Labour's New Economics Conference: Part Three, Housing Session
by Wendy Liu (@dellsystem) on February 24, 2018



This is the third part of our write-up and analysis of Labour’s New Economics Conference on alternative models of ownership. The “Alternative Models of Ownership” report is available here, and our analysis of the report here. This part focuses on the “Democratic approaches to housing” breakout session. You can find our recap of the introductory session here and the digital breakout session here.

The UK’s housing crisis has gotten to the point where it has ceased to feel like news and instead seems like a fact of life. We’ve moved past concerned op-eds and into resigned acceptance, with the crisis beginning to feel like a permanent background fixture. The scale of the problem is so enormous that it sometimes feels unreal, of almost farcical proportions. Clearly, something has to be done.

So why hasn’t something been done? Why does the problem still persist? After all, the standard narrative is that the crisis is merely the predictable result of urban population growth coupled with a shortage of housebuilding. Surely the solution is simply to build more houses, by any means necessary.

This breakout session, moderated by Emma Dent Coad MP and featuring writer Anna Minton, Bristol councillor Paul Smith and journalist Dawn Foster, served as an important counterweight to that view. Over and over, the panelists reinforced that the housing crisis is not just a straightforward problem of supply failing to keep up with demand. Rather, the crisis is structural, with deep economic roots that are decades in the making and intimately entwined with the neoliberal assumption that housing provision is best left to the market. As a result, there is no solution to the crisis that does not involve challenging the commodity nature of housing.

Looming like a shadow over the session was the tragedy of Grenfell, a reminder that consequences of the housing crisis are not just economic; when decisions around housing are dictated by financial concerns, the human costs can be visceral.

Anna Minton on the housing bubble

Minton began with a brief summary of her 2017 book Big Capital, which covers the economic underpinnings of the current crisis. She focused on the fact that housing has become an asset, lending a speculative element to the market that means housing prices are not simply a matter of supply and demand. Instead, housing prices in the UK—and especially in London, the epicentre of the crisis—are more influenced by patterns in global financial flows. Increasingly, property developers don’t even pretend that their luxury flats are meant to serve local communities; they’re deliberately marketed as assets in places like Hong Kong, to wealthy elites who often keep the property empty because they treat it as a safe investment rather than as a place to live.

The result is an economy that is structurally dependent on the continued existence of the housing crisis. Minton goes into greater detail in her book about the mechanics of the inflated housing market, and how price increases at the very top—driven primarily by the London housing market’s attractiveness to global capital—cascade downward in a perverse “trickle-down” effect, resulting in price increases at all stages of the property ladder. At the very bottom, the consequence is “state-led gentrification”: for local councils, the rising costs of housing in the private market result in a “rent gap”, whereby the public rent is much lower than the potential rent if the property were sold off and converted into luxury flats. As a result, the prospect of continuing their responsibility to provide social housing is much less attractive than selling off land to private developers, not least due to increasingly limiting budget constraints among local councils.

Minton’s assessment is that the situation is not sustainable. All the signs point to a structural instability in the market, and like a pyramid scheme, it will eventually come crashing down. In the meantime, though, the crisis is taking a huge toll on those at the bottom: having to live in poor quality accommodation (if any); constantly on the move; stuck in a state of financial insecurity because of high rents.

Minton then proposed that the way forward lies in empowering councils to build more housing. For Minton, this does not mean public-private partnerships along the lines of what the Haringey Development Vehicle would have been; it means building social housing outside the markets, without councils behaving like private developers.

Minton further suggested that planning permission should be decided by the local community, a proposal which even has cross-party support. This would help bring down the inflated value of land, as it would make it harder for private developers to build luxury flats or shopping centres that offer little value to local communities.

The major theme running throughout Minton’s talk is that incremental change is not enough. Instead, we need a step change, whereby we dramatically rewrite the rules of the system. The depth of the problem we’re facing now is one that cannot be fixed in a lasting way without completely reversing the trend towards a more liberalised housing market. We need a structural transformation, in which local governments take on a dramatically greater role in housing provision and the practice of speculative house-building is put to an end.

Minton concluded by emphasising that the present situation is a matter of political choice, not economic necessity. After all, Germany doesn’t have the same speculative housing economy. Decisions made by previous governments, including Margaret Thatcher’s right-to-buy policies, have all served to entrench the treatment of housing as an asset instead of a right, and that view of housing is what lies at the root of our current problem.

Paul Smith on local government

As the Cabinet Member for Housing in Bristol, Smith offered a different perspective, rooted in specific instances of what has been accomplished on the local level in Bristol, where the council has been pushing the limits of what is and isn’t possible when it comes to housing. Recently, the council has been taking public land off the market, in recognition of the fact that the private developers who purchase it often engage in land-banking. This practice involves securing planning permissions and then waiting until the land increases in value before even beginning to build, in order to hedge their risks. The more egregious version of this doesn’t involve any building at all—some simply sell off the land to another buyer, serving as middlemen for a wholly unnecessary transaction and fetching a comfortable margin the process.

Smith then criticised of the current definition of “affordable” housing—80% of market rate—as an absurdity, not least because of the current inflated market, and suggested a better definition which would be pegged to housing allowance instead of market value. Although local governments don’t have much power to contest this definition, they do at least have the ability to choose who to evict: Bristol has agreed to halt evictions for those who are negatively affected by welfare reform, for instance.

On the other hand, local governments are still quite financially constrained. In Bristol, they’ve had to build some new houses for sale just to be able to pay for council housing. Still, though, they’ve tried to make that into as positive a development as possible, with a view toward remodelling rather than regenerating—building these houses within existing estates rather than tearing them down and rebuilding; hiring locals for construction work; reducing rent for existing council housing tenants.

One custom that local governments have in their favour is the fact that unlike other public bodies, they are not required to sell land to the highest bidder—they can take into account perceived social value when assessing which bid to take. This gives them some degree of freedom, and means they don’t necessarily have to sell land for some cash in the short term at the expense of eroding their capabilities in the long term.

Dawn Foster on social impact

Last to speak was Foster on the social aspects of the housing crisis. As a journalist who has been covering housing for years, Foster has written extensively about the impact of temporary accommodation and homelessness on the individuals affected. Although temporary accommodation is usually meant to be limited to 6 weeks, in practice it could last for much longer. Tenants—who are sometimes accompanied by very young children—often have to share facilities with strangers, and there can be long-term mental and physical health effects resulting from stress as well as exposure to toxins. The most frustrating aspect of the situation is that it’s not even economically efficient; temporary accommodation tends to cost councils much more than actually providing council housing, as tenants are usually charged per night, and the profits go to private companies.

For those who don’t qualify for temporary accommodation, the situation is even worse. Foster told the story of a pregnant woman who had to sleep rough because she wouldn’t qualify for temporary accommodation until she had given birth, due to the local council’s stringent policies on the matter.

Foster then emphasised the detrimental societal impacts of the housing crisis even for those who do have longer-term accommodation. Many people her age, she said, end up having to move every year because landlords decide to raise the rent. As a result, they rarely get to feel like they’re part of their local community, which can lead to feelings of isolation. Furthermore, an unstable housing situation can affect whether they choose to start families, which could have larger-scale demographic effects.

Foster ended by proposing some solutions. In the short term, we need stronger tenants’ rights, combined with harsher regulation around who is allowed to be a landlord. In the long term, more housing should be socially owned, with a reduction in private ownership in favour of lifelong tenancies instead. Right-to-buy should be ended, as it only results in money—especially housing benefit—going to private landlords instead of circulating within the local community. Councils selling off public assets should be seen for what it is: a one-time action with only short-term gain and that only results in the council abrogating its duties in the long term.

On local councils

During the audience questions, the topic of HDV was raised, followed by the question of why Haringey council felt like it had no choice but to enter into a partnership with Lendlease. Why, the questioner asked, can’t local councils like Haringey—which has billions of pounds worth of assets—simply borrow money to build more housing?

Minton responded that this solution, as straightforward as it sounds, is unfortunately not entirely possible within the present system; there are many restrictions on what councils are legally allowed to do. Smith followed by clarifying that the reason councils cannot simply borrow is the result of central government diktat, and that the only real way to change this is to change the government. Such a change is a necessary (though not sufficient) step toward fixing the housing crisis, as it is the only way to ensure local councils are free to build houses at scale.

Toward decommodification

Near the end of the session, a provocative question was raised from a member of the audience: Given the scale of the problems at hand, why was the manifesto so timid when it came to housing? After all, what we’ve heard in this session points to a major, systemic issue requiring radical solutions. So why didn’t the manifesto make bolder promises?

The obvious answer is that the public—and even the party itself—isn’t yet ready for that. We’re already seeing a schism within the party as a result of opposing views on how best to handle the housing crisis. The internal battle over the Haringey Development Vehicle can be seen as symbolic of a larger ideological chasm within Labour, between those who believe that housing should not be a commodity and those who feel that some element of commodification is necessary in the current economic landscape. While the current leadership of the party appears to be on the former side, there is still strong resistance to that perspective within Labour’s own ranks in Westminster and beyond.

Ultimately, this has to change. As David Madden and Peter Marcuse write in In Defense of Housing:

Reversing the commodity character of housing must be the core of any answer to the housing crisis.

Such a reversal would represent a fundamental shift in how housing is viewed. This won’t be easy to achieve, given how much of the UK economy depends precisely on housing being a commodity, but it can happen if there is enough political will. What we need to do now is to build a social movement around the issue, not just to get Labour councils elected in May, but to create the political consciousness needed to push for the decommodification of housing on a larger scale. Only through decommodification can we fix the housing crisis.

A previous version of this piece mistakenly attributed comments by Anna Minton to John Healey MP, who was mentioned but was not present at the discussion. In addition, the presence of Emma Dent Coad as moderator was omitted. Thanks to Dawn Foster for the corrections.


author

Wendy Liu (@dellsystem)

Wendy is an editor for the economics section. She is a former startup founder who now writes about the political economy of the tech industry and why tech workers need to unionise. She goes by @dellsystem for fairly prosaic reasons.

related

Labour's New Economics Conference: Part Two, Digital Session

The second part of our write-up and analysis of Labour's New Economics Conference on alternative models of ownership.

Labour's New Economics Conference: Part Four, Co-Operatives Session

The fourth part of our write-up and analysis of Labour's New Economics Conference on alternative models of ownership.

Labour's New Economics Conference: Part Two, Digital Session

The second part of our write-up and analysis of Labour's New Economics Conference on alternative models of ownership.

Labour's New Economics Conference: Part Four, Co-Operatives Session

The fourth part of our write-up and analysis of Labour's New Economics Conference on alternative models of ownership.