by James Meek
In 2013, an over-ambitious housing association, Cosmopolitan, would have gone bust had it not been taken over by another large association, Sanctuary. It turned out that Cosmopolitan had used its social housing assets – most of which were the 7.000 former council houses of the borough of Chester – as collateral to guarantee loans it took out to fund a student housing business. Accounting blunders meant Cosmopolitan breached its loan covenants. If Sanctuary hadn’t come to the rescue, Cosmopolitan’s tenants might now have large financial institutions as their landlords.
In recent years Swan has set up spin-off companies: Swan New Homes to build houses for sale, a private residential care company called Vivo and a property management firm, Hera. If Vivo and Hera make good profits, fine – that will go into the social housing pot. If they lose money, however, there’s a danger that Swan’s surplus will be diverted to shore up these for-profit arms. For now, three-quarters of the new homes Swan builds count as social housing. But it seems that every time the housing associations show they can deliver with reduced government support, the reduced support becomes the new norm, ready to be cut again. If there were any doubt about the way all this is heading, a rule change made in 2008 under Labour made it possible to set up for-profit housing associations – as if the party’s policy people had listened to George Galloway’s misrepresentation of what housing associations were and thought it was a good idea.
‘Housing associations, particularly some of the bigger ones, have now reached the stage where they have assets and knowledge and expertise that allow them to operate in a rather different market and start looking at building for sale – not just riding on the coat tails of developers but being the lead developers themselves,’ Orr told me. ‘But here’s the rub: when we move away from the model of up-front capital investment to provide social rental homes, and do things that are more commercial, that’s the point where people on the left say see, we told you, they’re all just greedy bastards who want to build and they only care about development. Which is not true, but it’s a narrative that follows.’
Government leverage over the housing associations derives above all from the fact that Whitehall sets the rents housing associations may charge, most of which are actually paid via housing benefit. There are now three different kinds of rent in Britain: market rents; ‘social rents’, which is what council tenants pay, in London typically about half market rent or less; and ‘affordable rents’, currently pegged at 80 per cent of market rents. When in 2010 the coalition cut by two-thirds the grant it gave to housing associations, it still wanted them to build the same number of houses. The only way the housing associations could do that was by borrowing more money on the market. The only way they could finance that debt was by charging higher rents. Fine, said the government, from now on, whenever you build new social housing, you’ll have to make them affordable tenancies, with those 80-per-cent-of-market rents. The indirect consequence was that the housing benefit bill went up.
‘The part of the government that’s interested in building new homes has an absolute requirement to see rents going up,’ said Orr. ‘The part of the government that’s interested in housing benefit has an absolute requirement to see rents coming down. And the bit of government that’s meant to manage all the finances, the Treasury, want to see both of those mutually contradictory things happen at the same time.’ He might have added another contradiction – that the government agency encouraging housing associations to come up with ever more financially inventive ways of squeezing more homes out of their limited budgets is called the Homes and Communities Agency. The regulator supposed to make sure housing associations don’t take on excessive financial risk is … the Homes and Communities Agency. The policy gets more knotted still on the former council estates taken over by housing associations, where the coalition is demanding that when a social tenancy ends – when a former council tenant dies, for instance – the property is relet on an ‘affordable’ tenancy. But with the coalition’s own changes to housing benefit, poorer tenants in ‘affordable’ tenancies are finding it harder not to fall into arrears, meaning the revenue stream to the lenders the housing associations borrowed from is jeopardised – making it impossible to get further loans.
The direction of social housing policy since 1979 has been to gradually remove the state from the business of building houses, and now to gradually remove the state from the business of subsidising rent. You can imagine free marketeers believing the market can house the poor in decent comfort without the better-off being forced to chip in, although there is no evidence that it can. This is the benign view of the Thatcherites’ motive. But it is easier to believe that the actual intention – not formally designed in some conspiratorial way, and never openly described as such – is to demonetise that part of general taxation on the well-off that goes towards evening things out for the poor and replacing it with a tax in kind, a tax on conscience. To permit the gradual re-emergence of slums, in other words, in order to keep income and corporation tax low, and to make the threat to the well-off an easily ignored threat to their conscience, rather than to their wealth. To settle for history as wheel rather than ascent, in which it will eventually be time for Dickens to come around again.
There is a substantive obstacle in the way of that descent back into squalor: there is no neat way to separate the shortage of social housing from the shortage of housing in general. The government is pulling back in the face of a market that is failing across the board. Matt Griffith, author of an incisive paper for the think tank IPPR about the housing crisis, We Must Fix It, points out that the interconnecting problems afflicting the private housebuilding industry do not reflect a deeper economic malaise; they are the deeper economic malaise. Britain’s established housebuilders, Griffith reckons, no longer have housebuilding as their primary function. They’ve essentially become dealers in land. Griffith estimates British housebuilders have enough land to build 1.5 million houses. This is much higher than most estimates because he includes not only land that has been given planning permission for homes to be built on it but also the shadow land bank: the vast stretches of agricultural land that housebuilders’ canny local agents guess will get planning permission in future, and have tied up through confidential option deals with landowners.
Why is this land not being built on faster? Because the price the builders paid for the land is tied to the price they expect to get for the houses when they do finally build on it. In boom times, they build more homes, but tend to be over optimistic about the prices they will fetch, and overpay for land accordingly. In lean times they can’t build, because to do so would be to acknowledge that they overpaid for the land, which would threaten them and the banks that lent to them with massive losses through the devaluation of their assets. Instead of competing to build the most attractive houses, the firms in the private housebuilding oligopoly compete over who can best use their land-banking skills to anticipate the next housing bubble and survive the last one. The whole system incentivises land hoarding and an undersupply of new homes compared to demand, to keep prices high. This, in turn, incentivises banks to favour property loans over other forms of lending. An incredible 76 per cent of all bank loans in Britain go to property, and 64 per cent of that to residential mortgages. That is money that could be spent on lending to other, more productive businesses. Yet it is so large a share of banks’ assets that the kind of radical reform of the planning and land ownership system Griffith wants to see might, by lowering house and land prices, bring the banks to their knees again. As Martin Wolf wrote in a despairing attack on Help to Buy in the Financial Times, ‘a deregulated and dynamic housing supply could spell financial and political Armageddon.’
Against this is David Orr’s prescription: to increase housing supply at the other end of the market with a relatively small increase in government funding to housing associations, and to hand council housing over to a new set of European-style municipal housing agencies that could borrow money without adding to the natio
nal debt. Housing associations and councils have land banks of their own and every reason to build on them. ‘What is the thing that most characterises subsidised housing? Answer: subsidy,’ Orr says. ‘If we had a government that wanted to see a significant increase in the supply of new homes they would stop asking “Can we do it?” and they would start asking “How can we do it?” Right now we spend £10.5 billion per annum on housing and transport – £9.5 billion on transport, and £1 billion on housing. If we decided to spend £8.5 billion on transport and £2 billion on housing it would still be £10.5 billion, and with that extra billion, we would be building 40,000 new homes a year before they even got High Speed 2 anywhere near a planning application.’
Making space for everyone in the crowded southern end of an island with a growing population is likely to involve everyone giving something up. No one knows the fate of the Cranbrook Estate; like Doreen Kendall, I would like to see it remain council property, yet somehow restored and properly maintained the way Skinner, Bailey and Lubetkin designed it. That’s what I think should happen. But I’m not sure how. And suppose Tower Hamlets decides, like Swan, that it wants to increase the number of homes on the site by building over its green spaces or knocking it down and starting from scratch? The council, working with Swan, has already begun doing exactly that on another estate, the brutalist concrete Robin Hood Gardens near the Blackwall Tunnel, claiming, against the aesthetic objections of Richard Rogers and Zaha Hadid, that it has the support of the majority of residents. If we campaigned against a similar project for Cranbrook, would we be righteous campaigners fighting to save the nation’s artistic heritage, or Nimbys obstructing urgently needed new homes?
The broader battle is to fight for the ideal embodied by Cranbrook: the ideal of social housing supported from general taxation on the better-off, the ideal that it is not only the prosperous who matter. Glyn Robbins’s father was born in 1929 in a slum in Limehouse, since demolished. There was no hot running water there and no bathroom. Three families shared a single house. Robbins’s father’s family of four slept in a single room. In 1936, they were offered a council house in Dagenham, a suburban house with front and back gardens. The result was a bequest of stability to their children and grandchildren. ‘If I’d said to my Nan and Grandad that they might even think about buying their house it wouldn’t have made sense. They had no reason to,’ Robbins said. ‘It was only after 1979 that that temptation was dangled. With some pride they were adamant they wouldn’t buy it and never did and so when Nan and Grandad died the house got given back to the council and it should have been left to the next family on the list. But I went back recently, and of course it’s been sold, and it’s in a shit condition.’
You could see Robbins’s lament as nostalgia. After all, the slum-to-council-house journey was a one-off, exclusively for two past generations. There are no slums in Britain now, no favelas. But that would be to assume the journey couldn’t go in the other direction. One kind of move back to the early twentieth century has already begun. Throughout the 1980s and 1990s we thought the proportion of homeowners would keep going up as the number of council houses went down. But since 2004 home ownership has been in decline in Britain. Since 1992, the number of people living as private renters has doubled. Julia Unwin, chief executive of the Joseph Rowntree Foundation, is pessimistic: ‘At the turn of the twentieth century, the free market had provided squalid slums. We undoubtedly face the re-creation of slums, the enrichment of bad landlords, the risk of people being destitute. Beveridge had soup kitchens. We have food banks. We’ve got something that does take us back full circle, a deep divide in way of life between people who are reasonably well off and those who are poor. There’s always been a difference, but the distinction seems to be more stark now.’ The advent of the age of gentrification doesn’t preclude the advent of slumification, and nostalgia becomes prophecy.
Acknowledgements
Versions of most of the chapters in this book first appeared in the London Review of Books and, in the case of ‘Signal Failure’, in the Guardian. I’m grateful to Mary-Kay Wilmers, editor of the LRB, for her support and patience, and for her consent to the breach of the norms of article length that publication involved. I extend the same gratitude towards Alan Rusbridger, editor of the Guardian. At the LRB I must also thank Daniel Soar, Jean McNicol, Paul Myerscough, Deborah Friedell, Christian Lorentzen, Joanna Biggs, Alice Spawls, Nick Richardson and Jonah Miller. I owe a particular debt to Ian Katz, then features editor of the Guardian, who first suggested I looked into the story of the West Coast Main Line and didn’t complain when I took one and a half years to hand the piece in; to Charlie English; and to Rob Edwards, who helped with the Freedom of Information request for access to the consultants’ report that doomed Railtrack.
I carried out more than one hundred and fifty interviews for this book. Some of the people I would have liked to interview wouldn’t talk to me, or were prevented from doing so by the organisations they worked for. Others spoke on condition of anonymity. Where I’ve quoted people and could do so, I’ve identified them. But there were many who helped me with background information, or who spoke with me at a stage when I knew too little to ask the right questions, and so haven’t been quoted. Rabina Khan falls into the latter category in respect of housing; David Worksett and Allyson Pollock, health. I’m grateful for their time and their help with context. I’d like to thank Peter Morris for his inexhaustible patience in helping me understand the numbers in annual company reports, and the mechanism behind private consortia takeovers of infrastructure. Alicia Weston, Keith Hill, John Bryant, Roger Harding, Neil Litherland and Stuart Macdonald offered insights into Britain’s housing policy mess.
In an era where large corporations’ trappings of openness – bright, friendly, content-rich websites and well-staffed PR operations – turn out to be facades for gagged workforces, denial of corporate history and a refusal to engage with sceptical questions, the generalist-journalist is grateful for the work of specialist journals whose reporters track narrow fields scrupulously week by week, and to whose presence shy executives have become habituated. I’m particularly indebted to the staff of Inside Housing and the Health Service Journal.
Two organisations I approached put me together with helpful, imaginative and articulate men with the authority and confidence to face my questions directly, answering them with intelligence and humour, acknowledging their critics, and accepting that they spoke to a corporate history going further back than the beginning of that financial year. These were David Simpson, then of Royal Mail, and Chris Green, then of Virgin Trains.
The more thorough and detailed a journalistic inquiry, the more likely the journalist is to have to demand of his interlocutors not only information about a situation but a kind of instant education into the most basic terms by which the situation must be framed. It is a great deal to ask of an interviewee in terms of patience, particularly when the questions stray towards the inquisitorial; I thank, in particular, Stephen Littlechild and Emma Cochrane for their readiness to stop and explain concepts to me.
I am grateful to Dieter Helm, who read through the original version of the ‘Taking Power’ article before it was published in the LRB; to Michael Pryke, who read ‘Not a Drop to Drink’; and to Nick Timmins, who read ‘Multiple Fractures’. Any flaws in these chapters remain my responsibility.
Examples of electricity market abuse were found in Power Systems Restructuring: Engineering and Economics, edited by Marija D. Ilic, Francisco Galiana and Lester Fink, and Privatization, Restructuring, and Regulation of Network Utilities, by David Newbery. Right to Buy: Analysis and Evaluation of a Housing Policy, by Colin Jones and Alan Murie, was an invaluable text, as was Matt Griffith’s report We Must Fix It, available on the IPPR website (ippr.org). I am indebted to William Waugh’s John Charnley: The Man and the Hip and John Allan’s magnificent Lubetkin.
I would also like to thank Chloë Penman, Matthieu Le Goff, Joseph de Weck, Marc Francis and Stewart Smyth; my
agent, Natasha Fairweather; my editor at Verso, Leo Hollis; and those loyal Dundonian readers of my articles, Russell and Susan Meek.
