The housing crisis: what can we learn from history?

In the latest of our ‘History and Policy’ series, Peter Shapely considers the state of Britain’s housing market, and asks what we can learn from history to avoid the disappointments and frustrations of previous housing policies

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What is the current problem?
Over recent years it has become clear that Britain is facing a new housing crisis in both the private and rented sectors. The problem has been fuelled by a number of factors.

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These include a rising population, changing lifestyles with more single occupancy, land availability and cost. At the same time, wages in many parts of the country and sectors of the economy have not kept pace with the growth in house prices.

Despite the occasional lull, the underlying trend has seen house prices rise consistently, if not dramatically. This has led to increasing pressure on the existing stock of affordable housing. It is an issue which has impacted on all areas of the country, whether it be London and the Home Counties or rural areas.

The Government has recognised the problem and is now preparing legislation that will herald the start of a new house-building drive. It intends to support the building of a total of three million new homes by 2020, which would eventually mean creating an annual house-building target of 240,000 new homes a year.

How does the current situation compare with the past?
The Government’s support of a new building drive signals a return to the central position that house-building played in social policy from the end of the First World War through to the early 1970s. For much of that period, governments tried to solve the endemic problem of inherited Victorian slums that characterised large areas of urban Britain.

The slums arose initially as a result of rapid urbanisation, population growth and an unfettered market, which had become something of a holy cow of capitalism. Property owners and developers did not welcome interference, yet land and property values meant that the poor could only ever afford to live in overcrowded and unhealthy slums, creating an array of health and social problems.

How successful was direct government intervention in solving the housing crisis?
The sheer scale of the task has overwhelmed a succession of administrations from across the political spectrum. Governments throughout the 20th century were faced with the task of clearing slums and replacing them with affordable homes, which, in turn, meant state intervention and public subsidies.

The demand for widespread reform gathered momentum in the First World War. Those in power responded by making bold and well intentioned promises but these were all too often dashed by economic problems. The upshot was that governments appeared ineffective and everyone else felt an underlying sense of frustration.

The Liberal government of the early 1920s, for example, wanted to create ‘Homes-for-Heroes’, a mini revolution in social housing for the working classes. However, economic problems and material shortages soon scuppered their plans and, instead of ploughing more money into housing, the Cabinet of 1922 was forced to cut expenditure.

Homes-for-Heroes was no isolated case: in fact, economic imperatives were to prove a constant barrier to the aspirations of governments across the century. After the Second World War the Labour government aimed to create a New Jerusalem by, among other things, implementing a large house-building programme. However, as in 1919 (and 1929), the hopes and dreams of the Labour administration proved wildly optimistic. The housing programme was dogged by a series of problems, including material shortages, rising costs and the serious financial crisis of 1947.

It wasn’t all bad news though. The 1960s did witness a dramatic change in the pace of slum clearance and replacement building (albeit through the use of system-built developments), yet economic crisis meant that the Wilson government had to make cuts, just like their predecessors.

What was the impact of people’s desire to own their own homes?
One of its primary long-term effects was to erode local authorities’ role in house-building projects. By the 1960s, the need to recognise working class people’s desire to own their own homes had been lost on some Labour officials for many years. Though the Wilson government did show signs of reversing this trend, it was the Conservatives who did most to support and promote home ownership.

While the Tories’ policies had not dismissed social housing, they had helped the private sector to thrive. This was especially evident in the 1950s when, in contrast to the postwar Labour government, the Conservatives were able to boast impressive house-building completion rates. They encouraged the growth of home ownership, reduced stamp duty and provided loans to building societies while continuing with some municipal building.

When the Tories gained power in 1951 only 29 per cent of households were privately owned but by the time they were voted out in 1964 this figure had risen to 45 per cent.
The desire to expand home ownership proved even more central to the Conservative government of the 1980s. A right-to-buy policy meant that many council tenants were able to buy their homes at relatively low costs. Meanwhile, councils were no longer able to build new houses and, by the end of the decade, the housing stock in many areas had been transferred to other social housing bodies.

In summary, housing policies across the 20th  century attempted to solve lots of complex problems. There were successes, but now many of the problems which led to government intervention in the past are once again threatening to plunge the country into a new housing crisis.

What does history teach us?
We can draw a number of parallels between the housing market of the 19th century and that of today. Just as housing reformers of the late 1800s recognised that central and local government were the only agents capable of easing the problems of slum housing and high prices, so today’s commentators argue that the current situation demands government action.

Supply has outstripped demand, and wages have failed to keep up with prices to such an extent that only state intervention can resolve the crisis. An unregulated market with no government interference will surely exacerbate the problems.

Yet governments need to set realistic building targets, factoring in potential barriers to the building programme, such as economic problems or lack of available land. They simply can’t afford to ignore the dangers and, in that respect, the existing global economic crisis can be regarded as a warning shot. History has shown that, by failing to meet their targets, those in power not only deepen the housing crisis but appear incompetent.

Governments should provide a mixed economy of housing. They must also be able to accommodate people’s aspirations and so their policies should allow for affordable private property ownership. While the desire to own property is partly responsible for the existing crisis – placing huge pressures on supply – it is not politically expedient to ignore or dismiss the basic ambition of a large section of the population.

Giving people the opportunity to buy their own homes may involve direct intervention in the form of further subsidies. It may also demand an extension of the existing policy for key workers in the South East (in which certain public sector workers can apply for assistance in buying, upgrading or renting a home). Whatever the options, the fact is that the market cannot accommodate demand without government help.

While being mindful of many people’s ambition to own their own home, governments should also safeguard an adequate stock of affordable social housing. Selling off social housing might meet the aspirations of the tenant but if those houses are not replaced then it places even greater pressure on dwindling stock. Also, while people should be given the option to choose between the rented and private sectors, they should be able to make choices within the rented sector.

Local authorities must once again take a central role in providing the necessary resources to plan and build on a large enough scale to resolve the housing crisis – as they did last century. They can bring all agencies together (government, developers, social housing bodies and tenants) to provide a coordinated approach; they may even be justified in once again building and renting homes.

Council housing was not a universal success, but neither was it the total failure that the governments of the 1980s claimed. Central and local government achieved a great deal in clearing the Victorian slums, and much of the new houses built up to the 1960s were of a relatively high standard and were certainly vastly superior to the slums that they were designed to replace.

However, decision makers must keep the problems encountered in the past firmly in mind. There should be no return to the large estates that continue to blight many of today’s towns and cities. Other social housing disasters – such as the tower blocks, maisonettes and factory-built multi-deck access developments that proved such a nightmare for tenants – must also be avoided.

Finally, social housing should be well managed. All too often, council housing estates have fallen victim to poor maintenance. Local authorities or other allocated management agents must have the resources to ensure the homes and the surrounding environment are maintained to high standards. In short, government intervention must learn from the mistakes of the past if the housing crisis is to be finally resolved.

Three lessons from history

1. Social housing is needed to assist low income groups, as affordable housing cannot always be provided by the market.

2. Government can be a positive agent for reform but should be very wary of making promises it cannot keep. Any targets that are set should take into account potential problems such as economic changes or scarcity of land.

3. Government should not dictate housing types but should provide the public with choices. These choices must be based on consultation and participation with tenants, and should take into account people’s aspirations to own their property.

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Peter Shapely is a lecturer in modern and contemporary history at Bangor University. His monograph, The Politics of Housing, was published in October 2007