Housing
is a permanent problem under capitalism basically because houses are
built primarily not for people to live in but to be sold or let for
profit. The private ownership of land adds to the problem in that the
price of a house reflects not just the cost of building it but also
the price of the land on which it is built. As land is not the
product of human labour its price depends entirely on the effective
demand for it, the key element in which is its location.
Land
in the middle of a city is more in demand than land in some remote
rural area. This is why the Duke of Westminster, who owns land in
central London, figures as No. 10 in the latest Sunday
Times Rich List, while
the Duke of Buccleuch, who owns vast estates in Scotland and is in
fact the largest landowner there, only comes in at No. 530. At a much
lower level, it is why houses and rents near a tube station in London
are more expensive, like for like, than those further away.
It
also explains why so many decidedly far from noble property
speculators are in the Rich
List – these wide
boys got rich by buying land at one price and selling it at a much
higher one along with whatever they had had built on it.
House-building in Britain is overwhelmingly in the hands of such
'developers' who will only build if they calculate they can make not
just a normal profit but also a capital gain from the rise in the
price of the land. As the Times
(21 February 2017) put
it:
'Ultimately,
building houses is not rocket science and profits are not driven as
much by the cost of supplies or labour as by a company's skill at
acquiring land at the right price.'
Obviously
land can't change its location. However, its use can. Some areas of
central London or near to it which have traditionally been inhabited
by lower-paid workers have become desirable as places to live for
higher-paid workers with jobs in the City or in government
departments in Whitehall. This change has been called
'gentrification' but this is misleading. Historically, the 'gentry'
were the English equivalent of the classic French 'bourgeoisie'
whereas the higher-paid workers moving in are part of the working
class in the proper sense of anyone forced by economic necessity to
sell their labour power to an employer for a wage or a salary.
The
higher effective demand has pushed up the price of land and so of
housing there. This has had various consequences. It has provided an
incentive for private landlords to improve their property so that
they can let it at a higher rent, meaning that it becomes impossible
for lower and even average paid workers to continue to find
accommodation in the area at a rent they can afford. It has also put
developers in a position to bring pressure on local councils to let
them 'redevelop' or 'regenerate' the area by demolishing old,
lower-rent housing to replace it by newly-built, more expensive
housing.
Sweeteners
In
fact so profitable is this – in terms of increase in the price of
the land compared with what they paid for it –that the developers
are able to offer sweeteners to local councils, in the form of
providing libraries, health centres and council office space, as a
way of getting planning permission, offers which cash-strapped
councils cannot afford to refuse. Councils do have some power as it
is them who have to give planning permission. They use this to ask
that the developers include an element of 'affordable' housing in
their scheme. They don't do much more than ask as if they insist too
much the developer will simply walk away. In any event, 'affordable
housing', defined as up to 80 percent of the average market rent in
an area where market forces have driven rents up, is still not
affordable for most people.
There
are also let-out clauses under which, after permission has been given
and construction commenced, developers can plead 'unforeseen' costs
or other difficulties for not being able to provide as much such
housing as originally agreed, as in this example:
'A
developer has called on Kingston Council to remove an affordable
housing clause from its development plans. The Battersea Development
Company has submitted a planning application to "seek a revised
affordable housing obligation" for Willow Court in Cambridge
Road, Kingston.
In
a letter to the council its agent states: "The affordable
housing obligation as currently agreed makes the proposed development
scheme unviable in current market conditions. Our client wishes to
amend the affordable housing obligation"' (Surrey
Comet, 15 June 2015).
There
is 'social' housing – the modern equivalent of the 1890 Housing of
the Working Classes Act – in the form either of council housing or
of not-for-profit housing associations, both of which can charge a
maximum of only 80 percent of the local market rate. These days,
what's left of council housing is generally low-quality accommodation
used for housing people councils have a legal obligation to house.
Housing associations, under pressure to balance their books, have
begun to behave like property companies, even resorting to private
landlord scams like charging a rip-off fee for renewing a tenancy
contract as well as paying their top managers bloated salaries. As a
Liberal Democrats candidate in the recent London borough elections
lamented:
'Even
housing associations are now more interested in speculative
development than in looking after their elderly and vulnerable
tenants' (Ham,
Petersham & Richmond Riverside Comments,
No. 242, February 2018).
Easily
promised
Those
who imagine that this particular housing problem – which is
essentially an affordability problem – can be solved within the
framework of capitalism offer various solutions.
One
is a tax on rising land prices, or a Land Value Tax as its advocates
call it. This would certainly put an end to developers (but also
ordinary homeowners) speculating on the price of land rising. It
would transfer the benefit of this to national or local government
which could be used to reduce other forms of taxation, but it would
not stop land and so housing prices from rising in the areas
concerned and which make housing there unaffordable for low-paid
workers.
Why
not let local councils acquire the land that developers hold and use
it to build houses and flats to let at a rent that lower and average
paid people can afford rather than luxury flats? To many that might
seem to be an obvious solution and it's what the reformists of the
Labour Party and the Green Party propose. But this is easier promised
than done because under capitalism everything has to be paid for.
Doing this would be hugely expensive, if only because the land would
have to be acquired, even if compulsorily, at the going market rate
inflated as it is by the increased effective demand for it.
Where
is this money to come from? Most of what local councils have to spend
comes from the central government in the form of grants (for current
spending) and loans (for capital spending). House-building would be
capital spending, so the councils' debt repayment burden would go up
(many are still paying off the capital plus interest for council
houses they built in the past). This would be at the expense of other
services unless the government increased the grants for these. But
how likely is that?
As
housing on the acquired land could command a higher rent than would
be charged, doing this would amount to a rent subsidy for some
workers. But capitalism is not a system geared to meeting people's
needs or even making things easier for people. It is a system that
runs on profits under which profits and conditions for profit-making
have to come first. For the past ten years governments everywhere
have been committed to cutting, not increasing, state spending so as
to reduce the burden of taxation on profits in the aftermath of the
Great Crash of 2008 and the ensuing slump. This is not a political
choice that could be reversed by a different choice, but something
imposed on governments by the economic forces of capitalism that
dictate that priority has to be given to profits over everything
else, including social measures to benefit workers.
Even
in times of boom capitalism is not a system geared to meeting
people's needs and cannot be reformed into this. This can be, and has
been, attempted by Labour and reformist governments in other
countries but it has always ended in tears. It is conceivable that a
future Labour government under Corbyn and McDonnell might adopt a
land purchase and subsidised rent scheme to deal with the problem of
housing for lower and average paid workers being unaffordable in
areas of rising land prices. If so, they are likely to finance it by
recourse to the printing press. The resulting higher inflation and
economic slowdown would sooner or later force them to do a U-turn.
The
plain fact is that there is no solution to the housing problem for
workers within the framework of capitalism. It will always exist, in
one form or another, for as long as the capitalist system of class
ownership and production for profit does.
ADAM
BUICK
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