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A Case For The
Reform Of UK Housing Policy
Complementary Housing
Bernard Ready
February 2015
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ABREVIATIONS
PRCS
HO
RIH
RTB
Private Rented Consumer Service, private rents.
Equity not normally available to tenants.
Home ownership, relatively cheap for those who
can afford the initial high loan costs.
Rented Investment Houses. Growth of equity is
used entirely to reduce rents. The most efficient
and cheapest way to provide homes.
Right-to-Buy Law
Dedicated to Cllr. Len Woodrow, who made many things possible
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TABLE OF CONTENTS
ABREVIATIONS
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TABLE OF CONTENTS
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1. NEED FOR A HOUSING POLICY
Boot and Shoe Yard
The growth of equity
Bevan - a policy of investment
macmillan –
a high rent policy
An Affordable housing Policy
A Collective Legacy
An individual Windfall
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Error! Bookmark not defined.
Error! Bookmark not defined.
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2. COSTS OF PROVISION
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the Advantages of Investment
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Investment in a Rented Stock
Affordable houses without subsidies
Inner City Housing
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Carpetbag Policies
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3. A FUNDAMENTAL MISCONCEPTION
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The Pre-war PRCS is Unacceptable
The PRCS developed since 1972 is Lose-Lose
Investment in Homeownership is Win-Win
Investment in a Rented Stock is Win-Win
Comparing Like With Like
4. POST-WAR POLICIES
Bevan
The Financial Power Of Investment
Sharing the Advantages of Investment
Equality Of Independence And Esteem
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Macmillan
Like Any Other Commodity
HEATH
The 1971 Watershed
Thatcher
Loss of the Low-cost Rented Sector
5. THE COST OF SUBSIDIES
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6. THE DECLINE OF HOUSING
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Unacceptable Risk
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Dilemma Of The Single Option
The Boot & Shoe Yard Problem
The Return to a PRCS
The Foundations of Prejudice
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PRCS Subsidies
RIH Subsidies
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Confronting Prejudice
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7. THE EQUITY SPECTRUM
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COMPLEMENTARY HOUSING
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WITHOUT A FUTURE
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A New More Flexible Policy
Affordable Housing
Open Access To RIH
APPENDIX
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1. NEED FOR A HOUSING POLICY
From about 1750, the dawn of the industrial economy in the UK, the need for a housing
policy began to grow as the population moved from an agrarian economy into the crowded
towns that gathered large numbers of workers to service the industrial economy.
Liberal and Conservative governments espoused a policy of laissez-faire, asserting that free
from restraint the market will provide. For housing, this meant there was no need for a
housing policy. A view they held, when the world’s worst slums were located in the richest
country in the world1.
The private rent on a decent house is much the same as the cost of a loan to buy it, because
both are calculated as a competitive percentage of the house value. So the poor can no more
afford to rent a decent house than they can to buy it. Without a loan to buy, the free market
has only one solution, it reduces rents, by overcrowding or reducing the quality of
accommodation, until the poor can afford them. This is the provision of a Private Rented
Consumer Service (PRCS), more simply called the Private Rented Sector, but it is a process
of financing accommodation that is quite different from investment in homeownership or in a
rented stock. Without subsidies, a PRCS is slum housing for the poor. Sixty percent of
pre-WWII houses were privately rented and most of them were slums.
BOOT AND SHOE YARD
A cul-de-sac of 34 houses in Leeds. It housed 340 to 700, mostly itinerant workers and
yielded the best annual interest rate in the borough’. During the cholera epidemic in 1832,
75 cartloads of soil were removed from the privies in Boot and Shoe Yard. It was the fear of
cholera, typhus and tuberculosis that spread from these places that led to the first Public
Health Act in 1848. Even so, the first act of housing policy had to wait for Addison in 1919.
Philanthropic visionaries such as Robert Owen and Joseph Rowntree tried to show the
benefits to be gained from a well-housed workforce but before World-War II, there was no
national housing policy. The fledgling Labour Party achieved improvements via Addison in
1919 and in 1930. Grants were provided to build workers houses, but only skilled and
better-off workers could afford the rents. Conservatives expected private enterprise alone to
meet the demand for housing (See the Appendix).
It took 200 years, two world wars, a depression and the extension of the vote to all women in
1928, before the public voice was heard on the need for a housing policy and before a
Labour government first seriously addressed the problem in 1945.
Yet it is the alarming truth, that our present problems are the logical result of a
substantial return to pre-war housing policies.
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Malpass and Means - Implementing Housing Policy 1993 p22.
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Depressingly enough, the same thing had happened after WWI. Addison resigned from the
Lib/Con coalition in 1921, because Conservatives reneged on the WWI promise to build
“Homes for Heroes”. He wrote: “The insanitary and overcrowding condition of multitudes
of the people’s dwellings arose whilst we were content that private enterprise alone …
should be expected to meet the necessities of the case”. But the promise was remade by
Labour after WWII and Homes for Heroes were delivered in huge building programmes to
serve the general need and to replace the slums and war-damaged houses.
THE GROWTH OF EQUITY
Private rents increase, as the value of a house increases with time. But a loan is fixed on the
day of purchase, so that loan costs decrease with time. In addition to accommodation, loan
repayments yield a growth in ownership of an increasingly valuable asset and this growth in
value is called equity. The equity of council house stock was an effective income that grew
to become larger than actual rents and allowed rents to be kept low, while driving net costs
into surplus by the 1970s.
BEVAN - A POLICY OF INVESTMENT
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In 1946, Bevan began to build high quality, open access “council houses” with low-rents that
anticipated a rising income from the growth of equity in the stock. Initially, a subsidy is
required to balance this Public Cost equation, but as the equity of the stock grows, this
changes to yield a surplus and for most public housing, this began to happen in the 1960s.
Loan costs – Rents – the Equity of the stock = Subsidy or Surplus
L–R–E=S
Bevan provided seeding subsidies to keep rents low during the high cost period of
establishing the early stock, but these subsidies were gradually replaced by equity income.
HOMEOWNERSHIP
In addition to the function of providing accommodation, an investment loan to buy a house
yields a growth in the ownership of an increasingly valuable asset.
A HIGH RENT POLICY
Conservatives were determined to restore the dominance of the private rented sector and for
people to accept them; they had to eliminate all low-rent options. In 1956 Macmillan began
to undermine Bevan’s vision of council houses with restrictive and patronising social
policies and by exaggerating subsidies, which were actually little different from the post-war
subsidies to home buyers.
He reduced the size and quality of his council houses and encouraged campaigns in the Mail
and People to harass ‘scrounger tenants’ who possessed cars or television sets. In 1972,
Heath introduced a new system of very generous rent-subsidies that applied to all tenants in
both the private and public rented sectors. Then he doubled council rents and promised to
keep increasing them until
private rents rose to more
profitable levels. In effect, he
hoped to exploit the buried
equity of the council stock to
provide subsidies that would
halt the decline of the private
rented sector. But this was a
gross distortion of the housing
market and it reacted violently.
The intentions of the 1972 Act
were announced in 1971 and
house prices doubled
immediately. The private
In this graph ‘Private’ refers to homeowners plus private rents.
rented sector continued to
decline from 60% in 1939 to
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9% in 1980. In 1980, Thatcher realised that that even more extreme measures were required
to halt the decline of the private rented sector.
they eliminated the low-rent stock by means of a Right-to-buy law in 1980. Public and
private rents rose to private levels and subsidies escalated. The housing supply was
decimated.
New building was halted by the discounts and existing stock was diminished by the sales.
But the most damaging effect was that discounts stripped the equity from the stock and
prevented it from being used to keep rents low.
The option of low-cost rents was removed, which was the intended result, but high rents also
depressed demand. Private rents and housing associations have not come close to replacing
the loss of the low-cost rented sector.
The RTB law is the enforcer of the Conservative High Rent policy. It has driven both
private and public rents high. And with high rent subsidies, it has caused a high priced
and unstable housing market. The RTB law has taken us back to the 1930s.
Taxpayers are encouraged to blame tenants for high subsidies that have been engineered by
Conservative housing policies. Tenants are victims, who have been turned into scapegoats.
‘Help to buy’, ‘Buy to let’, ‘Bedroom taxes’ and ‘Bussing Tenants to cheap estates’ are
attempts to halt the decline of first-time buyers and to limit the level of rent subsidies. But
without a genuinely affordable rented sector, they are as much use as sticking plasters to
repair a severed limb.
AN AFFORDABLE HOUSING POLICY
We must abolish the discounts of the Right-to-Buy, which destroy the equity of the rented
stock and prevent it from being used to reduce rents.
Tenants, like home buyers must be allowed to benefit from the equity of investment.
The natural growth of equity is an income from the stock that creates affordable rents
without the need for subsidies. At no additional cost, low-rents can be made available to
everyone without restrictions of class or income. It will return stability to a market that was
shattered in 1971, when policies began to dismantled the low cost rented sector.
Lynsey Hanley in her book 'Estates - An Intimate History' said "The long decline of the
council house was triggered by nothing more than a change of perspective, from one that
saw public housing as providing the nation with a collective legacy to one that saw it as a
brief stop on the path towards acquiring an individual legacy".
But It Was So Much More!
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To this day, the fate of UK housing policy has been fought over the choice between these
two paths and it is of critical importance that we understand them.
A COLLECTIVE LEGACY
The growth of equity in rented stock is an accumulative benefit to all tenants. It
reduces rents to the cost of management and maintenance.
AN INDIVIDUAL WINDFALL
Rent-subsidies are a permanently high cost that is a crutch to support Conservative
dogma.
Sale-discounts and all grants to provide “affordable housing” under the high-rent policy
are windfall benefits to a tiny minority that is diverted from ‘housing provision’ to
‘personal expenditure’ within a single generation.
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2. COSTS OF PROVISION
Before we continue this analysis, we should be aware of costs for three main types of
provision shown in Graph 2.
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
HO: Buying a house for homeownership, is an investment transaction.
RIH: Buying a house that is added to a cost-balanced rented stock, is also an
investment transaction.
PRCS: But, buying accommodation by private rent is a consumer service transaction
Costs in the first year are much the same, because all three are based on the house value in
that year. The amount of a loan is fixed by the price on the day of purchase, but a private rent
is a consumer service and rents increase to match the increasing value of houses due to
inflation. In the years that follow, these costs diverge rapidly.
The cyclic cost of houses for homeownership occur because these houses change hands,
every 20 years on average. The departing owner withdraws the existing equity and the loan
costs of the house are raised to the loan and date of purchase for the new buyer.
Homeowners have the freedom to use the growth of equity in whatever way they wish, but
the equity of a rented stock is used entirely to reduce rents.
RIH is much more efficient than HO as a unit of accommodation. The reason is not difficult
to grasp. Houses in a rented stock serve many generations of tenants, but they are financed
by a single historical loan, which declines with time all the way to zero. Multiple mortgages
are required to service the loans of a single house in the ownership sector, because a loan is
renewed each time the house changes hands and this restores the profitability of bank loans
and mortgages that are updated to the new market level.
THE ADVANTAGES OF INVESTMENT
Two advantages arise from the provision by investment: The cost of a loan decreases with
inflation, while private rents increase with inflation.
In addition to the function of providing accommodation, an investment loan yields a growth
in the ownership of an increasingly valuable asset.
Both of these advantages apply to homeownership (HO) and to rented investment housing
(RIH), because they are transactions of investment. Investment harnesses the durability of
houses and makes them very cheap when measured over the total period of their
consumption.
The Equity of the stock is the current market value less the outstanding amounts of any
loans. The growth of equity in a rented stock is the most efficient use of investment to
provide accommodation, because it grows forever and is not dissipated by individuals or
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interrupted by reselling the property. Notice that house values increase and equity grows
continuously, even after the loans are complete.
A PRCS is far the most expensive policy of provision.
INVESTMENT IN A RENTED STOCK
Graph 3 shows the accumulative effect of investing in a large rented stock. The fall in cost is
amazing. Loan costs fall at the rate of inflation and this decline is accelerated by the growth
of equity in the stock. In effect, new houses are subsidised by well-maintained older houses.
Rents can be calculated to anticipate the fall in cost as stocks mature. This means that a
temporary seeding subsidy is required to hold down rents in the early years and prevent a
situation where the first tenants would subsidise all those that follow.
As more mortgages mature, the costs of the stock fall into the range of affordable rents and
provide the capacity to fund building without subsidies, after about 30 years. This is a short
time compared to the lifetime of a house and infinitely shorter than the lifetime of a stock
that can last forever by implementing good policies of maintenance and replacement.
Eventually, costs fall to 1 or 2% of stock value, which is the cost of maintenance and
replacement.
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AFFORDABLE HOUSES WITHOUT SUBSIDIES
It is the claim of this paper that Council Housing began to mature into surpluses by the end
of the 1960s and that the proof of this lies in the records of small towns and rural counties
such as Colchester that actually house the majority of this country’s population.
For three years from 1972 in Colchester, a Labour controlled housing committee built 600
houses per year on a balanced budget with no subsidies, adding 1800 houses to the existing
stock of about 12000. Further building on existing estates was halted and half of the
programme was built on much smaller estates that were distributed throughout the town.
The other half were built on infill sites of six to a dozen houses, which included the Dutch
Quarter, where our Chief Architect Ken Bell won a national prize for town development. In
addition to proving the economic worth of investment, Colchester showed that monolithic
council estates were an unnecessary feature of bad planning.
1 Colchester council houses in the Dutch Quarter
INNER CITY HOUSING
Having listened to accounts of the problems in large cities, I can make little useful comment,
except to observe that the accumulation of equity is scaled up in high cost markets, providing
it is tied closely to keeping rents low and not given away to selected minorities in windfall
benefits.
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CARPETBAG POLICIES
Rented Investment Housing is by far, the most efficient means of providing rented
accommodation. It brings high quality homes into the affordable range of almost all lowincome households. But, it is vulnerable to 'carpetbaggers'.
In 1971, Heath recognised that the growth of equity in council house stock had caused the
need for building subsidies to disappear in most parts of the country. But rather than rejoice
in the success of post-war investment, he saw it as an opportunity to be exploited. He made
his infamous 'apples and oranges' comparison; complaining that council rents were so much
less than private rents! But of course they were! And they no longer needed rent-subsidies
to support them! He announced his intention to double council rents.
He introduced rent-subsidies to bridge the gap between his new high rents and the rents
people on low incomes could afford to pay. He expected to revive private rented houses by
raising both private and public rents, with the support of rent-subsidies that were provided by
raising council rents. He intended to enforce a High Rent Policy by exploiting the resources
of equity buried in rented stock.
But the market reacted violently against him. He succeeded only in destabilising the housing
market; he abolished the stabilising control of the low cost rented sector and market prices
doubled more quickly than he was able to enforce the doubling of council rents (see Graph
1). No one could afford to buy and council waiting lists burgeoned.
Thatcher pursued even more ruthless carpetbag policies. She sold two million council house
and gave away tens of thousands of pounds in discounts on each one of her sales! In a 1979
Commons debate, she claimed "this policy alone is sufficient to persuade thousands of
people to vote Conservative for the first time". No wonder, Labour is still intimidated by this
policy! So what are we to do about morally corrupt policies that pull the plug on important
social structures and exploit their investment resources? They mark the depths of
irresponsible public policy. Housing is not alone, they have been used to exploit pension
funds for short-term gain, to destroy mutual building societies and they even caused the loss
of school playfields. Not unrelated to banking practices that new regulation is attempting to
control, they are corruptions of our public life that the electorate is demanding to be better
regulated.
This is the battle for democracy. It isn't a static condition that we achieve and can then sit
back to enjoy. Billions of pounds wasted on bad housing policy, impact on our ability to
support and maintain the NHS. We can't claim to have a better way and let it slip by,
because focus groups show that the RTB is popular with the electorate. We must
demonstrate the advantages of a better policy and show that it is important to the
fundamental needs and aspirations of our people.
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The battle for democracy is just as relevant now as it was in the 1930s. It needs balance and
conviction and the faith to present it as policy to the electorate.
The 'property-less poor' are impoverished, not so much by a lack of property, but by the
loss of independence imposed by rent-subsidies that sustain an artificial High Rent Policy.
A Complementary Housing Policy that extends the benefits of investment to tenants and
home buyers alike, is the cheapest means of providing high quality rented houses. With a
policy of open access, it can supply the general need for rented accommodation that
complements and enhances the access to homeownership.
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3. A FUNDAMENTAL MISCONCEPTION
The transactions of an investment market are quite different from the transactions of a
consumer service. They cannot be compared as if they were equivalent. Heath defined
"economic" council rents as equivalent to private sector rents; but that is like comparing
apples with oranges.
APPLES: Repayments of a loan to buy a house, whether for private ownership or
for rented stock, are transactions in an investment market that are very cheap, when
measured over the period of their capacity to deliver the function of accommodation.
ORANGES: PRCS rents are transactions in a consumer market, which are naturally
expensive, because they are expected to yield a weekly profit to a landlord, based on
the value of the property that is offered.
The result of the Conservative failure to compare like with like is that low-income tenants
are asked to pay five to six times more for their accommodation than high income
homeowners. Of course, they can't afford it, which means that taxpayers must foot the bill
for rent subsidies. Tenants and taxpayers are the victims of bad policies, but they are
encouraged to blame each other by ministers who enforce these policies.
The PRCS needs the support of rent subsidies, but they do not support the interests of tenant
and first time buyers. The cost to taxpayers rose to £23 billion in 2010. Subsidies were cut
in 2011 and again in 2012, but the high cost PRCS has been maintained, so tenants are forced
to pay; not with money, which they don't have, but by overcrowding and reducing their
quality of accommodation! Housing policy is back on the path that leads to Boot & Shoe
Yard.
THE PRE-WAR PRCS IS UNACCEPTABLE
 A Private Rented Consumer Service with unsubsidised rents, resulted in slums for the
first 200 years of the industrial economy.
THE PRCS DEVELOPED SINCE 1972 IS LOSE-LOSE
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

A PRCS with decent houses requires high subsidies.
RTB sale discounts destroy the equity of the stock and keep rents high.
We can't afford the high rent subsidies so decent standards begin to fall.
High rents suppress demand and with discounted sales, the rented stock has been
decimated.
INVESTMENT IN HOMEOWNERSHIP IS WIN-WIN
 Initial high costs fall to zero in 1/3 of a human lifetime
 Equity growth belongs to the homeowner
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INVESTMENT IN A RENTED STOCK IS WIN-WIN
 Seeding subsidies fall to zero due to inflation and the growth of equity, even when
rents are kept permanently low.
 Costs mature to produce surpluses, on affordable rents, in about 30 yrs. Self-sustaining
balanced budgets without subsidies.
COMPARING LIKE WITH LIKE
Private rents cannot sensibly be compared with the rents of an investment stock or with
homeownership because their costs are so different. Conservative policy adopted extreme
rent subsidies and sale discounts in order to establish and maintain the PRCS. But it is a
system that has served us badly. Compare the co-existence of council houses and
homeownership before 1971 (Graph 1). Both of them were forms of investment housing and
they both expanded rapidly at the expense of the private rented sector, which simply could
not compete with them.
RIH and HO both benefit from the advantages of investment but they deliver it with different
timings, which allows them to serve different needs. They are complementary alternatives
that provide affordable housing for tenants and owners alike.
The evidence is that the right wing 'free market' party has distorted the housing market in
order to stem the decline of the private rented sector. But these policies to restore a PRCS
cause high rents and high prices that make it more difficult to buy. Rather than achieve a
"property owning democracy" they have created a monstrous PRCS that is the antithesis
of HO. A recent survey shows that 46% of young people believe that they will never be able
to buy their own home and 40% of first time buyers now rely on help from property owning
relatives.
Homeownership that reached 60% in the 1970s was artificially boosted to 70% by the
discounted sales and is now falling rapidly under the High Rent policies.
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4. POST-WAR POLICIES
Conservative policy has continued to ignore the lessons of Boot and Shoe Yard and has
always tried to maintain or restore the dominance of the private rented sector. It has retained
an absolute belief in the policy of lassie-fair for the provision of housing. And tolerated slum
housing for nearly 200 years against the electorate’s demand for policies to ensured the
adequate provision of affordable and high quality homes.
Their plans were fundamentally challenged by Labour's post-WWII housing policy, which
recognised that investment in a rented stock could provide high quality accommodation very
cheaply and that once established, it could be self-sustaining.
BEVAN
Clement Atlee appointed Aneurin Bevan to be minister of Health and Housing and in six
short years, from 1945 to 1951, he successfully established both the NHS and Council
Housing. He charged affordable rents that anticipated the falling costs of investment. The
NHS has survived more or less intact for seventy years, because the electorate understood
and protected it. The slow implementation of housing policy and the concept of investment
in rented housing is less easily understood.
The real cost of a loan to buy a house is very cheap because a house is durable and it can last
for 200 years. But the cost is heavily front loaded, which makes investment in ownership
impossible for many. The intervention of policy is most urgently required to provide decent
and affordable housing for those who can’t afford to buy and a stable housing market for
those who can.
Bevan provided a temporary seeding subsidy to surmount the initial cost barrier to establish a
low-rent housing stock. By 1968, the housing accounts of most Local Authorities were
beginning to move into surplus and were able to sustain building without the need for
subsidies.
But repeating the 1921 ‘Betrayal of the Slums’2, Conservative policy via Macmillan, Heath
and Thatcher, resolutely sought to “restore the dominance of the private rented sector as it
was before the war”3. But before WWII, most of the private rented sector were slums.
It was Labour’s policy to clear slums by constructing affordable houses that were built to the
latest modern standards. This, even more than the NHS, was the reason that Churchill,
2
Christopher Addison, “The Betrayal of the Slums” p14.
https://archive.org/details/betrayalofslums00addirich
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1953 Macmillan’s Grand Design for housing
PRO: CAB134/807, Macmillan, 'Housing Policy', DC(52)12, 23 Aug. 1952. This and other references to
Cabinet discussions revealed by Peter Weiler - The Rise and Fall of the Conservatives 'Grand Design
for Housing', 1951-64
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though loved, was not elected in 1945. The memory of the electorate burned with the preWWI promise that was enacted in 1919, but betrayed in 1921 (See the Appendix).
In the vicious battle between these opposing aims, tenants and homeowners were falsely
portrayed as having opposite interests. The seeding subsidies required to establish the rented
stock were exaggerated and ruthlessly exploited as welfare subsidies and a unique burden on
the taxpayer. They were implemented by capping the interest rates on council building loans,
which was very much the same as MIRAS tax relief on mortgage loans for homeowners. It
was a level of political wrangling that totally ignored the vision of Bevan’s housing policy,
which was based on two important concepts: Investment and Open Access.
THE FINANCIAL POWER OF INVESTMENT
The first concept is about affordability. For those who believe there is 'such a thing as
society'4, then housing is its basic component and our policy must enable its adequate,
affordable and high quality provision. A home is an high value commodity that we cannot
do without. We cannot just ignore tenants who can’t afford to buy accommodation, “like any
other commodity”. A healthy nation must find a better policy.
In graph 2, we showed that the cost of a loan to buy is much cheaper than the cost of a
private rent. Typically, it takes 25 years to buy a house that can last for 200 years. So, the
provision of housing by investment is very cheap, when measured over the period of its
consumption. But however low the cost of repayments may be when assessed in the long
term, they are heavily front-loaded, which presents a starting barrier that low-income
families cannot afford.
The true cause of housing poverty is that the advantages of investment are limited to those
on high incomes – only those who can afford to buy.
Bevan provided an investment solution that was almost mature by 1970, but we failed to
recognise and protect it. Now in the 21st century, the problem has returned to haunt us.
Tenants are seriously disadvantaged by high rent policies that force them into dependence on
subsidies. But most emerging new households face barriers (of Price to Income ratio) that
are several times higher than their parents ever faced. The policies of desperation that cap
the rising costs of rent subsidies are proof that we have returned to a path that leads to Boot
& Shoe Yard. The credit crunch is not the cause of our problems in the UK. It adds to the
difficulties of borrowing, but our problems are entirely home grown.
SHARING THE ADVANTAGES OF INVESTMENT
The market costs of establishing a stock are high in the early years of investment.
Temporary seeding subsidies spread the cost across later generations and RIH allowed
tenants to share the advantages of investment that homeowners have always enjoyed.
4
Mrs Thatcher famously declared ‘there is no such thing as society’
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Bevan's council houses were not houses for the poor, they were never designed to be 'welfare
houses', they used the accumulative power of investment to provide high quality homes that
were genuinely affordable. And to encourage ‘a rich tapestry of mixed communities’, he
opened the access to his rented stock to everyone. They were Bevan council houses and they
provided a new environment for working families that was empowering. It is a significant
story of UK history that Bevan's investment stock survived more than thirty years of
Conservative attempts to reject council houses and 'to restore the dominance of the private
rented sector'.
EQUALITY OF INDEPENDENCE AND ESTEEM
The second concept is about the social structures of housing policy. These must allow
homes and communities to be built out of houses and they cannot be built within segregated
or temporary structures of accommodation5. Pride in our homes and communities, is a large
part of our identity; pride is resentful of handouts and especially those, which preserve
injustice by masquerading as relief to its victims. Housing Benefit supported high rents are
an extreme perversion of the free market and political propaganda crosses the line by
portraying tenants as the cause of its costs rather than as its victims.
OPEN ACCESS TO THE RENTED STOCK
Bevan removed the pre-war statutory restriction that limited public housing to the 'working
classes'. Of course, he expected councils to exercise priorities in the early years, but he aimed
to serve the general housing need and he expressed his determination to create 'a living
tapestry of mixed communities'. 'We should try to introduce in our modern towns and
villages what was always the lovely feature of English and Welsh villages, where the
doctor, the grocer, the butcher and the farm labourer all lived in the same street.'
The advantages of a policy of open access are enormous. They replace the socially
destructive policy of segregated welfare housing with genuinely affordable choices available
in mixed community developments. It is a policy to serve the needs of low-income
households by providing affordable rents. It eliminates the need for excessive rent subsidies,
imposed by high rent policies that were designed to restore the private rented sector, but
which trap poor tenants into dependence on subsidies and exposes them to the wroth of
taxpayers who have to foot the bill. Open access serves the general need by providing the
alternative choice to homeownership of a low cost rented sector. It would supply the need
for temporary accommodation when changing jobs or for whatever reason, when families
split-up and it would provide an economic refuge, while saving to buy. A low cost rented
alternative to ownership lowers and stabilises house prices. These choices should be
available to everyone. In a widely affordable low-cost provision of houses, there is no excuse
5
Cameron announces his plan to end lifetime council tenancies - Guardian 3 Aug 2010
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to exclude high-income tenants; they are potentially more demanding tenants, who could
drive standards up and waiting periods down. It should be a free choice.
Finally, there is a complementary interaction between rented investment housing and
homeownership. They both deliver the advantages of investment, but with different timings,
which allows them to serve different needs. They are mutually supportive and
complementary choices that, in the past, have flourish together.
MACMILLAN
Macmillan's 'Grand Design' for housing, presented an alternative vision; of a property
owning democracy that would somehow cement the involvement of everyone into the fabric
and responsibilities of democracy. It was a vision to inspire Conservative voters that implied
a discipline 'suitable for the working classes' and it was designed by ministers, who never
shared the lives of those that they affected. Finally, it was implemented, as a careless policy
of temporary welfare housing that was necessary to restore the dominance of the private
rented sector. Unfortunately, it was easy for Conservatives to reverse the policy of open
access and they did so, in order to reduce the supply of council houses to serve only a
welfare need. It was an unsympathetic policy of patronage that expected tenants to accept
poor services gratefully. Long waiting lists on large segregated council estates were the
norm. They housed high proportions of old people and single parent families with services
that were inadequate for their needs. The houses he built were 200 square feet smaller and
more cheaply fabricated than Bevan’s 900 square feet semidetached houses.
LIKE ANY OTHER COMMODITY
In cult history Macmillan is quoted as a champion of council houses, because he built a
record number of them in 1954; but he had warned his Cabinet that it would be political
suicide to build less houses than Bevan. He pursued an image to mask his hidden agenda.
Cabinet minutes revealed Macmillan's intention to restore the PRCS as it was before the war,
"a commodity whose price was regulated by the market and to limit the state's housing
obligation only to those in need. The limitation of price that has been applied to this one
commodity and not to other commodities (nor to wages) must be ended". 6
It was similar to the restricted policies of “Geddes Axe” that Conservatives forced on Lloyd
George in 1921. Conservatives then, wished to restore the economy as it was before WWI.
Macmillan was wrong, a house is not a commodity like any other.
6
PRO: CAB134/807, Macmillan, 'Housing Policy', DC(52)12, 23 Aug. 1952. This and other references to
Cabinet discussions revealed by Peter Weiler - The Rise and Fall of the Conservatives 'Grand Design
for Housing', 1951-64
21
It is an investment with an increasing value that housing policy
must harness for the advantage of rented accommodation; a
policy for decent housing that echoes and complements the
advantages of investment for homeowners.
Macmillan was never in favour of building council houses, he
believed that low rents offered by Labour's policy of investment
would discourage workers from buying their own homes. In
1953 he wrote a paper for the Conservative Cabinet and his
Ronan Point
'Grand Design for Housing' has been the bible for Conservative
policy ever since7. It is the dogma that prevailed because, in the second half of the last
century, Conservatives were in government three times longer than Labour. But their policies
have been a catalogue of disaster.
Macmillan ignored the long term cost distinctions between the investment and consumer
markets. But he could not ignore the housing need that followed the war, nor the clear
demands of the electorate.
He skilfully manipulated the popularity of Bevan's council houses, "You never had it so
good" and the desire of those who were eager to be included. He promised to build more and
faster and it was a promise he kept by reducing both the size and quality of his council
houses. He gave incentives to build cheaply fabricated tower block flats, but he failed to
restore the dominance of the private rented sector, which continued to dwindle from 60%
before the war to 9% in 1980.
Macmillan reduced the quality of council houses to more clearly match the role of welfare
housing. Among the dire consequences of his policies were the collapse of shoddy high-rise
buildings and the emergence of corruption in the1960s. ‘Conservative policies were widely
associated with profiteering and the homeless. The Rachman scandal of 1963 forced them to
retreat from what were seen as the unacceptable consequences of an unrestrained market in
housing and land'8
HEATH
In 1971, Heath announced his Housing Finance Act 1972. It would double council rents,
abolished council building subsidies and remove the right of Local Authorities to set their
own cost-balanced rents.
He believed the rent increases would pay for rent-subsidies that he needed to restore the
PRCS and for subsidies to encourage the growth of private housing associations that would
replace council houses. But the market reacted against him. House prices doubled, in what
7
8
PRO: CAB134/807, DC(52)6th meeting, 28 July 1952
ibid
22
remains the largest inflationary peak in our housing history. It should have been expected
that a 50% private sector would react, when rents in the 30% council sector were doubled.
THE 1971 WATERSHED
The 1972 Housing Finance Act unleashed a watershed change in the level and stability of
house prices, from the moment it was announced in 1971. Effectively, it abolished council
housing. Yet the entrepreneurial cause of the first peak and the watershed change in the
stability of house prices that followed, seem never to have been investigated.
Since 1971, house prices have had an unusually serious influence on the economy; housing
inflation has been wildly unstable and it has shifted to lead general inflation, which makes it
a cause rather than an effect. Economists appear to ignore the significance of 1971. They
have failed to explain that first great peak. It was due, not to a change of policy, but to an
announcement, that policy would change. It was a clear indication of the symbiotic link
between council housing and homeownership.
An engineer might suggest the loss of a damping factor in the 1971 'response' of the house
price system. Heath abolished the low cost rented sector, which we would expect to be a
market-calming alternative to homeownership. Indeed, a stabilising damping factor.
THATCHER
Macmillan's aim to restore the dominance of the private rented sector had to wait for the
more extreme policies of Thatcher. She recognised that even with the support of rent
subsidies, the PRCS could not compete with the low costs of rented investment housing. She
decided to give 70% discounts on sales of the rented stock. Cleverly, she called her
legislation the Right-to-Buy Law but it was a law that removed the option of RIH.
Sales diminished the stock directly. But more significantly, they drained the equity of the
stock and prevented it from being used to reduce rents.
At last! She achieved the Conservative goal to restore the PRCS, but it has been at a terrible
cost that can only increase in the future. The private sector rose slowly to 14% by 2008.
However, the dominance of the PRCS is not determined by its size, but rather by its effect on
all other rents. The post-war policy of low cost rented investment houses has been replaced
by a high cost rented consumer service. The discounts that drain the equity of the stock,
eliminate the choice of a low cost rented investment sector. It is a policy that raises all rents
to the level of private rents, which low-income households cannot afford and therefore, a
policy that needs high rent subsidies.
Deregulation, rent increases and rent subsidies failed to restore the dominance of the private
rented sector, but the Right-to-buy law struck at the heart of the low cost rented sector. The
discounts drained the equity of the rented stock. Council building stopped because it was
untenable to build houses that could be sold at a loss, the next day. The Right-to-buy Law
23
has effected a fundamental change in the driving force of housing provision. The equity
given away by discounts prevents it from being used to reduce rents and has established high
rents across both the public and private rented sectors. The Right-to-Buy Law enforces a
high rent policy that has restored the dominance of a PRCS by isolating tenants from the
advantages of investment.
LOSS OF THE LOW-COST RENTED SECTOR
Rent subsidies and sale discounts were introduced to support the deliberate elimination of the
low-cost rented sector. They have distorted the housing market for over thirty years and
diminished the opportunities for people to buy their own homes. The equity of the rented
stock must be allowed to grow again by abolishing the RTB discounts. The repeal of high
rent policies will save billions of pounds in rent subsidies and fund a building boost that
present policy will never achieve.
24
5. THE COST OF SUBSIDIES
Our history has proved that the UK housing market can support affordable housing by
investment for both rent and ownership, but it cannot support the demand for affordable rents
by means of a consumer service.
Within my own lifetime, most working class households lived in PRCS slums. Typically,
they were two up two down, single-clad brick houses, which were damp, used gas lights, had
no electricity, one cold tap, a tin bath hanging on the wall and an outside toilet. Council
houses transformed that situation in a single generation. Subsidies were needed to establish
and maintain the stock. But the high initial subsidies fell quite rapidly and many stocks
throughout the country were self-supporting by the time that the 1972 Housing Finance Act
abolished council house building subsidies.
The effects of residualisation polarised homeowners and council tenants who were
portrayed as having opposite interests. This paper and the graphic evidence of House Price
Inflation show that the opposite was true. Council tenants were regarded as a continuous
burden on the taxpayer even when, the reverse had become the reality.
25
The seeding subsidies required to establish a low cost rented sector in the 50s and 60s were
almost trivial, compared to the rent subsidies now required (£23 billion in 2010) to make
private rents affordable to low income households.
Even then, Conservative strategy exaggerated council seeding subsidies as an excuse to
reduce building and to demote their role to the status of welfare housing. It was a divisive
policy. They built too few low rented houses and then pilloried better off tenants for
depriving poor tenants from their chances for a decent home. The Conservative press
mounted vicious campaigns against "sponging tenants". These games are being played out
again as tenants are blamed because we cannot afford the subsidies of the PRCS.
The evidence is now clear. The rent subsidies and sales discounts that are necessary to stem
the decline of the private rented sector have massively distorted the market. The lost
alternative of a low cost rented sector has increased house prices but more importantly, it has
increased the risk faced by first time buyers; it has destabilised the house price market.
New subsidies to help first time buyers are not a real solution because they increase the
distortions. They are not the accumulative subsidies of investment that provide a permanent
resource of houses; they are unpredictable subsidies given to individuals that are dissipated
within a generation, usually for purposes no longer related to housing.
Graph 4 compares the seeding subsidies to establish the rented stock model of Graph 3, with
the rent subsidies to provide a PRCS of the same size. The two upper curves show the
seeding subsidies and the two lower curves show the rent subsidies to support a PRCS. In
each case, costs are reduced by two levels of affordable rents:
1.
Rents set to 30% of the national average wage
2.
Rents set to 30% of half the national average wage
The PRCS rent subsidies rise until building is completed and then remains high in perpetuity.
But the seeding subsidies to establish a rented stock are temporary and they 'mature' to yield
a continuous surplus. The period of maturity depends on the choice of parameters. This
model is very conservative, the subsidies mature into surpluses in about 40 years. But real
surpluses were achieved in Colchester after only 27 years.
26
6. THE DECLINE OF HOUSING
Under post-war conditions of scarcity, Bevan was building semi-detached houses that he and
his fellow ministers would be happy to live in and he was not prepared to compromise. "We
shall be judged for a year or two by the number of houses we build, but we shall be judged
in ten years time by the type of houses we build." But the electorate, already infused with
new hope, was impatient to be included. They voted for Macmillan's promises to double
council house building, which he kept by reducing the size and quality of his houses. He
also, began immediately to restrict their access to the role to welfare housing.
Today, UK Housing Policy is in a bad place because, in the major reforms of 1953, 1972 and
1980, Conservative governments replaced Bevan's ideal with a PRCS and because Labour
governments forgot why it was an ideal.
Bevan's council houses were a low rent investment stock that matured to become virtually
self-sustaining by the 1970s. Proof of this lies in the fact that council building continued
with balanced budgets, even after Heath abolished building subsidies in 1972. At best,
Conservative policy is aimed towards their ideal of a property owning democracy, but it is a
policy of imperatives not choices, that are unlikely advance their claim to encourage the
virtues of responsible citizenry.
Truth is, the architects of Conservative policy deny their own principles. They distort both
the consumer and investment markets, because they proved that a PRCS could not exist in
normal markets. Their policy is based on the fallacy that high rents would persuade workers
to buy their own homes. The reality is that the market draws the line of affordability. The
ratio of price to income defines those who can safely afford to buy. In the last century it’s
prudent value was about 2.5, which can be increased at low interest rates, but the ratio has
climbed to 5 or 10 in recent years. And sudden changes of interest rates are a threat that can
quickly destroy the hopes of first time buyers. Without the option of low cost rents, the
investment to buy remains ‘the only good option’ in the long term, but it is a minefield of
risk. These increased risks have destabilised our housing market.
UNACCEPTABLE RISK
The elimination of the low-cost rented alternative, caused house prices to rise and increased
the risk, for emerging households, of being trapped into dependency on the rent subsidies of
social housing. This fear has driven first time buyers to take higher and higher loans. The
majority of children from council house backgrounds once bought their own houses, but now
they are trapped into inherited poverty. Even the children of homeowners have lost the
expectation of ownership that represented normality for their parents.
27
DILEMMA OF THE SINGLE OPTION
Those who cannot afford to buy, cannot afford to rent. They are forced to accept the rentsubsidies of Housing Benefit. This not only sustains an inefficient provision of housing; it is
a poverty trap for the tenants.

A tenant, who works harder to earn more income, has benefit withdrawn at the rate of
67p in the pound. In effect this cuts a minimum wage, from £5.93 an hour to £1.96 an
hour. It is a poverty trap from which it is very difficult to escape. It gives the reason for
our position at the bottom of the European social mobility league.

High risk is the defining condition of the private rented consumer service and it is
caused by the loss of the low-cost rented sector in 1971. The Dilemma of the Single
Option is the risk inherent to the formation of each new household. The question "to
Buy or to Rent?" becomes a life changing risk between "Success and Failure”.

The association of the PRCS with high risk is confirmed by the response of the housing
market. In 1971 the stable UK housing market was transformed into a persistent
condition of extreme instability. House prices in the UK became hypersensitive to small
changes in the market.

Compare them with France and Germany who retain large low-cost rented sectors. In
contrast with the violent instability of the UK market, they have low and stable house
price inflation rates that are almost identical.
THE BOOT & SHOE YARD PROBLEM
Investment provides huge advantages due to the effects of inflation and the growth of equity.
The problem is that the financing of investment is heavily front-loaded. The initial cost of
repayments is prohibitive for low-income families and the free market forces them to buy
28
low quality accommodation with the high rents of a consumer service. It is because the free
market makes this fundamental distinction between a consumer service and investment, that
so often, it has the effect of making a distinction between the rich and the poor. This also, is
the Boot and Shoe Yard problem.
However, it can be made into a temporary problem; solved by a single short period of
subsidy to establish a self-sustaining RIH stock. Our history suggests that it would take
about thirty years, which is a short time in the scale of managing our housing problems. But
probably much less, since we have accessible stock and none of the slums and bomb damage
that followed the war.
Graph 3 shows that such schemes are sustainable with very low rents. It also shows that high
subsidies are required to make private rents affordable to low-income families. They are
subsidies that we cannot afford and they are blamed on 'scrounger tenants' because it is easier
to scapegoat than to explanations our horrendously bad housing policy. We are all culpable,
when we allow such policies to stand.
The 1972 Act ended subsidies to build council houses, but the record shows that this loss had
little effect on the capacity of most local authorities to continue building. It served very
clearly to show that most council housing had achieved the maturity of a low cost and selfsustaining rented stock after only 27 years of post-war investment.
It is relevant to note that 64% of the population live in small towns and rural counties, which
makes Colchester a more typical case for study than any of our larger cities. Yet at that
time in this small rural town, a large increase in building of 600 houses/year was
sustained for three years on a balanced budget with no subsidies.
The tragedy is that the 'Housing Finance Act 1972' was the watershed moment of our
housing history and it followed a post-war milestone in 1969, when dwellings exceeded
households for the first time. This period offered the opportunities of a new dawn, but the
Act led us back to the 1930s. Yet I can find no academic studies that span the watershed
event of 1971. We need advanced modelling of policy changes that may prove to have
caused the persistent instability of house prices since 1971.
29
THE RETURN TO A PRCS
A PRCS leads inevitably to diminished standards. Tenants are blamed for claiming high
subsidies to justify arbitrary capping. They are disqualified from access to social housing
because they have failed to get a job, or have held a tenancy too long, they have been
labelled for myriad reasons as intentionally homeless, or they have refused to transfer to an
estate 100 miles away, where tenancies are cheaper.
Negative equity of the 1990s followed the 70% discounted sale of social housing in the
1980s; a similar reaction in the 1920s is likely, due to sales boosted by Cameron's new
£75,000 discounts.
Housing Benefits are rent-subsidies that sustain the PRCS and distort the housing market.
Subsidies have spiralled out of control, but it is wicked to blame this policy failure on a
tenant 'culture of dependency'. Tenants suffer from 'financial structures of dependency' that
are deliberately imposed on social housing and we cannot accept the pretence of DuncanSmith that this very real dependency arose from some lazy culture of entitlement.
High rents cause an increase in house prices that trap the children of tenants into
inherited poverty. Fear of such consequences add to the risk of first time buyers, they
increase prices and the instability of the housing market.
With access restricted to poor and vulnerable households, council housing became
segregated into large areas of welfare housing, which suffered a 'grudging culture' of
paternalism with few choices and long waiting lists due to politically determined building
rates that ignored real levels of demand.
The transfer of 2,000,000 council houses to private ownership solved no problems of housing
need, but it created negative equity in the 1990s and ten years down the line, it will again if
Cameron's sale incentives take effect. We can no longer afford the cost of bad policies, or the
consequences, which every day are reported about the state of housing.
30
Discounted sales artificially boosted homeownership to 70%, but they left us with a severe
shortage of rented houses. As these houses move on, their value is not used for housing
need. Either the former tenant withdraws equity to enjoy in their retirement or their children
do the same, since it usually becomes available when they already have established homes
and families. The house returns to the pool of houses for sale, where it's effect of bloating
the ownership sector now causes negative equity. The homeownership sector is falling and
46% of young people believe they will never own their own homes.
Thatcher established the Conservative ideal of a PRCS in 1980. The effect of housing
policies, take at least 10 years to show, but after 30 years, where is the evidence of a property
owning democracy? On the contrary, the PRCS has proved to be the antithesis of
homeownership. Why would it be anything else? Huge rent-subsidies force the PRCS into
tense competition with homeownership, but low-income households are allowed no other
choice.
THE FOUNDATIONS OF PREJUDICE
The free market is undoubtedly efficient, but it has no natural tendency towards the equitable
distribution of the wealth that it generates and for that, we must rely on the wisdom of
governments. The principle task of housing policy must be to solve the problem of Boot and
Shoe Yard, which is a problem of timing created by the operation of the market. The
madness of current policy is that, for political reasons, we have chosen to use perpetually
expensive rent subsidies rather the temporary seeding subsidies required to establish an
investment stock.
The free market draws a line, which in the UK excludes at least 30% of the population from
buying their own homes. It is how the market works and it is a key fact that a policy to
provide affordable housing must deal with. It is not the same in all countries, because it
depends on house price to income ratios. In the USA the proportion of excluded households
is smaller because land and resources are more abundant. Average prices are 10% less, but
houses and incomes are twice as large.
PRCS SUBSIDIES
Most Conservatives accept that the provision of decent housing may need subsidies. But
their policy to restore the dominance of the private rented sector means that a PRCS requires
huge rent-subsidies. At £23 billion per year in 2010, they are more than we can afford. But
indiscriminate cuts are even more difficult for low-income tenants to manage. These policies
are leading us back towards 'Boot and Shoe Yard', which is not an exaggeration as tenants
are being shipped to cheaper estates and oppressed by warnings that tenancies are no longer
secure for anyone and that failure to find work could be grounds for eviction. It makes us
uneasy, but it’s a bigger shock, when suddenly, it effects one of our own.
31
RIH SUBSIDIES
RIH is the cheapest and most efficient provision of accommodation, with affordable rents
that evolve to balance costs without the need for subsidies. So why should they not be
available to everyone? We should build to meet the general demand and open the access to
everyone. The detail should not be too difficult because costs will move towards saving
billions of pounds no longer needed for rent-subsidies. The costs of Rented Investment
Housing (RIH) fall with time due to inflation, just as it does for Home Owners (HO). They
both generate equity, but they
use it in different ways.
Homeowners withdraw equity
when they move on and use it to
buy another house or for any
other chosen purpose. The
equity of RIH is dedicated to the
task of creating low rents. A
subsidy is needed to establish a
critical size of stock, but it is a
temporary seeding subsidy that
rapidly diminishes to zero. The
stock becomes self-sustaining
and capable of maintaining a
continuous building programme
without further subsidies.
CONFRONTING PREJUDICE
Many homeowners have enjoyed the fruits of investment by downsizing and using the
released equity to buy a second house in the cheaper European housing markets. But as
taxpayers we pay for rent subsidies, which leads us to support restrictive conditions on
tenants that we would never accept for ourselves. Yet sale discounts and rent subsidies
support a PRCS that is inefficient and unnecessary. We would be better engaged in
supporting more affordable housing policies.
The RTB law drains the growth of equity from the public stock, it renews borrowing to
replace the stock and it drives rent increases that keep pace with the private rented sector. It
is a high rent policy that supports private rents and without it, the PRCS could not survive. It
is a policy that necessitates extremely high rent subsidies, but it is not in the interest of
tenants, whose efforts to increase their income is diminished by the withdrawal of rent
32
subsidies. It is not a morally acceptable choice, because smaller temporary subsidies can
establish genuinely affordable rents in an investment stock.
We are normally a tolerant people, but somehow, we have allowed a wedge to be driven inbetween homeowners and tenants. Bevan saw this danger as long ago as 1949, which is why
he opened the access to his Rented Investment Housing to everyone. Ignorance chooses to
segregate people we identify as 'social tenants'. We are suspicious that they sponge off us.
But the truth is that policies we sanction, trap them into the high-cost rents of a consumer
market.
1.
2.
Many claim that tenants who can afford motorcars and television sets should not have
their rents subsidised out of public funds. We should not allow the comparisons and
excesses of the PRCS to place television sets and cars on the same radar as houses and
the suggestion of such parallels are ridiculous.
A lottery winner was pilloried as heartless on Channel 5 TV9 because he retained the
tenancy of his council house. Would we take the same attitude towards a neighbour in
our street of homeowners, or would we praise them for not being changed by their
newfound wealth? We have been brainwashed in to accepting horrendously bad housing
policies. The inferior functions of a PRCS cost far more than was ever spent on
establishing council estates.
Why do we accept and even collude in implementing a PRCS?
These attacks on the status and security of tenants are just as serious as attacks on race and
sexuality. In the past, seeding subsidies required to establish affordable low-cost rented
stock were vehemently attacked and Council tenants were portrayed as a continuous burden
on the taxpayer even when in fact, the reverse had become the reality.
Post-war policies to encourage housing provision also subsidised homebuyers and that
subsidy continued for 30 years after the end of council building subsidies10. In 1968, a
subsidy of £157 million supported 5 million council houses, while £300 million in tax
subsidies supported the owner-occupied sector of 7 million households11 (i.e. £28.50 per
council house and £33.30 per private house).
We didn't explain it. We still don't explain it.


We collude when we fail to challenge the arbitrary capping of Housing Benefit by
pointing out that high rent subsidies are a deliberate choice of current policy.
We collude when we penalise tenant's security with the excuse of a scarcity of rented
houses created by inadequate policies of provision.
9
‘The Wright Stuff’ Thurs 25th Oct 2012
ended council building subsidies in 1972. MIRAS tax rebates ended in 2004
11 In answer to a parliamentary question
10 Heath
33

We collude as we frequently repeat the prejudiced mores of the PRCS - A Guardian
reporter12, writing in support of tenant security, fell into this trap:
"Clearly it’s not fair that people should be entitled to houses at below-market rent for the
rest of their lives."
Clearly there is a confusion of markets here.
If I say “I bought my house in the private market”. Would that be the “market” that tenants
are taking advantage of? I don’t think so! We buy houses in the investment market and after
25-30 years, we just pay maintenance costs; nothing else, which is at least six times less than
a private rent and in addition we own an asset worth hundreds of thousands of pounds.
It would be best housing policy to use my ‘investment market’ not your ‘consumer market’.
But current policy isn’t fair. We deny tenants the benefits of a rented investment market
that could so cheaply be established. Policy eliminates the rented investment market and
prevents tenants from getting as good a deal as house buyers.
I think the reporter made an unintended mistake, but it is a mistake that is all too easy to
make. We are steeped in 50 years of propaganda from the Conservative press, conditioned
by distorted subsidies and the apartheid policy of welfare housing. These policies undermine
a large section of the population, whose houses are not their castles and if they are not well
behaved, they will not be allowed to keep their home.
7. THE EQUITY SPECTRUM
Equity is the normal growth in value of a house from the day it is bought or for rented stock,
from the day that it is built. It is a resource that should be placed at the heart of housing
policy because investment in ownership or in a rented stock provide the advantages of equity
growth and the decreasing cost of a loan that is fixed on the day of purchase.
The equity of ownership is entirely at the disposal of the owner, while the equity of rented
investment housing is used entirely to reduce the cost of rents. These two options lie at the
opposite ends of an equity spectrum. Intermediate between them are different types of
investment housing; such as mutual cooperative and part ownership investment schemes, that
use the growth of equity in different ways!
They are distinguished by differences of timing, which cause them to be mutually supportive,
but for this to happen, the ownership of the rented stock must be protected from
carpetbaggers; people who break up an enterprise and sell its assets for short term gain. It
12
http://www.theguardian.com/commentisfree/2010/
oct/19/council-housing-conservative-tenure
34
can be protected as a Mutual Trust, either by government or by charitable ownership. But
this is a modern dilemma, about the extremes of business and economic planning about
which, we must be more discriminating. The short term objectives of short term directors
have lead to the loss of pension funds, of most building societies, of school playing fields
and essential public assets; the slights of hand that suck value from the future. The
squandered assets of housing have been replaced by rent subsidies that devastate the public
purse.
Within the equity spectrum, the common means of provision is investment and within the
investment market, we can make like-for-like comparisons that open a whole new
understanding of the housing market. It is like comparing different types of apples. One is
for eating and another for cooking. They are choices that serve different needs. They don't
compete negatively, as homeownership and private rented houses do and where distorted
rents force house prices up. They are choices that serve different needs.
Private rented houses are a different species from which the benefits of equity have been
extracted and removed. They are expensive, suitable to serve specialist needs, but they
cannot be compared, either with homeownership, or with rented investment stock and they
are particularly unsuitable to the role of providing homes for the poor, which is the purpose
assigned to them by current policy. The public purse, simply cannot afford the rent subsidies
established to support the dominance of high private rents.
There is a permanent necessity for adequate, decent and affordable homes, but about half of
the nation cannot yet afford the high initial cost of a mortgage loan. Bevan showed that the
solution lies in the durability of houses; subsidies evolved into surpluses. Twenty seven
years later, Colchester was able to use these surpluses to increase its housing stock by 15%.
In 1969 Colchester rents were low, but the income from them and from the growth of equity
in the stock exceeded all loan charges and produced a surplus.
In 1968, I bought a house for £4,250 and sold it, twenty years later for £42,000. It is how the
investment market works. That and my pension were the biggest investments of my life and
they have served me well. Why do we deny this use of equity to fund low rents for the poor?
Why do we allow the discounts of the Right-to-buy law to be used to destroy the growth of
equity in our rented stock and prevent it from being used to reduce rents?
Why do we spend £24 billion per year on rent subsidies to support a distorted system of high
rents that trap the majority of emerging new households into permanently subsidised
housing, from which it is difficult to escape.
35
COMPLEMENTARY HOUSING
Complementary Housing (CH) is the spectrum of investment housing that delivers the
advantages of equity with different timings to suit the incomes or inclinations of every
household. A Complementary Housing Policy recognises that the power of equity can be
used in different ways and it asserts that they are mutually supportive. A policy should be
designed to provide this full spectrum of choices in order to best meet the demands of all
households.
Choices in CH are mutually supportive because they provide:
 A low-cost rented alternative that stabilises house prices
 A low-cost refuge for people saving to buy
 A seamless range of affordability that household can move between, according to their
changing circumstances
 A temporary base to enhance mobility of the workforce
 A policy designed to meet the demand and serve the needs of the whole population, not
just the poor, but by this means better able to serve the poor.
 An open access rented stock that will bring the accumulative advantages of the initial
temporary seeding subsidies to everyone.
 The elimination of a separated system of welfare housing and a policy that serves the
interests of tenants and owners alike.
The durability of houses can be focused by investment to provide accommodation very
cheaply. It is a policy that brings affordability to the millionaire or the labourer and allows
them equally to enjoy the independence and self-esteem of making their own choice of
affordable housing. The concept of Complementary Housing owes much to the vision of
Aneurin Bevan, but it earns just as much from the failed experiences of Conservative policy .
Rented Investment Housing is a low-cost alternative choice of accommodation that stabilises
house prices and provides an economic refuge while saving to buy. Graph 1 shows the
powerful interaction of RIH and Homeownership. Heath announced the doubling of council
rents and the market doubled house prices. If Macmillan had not unpicked Bevan's rich
tapestry of mixed communities, segregated 'Social Housing' may never have existed. The
access to homeownership is limited, by the price to income ratio. But a rented stock can
provide housing that is affordable to virtually every household in the country.
This was the low-cost method of provision that financed council housing. It was abolished,
just as it began to mature in to a rented stock that no longer needed subsidies. It was the lowcost choice of preference that caused the decline of the private rented sector, but it is no
longer an option because the equity of the stock is systematically destroyed by RTB
discounts.
36
WITHOUT A FUTURE
There is talk of a "generation rent" , which if it happened, would result in a massive increase
of rent-subsidies, then equally massive cuts and presumably, by unrest that would escalate
until the policy was changed. A boomerang generation describes the increasing trend of
young adults returning to the family home to share the resources of their parents. These
trends strike at the confidence of our young people and diminish their hopes for the future.
The chaos of the housing market since 1980 has become confused with our fears about the
2008 crash of the global economy and it doesn't help our search for solutions. The housing
crisis is not caused by the global credit crunch; it is due to policies that were completed
twenty-eight years before the credit crunch. Houses are localised, which probably makes
their provision the last of the non-global industries. Of course it has made the crisis worse
because banks insist on larger deposits for their loans, but unlike the American bubble, it was
not caused by bank miss selling in their sub-prime housing market. Our housing problems
are of our own making.
A NEW MORE FLEXIBLE POLICY
With hindsight, it was probably a mistake by Bevan to place his scheme into the hands of
politically divided local governments. It allowed him to accelerate his building programmes,
but it gave the same control to Macmillan and co, who eventually destroyed the low-cost
rented system. The post-war rebuilding programmes of our European peers involved a
diversity of agencies, trade unions, charities, churches, other voluntary groups and
governments, that continues to provide resilient low-cost rented sectors.
Bevan's policy of open access was designed to meet demand. It was not restricted to housing
the poor and did not question the choice of tenants with high incomes, though of course,
local authorities could operate priority schemes in times of shortage. It was a plan to
establish an unsubsidised low-cost rented stock that was open for access to everyone. It had
so many advantages that the short period of seeding subsidy was well worth it by comparison
with any alternative subsidies. It was a policy to stabilise house prices by offering an
alternative low-cost rented option. With a larger stock, built to meet this wider demand, it
would have a greater capacity to respond to urgent need. It was a policy that would never
have needed a bed and breakfast solution for the homeless or created the circumstances of
'Cathy Come Home'. It offered flexibility to a more mobile workforce and an economic
refuge for those on their first flight from home or those saving to buy. With a stock freed
from subsidies and patronage, tenants with mixed incomes and experience would demand a
more flexible modern management with a percentage of empty properties designed to
facilitate prompt access and ongoing modernisation programmes.
37
AFFORDABLE HOUSING
The discounted sale of social houses boosted the size of the ownership sector, but as former
tenant owners move on, it is again declining. Ownership doesn't usually transmit between
generations, because a parent's occupation extends beyond the start of their children's
families. The equity of ownership makes little contribution to the provision of houses. It is
withdrawn as equity when downsizing or it boosts the comforts of middle aged children and
the property returns to the pool of houses for sale.
Without solving a single housing problem or even causing a change of residency, the tenure
of two million, mostly older tenants, was reassigned to the status of ownership and ten years
later, the market suffered negative equity. This Conservative policy of tenure is not a policy
of housing provision, it is a political dogma that the market has rejected and it is not
surprising that it has failed to provide an adequate rented sector.
The provision of housing by a private rented consumer service (PRCS) is fundamentally
more expensive than the provision of housing by investment.
The former is too expensive for those on lower incomes because a business expects 5-10%
return on the value of their properties. For a £250,000 house to return a 5% profit, it requires
a rent of: 250,000 x 5/100 / 52 = £240 / week. PRCS rents are five or six times higher than
RIH rents.
OPEN ACCESS TO RIH
Currently, we have high unstable house prices, the poverty trap of social housing,
unsustainable housing benefit and the increasingly isolated property-less poor.
The dogma of the PRCS is the unsubstantiated belief that it would encourage a mass
movement to buy. But this final state of the political dogma was implemented 32 years ago.
It takes about a generation to experience the effect of housing policies, so now it is time to
make a judgment. Has this policy advanced the realisation of a property owning democracy?
Or more simply, has it improved the quality and affordability of our homes? On the
contrary, all of the reports are negative. Older generations look with pity on the prospects of
current and future generations as 40% of first time buyers now rely on the support of
property owning parents.
The provision of housing is trapped within the rigid constraints of a PRCS. By realising this,
we can understand and solve our housing problems. We can begin to understand why these
structures must be replaced with policies of provision that make both the ownership and
rented sectors mutually supportive. The unfolding consequences of the PRCS began in 1971,
with the abolition of the cost-balancing principle on which the low-cost rented sector was
based. It has nothing to do with the global credit crunch, which merely has the effect of
emphasising the size of the hole that we are in.
38
Our peers in Europe have maintained large low-cost rented housing sectors. We forgot, just
how important, Bevan's policy of open access was. Everyone has the need for rented
accommodation at some point in their lives and it is only by serving this general need that the
value and efficiency of a rented investment stock can be understood. Then the cumbersome
operation of our democracy must be our protection against the carpetbag policy of the RTB
as it has been for the NHS so far.
1
APPENDIX
Kings Speech 1919. ‘It is not too much to say that an adequate solution of the housing
problem is the foundation of all social progress’. 13
Christopher Addison, former Minister of Health, resigned in July 1921 because the
Conservative-Liberal coalition ‘decided to set aside these engagements and to restrict
assistance in the building of houses … to ignore the obligations which the state had assumed
under the law passed in the year 1919 … and to substitute a grant … of so trifling a character
that it will not suffice even to make good the amount of deterioration that is progressively
occurring …
assistance from the State was required in this matter because the insanitary and
overcrowding condition of multitudes of the people’s dwellings had arisen whilst we were
content that private enterprise alone … should be expected to meet the necessities of the
case’.14
Replying to a question in the House of Commons in 1922, Sir Alfred Mond, the Minister of
Health expressed the hope “that future State intervention in any form will not be required, and
that the building industry will return to its pre-war economic basis”.
In reply to a question on young married people starting life in overcrowded conditions, he
said: “But isn’t the demand of the newly married for a separate house a comparatively
modern development? In China and the East generally, I understand they continue to live
under the parental roof quite contentedly” 15
13
Christopher Addison, “The Betrayal of the Slums” p13.
https://archive.org/details/betrayalofslums00addirich
14
15
Ibid p14
Ibid p16.