Thursday, August 05, 2010

Ending the housing crisis

The latest subject of the government's Two Minute Hate are people who live in council housing when a government bureaucrat thinks that they should move out.

I think it is sheer fantasy to suppose it is any kind of solution to the housing crisis to evict people from their home if they get a decent job, or if they are a lone parent who meets and chooses to live together with someone they love. But I can also understand why someone having to cope with sky high rents and a bad landlord in the private rented sector might wonder what all the fuss is about and feel that council tenants have it easy. This is what happens when you have a residual, heavily means-tested public service only for the poorest - it is easy to divide people who need the service against each other and cut it.

Let's try and sketch out an alternative:

The only people who benefit from the current housing crisis are slum landlords, who charge low paid workers extortionate rents, and get billions of pounds in handouts from the government in housing benefits.

Communities all over the country have been damaged by landlords who don't look after their tenants or maintain their properties. Meanwhile, thousands of people who aspire to live in council housing, or to own their own home, have been denied the opportunity to do so, and many are living in overcrowded or unsuitable accommodation.

At a time when the costs of construction are at their lowest in years, we have a housing shortage and mass unemployment. Savers who are trying to put aside money for their retirement are incentivised to invest in property, driving house prices higher, while British businesses are desperate for loans to help them grow.

None of these problems will be sorted out by the current government's policies of driving poor people into debt by cutting housing benefit while scrapping regulations which would protect tenants from bad landlords.

Instead, we could get people off benefits and into work by building the new council homes that people need. This would create thousands of skilled working class jobs, and help young (and not so young) unemployed people learn a trade. Building these homes would mean that, as in many other countries, people on lower and middle incomes had a genuine choice. Those that wanted to could buy their own home, while others who preferred to rent from the council or privately could do that as well. Rather than ghettos where only the poorest live, council housing would have a wider mix of people.

Meanwhile, the economic and housing crisis means that the boom times should be over for bad landlords. New regulations - supported by good landlords and tenants alike - could be introduced, and private sector rents could be capped and reduced, to make renting more affordable and cut the housing benefits bill. And savers who got into property speculation to try to provide for their retirement could be given incentives by the government to invest their money in British business, helping them to get the credit they need to grow and employ more people.

Expensive in the short term, but there would be colossal long term savings. Rather than spending money on unemployment benefits, governments handouts to wealthy landlords and the costs of picking up the pieces and supporting families who are homeless or living in overcrowded housing; we'd be spending the money on people doing necessary jobs, preventing the problems caused by bad housing, and encouraging people to invest in British businesses.

If nothing else, it has to be better than pretending that everyone can (or even wants to) own their own home, that social housing should be only for the most needy, or that the best use for your savings is to invest in property - and then trying to distract people from the consequences of this by blaming council tenants for causing the housing crisis.

2 Comments:

At 11:13 am , Blogger Tim Worstall said...

Oooooh lovely!

"and private sector rents could be capped and reduced,"

We did that you know? 60's through to the early 80s. What happened? The private rental sector nearly disappeared and....the homeless rate rose as a result!

Since we abolished rent control the private rental sector has revived and the homeless rate has fallen.

Gosh, I wonder if there's some economic theory that might be able to connect these dots? Umm, wait a minute, it'll come to me....ah, yes, that's the one. When you set the price at less than the market clearing price you get a shortage!

Yes, that's the one alright.

 
At 2:09 pm , Blogger donpaskini said...

Hi Tim,

Here's a graph of households accepted as unintentionally homeless since 1980:

http://www.hnm.org.uk/charts/homelessness.html

Have you ever considered why it is that your theories don't explain what actually happens in the real world? I know it sounds crazy, but it is almost as if there is more than one factor or variable which affects the homeless rate.

 

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