Back to the slums for the working class

The private rented sector (PRS) has expanded exponentially over the past decade, now accounting for 20% of all household tenures across Britain, and 30% in London. In 2018 the Resolution Foundation found that 40% of ‘millennials’ – those born between 1980 and 1996 – would be living in privately rented accommodation by the time they were 30, with a third remaining there all their lives. The ranks of private tenants have been swollen on the one hand by young middle-class professionals, prevented from buying their own homes by rising house prices and, on the other, by the very poorest excluded from Britain’s ever-shrinking stock of social housing. The result has been that while investment is pouring into providing decent homes for the better-off sections of the working class, the poorest are being driven into what have accurately been described as Britain’s new slums. Cat Wiener reports.

Build-to-rent: ‘an attractive investment opportunity’

41% of households renting privately are now what the Office for National Statistics describes as ‘higher and lower managerial, professional’, with incomes over £40,000pa. Around a third are aged 25-34 and many are families with children. Despite rents claiming, on average, 32% of income, or more than 40% in London, nearly half of private renters (49%) find paying rent ‘easy’; this is ‘Generation Rent’ – the young middle classes and better-off sections of the working class who would once have aspired to home ownership but find themselves excluded by rising prices even from the Conservatives’ much-vaunted ‘Starter Homes’ offers. And it is they who are driving the ‘build-to-rent’ bonanza now being promoted as an apparently inexhaustible source of revenue for corporate investors. In 2017 global property agents Savills found that for the first time the total private sector rent bill was more than double the total interest being paid by mortgaged homeowners, with some £54bn being paid to private landlords – a 35% increase over five years. It is no surprise that major financial institutions are now leaping at the chance to seize such a profitable opportunity for themselves.

The housing crisis is a symptom of a crisis-ridden capitalism lacking channels for productive investment. Land has become an increasingly profitable repository for surplus value. ‘Build-to-rent’ – the building of blocks of private residential property specifically for rent – is the logical extension of that phenomenon. These high-end developments are typically owned by property, pension or insurance investment companies and let directly or through an agent. Frequently built on former council land, they are marketed as community ‘hubs’, with good transport links, fast broadband connections, concierge services, amenities such as roof gardens or integrated gyms and the security of three-year contracts. Offshore-registered property developers Delancey teamed up with Qatari Diar and Dutch pension fund APG to create East Village in Newham, east London, on the site of the former Olympic athletes’ village; Delancey has similar plans for the Elephant & Castle shopping centre site in south London. In April, Goldman Sachs entered the build-to-rent market for the first time, with a £118m investment in Birmingham’s Broad Street development. In 2018 Savills estimated that ‘operational’ build-to-rent developments were up 26% on the previous year, with those under construction up 36%; 30,000 units were built in the first quarter of 2019. In February, the estate agent Knight Frank forecast that private companies would commit £75bn to build-to-rent by 2025.

While hundreds of thousands of people in Britain struggle to find secure, decent, affordable housing, property investment company SevenCapital points out that this ‘non-volatile, high-quality investment that delivers long-term returns’ is entirely dependent on rising house prices and rising rents. ‘Regional cities, in particular, are becoming popular with key tenant demographics but are suffering from the nationwide housing shortage. This obviously plays into positive supply and demand conditions for you as a PRS investor.’

‘The most infamous pigsties’: the return of squalor

But the corollary of these shiny new luxury residences for the better-off is the growth of slum-like conditions at the lower end of the private rented sector. 38% of private renters are amongst the poorest third of British society. With no hope of ever getting a council house, they are forced to accept extremes of overcrowding, dilapidation and squalor in order to live anywhere at all – with even the cheapest rents barely affordable for many. One example of this is the conversion of office blocks into rabbit warrens of tiny rooms. An investigation by the Financial Times found one block in Croydon, in south London, converted into 54 flats, each costing £1,000 a month. The single rooms lacked ventilation, with windows that did not open; some had dangling electrical wires and there were numerous other fire hazards. (Financial Times, 26 December 2018, ‘The slums of the future?’). A BBC documentary in April focused on Terminus House, a 1960s office block repurposed as temporary accommodation in Harlow. Single mothers share one cramped room with their toddlers, who have no outside space to play in. Half of all new ‘homes’ in Harlow are former office blocks. Residents complain of damp, vermin infestations, broken boilers and dangerous electrical fittings.

In 2013 the government expanded so-called ‘permitted development rights’, allowing the conversion of unused office space into housing without planning permission; there is little regulation and no minimum space standards. There are thousands of such conversions across the country, with 42,000 having taken place in the last three years. Many are on the fringes of cities, surrounded by industrial warehouses and far from shops, schools and other amenities. They are predominantly used as dumping grounds for homeless households from London boroughs, ‘temporary accommodation’ that can in reality be people’s homes for years.

The conversion of family-sized homes into bedsits – or ‘houses of multi-
occupancy’ – in theory may need planning permission, but in practice this is often ignored by councils. A Guardian investigation in Weston-super-Mare found four-bedroom houses converted into 11 ‘studio flats’; many were black with mould, and tenants complained of floorboards rotted by damp and leaking roofs and infestations of vermin. One had a faulty boiler, some flats had no heating or electricity at all. The rent was £500 a month.

Yet even at such rents, the lowest on the market, tenants struggle to make ends meet. A combination of cuts to housing benefits and delays in access to Universal Credit mean that arrears are growing. 75% of those on Universal Credit are now reported to be in rent arrears. Data from the Family Resources Survey 2017/18 shows that the poorest spend more than 60% of their income on rent, compared to less than 20% for those in the highest income decile. Nationwide Foundation research last year found that ‘Changes to welfare are creating a “slum tenure” at the bottom end of the market’. Landlords complain that at such low rents, the only way they can make a profit is by cutting back on maintenance.

Recent government reforms to curb the worst excesses of the private rented sector will not make much difference to the poor. The Homes (Fitness for Human Habitation) Act 2018 which finally became law in March 2019 gives tenants the right to take their landlord to court over a number of housing failures – but those in the worst housing are also those least able to exercise that right. The notorious Section 21 notices, which allowed landlords to give tenants two months’ notice with no stated reason and were the biggest cause of evictions in Britain, have been scrapped. Landlords can still however evict tenants for rent arrears, ‘wilful damage’ and anti-social behaviour, and again it is the poorest who have the least protection. While the government is prepared to introduce some regulation protect the interests of the electorally crucial better-off demographic, it is clear that the poorest sections of the working class will be left to rot in ever worse housing conditions unless they start organising to fight back. 150 years ago Frederick Engels wrote: ‘there must always be tenants even for the most infamous pigsties; and… the house owner in his capacity as capitalist has not only the right, but, in view of the competition, to a certain extent also the duty of ruthlessly making as much out of his property in house rent as he possibly can. In such a society the housing shortage is no accident; it is a necessary institution and it can be abolished … only if the whole social order from which it springs is fundamentally refashioned.’ This is the inexorable logic of capitalism.    

Fight Racism! Fight Imperialism! 270 June/July 2019

 

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