Why building new council houses is a bad idea

There is no need for the state or its agents to intervene in rents let alone own huge swathes of badly maintained, poorly managed homes with artificially low rents.

Any consideration of using state power to make housing affordable probably needs to open with something about rent controls:

“Rent controls are a textbook example of a well-intentioned policy that does not work. They deter the supply of good-quality rental housing. With rents capped, building new homes becomes less profitable. Even maintaining existing properties is discouraged because landlords see no return for their investment. Renters stay put in crumbling properties because controls often reset when tenants change. Who occupies housing ends up bearing little relation to who can make best use of it (ie, workers well-suited to local job opportunities).”

The impact of rent controls is to reduce the amount of new housing that gets built, leads to poorly managed and maintained housing and excludes the productive from homes close to work opportunities. There are obviously short term benefits for existing tenants from rent controls (which is why city politicians like them) but their wider effect on housing supply and the economy makes them probably the worst possible response to a housing crisis.

Which makes it odd that UK housing policy, from right, left and centre, is dominated by the idea of affordable housing made possible by the state determining rents. We call it ‘social rent’ and ‘council housing’ but, regardless of this supposedly noble social purpose, such housing is simply rent controlled provision. And rent controls don’t fix the housing crisis, indeed they may make matters worse especially given the manner in which the allocation of social housing operates. Priority is given to the less productive which means that a huge proportion of housing in high demand areas like central London becomes filled with people who do not participate in the labour market. Only 29% of Britain’s social housing tenants are in full time work (compared to 66% of private renters).

Despite this, many people still advocate for building lots more social housing and demand that the government spends billions to make this possible. Shelter, Britain’s biggest housing charity (the one that doesn’t actually provide any housing, housing support or aid for the homeless) wrote an ‘open letter’ prior to the recent general election that sums up the obsession of housing campaigners with subsidised housing:

“The lack of social housing in this country is driving a housing emergency. Across the country, 1.3 million households sit on social housing waiting lists. There are over 145,000 children homeless in temporary accommodation, with nowhere to play or do their schoolwork and whole families living in a single room. Meanwhile, a private renter receives a Section 21 ‘no fault’ eviction notice every 3 minutes”

Shelter, the National Housing Federation, the Chartered Institute of Housing and the Local Government Association all argue that the way to solve the housing crisis is to spend billions of borrowed government money on building new council and social housing. We are repeatedly told that the only time when we built lots of houses was in the 1960s when councils were inspiring Lindisfarne to write songs about planning:

“Politicians, planners, go look what you done

Your madness is making a machine of ev'ryone

But one day the machine might turn on

We'll tear you down, mess you round

And bury you deep under the ground

And we'll dance on your graves till the flowers return

And the trees tell us secrets that took ages to learn”

The song isn’t about the green belt but about the corrupt T. Dan Smith era of Newcastle government when people’s homes were compulsory purchased and demolished while the lucky inhabitants were rehoused in badly built, often dangerous high rise blocks. Today the Council is knocking down these tower blocks because they are expensive to maintain, hard to manage and unpopular.

The latest generation of council housing enthusiasts, of course, will tell us that they’ve learned from past mistakes and people are going to love the new council houses. Like those 1960s local councils the idea is that councils will borrow to build new homes, that land acquisition will be possible because of compulsory purchase laws and generous dollops of central government grant funding. All to build a load more rent controlled housing that councils can’t afford to maintain properly let alone manage effectively over a home’s lifetime. The result looks like this:

“From the evidence and assurance gained during the inspection, we have concluded that there are very serious failings in LB Newham delivering the outcomes of the consumer standards and it must make fundamental changes so that improved outcomes are delivered, specifically in relation to outcomes in our Safety and Quality Standard and our Transparency, Influence and Accountability Standard. Although LB Newham has indicated a willingness to address these serious failings, we have not yet seen evidence to sufficiently assure us of its ability to put matters right.”

And the reality for tenants is like this:

“The conditions in the flats on Regina Road in South Norwood, with the damp, mould, poor standards of repairs and maintenance, and with health hazards everywhere you looked in what are supposed to be the homes of families with young children became a byword for poor housing provision throughout England and Wales.”

There is a very simple reason for councils not looking after their housing properly - rent controls. When those homes were built back in the 1960s and 1970s the rents were set in line with the rents that people had been paying to their previous landlords. But, over the years, councillors (while they still controlled the level of rents) persistently kept rents low. And why wouldn’t you, the currency of politics is the vote and there's votes in low rents. Today, of course, the councillors no longer control the rents, these are set by a national regulator under the direction of central government’s ministers. But there’s still no votes in raising rents and it won’t be Angela Rayner who is blamed for councils failing to manage their homes properly.

Council housing is one of the reasons we have a housing crisis. So long as nearly a fifth of England’s housing stock is rent controlled social housing with a lifetime tenancy, we are going to have long waiting lists for that housing. And these waiting lists will continue to distort the demography of cities because the old, ill, poor and unemployed will be prioritised over the productive worker. Councillors on planning committees will continue to demand ‘affordable’ housing contributions adding to the cost of development (and reducing how much of that development we get) while the housing sector and campaigners like Shelter will argue that meeting housing need requires billions in subsidy to councils and housing associations. All while the same councils demand further grants - ‘regeneration’ they’ll call it - so they can try and catch up with the repairs and improvements they can’t afford from the rent income.

There’s a strong argument for the state providing emergency housing as well as specialist housing for those who genuinely can’t make their own provision and need support. But the idea that the state should borrow money to build houses to rent out at below the real cost of management is crazy. Even more crazy when this can only happen with further subsidies for land acquisition and where, regardless of the tenant’s circumstances, they get that cheap rent for life. Yet people repeatedly argue that this is the only way to resolve our housing problems even though the outcome is that productive workers are unable to afford to live in the cities and towns where their work is located.

I know many fantastic people who’ve managed council and social housing. These people genuinely care and argue passionately for their sector. And lots of the housing they provide is as well looked after as they can manage with the limited resources available. There are great tenants associations and residents groups that advocate for council housing and those who live in that housing. But the truth is that, if we want to resolve the crises with our housing we need to start by recognising that building rent controlled homes is the wrong place to start because rent controls simply store up future problems, mean fewer homes and poorer overall standards.

It needs repeating again and again that the main causes of our housing problems lie with the planning system and, in particular, with how that system limits the availability of land in places where people want to live and work. If you change the system so it allows people who own land to build houses on that land then rents and prices will fall. There is no need for the state or its agents to intervene in rents let alone own huge swathes of badly maintained, poorly managed homes with artificially low rents.