When I was growing up in the 1970s, council housing was the most important rental sector: in 1979 there were around 5.5 million dwellings.
However, in 1980 Margaret Thatcher passed the Housing Act 1980, introducing the right to buy property for council housing tenants.
The properties were sold at a huge discount and were highly sought after, leading to most of the best council properties being withdrawn from the social housing sector in the 40 years since.
By 2022, public housing is expected to fall by around 25% to 4.1 million units.
On the surface, this sounds great, and indeed, for many “regular people,” having the opportunity to own their own home was a great thing that they might never have been able to afford otherwise.
But in the long term, it has proven to be very detrimental to the economy, and especially the housing sector. For example:
the inability of the council to re-acquire properties that have been sold;
The rules when these properties were sold stipulated that only half the proceeds went to local governments, which were required to use the money to reduce debt rather than build more housing.
This had the following unfortunate effects:
A reduction in available social housing and future rental income for local authorities
There is little incentive for local authorities to go through the often difficult and costly process of obtaining planning permission and funding to build new social housing if it will all be sold off at bargain prices in a few years' time.
It can also be argued that building social housing and then selling it off later at a low price is a thoughtless waste of public money.
Transfer of wealth from society to the private sector
Around 40% of social housing sold to tenants is thought to eventually be sold to private landlords.
This is unfortunate because private landlords charge market rents rather than the lower rents charged by social housing landlords.
This means housing has become significantly more expensive for welfare recipients. In many cases, welfare payments are insufficient to cover tenants' rent.
In addition, rising living costs are leading to an increase in overcrowding and homelessness as more tenants are forced to move out due to non-payment of rent.
The huge costs to local governments of rehousing priority populations
Local authorities have a legal duty to re-house homeless people who need housing as a priority (as I discussed in my recent post ).
However, the shrinking pool of council-owned property (mainly due to purchase rights and councils' inability to replenish properties sold) is forcing councils to turn to expensive private sector and bed and breakfast accommodation.
This cost has contributed to the financial crisis many councils are currently experiencing, with some councils already having issued or about to issue section 114 notices (effectively the equivalent of bankruptcy).
This is one of the reasons why Labour is determined to abolish no-fault evictions, as it would reduce local authorities' obligations to re-house people who are evicted.
What needs to happen?
Municipalities need to increase the amount of accommodation available. There are two main ways to do this:
Stopping the outflow of property through the right to buy and allowing local authorities to fund the construction of new properties
Barring any major planning issues, new suitable social housing could be built fairly quickly, especially if modular housing methods were adopted.
The damage caused by the sale of social housing is now publicly acknowledged, and there are campaigns such as Shelter to stop this corruption.
What will the Labour Party do?
The Labour Party is predicted to win the 2024 general election (with just under a week to go at the time of writing).
Their manifesto is
Increase the construction of social and low-income housing, strengthen planning obligations to ensure new developments provide more low-income housing, make changes to the low-income housing programme to provide more homes from existing funding, support local authorities to build more homes, prioritise the construction of new social rented housing, review the expansion of the Right to Buy discount introduced in 2012 and provide greater protection for new social housing.
I would like to see the right to buy abolished completely, as in Scotland and Wales – and it is my view that this should eventually happen – but perhaps that is asking too much at this point.
Reducing the scope would make a big difference. But ultimately,
The right to buy will either be completely revoked or the council will be required to replace all properties sold with new council-owned properties.
The former option would be easier to implement, which is why I say right to buy should eventually be phased out.
This would ensure that council housing covers low-income families and others in need, leaving the private rented sector to cater for those who cannot get council housing or for whom council housing is deemed unsuitable.
That is the situation we should aim for.