The Battle For Our Homes

English: Betsham House, Tennis Street, Southwark Typical of the many London County Council tenement blocks in this part of the city. (Photo credit: Wikipedia)

The London Borough of Southwark, a council based in some of the richest and the poorest areas of inner London, has just sold a council house for £3,000,000. The Labour-run council has sold the dilapidated but listed 6 bedroom house (which is just 1 mile from the City) on the grounds that it could build 20 family council houses with the proceeds, as part of its initiative to build 11,000 new council homes in the borough. It’s certainly an ambitious policy: Southwark has  a population of 250,000 (roughly 100,000 households) so to increase the housing stock by 11% in a densely-built city requires creative thinking and vast financial resources. It would also clear the social housing waiting list altogether: something almost unheard of in the UK.

However, many local residents are dubious of Southwark’s plan, saying that it is more likely to use the £3,000,000 to ease budget cuts- Southwark has had its funding cut by one-third- than to reinvest in housing. They say that Southwark is going to asset-strip its housing portfolio, declaring the few valuable houses it still owns too costly to repair in order to flog them off to developers. It doesn’t help that the Labour administration has been flaky in the recent past in securing affordable housing in new building developments. That’s why local activists started squatting in the house in question on Sunday, determined to prevent the sale of what they term ‘useful’ council housing.

I am not hostile to squatters in general. In fact, I approve of them utilising empty houses, provided they do so responsibly. Indeed, squatters provide a service in discouraging property speculation, when the threat of Compulsory Purchase should (but doesn’t) prevent developers leaving homes empty. Alas, squatting of residential property was made a criminal offence last year. However, I’m not sure what the Southwark squatters hope to achieve by occupying a building that is already sold in an attempt to block the release of funds to build 20 new council homes- homes that would go to those who actually need them, unlike so-called “affordable housing” which costs 80% of market rates.

The fact is, Britain is in desperate need of new homes, for both council tenants and owner-occupiers. There are literally millions of families living in substandard, temporary or unaffordable homes because we simply haven’t got enough of them to meet demand. I estimate that, though the Labour Party’s policy of building one million is good, we ultimately need 3,000,000 new homes to solve the crisis- in other words, we need to increase our housing stock by the 11% that Southwark aims to do.

The cost need not be huge: to actually build a 4 bedroom house to high building and environmental standards costs about £100,000, which could be recouped with profits if sold at just one third of market rates. No, it is land and developers’ profit margins that are the greatest costs, and these can both be eliminated if we put the public sector in the driving seat. What is more, we can be imaginative when building them: let’s not try to cram more and more people into existing towns and cities which were designed along outmoded ideas.

We can do away with sink estates: every new street that is built would be mixed tenure. Traffic jams can be avoided if public transport is could and most facilities are a short, safe and pleasant walk away. Comnmunities can thrive if out-of-town supermarkets are not built. Quality of life can improve dramatically in spacious New Towns with plenty of parks, cycle lanes and an end to the artificial pattern of commuting. Furthermore, we could adopt a range of architectural styles to avoid the aesthetically displeasing look of previous New Towns (like parts of Basingstoke). The most advanced knowledge of social sciences and engineering could be used to build organic, (and I apologise for the following hyperbolic-sounding term) ‘people-shaped’ communities.

 

I know that we’ve tried planning in two generations of New Towns, and it has been only a limited success. But we could get it right this time, and provide a self-financing boost to the economy whilst doing so. What better way of challenging ‘London-centricity’ could their be than building a cluster of New Towns- or even a ‘New City- in the North capable of being an economic hub in its own right? What better way of ‘going green’ than creating homes that are ultra-energy efficient and have their own solar panels? What better way of resolving deprivation than ending the practice of hiding the underclass (and I use the term in its scientific sense) in tower blocks they almost never leave?

It’s a logical and, in my view, inspiring solution. But it can only happen with the political will which has only rarely been applied to housing policy.

 

Plaid Cymru Thinks Big

Though I support Wales’ continued membership of the UK, and have my concerns about further devolution of powers from the UK government to the Welsh Assembly, I have a good deal more patience for Plaid Cymru (that’s the Party for Wales, commonly known as the Welsh nationalists) than many other political parties. Wales was the cradle of British socialism for a reason, and that is the fundamental compatibility between collectivist aspects of Welsh culture and left ideology. It’s something that Plaid has built itself on, and has remained true to even as the Labour Party wavered towards neo-liberalism.

That’s why I watched Leanne Woods (Plaid’s newish leader) give her speech to party Conference in Aberystwyth last week. I can see why she is credited with restoring her party’s fortunes (it is now polling in a strong third place), moderating its nationalist stance and offering radical policies that would benefit the ‘ninety nine percent’. A Plaid Cymru administration in Cardiff would set up a publicly owned energy provider that would operate not to make a profit but to stabilise energy prices as much as possible. There’d also be rent controls imposed on the private housing sector, and the recruitment of 2,000 new NHS nurses funded by a tax on sugar-ridden soft drinks.

A fair deal on energy and housing and a better-equipped NHS can be offered with no increase in general taxation. That’s why these policies are impressive: they can be implemented by spending very little money. The only problem I have with them is that we in the Labour Party haven’t adopted the lot. Labour in Wales and nationally have a good vision for the future, and there are thousands of Labour councillors, AMs, MSPs and MPs working hard for their constituents. They are just let down slightly by the moderate official policy platform.

As a Labour Party member, I trust in my party to be the best choice in virtually all elections. Welsh Assembly elections are no different: I do not endorse Plaid Cymru. However, I’d point out that Plaid and Labour have worked in a constructive coalition in the past, and have the common values upon which to co-operate again. With both sides having so much to offer, I’d urge them not to rule anything out.

Victory, What Victory?

British Chancellor George Osborne’s claim that he has ‘won the economic argument’ against Labour has not received the coverage it deserves. His claims that the nation has entered a period of sustained economic growth; that his Help to Buy scheme is developing the housing market; and that his draconian spending cuts have enabled these supposed ‘good times’ to exist, deserve a lot more scrutiny than they have received.

Six years after Britain crashed into recession, it is not only a shock that we haven’t made a full recovery- the economy growing to its pre-recession peak- by now. This is indeed the slowest post-war recovery that has ever taken place in this country. But unfortunately for us, the headline growth that exists does not seem to be reaching most of us.

So if the corporate kleptocracy that exerts so much power today is flourishing despite every attempt by the Chancellor to dampen consumer demand, he can welcome the nice-sounding statistics that are created, but it would be naive to assume it has much impact on the middle and working classes. If you ask the typical voter about the state of the economy, a large number would still say that we’re in recession. Why should they think otherwise. Still their paypackets shrink. Still their local businesses close. Still our public services shut down. The recession of living standards is alive and well, and the statistics that show it are just as important as that of GDP.

Labour warned that Osborne’s cuts would trigger a second recession, and they did. Campaigners warned that homelessness and foodbank visits would surge as the welfare state was attacked, and they did. The Bank of England and international economic institutions have warned that Help to Buy will create a second housing bubble when the first one hasn’t properly burst. At this stage, it looks like they’re right: house prices are surging ahead of inflation when they are far above the sustainable level of 3.6 times median earners.

Osborne hasn’t won a single argument. He’s just as incompetent as ever.

How Help To Buy Doesn’t Help

In his Budget of 3 months ago, George Osborne surprised the country with a plan to make home ownership a realistic possibility. A realistic possibilty for  millions of twenty and thirty-somethings who have been unable to scrape together the massive deposits that mortgage lenders now demand from those hoping to ascend into the universe of home ownership. Through a combination of the provision of public loans to reduce the cash deposit buyers need, and £130 billion of Treasury guarantees to make lenders more flexible, Osborne hopes to create vast number of new owner occupiers.

Now, setting aside the Chancellor’s attempt to allow second home buyers to benefit from the scheme, there are three things which surprise me about the policy. Firstly, I’m amazed that a minister from this Cabinet is able to comprehend a situation in which a 25 year old can’t get a £50,000 handout from their parents to buy a house. After all, the rest of this Government’s housing policy suggests they think this! Secondly, this is such a vast state intervention in this sector of the economy that, had Labour attempted it, the Coalition parties would have condemned it as 70s style corporatist economic mismanagement. Thirdly, why Help to Buy hasn’t been attacked as a recipe for the mother of all housing bubbles is a total mystery. Only a few economists and politicians seem to see it for what it is: a means of artificially inflating the amount of unaffordable debt people can take on, pushing prices up, forcing more state support… And that is because the policy inflates demand but but not supply.

To those who say that the market will always work to meet demand, I would ask why construction has been at absurdly low levels since the effective demise of council homebuilding thirty years ago. I would ask why the average house price is almost three times the cost of construction. I would ask why we need the nationalisation of 15% slices of homes under Help to Buy if the market has worked so well on its own. These are all questions to which I haven’t heard convincing answers. Clearly the market hasn’t worked, but government activity will fail too unless it is planned properly. What we have here is a crystal clear example of a policy designed to win votes rather than to, well, work. And yes, this policy is definitely going to create terrible new problems.

10 out of 10 for effort, Mr Osborne. Unfortunately, you’ll still have to take your plans back to the drawing board. You just don’t know it yet.

The Benefits Cap: There May Be Trouble Ahead

As of yesterday, the Coalition introduces in earnest its roll out of a cap on ‘all benefits’ paid to households suffering with unemployment.Two-adult homes will have to get by on £500 a week, while the figure for single-adult homes is £350. The logic which our political masters have applied, they say, is that no family which is unemployed should receive more than the average wage of one adult who has the fortune to be employed. And I have to say, there is overwhelming public support for the measure.

I therefore decided to conduct an intellectual experiment: could I find a way the policy? The answer was of course a resounding ‘no!’ However, the policy as it is understood is difficult to argue with. After all, many concerns are dealt with by the exemption of the disabled and pensioners from the cap. So on the surface, it appears reasonable that workers should get more than the unemployed, and £26,000 a year for a family of two parents and two children is survivable. And surely few people actually get enough to be affected by the cap. Surely?

Well, no. The biggest problem is that Housing Benefit is included in the cap- a benefit that goes to more employed people than it does unemployed. With housing costs being what they are, and the lack of social housing being so acute, the cap guarantees that nearly any household in the private rented sector in the south of England that suffers unemployment will be plunged into poverty. Employed people will suffer with the separate Housing Benefit gap, but the effect is going to be the same: a formidable benefits trap. The only place the poor can afford to live will be ghetto-like estates (entire towns too, probably) in which employment is a rarity and a cycle of deprivation prevails. This is a recipe for a large and uncontrolable underclass that will make our ‘chav’ (a word I despise, by the way) problem look insignificant.

In addition to that, consider the effect of a £350 a week cap on a single parent who finds him-or-herself unemployed with two or three children to provide for, let alone four or more. I thought the welfare state was supposed to provide additional assistance to single parents, not make life even harder for them. After all, the absent parent is effectively valued, under the cap, at £150 a week. That is curious, as the support given to any children, however many there are, at £200. But that’s enough discussion of figures. I’ve concluded that a fair cap would only apply to the unemployed on a like-for-like basis. That means that Child and Housing Benefit would not be included in the cap… And only a few households would still be affected by it. But with a Work and Pensions Secretary who refuses to look at the facts, but has “confidence that [he is] correct” when challenged with them, I don’t think we’ll see justice being done.

Spare a Thought For The Mansion Owners (!)

I am aware that my fiery, socialist (or progressive, as my American friends would say) rhetoric sometimes makes me sound as if I have limited sympathy for the tax-dodging ultra rich elite. Indeed, when I echo the communist-sounding demands for these people to “contribute to society”, it sounds as if I fail to realise how tough it can be working out how to dispose of a ridiculously burdensome six or seven figure income. Well, on Friday I read the below article and, with tears streaming sown my face, was so moved that I felt obliged to share it with you:

Hampstead side-return and basement extension creates perfect family home

As a family outgrew their cramped Georgian home they prepared to move – then their architect had a bright idea. By Deborah Collcutt
The Goalen family thought they faced a stark choice: stay in the overcrowded house that they loved, or up sticks and move somewhere bigger. The first option appeared unrealistic — Monique Goalen and her husband Iain have four children — so reluctantly they started looking at property near their children’s Hampstead schools.

“It was with a heavy heart,” says Monique, a lawyer, “because we really didn’t want to move. But we’d had a planning application to extend the house turned down flat by Camden council and felt we had run out of options.”

The family wanted to create an open-plan dining area with garden access that would be perfect for entertaining friends

The Goalens’ four-storey terrace house was Grade II-listed, which made it difficult for their architect to come up with a design that gave the family the additional space they needed while also keeping the council happy.

When Monique and Iain bought the house 17 years ago for £400,000, it was because they loved its Georgian panelling, cosy little rooms and wealth of original features.

“There were two of us then. Now there are six,” says Monique. “But we love the house and the area, and we couldn’t imagine living anywhere else.”

Unlike many of the surrounding houses — all close to the station and the heath — the Goalens’ 350-year-old house had not been split into flats.

“The previous owner had it for years and changed almost nothing. That was both a blessing and a curse,” says Monique.

In the new family room, the children can watch films, listen to music and have friends over without disturbing their parents

When they bought the house there was a lower-ground floor with three small rooms, including an old kitchen extension. On the ground floor were two formal reception rooms and then four bedrooms and two bathrooms arranged over the two upper storeys.

The Goalens wanted a family room where Angus, 17, Tara, 15, Cameron, 12, and Maia, nine, could watch films, listen to music and have friends over without disturbing their parents. Their parents wanted an open-plan kitchen/dining room that would open on to the modest-sized garden and where they could entertain their friends.

Architect Shahriar Nasser used glass panels that blend with the brickwork to create a spectacular visual effect
In a last-ditch attempt to change the house into their forever home, they turned to Shahriar Nasser, founder of award-winning Belsize Architects (belsizearchitects.com; 020 7482 4420).

“When I came on board they were desperate,” says Shahriar. “The previous design was a huge basement extension taking up most of the back garden and running right up to the neighbours’ wall. I wasn’t surprised the planners rejected it.

“Our plan was to open up a side-return area, take an extension to the lower ground floor deeper and build a room on top of it.”

In order to further appease the planners, Shahriar matched the brickwork of the extension, adjacent patio and steps up to the garden with those of the original house.

In addition, knowing that he would use a lot of glass, particularly in the new basement room, Shahriar took inspiration from the renowned architect David Chipperfield, who was the first to use mesh between panes of glass to create a colour effect.

Shahriar used copper mesh in some glass panels — including those in the sliding doors that open from the dining area out onto the garden — so that they would blend in with the brickwork.

The results are stunning. The children have a cinema room in the basement, equipped with a large TV and the hub of a house-wide sound system, while above them their parents have a modern kitchen with open-plan dining area that is perfect for parties.

The new garden room where Monique will be able to work in peace

“A friend told me that when your children become teenagers you want them beneath you, never above,” laughs Monique.

“This is the perfect solution. The basement extension has its own entrance and can be shut off from the rest of the house, so they can make all the noise they want.”

Shahriar created a large bedroom for Angus on the lower ground floor. Beside it is the hallway with stairs leading down into the basement extension. The layout of the rest of the house is the same.

“Monique and Iain didn’t want to change everything,” Shahriar says. “We renovated and modernised but essentially the original part of the house retains its original character, while the back has this modern extension.”

Shahriar also designed a garden room, which Monique is using as a studio to design her own range of lingerie. The house has been valued at £4 million, but thoughts of moving couldn’t be further from Monique’s mind. “I don’t ever want to move,” she says. “I can easily see Iain and I being here when it’s only two of us again.”

If you were not weeping with sorrow for the hardship of this family, having to endure life in a posh 4 bedroom, 2 reception home in an affluent London suburb without the benefit of a cinema for the exclusive use of the children, nor a lingerie designing studio, then you must have a heart of stone. You can see how cramped these millionaires must have felt, torn with indecision as to whether to endure such primitive conditions or move out to a backwater like Buckinghamshire.

And yes, they have succeeded in making appallingly unsuitable alterations to an historic building. (It’s strange, isn’t it? Joe Bloggs can’t add an extension to his 3 bedroom semi built in the 1970s, but an 18th century multi-million house can easily be altered with incongruous glass pane walls and the Council doesn’t bat an eyelid)

But on the plus side, the next Labour government will hit them with a Mansion Tax costing them £20,000 a year.  There is some justice in this world after all. But in the meantime, aren’t there some equally hard done by families who could ask the Goalens to share their kids’ cinema?

Related articles

• Lib Dems consider wider mansion tax (bbc.co.uk)
• Real neighbours from hell? They’re the stinking rich | Catherine Bennett (guardian.co.uk)
• Book Tower House by Platform 5 Architects (dezeen.com)
• A Grand Design set in over 6 acres with private loch (tryingtobalancethemadness.wordpress.com)

Housing Is Not A Commodity: Part 2

A rational approach to the issue of the disparity between supply and demand in housing sectors in several developed countries would be to tackle both excessive demand and insufficient supply. I will focus on Britain in this post, but much of it will apply to other countries.

A major factor in the absurd inflation of house prices is the rise of wealthy landlords buying homes with buy-to-let mortgages. When deposits are 10-20%, those with a good level of capital will easily outbid a twentysomwthing on a modest income. With the buying power of potential landlords increased so effectively, they have made home ownership unaffordable for the people who must now rent from the landlords at inflated rents.

One’s reaction to this very much depends on their perspective. Homes are either commodities or a right. If the tips roofs over people’s heads are a legitimate market for speculation, then it doesn’t matter if costs become unaffordable. If, like me, you see homes as a right, then it is only sensible to correct any imbalances in the market. There is a serious imbalance. When potential tenants are pitted against each other to bid their way into a small home; to pay nearly half their income for something worth so little; and when some prospective tenants feel compelled to submit their CVs to landlords, the situation echoes, to some extent, aspects of mediaeval serfdom.

Water prices are regulated, as are public transport fares. Rents should be too. Going above and beyond old fashioned rent controls, all private sector lettings would have to be made through a National Lettings Agency, which would work with regulators to guarantee fair rents and a good state of repair in all properties. The agency would also have powers to discourage the leaving of empty properties.

These moves would be accompanied by a government commitment to build one million quality new hones in mixed-tenure developments. Ideally, the state would be the direct owners, so that they could sell homes to selected groups at a profitable, yet below market, rate. A sustained boost to supply at this rate should ease pressure on social housing and existing developments.

Lastly, buy-to-let mortgages must be curtailed. If a landlord is putting more of their capital at stake, they will collectively be less keen on speculation in the housing market. Also, it will limit competition with families, who should have “dibs” in a system that should serve them. Therefore, I propose that deposits on buy-to-let be increased to a statutory minimum of 50%. This represents a level that still doubles their natural spending power, but doesn’t quintuple it as before.

Importantly, many of these methods of creating “people shaped homes” will have to be phased in, so as not to trigger a crash in house prices and wave of mortgage defaults. It may well take 15, or even 20 years to rebalance the system. But if we don’t do it, the all powerful markets will do it for us.

Housing Is Not A Commodity: Part 1

What was the root cause of the global recession? I think that we must all have been told the answer dozens, if not hundreds of times. Though some have (albeit unsuccessfully) attempted to respectively instil the myth that “unsustainable” government borrowing, we are all aware that the problem was in fact the securing of excessively large mortgages on overpriced housing (provided to risky borrowers). And yes, a lot of the blame falls on the irresponsible profit-hungry bank executives and the governments which failed to regulate them.

But the problem couldn’t have arisen in the first place had house prices not been allowed to rise to such artificially high levels. I can only write in detail for the UK, however my broad point applies in most countries. Over the past 30 years, UK house prices have tripled, whilst the social rental sector has been severely curtailed. Since rent controls were abolished in 1988, rents in the private sector have surged to the point that a household can expect to spend 40% of its net income on rent. Consider that figure: it’s more than the combined food, transport and energy budget of a typical family.

It gets worse. For those who’d like a bit of security (there is nothing to stop a landlord evicting a tenant and very short notice), and the freedom to maintain their own home, they will find that a 1 bedroom home in the south east of England can easily cost upwards of £150,000. And such a cost might be alright as a mortgage, but banks have so little capital to lend that they demand a 10% deposit (and even then at a significant premium). With living costs being what they are, it is rapidly becoming the norm for adults to live in their parents’ houses into their thirties.
The interesting aspect to this is that virtually everybody (though those old enough to have bought their homes early are fine) is paying so much for their housing, when the value of the bricks and mortar is so low. It costs £110,000 to build a carbon-neutral, quality 4 bedroom house. The market price would be at least three times this. The only economic phenomena that would cause such a disparity between cost and value are state intervention artificially increasing prices, or demand vastly outstripping supply. It’s obvious that the state isn’t taxing us to this ridiculous extent (we’d have no deficit problem then), and the latter is clearly the problem. There are therefore three solutions: reduce demand, reduce supply, or provide state assistance with the costs.

State subsidy would fail to tackle the root of the problem. It would distribute billions to landowners and landlords, ensuring that our economy is still linked to a bubble.

To be continued.

Conference Notes

The Labour conference is shaping to be what it is supposed to be: the sharing of new ideas between party members and the leadership, instead of the tightly-controlled, dull and uninspiring affair that New Labour invariably offered. Inspired by their revived popularity, Miliband and his associates have the confidence to be that little bit more imaginative when revealing policy- and a good thing too.

Today Ed Balls will say that he’d spend the £4 billion proceeds of the sale of 4G bandwidth on the construction of 100,000 new affordable homes and a stamp duty holiday for first time buyers. He estimates that this will create 150,000 new jobs directly, with an optimistic figure of 600,000 jobs created indirectly. And this is a brilliant policy, even if the number of affordable homes that should be built is more in the region of one million. Construction is the best form of stimulus that it is possible to provide to a stalling economy, and, of course, there are millions in need of reasonably priced housing that they can get a mortgage for. If this can be done without adding to the national debt, all the better. That would be far more effective than a few privileged kids dipping into their affluent parents’ pensions, as suggested by the Liberal Democrats.

But we should remember that Ed Balls has little prospect of becoming Chancellor within the next two and a half years, by which time the bandwidth will have long been sold. So I hope Balls will explain what he will do when he becomes Chancellor in 2015. He must do something to address the housing crisis that the nation is facing, and rent controls could be a low-cost part of the solution.

In other conference news…
Shadow Health Secretary Andy Burnham has promised that Labour “will not accept” a free market in the NHS. Very wise. The firmer the commitment to reversing Lansley’s semi-privatisation, the more confidence we can have that at least one party is prepared to protect this vital public service. Labour is always served by being seen to be for a quality NHS.

A Graduate Tax has been mooted as an alternative to the existing policy of cutting tuition fees to £6,000. As I’ve explained before, the existing policy would actually be regressive in most cases, for “repayments” would not change for low and middle income graduates. If we have to pay for higher education, a straight graduate tax would be much fairer, and would remove the cloud of £40,000 odd “debt” that students must now face. I hope this policy is developed further.

P.S. I will shortly be making The Political Idealist carbon neutral! Watch this space…

We Don’t Need A Bigger Housing Divide

You will probably have heard by now of the Housing Minister’s endorsement of a plan to sell-off high-value council houses, build cheap houses elsewhere, and pocket the profit made. In other words, they want to sweep the underprivelleged out of quality houses in pleasant areas, and complete the process of ghettoising low earners. Unsurprisingly, this has proved unpopular with the progressive wing of British politics, though we have yet to see if this becomes official Government policy.

One myth perpetuated about council housing is that it is state-subsidised. All that the state pays is the Housing Benefit bill, which is highly inflated due to the fact that working families simply cannot pay the rent demanded by private-sector landlords. In fact, the nationwide stock of council housing returns a modest profit, even with rents being a fraction of market levels. What does this say about the state of the housing market? Once the principle is established of deliberately moving council tenants into low quality housing in undesireable areas, we are sending a dangerous message to future generations. We are saying that we care so little about the have nots that they are pushed to the fringe of our communities into run down areas that are ignored by society. We are saying that a good quality of life is the preserve of the rich. We are saying that we don’t want them. But the advocates of this two-tier society do want them: where are they going to find cleaners, waiters and shop assistants able to work for the depressed wages that they’re prepared to pay? They just don’t want to have to live with these people.

The gated developments are a disturbing indicator of the wish to illustrate this point. With housing benefit caps, the slashing of council home stock, and the removal of affordable housing obligations on developers, we are headed for a social, geographical and economic divide that will have dangerous conseuences for decades, if not centuries, to come.