By Michael Faulkner – August 29, 2010
London is one of the most expensive cities in the world.
Visitors from continental Europe and beyond sometimes express astonishment that
residents can afford to live here. The public transport system, though improved
during Ken Livingstone’s tenure as mayor, is far from reliable. Some
underground and overground lines on the rail network have been closed ‘for
essential work’ at weekends for many months causing serious inconvenience to passengers
who pay the highest fares in Europe for the privilege of using a largely
privatized public service inferior to those in most other continental capitals.
For large numbers of Londoners living in the capital is a struggle to make ends
meet. This is particularly true for most young people, who, whether employed or
unemployed, have no opportunity to move elsewhere. For older people there are
certain benefits. The ‘Freedom Pass’ introduced several years ago by Ken
Livingstone, allows free travel on the public transport system. Any attempt to
remove this concession, or make it subject to means testing – and, given
the coalition government’s determination to cut public spending to the bone,
such an attempt cannot be ruled out – would hopefully be met by a
powerful campaign by senior citizens to prevent it. For younger people –
those in their twenties and thirties – the biggest problem is finding
somewhere to live.
In London and the south-east of England house prices are
amongst the highest in the world. The inflation of property prices began in the
late 1970s and continued to rise until the late 1980s when the bubble burst,
leaving many thousands in negative equity and leading to re-possessions. But
the market ‘recovered’ fairly quickly and by the late nineties prices had far
outstripped their 1980s level. Of course this housing boom was a global
phenomenon closely linked to the speculative financial bonanza that proceeded
unimpeded until 2008. In Britain, as elsewhere in Europe, but with a more
obsessive dedication here, the love-affair with home-ownership was an almost
universal phenomenon. The consequences look likely to prove disastrous for the
next generation.
It is becoming increasingly clear that the ‘fiscal
tightening’ (swingeing cuts) about to be implemented by the Con-Lib government
are going to fall most heavily on those least able to bear them. They are going
to hit young people hardest. Youth are three times as likely as adults to be
unemployed and youth unemployment in 2009 continued to rise over two thirds of
the UK. The recession is not over and all serious observers of the economy are
predicting a ‘double dip’. As both private and public sectors cut back,
unemployment will increase. Now standing at 2.5 million (not counting the many
thousands of part-time workers who would like to be working full-time), the
figure will surely reach 3 million in 2011. Belief in a consumer-led recovery
looks far-fetched. If you are faced with the prospect of redundancy, an
increase in VAT to 20%, rising fuel and food prices, it is pretty obvious that
you are going to cut back as far as possible on spending. Luxuries and ‘little
extras’ will have to be abandoned. You will have to forego the holiday in Spain
or Greece. That’s why travel firms have gone under and more will follow. Hopes
of an export led recovery based on the Euro zone look equally misplaced. The
Eurozone is also cutting back and its citizens are not inclined to purchase the
exports. There are no jobs for the school leavers who, despite good qualifications,
have failed to get to university this year due to the reduction of places
through enforced cuts in educational funding. Those without qualifications have
even less hope. The government’s advice to those who have failed to find
university places that they should start their own businesses, sounds like a
bad joke.
What prospects do these young people have of finding
somewhere to live? The average house price in the Greater London Area is around
£300.000. In more sought-after neighbourhoods one would be lucky to buy a two
bedroom flat for £380.000. Let’s be clear – in such neighbourhoods this
is the cheaper end of the market. These are properties that would be suitable
for first-time buyers. Credit is now very tight. In order to obtain a mortgage for
a two bedroom apartment much cheaper than this, a single person would need an income
of at least £50.000 p.a. and would need a deposit of at least £40.000. The
average income in the UK is around £22.000. People earning between £12.000 and
£25.000 have no chance of getting social housing, where there is a waiting list
nationally of 1.8 million. Millions have been priced out of the housing market
as owner-occupiers. They must rely on the private rented sector which is
expensive. The average rent for a one bedroom apartment in a more sought-after
neighbourhood in London is £1000 per month which requires an income of well
over £30.000 p.a. And in the rented sector, tenants are often at the mercy of
landlords who are unwilling to provide anything but the bare necessities even
for properties rented for £1.000 a month. Forty per cent of rented
accommodation in Britain is considered to be ‘non decent’.
For the origins of this crisis we need to look back at least
to the Thatcher years. The notion of a ‘property owning democracy’ was the
brainchild of Harold Macmillan who coined the phrase after he became prime
minister in 1957. But earlier, in 1950, Macmillan had criticized the Attlee
government for failing to solve the post-war housing problem by building
sufficient municipal homes. In fact, the Labour government had done a great
deal to repair bomb damage, clear slums, plan and build ‘new towns’ and build new
council houses to meet the desperate needs of the time. In fact, the slower
pace of building was due to the attention given to design, creating low-rise
estates and pleasant environments rather than erecting high rise blocks at
record speed. On achieving office in 1951, Churchill appointed Macmillan
Minister of Housing and charged him with the task of building 300.000 council
houses a year. ‘It is a gamble’, said Churchill, ‘It will make or mar your
political career, but every humble home will bless your name if you succeed.’
He achieved his goal ahead of schedule. It seems surprising today that the
greatest expansion of municipal housing was undertaken by a Conservative
government.
By the time Margaret Thatcher became prime minister in 1979,
the Tories had already stigmatized social housing provided by local authorities
as a social evil helping to perpetuate slothfulness and stifle individual
initiative. Thatcher’s great contribution to social engineering was the ‘right
to buy’ policy for council tenants. This enabled thousands of people who would
otherwise never have got a foot on the housing ladder to purchase their own
flats at concessionary prices. Local authorities were required to sell and
denied the right to invest the proceeds in the construction of new properties.
The policy was popular with many council tenants and there is no doubt that it
contributed to extending the culture of home ownership which may be summed up
in the phrase ‘Right to Buy – Wrong to Rent’.
Since the 1980s, under the Tories and New Labour, the stock
of social housing has shrunk. Even in Scotland, where the tradition of social
housing was much stronger, it has been steadily eroded. Local authorities have
almost stopped building. The ‘right to buy’ has deepened the social divide and
contributed to the creation of inner city ‘sink estates’ with very high levels
of unemployment and anti-social behaviour. Now the chickens are coming home to
roost. A generation of young people find themselves shut out of decent housing.
Talk of extending social housing has amounted to nothing and, without
determined public pressure, is unlikely to come to anything. The government is
about to cut housing benefit payments for dependents in private accommodation,
forcing them to leave reasonable premises for cheaper, inferior ones. Cameron
has warned council tenants that they may lose the right to permanent residence. This is not a crisis
confined to the poorest people. Younger, middle class professionals and others
cannot afford to buy their own homes. In a society so obsessed with home
ownership this seems like the end of a dream. But if it helps to dispel the
unhealthy preoccupation with property prices and housing bubbles it may point
the way to a saner way of living. There is evidence that house prices in
Britain, after a partial recovery, are likely to fall again. According to some
predictions, the public spending cuts and tighter credit conditions could lead
to a 25% to 30% fall in the next few years.
There is another example of city living that, while far from
perfect, is much more sensible. In Berlin only 14% of people are
owner-occupiers. Spacious, well appointed apartments may be rented for far less
than - sometimes half the price of - smaller, far inferior apartments in
London. The great majority of Berliners are tenants, whether they live in
social or private housing. They seem to like it that way. Who knows, maybe we
would too – if the choice were available.