Private Island: Why Britian Now Belongs to Someone Else (27 page)

The old council house waiting list no longer exists. Now areas run waiting lists for ‘social housing,' a pool of council and housing association properties at subsidised rents. In Tower Hamlets, there are 22,000 people on the list. A significant number of them will have families, so it's hard to know how many individuals the figure represents, but it corresponds to a fifth of all households in the borough. Of this 22,000, 10,000 are waiting for a one-bedroom flat. Five hundred of them have been waiting twelve years or more. How many one-bedroom flats became available in Tower Hamlets in 2012–13? Just 840. Supply and demand have floated free of each other, and not only in the category of social housing. In the same year, the price of private flats for
sale in Tower Hamlets went up by 5 per cent; in neighbouring Hackney, which has a similar demographic, it was a wild 15 per cent.

There aren't enough homes in Tower Hamlets. There aren't enough homes in London, in the South-East, in Britain. The shortage gets worse. Each year, population growth and the shrinking of average household size adds a quarter of a million households to the twenty-six million we have now. The number of new homes being built is barely above a hundred thousand.

To understand how it came to this, you have to go back to 1979, when Margaret Thatcher began forcing local authorities to sell council houses to any sitting tenant able and eager to buy, at discounts of up to 50 per cent. It was one of those rare policies that still seems to contain in its very name the entire explanation of what it means: ‘Right to Buy'. Cherished by Tories and New Labour alike as an electoral masterstroke, it offered a life-changing fortune to a relatively small group of people, a group that, not by coincidence, contained a large number of swing voters.

Right to Buy differed from the period's other privatisations in many ways. It was tightly linked to the buyer's personal use of the asset being privatised. If the Royal Mail had been sold on the same principle buyers would have got a discount on the share price based on the number of letters they'd posted over their lifetime. According to Hugo Young, Thatcher had to be talked into Right to Buy by a desperate Edward Heath, then her leader, who'd been persuaded by his friend Pierre Trudeau after his electoral defeat in February 1974 that he needed a fistful of populist policies. No wonder Thatcher baulked. Right to Buy violated basic Thatcherite values: that self-reliance was good, state handouts bad. Right to Buy was a massive handout to people who weren't supposed to need handouts. In fact, that was why they got the handout – because they were the kind of people who didn't need handouts.

It was Britain's biggest privatisation by far, worth some £40 billion in its first twenty-five years. But the money earned from selling Britain's vast national investment in housing – an investment made at the expense of other pressing needs by a poor country recovering from war – was sucked out of housing for ever. Councils weren't allowed to spend the money they earned to replace the homes they sold, and central government funding for housing was slashed. Of all the spending cuts made by the Thatcher government in its first, notoriously axe-swinging term, three-quarters came from the housing budget.

What you think the Thatcherites expected to happen once they'd set Right to Buy in motion depends on how cynical you are about their motives. The most benign view is that they thought supply and demand was a straightforward elastic law, and that the market would take up the slack: private housebuilders would build more homes, for both sale and rent, as the number of new council houses being built waned. A dwindling number of the poorest people would be catered for by residual council stock, by the non-profit housing associations – which would still get state grants to build houses for the less well-off – and, for those who were really hard up, by an obscure welfare top-up called housing benefit.

It didn't happen that way. One outcome can be seen starkly in a recent online manifesto for self-builders of private homes,
A Right to Build
. Published in 2011 by Sheffield University's school of architecture and the London architectural practice 00:/, it was designed as an attack on the dominance of the big seven private housebuilding companies – in descending order of size, Taylor Wimpey, Barratt Homes, Persimmon, Bellway, Redrow, Bovis and Crest Nicholson – who between them have almost 40 per cent of the market in new homes. But the most striking thing in the document is a chart displaying the history of Britain, in housebuilding and house prices, since 1946.

It shows that in the 1980s, as the construction of new council houses shrank to almost nothing, there was a slight rise in the
number of private homes being built, peaking at around 200,000 homes a year at the end of the decade. Then it fell back – and stayed fallen. Between the early 1990s and the onset of the financial crisis in 2008, supposedly a boom time in Britain, the number of new private homes built each year didn't go up. It barely budged from the 150,000 a year mark. The market failed. There was increasing demand without increasing supply. Midboom, as the imbalance between the number of people chasing a house and the supply of new homes reached a tipping point, average house prices took off like a rocket, trebling between Tony Blair's accession and the 2008 crash. (In Tower Hamlets, prices went up three and a half times.) Even allowing for inflation over that period of time (36 per cent) it's a terrifying increase.

The chart only shows part of Right to Buy's drawbacks. Those tenants who didn't buy their houses, either because they didn't want to or because they couldn't afford to, had their rents jacked up. At the same time, because of the growing shortage caused by the inability of councils to build, the failure of private builders to build enough, and weak government support for housing associations, rents in the private sector went up. The poorest and most vulnerable members of society, the sick, the elderly, the unemployed, single mothers and their children, were shared between a shrinking stock of council housing – the council housing least likely to be sold, that is, the worst – and the grottier end of the private rental market.

Much of the rent in both types of tenure had to be covered by housing benefit, and as council houses continued to be sold, the proportion of the poor and disadvantaged claiming housing benefit in expensive privately rented property rose. Many people who bought their council houses sold them on to private landlords, who rented them to people on housing benefit who couldn't get a council house, at double or triple the levels of council rent.

Right to Buy thus created an astonishing leak of state money – taxpayers' money, if you like to think of it that way – into the hands of a rentier class. First, the government sold people homes
it owned at a huge discount. Then it allowed the original buyers to keep the profit when they sold those homes to a private landlord at market price. Then the government artificially raised market rents by choking off supply – by making it impossible for councils to replace the sold-off houses. Then it paid those artificially high rents to the same private landlords in the form of housing benefit – many times higher than the housing benefit it would have paid had the houses remained in council hands.

In other words, since Thatcher, the British government has done the exact opposite of what it has encouraged households to do: to buy their own homes, rather than renting. Thatcher and her successors have done all they can to sell off the nation's bricks and mortar, only to be forced to rent it back, at inflated prices, from the people they sold it to. Before Right to Buy, the government spent a pound on building homes for every pound it spent on rent subsidies. Now, for every pound it spends on housing benefit, it puts five pence towards building.

The response of the current government to the housing crisis is to try to make it worse. It is taking steps to increase house prices, without taking steps to increase supply. The coalition's two most explicit interventions in the housing market have been to restrict supply and raise prices: the first when it cut, by two-thirds, the grant given to housing associations to build new homes, and the second with its mocking parody of Right to Buy, ‘Help to Buy', offering already well-off people cheap loans to overbid for overpriced houses they couldn't otherwise afford.

Those who believe the aim of Britain's private housebuilders is to build as many homes as possible, and that they are only prevented from doing so by a cranky planning system, could say I'm being unfair and point to another coalition intervention. In 2012 the old rules governing what could get built where were replaced with a streamlined model called the National Planning Policy Framework, NPPF, which put the onus on councils to allocate enough land for new houses – including farmland, if necessary – to meet demand five and a quarter years ahead. Councils who
don't comply face, in theory, being overruled on appeal if they try to stop speculative development. But putting aside land for houses isn't the same as building them. The historical evidence suggests Britain's private housebuilders have been driven less by the urge to build the maximum number of new homes than by the urge to make as much (or lose as little) money as possible.

Pat Quinn was born into the final waning of the old East End, where working-class Londoners rented rooms in cramped, crowded, badly maintained terraced houses with poor plumbing and sanitation. Aged twenty, just married, Quinn and her husband, like hundreds of thousands of others, swapped their private landlord for a tenancy with the state. Long before the Luftwaffe and Hitler's V-weapons knocked jagged holes in the soot-blackened brick of Bethnal Green, Stepney and Poplar, the three London boroughs that would eventually be merged to create Tower Hamlets, the municipalities had begun knocking down old streets and moving their residents into newly built council houses, bigger and lighter than anything they were used to, with modern kitchens and indoor lavatories. When the Second World War was over, the bulldozers returned to clear bombsites and slums all at once, and the construction of new homes went on.

The pattern was repeated across the country. There was a difference, however, between council houses built in the 1920s and 1930s and those built after 1945. The interwar municipal housing estates were focused on the poor, on replacing the worst slum housing, even though, in practice, the poorest of the poor could seldom afford the rents, and moved to another slum instead. The politicians who got the interwar houses built were motivated by the fastidious, paternalistic, missionary zeal of their nineteenth-century reformist forebears, together with a contrary mixture of fear that socialism would come (so we'd better show the workers that a capitalist society cares) and hope that socialism would come (and this is what it will look like).

After 1945, as the scale of council house building increased in the hopeful atmosphere of the budding welfare state, the builders' masters voiced more ambitious aims. In 1946, Aneurin Bevan, minister for both health and housing, told Parliament that having the better-off catered for exclusively by speculative builders while the poor were set apart in council housing was wrong.

Bevan's stance had all sorts of implications, but the most significant was that there was no limit to the number of houses the state was prepared to build, that building would continue until there was a home for everyone – a point effectively reached in the 1970s, at about the time Quinn and her husband moved to their new council flat.

Until then Quinn – father a long-distance lorry driver, mother a worker at the Bryant & May match factory – and her husband had rented the downstairs floor of a private terraced house in Usher Road, Bow, a land of cobblestones, cigarette smoke, crowded pubs and crowded bedrooms, backyard privies and tin baths filled with water heated on the range. Usher Road was the kind of place the authorities considered a slum, and it was decided to knock the old terraces down. Residents were offered a choice of council house. Quinn chose a flat in a small new block near the Royal London Hospital in Whitechapel, two miles closer to the centre of London. Her husband was sceptical – Whitechapel had a reputation as a rough area where the sex trade flourished – but he went with her choice and they settled in. It is a measure of the relative value of private and council rentals in those days that their rent went up from £1 a week to £4.

I met her at a public meeting in Bethnal Green called to discuss ways of combating the government's welfare changes and went to visit her at home a few weeks later. Her flat is one of ten in a plain, red-brick, three-storey block; five one-bedroom places on the ground floor and five two-bedroom flats on the upper storeys, one of which is Quinn's. It was summer and red and white roses were blooming in the block's communal gardens. Quinn showed me the fruit and vegetables the residents had planted in the spring: raspberries, strawberries, lettuce, onions, peas, beans, radishes. ‘Very optimistically a gentleman is trying to grow kiwis,' she said. ‘The cherries aren't quite ripe enough to give you one … there's an aubergine there but I don't think it's going to make it.'

Only three of the ten flats still belong to the council. The rest have been sold off. Four are lived in by their owners and three are let out privately. Students share one of the flats, and in the others there are bankers (the flat is two tube stops from the City; you could walk to the Lloyd's building in half an hour), an immigration lawyer and an accountant working in one of London's temples of public art. ‘Irish, Welsh, Iraqi, Bengali … three Bengalis. And myself, English,' Quinn said. It's the sort of diversity that might have pleased Bevan. But the government wants Quinn out.