Back in the 1970’s when I was growing up, Council housing was the most important rental sector. In 1979 there were some 5.5 million homes.
However, in 1980, Margaret Thatcher passed the Housing Act 1980, which introduced the right for Council Tenants to buy their property.
As the properties were sold at a substantial discount, this proved very popular, and over the 40 years since then, most of the best Council Properties have left the social housing sector.
By 2022, social housing had declined by around a quarter to 4.1 million homes.
Superficially, this sounds fantastic, and indeed, it was wonderful for many ‘ordinary people’ to have the opportunity to own their own home – something they might never have been able to afford otherwise.
However long term it has proved very bad for the economy and the housing sector in particular. For example:
The inability of Councils to replace the properties sold
The rules under which these properties were sold provided for only half of the proceeds of sale to go to Local Authorities and they were required to use the money to reduce their debt rather than build more homes.
This had the unfortunate effect of:
- Reducing the social housing available and also,
- Reducing future rental income for Councils
There is little incentive for Councils to go through the often difficult and expensive process of obtaining planning permission and funding to build new Council housing if it is just all going to be sold off at an undervalue in a few year’s time.
It is also arguable that building social housing only to be sold later at an undervalue is an imprudent waste of public money.
The passing of properties from the social to the private sector
It is believed that some 40% of all social housing sold to tenants has eventually been sold on to private landlords.
This is unfortunate as private landlords charge a market rent rather than the lower rents, charged by social landlords.
This means that housing for families on benefits has become considerably more expensive. Often, benefit payments are insufficient to cover tenants’ rent.
This has also led to overcrowding and more homelessness, as the cost of living crisis has resulted in more tenants being evicted for rent arrears.
The massive cost to Councils of rehousing those in priority need
Councils have a legal obligation to rehouse people made homeless who are in priority need (discussed in my recent post).
However, due to the shrinking pool of properties owned by Councils (due mainly to the right to buy and the inability of Councils to replace those sold), Councils are having to use expensive private sector and bed and breakfast accommodation.
The cost of this is contributing to the current financial crisis being experienced by many Councils, some of whom have already or are about to issue a section 114 notice (effectively the equivalent of bankruptcy).
This is one reason why the Labour Party is determined to abolish no-fault evictions – as it will reduce the obligation on Councils to rehouse those evicted.
What needs to happen
We need to increase the pool of accommodation available to Councils. The two main ways to do this are to
- Stop the haemorrhaging of properties through right to buy, and
- Enable Councils to fund the building of new properties
Assuming there are no major planning issues, new, decent council housing could be built fairly quickly, especially if modular housing methods are used.
The damage that has been done by the sell-off of our Council Housing is generally accepted now, with campaigns such as this one from Shelter to reverse the rot.
What will Labour do?
Labour are expected to win the 2024 General Election (at the time of writing, just under one week away).
Their manifesto provides for
- An increase in social and affordable housebuilding
- Strengthening planning obligations to ensure new developments provide more affordable homes
- Making changes to the Affordable Homes Programme to ensure that it delivers more homes from existing funding
- Supporting Councils to build more
- Prioritising the building of new social rented homes and
- Reviewing the increased right to buy discounts introduced in 2012, and
- Increasing protections on newly built social housing
I would prefer to see the right to buy removed altogether, as is the case in Scotland and Wales, and my view is that this has to happen eventually. However, maybe this is too much of an ask at the moment.
Reducing its scope would make a big difference. However, in the end, we should move to a situation where either
- The right to buy is removed altogether, or
- Councils are required to replace every property sold with a new council property.
The former option would be easier to implement. Which is why I say the right to buy should eventually go.
Social housing can then take care of low income families and other needy persons, leaving the private rented sector to house those ineligible for social housing or for whom social housing would be inappropriate.
Which is the situation we should be aiming for.