Alex Marsh
It is not hyperbole to claim that we face a global housing challenge. In both the Global North and South – particularly in urban areas – the incidence of households living in accommodation absorbing much of their income is startling. But the housing challenge many face is not simply about the out of pocket cost of maintaining the roof over their heads. It is about quality. It is also about security. It is about the very possibility of accessing accommodation at all. While the characteristics of the housing challenge clearly differ regionally – for example, whether the primary concerns are in the formal or informal housing sector – there is nonetheless a family resemblance in the patterns we can observe nationally and globally.
Housing is an area in which assumptions about ongoing improvements in social outcomes are not as secure as we might once have believed them to be. As welfare safety nets are shredded and governments seek to redefine the extent of state obligations to assist, achieved housing outcomes have deteriorated. That, at least, is the recent English experience.
Housing outcomes are driven by the complex interplay of global and local factors, short-term crises and longer-term chronic problems. The forging of stronger interconnections between the housing system and the broader financial system since the 1980s meant that housing became more exposed to the wider global economy. Since 1980 the Right to Buy policy translated publicly-owned assets into private commodities to be bought and sold. This commodification of public housing meant that an increasing proportion of households were exposed to market-related risks associated with house price and interest rate volatility.
The 2007-8 Global Finance Crisis brought in its wake waves of Quantitative Easing (central bank purchase of assets held by financial institutions with the aim of increasing the money supply), increased mortgage regulation, and tighter lending conditions. Quantitative Easing drove down returns on safe assets and made housing one of the few asset classes that continued to offer the prospect of good returns. Broader geopolitical turbulence made relatively stable democratic countries experiencing strong house price growth look like safe havens in which to store money in the form of residential property. The result was upward pressure on prices. At the same time, increased mortgage regulation – particularly deposit requirements – made owner occupation more difficult to access.
These short term financial dynamics were overlaid upon a housing system that had consistently failed to deliver sufficient new housing to keep up with population growth and effective demand. This failure of housing supply in England is well recognised and well-rehearsed. The land market, the housebuilding industry and the planning system are all implicated. The result is upward pressure on prices.
But housing outcomes are also a function of change elsewhere in the economy – particularly transformations in the labour market generating greater insecurity and more low paying jobs – and in other policy areas. The UK Coalition Government’s austerity response to the GFC arguably accelerated labour market change through forcing reductions in relatively stable public sector employment. It reduced the overall subsidy for building social housing and subsidy per property so that social housing transmogrified into ‘affordable’ housing, which in many localities was nowhere near affordable for lower income households. Policies such as increased reliance student loans to fund higher education mean young people have lower capacity to take on housing debt. Cuts to social care budgets mean that support for independent living or assistance to non-priority homeless households has all but disappeared in some areas.
Changes in welfare policy and policy towards social housing have contributed to some of the starkest changes in housing outcomes over the last six years. Some of the key changes have included reductions in the generosity of tax credits and housing allowances; introduction of the massively controversial ‘bedroom tax’; reducing or removing the eligibility of younger people for housing assistance; increasingly punitive use of benefit sanctions; localisation of council tax; and the introduction – and subsequent tightening – of the Overall Benefit Cap affecting households who have relied on social security for extended periods. Many of these changes have affected the same households, and many of the households affected have a disabled family member. The cumulative negative impacts upon some groups of vulnerable households have been severe: severe enough and focused enough for some commentators to argue that policy has been targeting the poorest and most vulnerable.
These drivers of housing outcome have combined to generate several major effects.
While there continues to be an overarching narrative about the normative desirability of home ownership in societies like the UK the reality is that accessing owner occupation has become much more difficult. In the 2000s the growth of home ownership and the ‘investor-subject’ led to policy advocacy for asset-based welfare (ABW) – households could meet their family’s other social needs by releasing accumulated residential equity. Yet almost as soon as the ABW agenda gained momentum the probability of new households entering owner occupation started declining. Each successive cohort is entering owner occupation later, if at all. The overall proportion of households in owner occupation has been declining since 2004.
Those households recently able to become first time buyers are either entering the market later or are increasingly relying upon substantial intergenerational wealth transfer within their family. Government attempts to increase the affordability of home ownership using policies such as Help to Buy have succeeded in redirecting housing subsidies from the poor to those in the top half of the income distribution. Households with accumulated housing equity are able to leverage this into further house purchase. This sustains prices and increases the incidence of small scale private landlordism.
As ownership of housing assets has become concentrated in fewer hands, the most striking characteristic of housing system over the last decade is therefore the growth of private renting. In 2004 12% of properties in England were in the private rented sector but by 2014 the sector accounted for 20% of properties.
Most private rented housing is let on six month assured shorthold tenancies (AST). So the proportion of households exposed to insecure housing conditions has increased. The composition of the PRS population has changed, with many more families with children living long-term in the sector, even if they are having to move regularly. This can have a range of negative side-effects, including impacts upon children’s educational achievement that can have long-lasting effects upon life chances and future economic productivity. This highlights how welfare reform under austerity conditions can have profound social consequences.
Rises in homelessness, use of temporary accommodation, and rough sleeping are some of the most vivid problems associated with the architecture of the existing housing system, particularly in southern England, in the period since the GFC, even in a context where since 2004 local authorities have tried to adopt a much more preventative approach. Numbers of hidden and overcrowded households have also increased. Greater reliance on expensive private rented housing is certainly part of this story. The ending of AST has now emerged as a key reason for households having to approach a local authority as homeless. But as a cause of homelessness ‘the ending of a private sector tenancy’ can obscure as much as it reveals. It can be the last link in a chain triggered by job loss. It can be the result of social care support no longer being available to vulnerable households. It can be about landlords in fast moving housing markets seeking to increase the rent, beyond the reach of current residents. Or it can be the product of benefit restrictions and sanctions.
The levels at which housing allowances and the overall benefit cap are now set means that in many high-cost housing markets in the south of England independent living is no longer possible for households requiring state assistance. We are now seeing processes of spatial sorting and segregation as the poor have either been priced-out of cities and city centres or compelled to switch to less satisfactory, more crowded accommodation locally. Large families and young single people have been particularly hard hit.
These processes are well underway. But the generosity of state assistance is being further eroded and other restrictions are planned to come into force in the near future. Hence low income households’ difficulties of securing adequate accommodation will only intensify. We are yet to see the full impact of changes already agreed and implemented, but the results of financial modelling indicate that for families with several children who rely upon state assistance there will soon be no adequate affordable rented accommodation in either the private or social sector across most of the country. Quite what will happen then – apart from these households being exposed to substantial uncertainty and housing insecurity – is not at all clear.
The contemporary housing system is characterised by increasing differentiation and divergence. Some families are able to accumulate wealth more extensively through housing. For others the prospect of entering home ownership looks ever more remote. While first time buyer numbers recovered somewhat in 2016, the average deposit necessary to purchase is beyond contemplation for many. Greater reliance upon private renting means more pervasive insecurity. Greater numbers of households find their hold upon settled accommodation to be precarious or non-existent. A candid assessment of the dramatic and ongoing retrenchment of welfare would lead to the conclusion that any claim that the system can ensure a decent, affordable home for all should be treated with great scepticism.
Alex Marsh is Professor of Public Policy and head of the Centre for Urban and Public Policy Research at the University of Bristol, UK.