Ruling class ‘fears’ future housing crash but the poor lose their homes

In May the Organisation for Economic Co-operation and Development (OECD) warned that Britain should take action over soaring house prices. On 18 May, Governor of the Bank of England, Mark Carney said: ‘… the biggest risk to financial stability, and therefore to the durability of the expansion [of the economy] – those risks centre in the housing market ...’ Their worry is that the government’s ‘Help to buy’ scheme may be fuelling a housing bubble. Despite all this anxiety, you would be hard-pushed to find any concern that the housing crisis is making the lives of working class people miserable. What upsets these mandarins is that ‘overheating’ in the property market will damage Britain’s economic recovery (that is, profit-making capabilities) and risk another banking crash. The capitalist class is only concerned about housing the working class insofar as it affects their profits.

Help to buy

According to RightMove, house prices in London hit an average of £592,763 in May 2014, 16.3% higher than in May 2013. In five London boroughs, Westminster, Kensington & Chelsea, Hammersmith & Fulham, Wandsworth and Tower Hamlets, prices rose by more than 10% in one month (April 2014). Across England and Wales house sellers are asking 8.9% more than in 2013. The annual rise is creeping closer to the 10.4% last seen in October 2007 just before the financial crash.

The government mortgage schemes aim to help buyers by reducing the level of deposits or by offering a government guarantee on part of the loan, with some loans four or five times the borrower’s salary. Either way, this represents more risk for the mortgage providers and for the Treasury if interest rates rise, if buyers cannot sustain repayments, or the housing bubble bursts and property prices fall. The solution, supported by Carney and a wide range of Coalition pundits, is to scale back the schemes, especially in London, so that mortgages become harder to get.

This may calm the bankers’ fears but it will do little to solve housing shortages. There are plans to build about 130,000 houses each year, but more than double this number are needed just to keep up with demand, without addressing the existing shortfall. It is jackpot time for property developers as prices soar and more people are driven to rent in the private sector at super-inflated rents.


‘Newspeak’ in the property and housing world renders ordinary English words into their opposite. ‘Luxury’ is a good example, now meaning ‘ordinary’. ‘Affordable’ has become the current favourite. As everyone knows, ‘affordable’ house prices and rents are too high for most people. The un-‘affordable’ rent scheme allows developers and landlords to set rents at a maximum of 80% of the market rent; the average charged is 63%. But in London’s Westminster or Kensington & Chelsea you would need an income of more than £80,000 for an ‘affordable’ rent (at the 63% level), and more than £50,000 in the City of London, Camden, Islington, Hammersmith & Fulham and Tower Hamlets. The fashion for ‘affordability’ means that there are also plans to force social housing rents up to these levels.

All over London, councils are allowing private developers to dodge their minimal obligations to include ‘affordable’ or social housing in new developments. Many, like Southwark, are demolishing large council estates to allow private development with a minimum level of ‘affordable’ or social housing. In the flagship Tory boroughs in London, like Westminster, Wandsworth and Kensington, developers are being allowed to forego any ‘affordable’ housing whatsoever. The developers of Admiralty Arch in Trafalgar Square (into a private members’ club and five-star hotel) paid £600,000 cash to Westminster Council to avoid including social housing as part of this scheme; £400,000 less than outlined in the council’s own policies. The inclusion of social housing would, according to the council, have threatened ‘heritage, security and management’. ‘No poor people need apply!’

A cleft stick

The government has, however, created a cleft stick for itself. The failure to build homes, and in particular council housing, forces more reliance on the private sector. The resulting higher rents and minimal regulation mean boomtime for private landlords, but it also means higher benefit bills as most housing benefit/local housing allowance (LHA) is paid to the landlords of low-paid workers. With their stated aim of minimising welfare benefits, this is a problem for the government.

The state has created a number of possible solutions to soaring benefit bills, all of which attack poor people. Claimants are either being paid less than their rent in housing benefit/ LHA; driven out of high-rent regions like London and the South East where most of the jobs are; or deprived of housing altogether.

The government claimed that the bedroom tax would solve the problem of long waiting lists for social housing. On the contrary, the tax has considerably worsened the housing crisis nationally as in most regions there is a shortage of one- and two-bedroomed properties for tenants to move into and larger properties are lying empty because prospective tenants cannot afford to risk reduced benefits. In line with the government’s aims, the tax has deprived already poor and vulnerable households of their full entitlement to welfare benefits. Department for Work and Pensions statistics show that the number of households where the bedroom tax has been applied is 498,174 and the average reduction in benefit across the UK is £14.40 per week.

The interim scheme to help households affected by the tax is failing. Councils across England rejected 70,000 applications for discretionary help in 2013/2014. More than 60% of the households hit by the tax include disabled people. Whereas many councils in the North, such as Liverpool, did not receive enough government funds, the old Tory favourites, Westminster and Wandsworth, returned large parts of their allocations unused, at the same time refusing hundreds of requests for help.

Our experiences with the Focus E15 mothers and hostel dwellers illustrate how removing poor or homeless people from London altogether is becoming more popular among London borough housing departments. In the year to June 2013, London boroughs more than doubled the number of homeless households they forced to live outside the capital. Chartered Institute of Housing research shows that, since March 2011, claims for LHA have fallen by more than a quarter in Kensington & Chelsea and by nearly a third in Westminster. Across Inner London the fall is 5.2%, while the number has risen by 6.4% across Britain as a whole.

As a last ditch solution to reducing welfare spending on housing, the denial of help to homeless people indicates the barbaric and ruthless nature of the ruling class. More than 215,000 households in England are at risk of eviction or repossession, the equivalent of 4,140 homes every week, according to housing charity Shelter. The government has been relentlessly tightening the rules for helping homeless people and cutting advice services. Rough sleeping in England has risen by more than a third since 2010 (in London by 60%) and a report from charities Shelter and Crisis has revealed that many homeless families, now denied the right to social housing, are being housed in slum conditions. In Belfast five street homeless people have died in the last five months.

Jane Bennett

Fight Racism! Fight Imperialism! 239 June/July 2014


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