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International Socialism, Winter 1968/69

Jim Kincaid

Housing: Fact and Fiction

From Survey, International Socialism (1st series), No.35, Winter 1968/69, pp.3-6.
Transcribed & marked up by Einde O’Callaghan for ETOL.

Jim Kincaid writes:

New Houses

When Labour took office in 1964, they undertook to increase the number of houses built in Britain each year from 374,000 in 1964 to an annual output of 500,000 by 1970. This was a modest target, given the much better performance of the building industry in countries comparable to Britain.

The target of 500,000 houses translates into 8.8 houses per year per 1000 population – i.e. by 1970, Britain would be building at a lower rate than Sweden, USSR and W. Germany six years previously. After four years of Labour rule the annual rate has gone up to 7.3 houses per 1000 population. Given recent government cuts in house-building the rate is unlikely to improve much over the next two years,

The original target must seem even more unadventurous when compared with the desperate state of British housing. In 1965 needs were estimated as follows:–

The number of families needing a house of their own is increasing rapidly each year mainly because the average age of marriage is falling, and because life expectancy is rising. The rate of new household formation will continue to be high into the 1970’s. The other figure refers to the, houses needed to replace houses (not slums) demolished for roads, urban redevelopment etc. Thus during the late 1960’s. 200,000 new houses are required each year, just to prevent an increase in the existing shortage.

The existing shortage was estimated in 1965 as:

It is now accepted that the 1970 target of 500,000 will not be nearly reached. In 1967, 400,000 were built but in January 1968 the government announced that production was to be cut by 16,500 houses in both 1968 and 1969. To achieve the original target of ½ million would have required a 5.5 per cent increase each year in the numbers of houses built. The figures show a disastrous failure to match this rate.

The government have tried to hide from the public – maybe even from themselves – the magnitude of this failure, by using a simple statistical distortion. What matters is the number of new houses completed each year. Instead the figures the government have taken to quoting in the past few years are, numbers of houses started,

under construction and completed. The resulting figures are wildly over-optimistic, given that the time taken to complete houses has been higher in recent years than when the Tories were in power. Average completion time 1957-64, about 14 months, 1965-6, about 16 months.
 

Slum Clearance and Renovation.

The crash programme to accelerate slum clearance had equally uninspiring results.

At a slum clearance rate of even 90,000 a year, it would take another 39 years to get rid of all the houses at present unfit, even by current standards.

There is a general historical pattern, that when governments find their construction programme lagging, they begin to suggest that the number of slums in existence is really rather less than appears. That is, that with some improvements and modernisations many houses formally defined as slums would do quite nicely for the time being. In April, 1968, a White Paper appeared called Old Houses into New Homes.

‘Now as a result of the very large increase in housebuilding in the last few years, it is possible to plan for a shift in the emphasis of the housing effort ... The Government intend that within a total of public investment at about the level it has now reached, a greater share should go to the improvement of older houses. How can this be brought about? Some new facts have come to light, some old facts have been better understood ...’

And some very convenient facts they are. Of the three million houses in England and Wales which in 1965 were ‘not worth improving’ 1.2 million are now regarded as ‘not unfit’. ‘Fitness’ has to be understood in a strictly relative sense, since of the 13.9 million or so dwellings which are not unfit, some 3.7 million need repairs costing £125 or more, and some 2.3

million lack one or more of the following, an indoor lavatory, a fixed bath, a wash basin, and a hot and cold water system. The total needing such repairs and improvements is 4.3 million out of a total housing stock of 15.7 million. So, to sum up. the Government’s latest position is that we have 1.8 million unfit houses (i.e. slums proper) 4.3 not unfit houses (i.e. rescuable slums) and 9.6 million fit houses.

The new concept of the not unfit house has at least the merit of focusing attention on the less than dynamic success of Labour’s previous programme of improvement grants.

It is rather unlikely that these grants have been concentrated where the need is greatest, given that since 1960, 49 per cent of improvement grants have gone to owner-occupiers and 29 per cent to local authorities. All available evidence indicates that the worst housing is in the private landlord sector, which has only had 22 per cent of grants. Landlords have shown no great enthusiasm for a scheme in which grants are obtainable if matched £1 for £1. The new scheme provides a much needed increase in the size of grants. But far from insisting that rents should be cut if improvements are not carried out, the government are proposing that if landlords improve, the rent can go up. Worse still, any property so improved will pass from the controlled rent category, into the ‘fair rent’ sector created by Labour’s Rent Act of 1965. This is the ‘fairness to landlords’ Act – since it has meant increases in 55 per cent of all rents submitted to rent officers and reductions in only 36 per cent of cases. No proposals have been brought forward to means test applicants for improvement grants. The new enthusiasm for selective welfare benefits does not affect state aid to the middle class thousands who are fashionably buying and renovating older property in big cities. Indeed under the new scheme the maximum conversion grant goes up from £500 to £1,200.
 

Local Authority Housing

The case for a continuing and much increased programme of council house building rests not just on the fact that millions of people want to live in one. The economics of housing are such that large numbers cannot afford any other sort of decent house at a manageable rent. Productivity in the building industry has lagged well behind most other industries throughout this country. Minimum tolerable standards in housing have risen. Land is in short supply, and its cost inflated by profiteering on a gigantic scale (100 brand new property millionaires created in Britain since the war). Interest rates have been high since the early 1950’s and currently are higher than ever. All these factors combined mean that despite increases in average real incomes, the percentage of people who are in a position to buy a house has shown little increase. The average expenditure on housing in Britain is 10 per cent of household income. Even if people were willing to sacrifice up to 25 per cent of income large numbers could not buy a house. Even with tax relief it costs at least £7 per week to pay back a building society mortgage over 20 years for a £3,800 house. Rates are additional to this. The building societies are loath to lend to people who cannot meet all housing costs out of the 25 per cent of gross income – overtime and wife’s earnings do not count.

The Government have to some extent managed to increase the proportion of council houses being built each year. But even in the best year (1967) only 50 per cent of all houses built were local authority – and in the first half of 1968, the proportion dropped back to 46 per cent.

The crippling restriction has been the massive increase in interest charges paid by local authorities. Labour’s undertaking to protect council house building from the withering effect of high interest rates was not fulfilled until 1967 by the Housing Subsidies Act. Even then the rate fixed was 4 per cent – high by historical standards.

Current expenditure on housing by local authorities in England and Wales rose from £350 millions in 1963-64 to £481 millions in 1966-67. 82 per cent (£108 million) of this increase was due to increase in debt charges. Nor will the hew Act do much to relieve the situation for many years to come, since the 4 per cent fixed rate of interest applies only to borrowing for new house building. What is strangling local authorities is the need to borrow headily to service their massive accumulated debt. When interest rates rose steeply in the late 50’s, many local authorities gamble d that high interest rates would only be a temporary phase and changed over from long term to short term borrowing. Thus in recent years a high proportion of their total debt has fallen due to be refinanced each year. At present 55 per cent of all current expenditure on housing by local authorities is to meet loan charges, and the proportion is increasing all the time.

Meanwhile other costs are rising too. In London the GLC were paying 50 per cent more per acre of land in 1966 than the LCC in 1964. After many delays the Land Commission began to operate in 1967 – its purpose being to acquire land and to pay for this land by imposing a levy of 40 per cent on the extra value of land being sold for development purposes. Its first annual report did not make action-packed reading. A staff of 1499, employed at a cost of £2,4 million, had collected only £462,000 in levy charges. The grand total of land acquired by the Commission – 2 acres.
 

Rents and Rebates

The consequence of these developments is that between 1964 and 1966, the number of council houses built went up by only 20 per cent whereas the annual housing expenditure of local authorities rose by 27 per cent. This increased expenditure has been financed mainly by putting up rents.

The Prices and Incomes Board estimate that council rents in England rose by 25 per cent between 1966 and 1968 – and by 37 per cent in London.

Council rents have become a key element in the Government’s prices and incomes strategy, designed to cut working-class standards of living. The Government have warmly welcomed the recent recommendation by the Prices and Incomes Board that council rents should rise each year by at least 7s 6d per house per week. Annual increases in wages, when they occur at all, are discussed in terms of 2 per cent and 3 per cent – but 7s 6d represents an increase of 20 per cent .n the average council rent of £1 17s 9d in England and Wales, and of 42 per cent in the Scottish average of 18s (These figures do not include rates). Thus the Government is insisting on increases of up to 20 per cent or more in an item of expenditure which takes up 10 per cent of the household income of all council tenants, and 15 per cent of the household income of these tenants with less than £20 per week coming in (35 per cent of council tenants have a household income of under £20 per week). Rent increases of this size will make a sharp impact on the standard of living of council tenants.

The Prices and Incomes Board’s own recently published survey completes the demolition of the popular myth of council tenant affluence. Even when husband’s and wife’s income was aggregated, only 10 per cent of council tenants grossed £30 a week and over. On the other hand 40 per cent of tenants were getting for the long or short term some kind of statutory income supplement, or were living on a pension without other income. This estimate leaves out low wage earners who do not qualify for supplementary benefit. The 40 per cent was made up as follows:–

Rent increases are always justified with the claim that rent rebate schemes prevent hardship. The PIB survey reported that only 12 per cent of council tenants in Britain were getting rebates in early 1968.

The rates rebate scheme introduced in 1966 offers even more limited help. In the first year of operation only 5.9 per cent of ratepayers in England and Wales got help. In 1967-8 the proportion of beneficiaries fell to 5.1 per cent mainly because the Government did not match increases in money wages by raising the income limit which qualifies for a rebate, or not at least till October, 1968. It is currently estimated that 500,000 families whose income would qualify them to a rebate still have not applied. As is usual with selective benefits, it is probable that those in relatively less urgent need are applying. At all events in the past year 6.7 per cent of owner-occupiers applied successfully, but only 2.7 per cent of council tenants.

Both rates rebate and LA rent rebate schemes are administered in the same way. The individual must normally find out himself when, how and where to apply. The application forms are bewilderingly complicated. Usually the eligibility requirements are a closed secret. A person will not know whether he has been refused benefit because of someone’s bad arithmetic or a mistake in his employer’s accounts department. In any case there is no appeals tribunal against decisions. The applicant has to supply complicated details about his earnings over a period. He must trouble his employer for an income statement. He must give the benefit authorities the right to check his story in whatever way they wish. There are severe penalties if you are caught giving false information to the authorities – but they are not penalised for incorrectly refusing benefit. In the case of rent rebates, any arrears of rent usually disqualify the applicant out of hand. In other words these schemes are a political sop to justify rent increases, not a serious effort to alleviate hardship.

In housing, as in social policy generally, the Labour government have retained intact the middle class welfare system they inherited from the Tories. All the rigors of economic crisis have not inspired them to re-introduce the Schedule A tax on house property abolished by the Tories. Yet if this tax were still in force it would be producing an annual revenue of about £300 million a year. Under Labour the tax relief to people buying their own houses offers a higher subsidy to the upper income groups, because house prices have gone up, the standard rate of income tax was increased to 8s 3d in the £1 and because interest rates are now higher. A man paying standard rate of income tax in the early years of repaying his mortgage will be getting tax relief of more than .£20 per year for every £1000 that he has borrowed. So if he borrowed £4,000, the state is giving him a subsidy of around 25s a week in the form of tax relief. The average council house in England attracts a subsidy from rates and exchequer of less than 10s per week. The value of privately owned houses is continually rising and, in this respect, private house owners have a great advantage over council tenants.

House and land prices rise because of a general increase in the prosperity of the community. Such growth is the result of the efforts of all workers in a society yet house owners reap a special benefit. Also, the capital gains made by owner-occupiers who sell their houses are not subject to capital gains tax. Profits on the sale of private houses represent clear gains made by private individuals, although it is the whole community which has created the extra value. The cost to the Treasury of tax relief to house buyers is now reckoned to be .£180 million a year. Compare £150 million, the total subsidy transferred into the council house sector from Exchequer and rates combined. The only reform Labour have made is that from April, 1968, under the Option Mortgage Scheme, some subsidisation is also offered to groups paying less than standard rate of income tax.
 

Conclusion

Labour’s housing record is pathetic. They have achieved little more than the Tories, and told even more lies about it. After four years housing policy is dominated by the crudest of capitalist objectives – to cut working-class standards of living, to restrict the resources going where need is greatest. Labour have certainly increased the percentage of the national income going into the housing sector. But more money spent on housing does not mean correspondingly more spent on bricks and mortar. Land values have continued to rocket. The profits made out of land and house-building have shown no decrease. Above all, both the public and private sectors in house construction are increasingly over-weighted by massive interest rates.

Between 1964 and 1966 the trading profits of all British industries declined slightly, from £4,600 million to £4.500 million. But profits from what is now the largest sector of British capitalism – insurance, banking and finance – rose by a staggering 25 per cent from £800 million to £1,000 million a year. In this development housing played a considerable role.

 
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