of the Governor is the growth of what he calls consumer credit, but which others might call living on tick, which he says has doubled over the last ten years:

  Thrift has gone out of fashion. Indeed the all-to-prevalent outlook on life has become I want it, and I want it now.

These sentiments would have been well received in Downing Street, by a prime minister who has such fond memories of her father's dour parsimony and whose professed ambition is to run British capitalism like a thrifty housewife who never gets in debt. The only snag is that the credit boom has happened while the thrifty housewife has been in charge, even if the Chancellor who did so much to help her is now increasingly denounced as a reckless wastrel. It is not new for a moral issue to be made of debt: this governments contribution to this particular piece of hypocrisy has been to link it with what it has called the dependency culture—of single mothers passing their responsibilities on to the state, of scroungers battening on to a naively generous Department of Social Security, of hypochondriacs absorbing almost the entire resources of the National Health Service.

Tally men and credit cards

It is not convenient to this theory that people who rely on earning a wage for their living can hardly avoid getting into debt and that it has been like this for a long time. A lot of today's consumer credit would once have been supplied by the less exotically named tallyman with his bicycle and his mini-ledger and through the "cheques"—credit vouchers—often sold by churches who took a commission on the repayment by instalments. Now these same functions are performed through credit cards, mail order, HP agreements, bank overdrafts and the like. This is not to mention one of the most common forms of modern debt—the mortgage which, according to the Governor, has grown even faster than the other types of credit and which has widely replaced rental as the most available method for a worker to get somewhere to live. At the lower end of the poverty scale, this government has recently created a new tribe of debtors in the social security claimants who are now forced to grovel for a loan from the DSS if they need things like clothes or furniture, where before they were likely to get an outright grant.

But this nation apparently seething with debtors is not a happy place where everyone is getting everything they want now because they can't be bothered to save for it, through the benevolence of the money-lending institutions. A survey of the situation in 1989 carried out by the Policy Studies Institute, Credit and Debt in Britain, found that more than ten per cent of families in the UK were is arrears, some of them with multiple problem debts. The average arrears amounted to £600. which may not be much to the Governor of the Bank of England but is a mountainous sum to a single parent family or someone who is unemployed. In these days of the mortgaged home, rent arrears remain a serious problem; the survey said that over a million families were in trouble over rent last year.

There is no happier news about mortgages, which have long been fondly advertised as the way to a secure home. "Mortgage misery" is a phrase which has been overworking in the headlines of the popular press lately. It encapsulates the kind of evidence published in August by the Council of Mortgage Lenders—that the number of mortgages in arrears of six to twelve months was 95,030 in the first six months of 1990. compared to 58,040 in the same period last year. Mortgages more than 12 months behind rose from 12,030 to 18,750. Those friendly banks and building societies, who have put so much effort into assuring us that their main concern is to help us get a roof over our heads, have responded to this situation by taking the roof back, with the rest of the house. Repossession cases numbered 7,390 in the last half of 1989; in the first half of this year they reached 14,390—almost double. A spokesman for Barclays Bank said (he was trying to be helpful). "Anyone who is having difficulties shouldn't just ignore them . . ." as if it were possible to ignore the trauma of repossession, of being homeless. "We've advised him to go the the council's homeless person's unit", said a local Citizen's Advice Bureau of one man with a pregnant wife and two children who owes £3,500 to a building society. "He’ll have to prove real financial and personal difficulty before they rehouse him”.

Capitalist debts

At the same time we have been hearing of many other cases of people who, whatever the Governor of the Bank of England may think, wanted something now and were willing to get into debt for it. There is a crucial difference between these people and those who fall behind with the mortgage, or can't pay for the fridge they got on HP, or have to apply for a loan from the DSS and that is the scale of what might be called their operations. The Parkfield group, which had investments in engineering, property and entertainments, recently crashed owing £288 million of which £27 million is unlikely ever to be repaid. News Corporation, the huge media conglomerate controlled by Rupert Murdoch whose British papers have worked so hard to keep Thatcher in power and in so many other ways to titillate working-class delusions. has a "long-term” debt of A$7.58 billion (£3.22 billion). The vast and complex empire of Robert Maxwell, who was once a Labour MP and who is still extravagant enough to call himself a socialist, has debts of over £1.5 billion. It is the same story with other groups whose reputations rest on the charisma—or should it be the media hype associated with one person such as Brent Walker and Saatchi and Saatchi. When capitalism was in boom these people were revered as super intellects who had done the impossible—they had produced infinite profitability even if the proceeds were not available to all those readers of the Sun and the Mirror who so admired them. Sales went on soaring and the groups snapped up one expansionary deal after another. It seemed it would never end.

That was all very well as long as profits kept rising and interest rates were low but as the situation changed the extravagant debts of these groups put them under a lot of pressure. Many famous company names—Coloroll. British and Commonwealth—were extinguished while others—Laura Ashley—struggled on. Among the most spectacular of recent struggles has been Polly Peck whose chairman and chief executive, Asil Nadir, has been under scrutiny by the Serious Frauds Office. Polly Peck controlled over a third of the press in Turkey, it owned the Sansui hi-fi company and Russell Hobbs Kettles. Most famously it also owned Del Monte, the canned fruit firm which ran those TV ads in which Mediterranean peasants waited anxiously in the early morning sun for the Man from Del Monte to sample the fruit and give the go-ahead for it to be picked for canning . . . Polly Peck borrowed about £570 million to buy Del Monte: its total debts were estimated at around £1.3 billion and Asil Nadir anxiously grovelled to the Turkish government to help rescue him before disaster, not to mention the boys from the SFO, overtook him.

These debts put into proportion the problems of mortgage, HP and rent arrears. The working class, who depend on employment for their living, need to borrow money—sometimes to survive, sometimes to buy something which the Governor of the Bank of England and Margaret Thatcher's father would no doubt regard as a luxury like a TV set or a washing machine. At one time they did this through "cheques" or tallymen or the pawnbrokers who lent small amounts on the flimsiest of security such as a man's best (and only) suit. There was always a certain stigma attached to these methods—tallymen did not advertise themselves and there was nothing brazen in the manner of those who slipped into the pawnbrokers on a Monday. But this does not apply to credit cards or bank overdrafts or mortgages: in most cases these are seen as evidence that a worker has arrived at some sort of economic maturity: they have solved the problem of poverty and can read the financial press with the same interest as a Maxwell or a Nadir. Not many people regard themselves as members of the working class when in the company of their Flexible Friend.

But capitalism can wipe out delusions as fast as it promotes them. Facing reality can be a painful business, for the worker whose dream of a secure home turns into a nightmare of council bed-and-breakfast accommodation and possibly for the tycoon whose financial juggling act falls into disarray and ends up in bankruptcy. Except that when this happens it usually leaves them down to their last few million, their last few thousand acres, their last private jet and yacht. It is the class who end up in homeless families accommodation who make all these things, who produce the profits which finance the machinations of people like Murdoch and Nadir but who suffer the anguish and the humiliations of poverty. And that will not Do Very Nicely.

Ivan

Castles in the air (1986)

Illustration by George Meddemmen

From the April 1986 issue of the Socialist Standard

Under capitalism the housing problem has been a constant feature of working-class life. Although consecutive British governments have enacted numerous reforms, overcrowding. shortages, slum-living and homelessness persist. The present government's 1980 Housing Act sought to broaden the scope of home-ownership by allowing council tenants the "right to buy" local authority-owned housing, in the belief that a shift of tenure offered the best solution. So what have been the results so far?

There is a popular image of owner-occupiers as a privileged minority enjoying a number of advantages denied to tenants of rented accommodation, such as freedom of choice, independence, security of tenure, high-quality housing and asset growth. In addition, the financial carrot of tax subsidies such as mortgage interest relief helped make owner-occupation a seemingly attractive proposition.

The remarkable growth of the owner-occupied sector — from 54.7 per cent in 1983 to 60.2 per cent in 1985 and a projected 67.9 per cent in 1991 — seemed to justify the Conservatives' policy on council house sales, which was popular with the electorate. Political pundits have in fact pinpointed the 1980 Act as a major factor in the Conservatives' electoral successes in recent years and Labour traditionally the party of council housing has taken note of this and reversed its policy.

Despite its apparent popularity, however, the growth of owner-occupation has not been accompanied by an easing of workers housing problems. In fact for many working-class households owner-occupation has created more problems than it has solved. Entry into the owner-occupied sector is no guarantee against squalor and the responsibilities of maintenance and repair, coupled with the pressures of regular mortgage repayments. place an enormous burden on those dependent exclusively on wages and salaries for the upkeep of their house. In this context security of tenure is an illusion and the threat of eviction and homelessness is ever present.

Contrary to popular belief, most owner-occupiers do not actually own their houses. Their right of tenure is secured only through loans which they have to repay with interest to the lending institution — usually a building society but increasingly since the 1980 Act to local authorities. The title deeds to the property are held by the lending authority until the mortgage has been fully repaid, which means that over the life-time of the mortgage — which can be as long as 30 years the owner-occupier's status is akin to that of a tenant but also bearing all the responsibilities of repair and maintenance.

If owner-occupiers get too much into arrears the loan-making body can apply for a court order to gain possession of the property. A recent report in the National Westminster Bank Quarterly Review shows that as owner-occupation grows so too does the problem of mortgage arrears and repossession. It points out that "although increasing numbers of people are entering owner-occupation. increasing numbers are being forced out" (August 1985). The 1980 edition of Judicial Statistics showed that there were 27,105 mortgage possession actions in County Courts in England and Wales. By 1983 this figure had reached 43,274, an increase of 61 per cent. This nevertheless tends to underestimate the problem of mortgage default because most of those in arrears do not figure in possession actions. Many people resolve the problem in other ways: some borrow money to pay off the arrears (even though this only delays the date of court action); others sell their house to meet their debts and either move down market or into rented accommodation, while some simply hand over the key of the property to the mortgagees.

Those forced to give up their houses either voluntarily or as a result of a court order often face difficulties in securing other accommodation. A move to cheaper housing invariably means a move to a poorer area, with all the repercussions that may have for changing jobs (if this is possible) and schools and severing family and social connections. The move to rented accommodation is not, however, as easy as it appears. As the local authority housing stock dwindles the chances of ex-owner-occupiers being rehoused are slim — a problem which is aggravated by the rules many local authorities have which effectively exclude owner-occupiers from access to council houses and place them in low priority categories for rehousing. And as for the privately rented sector, this has shrunk so much that offers of accommodation are exceedingly rare or far too expensive for those priced out of owner-occupation.

So what are the causes of mortgage difficulty? Building societies grant mortgages on the basis of the size and stability of household income, and for members of the working class this means the wage or salary derived from the sale of their mental and physical energies to the capitalist class. The conditions of capitalist production determine both the amount and the availability of workers' incomes — if the capitalist class isn't trying to cut workers' wages to the absolute minimum in order to maximise profits then it is making workers unemployed to minimise losses. Ether way workers cannot win, a fact mirrored in the insecurity of their position as owner-occupiers.

The Building Society Fact Book (1985) attributes the upsurge in arrears and possessions to the sharp increase in unemployment and the consequent fall in wages and salaries. Two major reports — the National Consumer's Behind with the Mortgage and the Building Societies Associations Mortgage Repayments Difficulties — show that owner-occupation becomes unsustainable for those households which suffer an unexpected and long-term cut in earnings. This can be brought about by factors other than unemployment, such as sickness, pregnancy. industrial disputes, marital breakdown and death.

It follows, therefore, that owner-occupiers who want to maintain their homes and stave off the bailiffs must not get sick, pregnant, go on strike, get a divorce, be made redundant or die — a tall order for any member of the working class. In the circumstances of rising unemployment the pressure on owner-occupiers is enormous, but for low wage earners it is especially acute. Workers on low wages are highly vulnerable to sharp increases in housing costs or any reduction in their income, and even the slightest rise in mortgage rates can cause severe problems.

To encourage as many households as possible to take up owner-occupation, the government has also wielded the axe to council house expenditure programmes. This has meant that council house rents have risen sharply over the past few years while tax subsidies to owner-occupiers and various other incentive schemes (shared ownership, homesteading, mortgage guarantees and council house sales with large discounts on market values) have helped to cheapen the cost of house purchase. Given the choice between slum or near slum council housing and the seemingly lucrative financial incentives of house-buying, it is hardly surprising that opinion surveys indicate a huge demand for owner-occupation.

In recent years the concept of home-ownership has been sold to workers so relentlessly that the shabby reality of owner-occupation has been submerged beneath a barrage of misinformation. Workers should not accept the well-worn fallacy that there is something fundamentally different between rented and mortgage accommodation — that council housing is somehow "socialist" and owner-occupation "capitalist". The provision of both is determined by the conditions under which those who own the means of producing houses, the land, building materials and capital, can realise a profit. These people do not care whether their capital is used to produce council houses for rent or houses for sale in the private sector. Their goal is profit and nothing else.

Under capitalism the housing market determines both the quality and quantity of accommodation within the price range of the working class. Consequently, there is very little difference in house standards between owner-occupied housing and council accommodation — in fact, owner-occupiers are marginally worse off than council tenants in this sense. The recently published Duke of Edinburgh Inquiry into British Housing reveals that the state of repair of the average owner-occupied sector has fallen below that of the average council house. The former has, on average, a higher percentage of dwellings which are officially classified as unfit (4.7 per cent); lacking basic amenities such as an inside toilet (3.3 per cent); and requiring repairs of £7.000 or more (5.3 per cent) and £2,500 or more (21.3 per cent). Many workers simply cannot afford to carry out the maintenance and repairs required on their homes, a situation which has been exacerbated by the recent cuts in home-improvement grants. In some cases workers are sent on an endless trip to nowhere for what is basically a slum house; or worse still, making mortgage repayments on a house that has been demolished as a result of structural faults or subsidence. Their homes may have been lost or fallen into an uninhabitable state but their mortgages remain the same.

In the nineteenth century Engels made the following remarks about the housing problem:

 As long as a capitalist mode of production continues to exist it is folly to hope for an isolated settlement of the housing question or of any other social question affecting the lot of workers. The solution lies in the abolition of the capitalist mode of production and the appropriation of all the means of subsistence and instruments of labour by the working class itself

(The Housing Question)

During Engels’ time very few members of the working class could be described as owner-occupiers: the majority lived in rented accommodation. At present owner-occupation is the major form of house-tenure in Britain but the problems to which Engels was referring in The Housing Question are still with us. Homelessness rose by 6 per cent last year and the government is at present carrying out a full national survey which, experts believe, will reveal the true extent of the housing "crisis".

As long as profit takes precedence over human need the problem of housing will remain as an ineradicable feature of working-class life. The solution, therefore, lies in the abolition of capitalism nothing more, nothing less.

G. Davidson

Worker's Prosperity in 1961 (1961)

Watford, High Street 1961 (Photo credit, Francis Frith)

From the June 1961 issue of the Socialist Standard

The town of Watford, in Hertfordshire, is claimed by its Press to be one of the most prosperous in post-war Britain. One local weekly claims for it the distinction of being the second most prosperous town in this country—second after Coventry, in fact. Whether this held good after the motor car recession is not clear.

The sort of criteria applied are the number of vacancies at the local Labour Exchange, wage rates offered, enquiries for juveniles leaving schools. Income Tax returns, rents of shops, increase of population and, logically enough, price of house room either in rent or mortgage repayments. Unfortunately, this “prosperity” brings many unpleasant and disagreeable results.

In some ways, it is a miniature of what is happening on a national scale in Great Britain these days. A demand for labour raises its price. Higher wages bring workers from lower priced areas. And so Watford market resounds on Saturdays to the lilting song of the Celt, the guttural voices of the Clyde, the broad accents of the East Coast, and, to be sure, Mick and Pat, who never had it so good in “Ould Oireland.”. By the same token, a further 50,000 West Indians are coming to Britain this year, not as tourists looking at ruins,. but workers seeking jobs.

The employers, through their Government, can easily control this foreign emigration—turning it on, or off, as required, like a tap. They have always done so, as when Campbell Bannerman’s Liberal Government in 1906 boasted that any Jew landing at London docks with £15 in his possession might remain here, or when the successive American Governments at the turn of the century admitted emigrants by the million.

It is not quite so easy to keep them all at work once admitted, as all the historical cases show. The result of this in Watford is that Boom Town No. 2 is bursting at the seams. Although some employers, in their extremity, are making special provision for housing their workers, the unskilled (and paradoxically enough, even skilled building workers) are finding accommodation hard to get.

All this has prompted a local scribe to gently but firmly disillusion the large number of Easter Brides (and Grooms) about their chances of a roof in “prosperous” Watford. The local newshawk has taken the trouble to collect the facts.

So you want to rent a house? he says. Forget it!

“Mum and Dad never had the problem young couples in Watford today have to face. Before the war, there were houses galore for renting.” I haven’t let a house in years,” one agent told me. Even if one did come on to the market the rent would be at least £5 a week.”

So that’s out. There are a few houses—but they are all for sale only. Advances on mortgages are granted only to applicants in permanent and secure employment. ‘‘Watford’s terraced properties have priced themselves out of all proportion to their actual values. Houses built for £800 at the turn of the century are now offered for anything between £1,900 and £2,900, and they sell ” (Watford and West Herts' Post.)

The local writer goes on to say:

  To get the house, Bob [our hypothetical homebuilder] would have to afford weekly repayments of almost £5 a week, and sign a cheque for almost £400 to cover deposit and legal fees. . . .
  Another house advertised this week is a good semi-detached home in North Watford with garage space. The price: £3,750. . . . A £400 deposit would mean a loan of £3,350. . . . Repayments on this loan would work out at about £24 15s. a month. And how much would the legal and building society men want from you in fees ? Just under £100.
  What about interest on loans? That is the crippling thing these days. So many young Watford couples fail to realise just how much they will eventually pay for the house of their dreams. Borrowing only £2,500 on that terraced house Bob and Sylvia would, during those 20 years, repay the staggering total of £4,560. Almost double what they originally borrowed.
  With a loan of £3.500 and repayments of £24 a month, the couple, with this ball and chain firmly shackled to them, would pay back to the Building Society in 25 years the perspiring, hair-raising sum of £7.200. So do not think the Building Society is doing you a favour in lending you the money. They get it back with gold-plated interest.

What has our kindly press adviser to suggest? “If you are determined to live in this price-inflated piece of the country, then my advice to you is to live with Mum, live in two rooms, anywhere you can call home and save “ like blazes.”

But what are the harsh facts? Just as sellers seek the highest price—buyers chase the lowest, and there may be those who hope that new towns and estates will supply their need. Unfortunately for them the facts are these. At least 4,000,000 dwellings in this country today are over 75 years old. At least 10 million dwellings will be due for replacement in the next 25 years, to keep up with depreciation. That would require 400,000 houses a year. The Government post-war target was 300,000 a year. This has been dropped, and is not reaching anything like that figure today.

The present position is that slums are growing faster than rebuilding is taking place. Not only does this apply to slum dwellings, but to slum offices and slum industries as well . . . “At the present rate of building the indications are that the total of inadequately housed people will substantially increase over the next 25 years.” [Franklin Medhurst. Town and Country Planning Dept., Manchester University. Guardian. March 24th, 1961.]

The choice before the married worker is a very limited one. He can either pay up to £6 a week repayments, which includes £3 a week interest—or move further afield where rent and mortgages are lower. Then, if he wants the higher wages, he must pay fares, or run a car and spend time in monotonous travelling. Alternatively, he can live with Mum.

Horatio