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Housing advice, homelessness services including temporary housing, housing support services, strategic work across the area and the maintenance of housing standards in the private sector are all important, locally provided local authority services. The local authority also can undertake or support a range of building and improvement work associated with these housing services.
Local authorities in England are more reliant on central government for funding than their European counterparts, so the impact of austerity measures is particularly severe. The Labour leader of Birmingham City Council remarked in 2012 that the £600 million that has to be cut from that authority’s budget up to 2017 marked ‘the end of local government as we have known it’. This chapter will explore this view from the perspective of housing services and will discuss:
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the range of housing services provided through the General Fund and their main sources of revenue funding;
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funding issues connected to three important services: the homelessness service, the Supporting People programme and the housing benefit service;
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possible sources of capital funding for new building and improvement work, including funding to achieve the DHS in any retained council housing.
The management of any council housing will be discussed in Chapter Five. The limitations of space are such that this chapter is focused mainly on England.
Central government has exercised considerable influence at local government level in recent times. Practically, this has been to maintain a firm control over public expenditure. Overall, local authority General Fund expenditure (of which general housing services form a part) accounts for 25% of total public expenditure in England and Wales.
Political discussion about owner-occupation has usually focused on the supposed positive attributes that ownership brings: a sense of independence, security and feeling of ‘paying your own way’. Margaret Thatcher was fond also of asserting that citizens needed a stake in society, hence she promoted the right to buy with the idea of the ‘property-owning democracy’. In turn, Tony Blair and Gordon Brown believed that extending homeownership would spread ‘wealth’. There can be no denying that owner-occupation is popular in the UK, but the attributes claimed for it are not universal across the tenure. The positive view needs to be tempered with an awareness of the financial implications of extending owner-occupation down the income scale at a time when the ‘safety net’ for owner-occupiers who run into difficulties paying their mortgage is minimal.
Different aspects of owner-occupation at the margins will be considered in this chapter in order to demonstrate this darker view, as well as wider points. These are:
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moving into owner-occupation: first-time buyers and the implications of large deposits; shared ownership and equity sharing as a way into owner-occupation; council tenants and discounts under the ‘right to buy’;
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staying in owner-occupation: paying for repairs and maintenance;
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leaving owner-occupation: ‘prime’ owner-occupation, mortgage rescue and the likelihood of repossession; sub-prime owner-occupiers and the likelihood of repossession; ‘spending the home’ on long-term care.
First-time buyers have found it increasingly difficult to buy. In the early 2000s, the price of property increased by over 60%. However, before 2007 it was possible to obtain 100% mortgages or mortgages with a very high ‘loan to value’ ratio, generated from calculations of four, five or even six times the household income (see Box 2.2).
In 1914 about 10% of the population owned or were buying their home (Malpass, 2005, p 49). For a short time, in 2001, this figure peaked in England at 70% (74% in Wales, but less in Scotland), although by 2012 it had declined to 65% and looks set to decline further (see Table 1.2). The New Labour government, believing that 90% of the UK’s adult population ‘aspired’ to ‘the dream of home ownership’, had planned to extend owner-occupation even further down the income scale than had the Conservatives before them (DETR/DSS, 2000, p 30). New Labour wanted to enable lower-income households to build up ‘wealth’ through property ownership. They would benefit from ownership and their asset (that is, their home) would open the door to ‘asset-based welfare’ opportunities through opportunities for additional borrowing. The financial crisis of 2007 put paid to this prospect, but the astonishing growth – and more recent decline – of owner-occupation will be explored in this chapter, while Chapter Eight will focus on the implications of ownership for lower-income households, a solution to housing problems that the Coalition government continues to pursue. A range of institutions with varying degrees of influence have been involved in the story of owner-occupation over the last 100 years. These include: private landlords, speculative house builders, building societies and banks, central and local government. Relationships between these bodies have waxed and waned over that time. Wider economic concerns have also played an important part: the rate and nature of formal employment; the availability of mortgages, and interest rates on loans; the extent and nature of financial regulation; and the development of transport links beyond the more central areas of towns and cities.
The main way in which the welfare state provides help with housing costs has been through the housing benefit (HB) system. This is a system of benefit payments available to those who rent their homes who need financial help to meet the full cost of the rent. The scheme is available for those who live on low incomes or have no other income apart from benefit income (because they are unemployed, are long-term sick or disabled or have retired). The take-up rate for HB is about 85%, better than for other benefits. Higher take-up rates have been found in areas where the local authority encourages claims through take-up campaigns, accessible offices and helpful staff. Even so, each year anything up to £1,230 million remains unclaimed.
There is also help available for owner-occupiers if they have mortgage payments to meet and they become unemployed, long-term sick or disabled or are low-income pensioners. This financial help is related to mortgage interest, not payments of principal.
The HB scheme for housing association, council and privately renting tenants takes up most of this chapter. In addition, the impact of HB cutbacks on residents’ ability to pay the rent in specialist voluntary or housing association homeless projects and private landlord temporary accommodation schemes will also be discussed. The bare bones of the HB system of help available and the cutbacks occurring are included here. More detailed information is available from Child Poverty Action Group, Shelter and Citizens Advice. The main themes in this chapter are:
Although some form of housing is needed by everyone in the UK, the ways in which it is provided and paid for often remain a mystery. People complain about rent increases or worry about rising mortgage costs, but what thought is there about how these are calculated and whether they should be challenged? The numbers of properties built each year, whether they are available to rent or buy and the costs of maintenance and longer-term improvement are also rarely considered. Instead, newspapers laud recent signs of increasing house prices as if these were a positive sign for the future. In reality, they signify fewer first-time buyers and increased mortgage debt.
Having been thoroughly distracted by New Labour consumerist ‘choices’ up to the 2010 general election, UK citizens are now facing Coalition austerity measures. These stigmatise and penalise the poor for being poor and ‘squeeze’ the apparently more deserving ‘middle’. The wealthiest have been left to continue creating wealth that will ‘trickle down’ for everyone’s benefit at some point in the distant future. Politicians have done better than this in the past. They can do better than this in the future, but only if pressure for progressive change is exerted by the electorate.
This chapter focuses on the influence that politicians may exercise on the financing of housing, tenure changes and housing costs. It looks at:
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the influence of formal politics on the funding of different housing tenures, showing the changing balance between state and ‘market’ housing solutions;
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the way in which the balance between different housing tenures has shifted over time, considering whether the growth of owner-occupation represents ‘modernisation’ and what the prospects might be for a resurgent council housing sector;
The private rented sector was in decline for most of the 20th century. The Housing Act 1988 and deregulation of the financial services sector are being claimed as the keys to its apparent phoenix-like recent growth. Some commentators are now focusing on private renting and identifying potential for it to play a significant role in housing low-income households, as the Coalition government wants. But is this new private rented sector any different from the old one, which was notable for badly managed, poor-quality and expensive housing? This chapter will examine this in a number of ways:
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rent control and selective decontrol: the decline of private renting in the 1930s;
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early 1950s London: the problems of decontrolled rents and uncontrolled landlords;
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the 1960s and the ‘fair rent’ solution for a ‘regulated’ market;
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the Housing Act 1988 and the ‘independent rented sector’ with rents and tenancies that are now ‘assured’;
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a focus on growth: buy-to-let mortgages and homeowners renting out their home because they cannot sell;
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25 years of deregulation – expensive rents, poor living conditions and limited security. Can private rented housing provide a long-term home?
The idea of rent control – administratively fixing rents in private lettings at a particular level rather than allowing the landlord to do so – has been discussed in Chapter One. There have been different forms of rent control. Their impact has been much exaggerated. Rent control or, most recently, rent regulation, has affected private rented housing in different ways depending on the landlord arrangements (resident or non-resident), type of letting (furnished or unfurnished) and/or the rateable value of the property.
Landlords see rents as income and, consequently, as a most important part of housing management. Tenants often have a more complicated view, especially if they are tenants of local authorities and housing associations. Yet in some past protests about expensive rents the interests of tenants have seemed very similar, whoever the landlord.
It is easy to see the issue of rents in a completely ahistorical way, devoid of political and economic context. In this chapter, the issue of rents will be examined more broadly than usual, identifying where conflicts over rents have led to change. Rent strikes and campaigning are largely ‘hidden from history’ in housing finance. This chapter is an attempt to begin to redress the balance. Arguably, this perspective will be most relevant in the years ahead.
This chapter moves from general points to looking at the different ways in which rents have been established in the private sector, local authorities and housing associations. It ends with consideration of ‘rent convergence’ between local authorities and housing associations and the likely prospects for more expensive ‘affordable rents’. In this chapter the themes are:
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what is rent? – from the landlord’s and tenant’s perspective;
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the private rented sector – from controlled to market rents;
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local authority rents – from independence to rent restructuring;
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housing associations – cost rents, fair rents, assured rents, ‘affordable rents’?
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rent convergence between local authorities and housing associations;
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changing principles for rents over time;
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the ‘affordable rent’ and its prospects.
‘Rent’ is a financial sum that is set by the landlord for a flat, a house or a room in a house.
