Housing worthy of the Olympics?

The London Borough of Newham has been in the news for various reasons in recent weeks. Newham Council’s plans to move social tenants into housing association properties in Stoke-on-Trent (170 miles away) were widely condemned. As stated in the Guardian Newham Council’s justification was that ‘rent rises linked to the Olympics and the demand for housing from young professionals has caused rents to rocket in east London'. This follows predictions that the Government’s Housing Benefit cuts and caps would inevitably lead to displacement of the large numbers of people who will be unable to pay their rent, particularly in cities like London with disproportionately crowded and expensive private rental sectors.

In the wake of Newham Council’s proposals, the now re-elected Mayor of London, Boris Johnson, reiterated his previous opposition to housing policies leading to ‘Kosovo-style social cleansing’. One of the few areas of agreement between Mayoral candidates was the need for much more affordable housing. Yet experts in the housing sector point to a housing crisis and suggest a response that goes beyond measures envisaged by Government or the Opposition. The Government’s Housing Strategy promises 170,000 new affordable homes by 2015, an increase on its previous target of 150,000. Many housing experts see this as far too little. The National Housing Federation recommends 'A public investment of £1bn - matched by £8bn from housing associations - would build 66,000 shared ownership homes for people on low to middle incomes, create 400,000 jobs and in doing so save the taxpayer £700m in job seekers not to mention the added savings from housing benefit and increased tax revenues.’

Boris Johnson has supported Shelter’s new Homes for London campaign – an attempt to create a body equivalent to Transport for London, focusing on housing. The first priority is “Homes Londoners can afford” and the key target is 33,400 affordable homes per year: this shows how far short of the ideal current Government plans are falling. The other objectives are ‘family-friendly rental contracts’, the creation of a ‘rogue-landlord prosecution team’ and a ‘London-lettings service’.

The tragic need for these measures is shown by another story relevant to housing in Newham: “The woman who lives in a shed: how London landlords are cashing in”. In view of the scale of low quality and often illegal housing being offered at often extortionate prices by rogue landlords (frequently to illegal immigrants), housing minister Grant Shapps announced the creation of a ‘beds in sheds taskforce’. Yet without a substantially-increased building programme on the scale of Homes for London’s targets, there simply will not be enough accommodation to meet demand.

This is not just a London-centred issue. People need to live where they can work and any tenants relocated under Newham’s plans would have been faced by the employment shortage in Staffordshire. The concept of a ‘choice’ in where to live is meaningless when jobs are concentrated in particular places e.g. London and as the population of major cities rises beyond the capacity of social housing and benefits, there seems little hope of avoiding  the ‘social cleansing’ and its consequences for people’s wellbeing and livelihood that Boris Johnson has criticised.

A recent report by the IPPR recommends that the Mayor of London’s new housing powers be matched by be given additional powers related to Welfare Reform. This could lead to an augmented Local Housing Allowance in London. If the Mayor gained devolved Housing Benefit powers, this could be followed by a broader devolution of Housing Benefit powers. The challenge here will be to develop the case for devolved Housing Benefit against the standardising direction of the Universal Credit.

Yet there is a broader issue.  It is sometimes argued that the expense and upheaval involved in large-scale development, like that associated with the Olympic Park, is that it can bring affluence and opportunity to poorer areas. In reality it often leads to rising prices and an inexorable increase in the value of land, rendering places permanently unaffordable to their previous inhabitants. As the few remaining affordable homes in London in areas like Newham are bought up by ‘young professionals’, tenants are priced out due to the Olympics and homeless people cleared away, the opportunity to remedy the social problems of a poor area has been missed.

Without a much deeper understanding of the relationships between the economy, housing and commercial property – grounded in land value – we will increasingly see paradoxes like residents being relocated 170 miles away in the name of initiatives supposedly meant to benefit the local community.

The Housing Crisis

The word 'crisis' is overused, but the National Housing Federation's warning of a coming housing crisis is not so much alarmist, as inevitable unless a fundamental change of policy takes place. Beyond the lesser crisis for party politics and middle-class aspiration, there is a growing threat of increased poverty and homelessness due to the shortage of affordable housing.

There are nearly 5 million people on social housing waiting lists in the UK, homelessness is rising and cuts to housing benefit are tightening the screws on those on low incomes. On 2010 Government figures, 48% of Local Housing Allowance claimants, i.e. private sector tenants in receipt of housing benefit, experienced an average shortfall of £23 per week between their rent and the benefit they received. £23 is a serious sum to have to meet from a low wage or unemployment benefit. And these figures were before the cuts announced in the Comprehensive Spending Review of October 2010, which have begun to come into effect from April this year: preliminary studies suggest things are going to get much worse.

The single main cause of the pending crisis is the ongoing failure of successive governments to build sufficient social housing in combination with the 'right to buy' scheme introduced by Thatcher in the 1980s. This led to a chronic and unsustainable loss of social housing stock especially following the previous Labour Government's wasted opportunity to invest in social housing during the boom.

During an economic downturn, with home ownership set to fall to 1980s levels, the increased difficulties in getting mortgages, along with benefit cuts, make the need for social housing acute. Yet Government has announced an approximately 50% cut in its social housing budget from £8.4bn to £4.4bn from 2011-2014.

Whilst the Keynsian attitude that a country must spend its way out of an economic crisis is not universally valid, it arguably applies to housing, which is on a par with national infrastructure. History shows that the cost of investment in good social housing is soon recouped. Increased investment in social housing would also create jobs and incentivise the housing and related sectors.

It would also offset the net result of this and the last Government's housing policy which is an ever-increasing transfer of taxpayers' money to private landlords. According to the (aptly-named) housing charity, Crisis, the average private sector rent rose from £79 per week in 1997/8 to £129 in 2007/8, while the average housing benefit award in 2007/8 was £109.25

The current housing benefit bill is estimated at £21bn - this is a massive sum. But the most significant cause of the last decade's increased bill is the steep rise in private rental prices. One of the many damaging effects of the way housing became bound up with global financial speculation and irresponsible borrowing and lending was that house prices in the UK appoximately trebled in the last decade. The persistent high value of property not only prices many out of home ownership, but contributes to landlords charging higher rents. Contrary to popular opinion, this is not merely an issue for the unemployed: 2010 figures showed that more housing benefit claimants were in work (26%) than out of work (22%). The net result is that private tenants struggle to pay the rent while their money drains away instead of serving to support social housing stock.

It is fundamentally scandalous that average wages (and benefits) are so low that people need the current high levels of housing benefit. But the Government's housing benefit cuts look set to increase pain for the growing proportion of the less well off in the UK without resolving the problem. It has justified setting the Local Housing Allowance at the 30th percentile instead of the median, and an 'affordable rent scheme' allowing housing associations to charge tenants up to 80% of local market rates, by claiming that landlords will reduce rents to accomodate falls in benefits. In view of the high demand for accomodation and ongoing property values, this remains an unlikely scenario.

The other solution would be for Government to cap rents. That this policy is politically unpopular is a sad reflection on how property and the land it occupies have been equated, mistakenly, with the market. This leads to property speculation and high housing costs and works agaist communities. From a Biblical point of view, it ignores the theological view of the earth as God's creation and a field not just of opportunity but stewardship and moral action. Housing is not a lifestyle choice and land not a 'possession' in the way a car is; they are more fundamental should be guarded against being made subject to concepts of profit and 'value added'. Until our society revisions the concept of land value and the malpractice of exploiting people's basic need for shelter and a context in which to thrive, property will continue to enshrine a feudal attitude of enclosure and landlordism.