PART ONE
The question of housing in Britain
today reveals much about the character of the crisis that permeates our entire
society. Through the medium of housing we can see almost every problem our
society faces – from inequality to out of control speculation, health problems
to overcrowding, groaning infrastructures to gross regional imbalances and
distortions. And finally to the extreme discord between the ideals of design
and aesthetics and the (literally) concrete, ugly reality of our cities. Crisis
is a word we hear being used a lot at the moment, almost to the point where it
has little impact on us so familiar are we with it. But there can be no doubt at all of the impact
on our communities of the scale of crisis in British housing.
Thousands face homelessness as
they see their homes being repossessed.
Old dwellings are gradually falling apart not to be repaired or
replaced. The demand for housing already far outstripped the growth of national
housing stock even before the housing market crash in 2007. Short-sighted
speculation has pushed property prices to farcical levels, and the extreme
concentration of workplaces in our cities without a corresponding housing plan has
lead to an unnecessary strain on an already weakened and underinvested privatized
infrastructure.
Conscious underinvestment and
dismantling of council housing has led to stigmatized ghettoes, beset with
massive health and unemployment problems as these run down communities become
isolated, as well as creating a reflection of class society in our state
education system as the rich populate the catchment areas of the best schools.
Since the mid 1970s, when
capitalism in the UK entered a prolonged crisis that heralded Thatcherism and
the end of social reforms for the working class, the British bourgeoisie and
its parliamentary representatives have striven to undermine all council and
social housing. Recognizing the root of the housing problem would of course
mean dealing with unemployment and poverty by ending the anarchy of the market,
clearly not an option for the bosses!
The appalling slums which came to
dominate the cities and towns in the wake of the Industrial Revolution of the
early 19th Century showed capitalism at its worse. People were
crammed into crumbling, unsafe and unhealthy buildings, enduring terrible
conditions at the hands of ruthless landlords. With the growth of municipal
housing in the 20th Century, workers found themselves facing council
landlords often every bit as bad as the private ones. Some councils took a
stand against this such as those in Poplar and faced the full might of the bosses’
law as a result.
The huge damage to our cities
caused as a result of wartime bombing meant that, after 1945, a huge new level
of council house building was required. Many of the old Victorian tenements
were gone and whole areas now required rebuilding. Initially, it was intended to build housing
that would be of the highest standard. Later on such lofty aims would be
abandoned in favour of tower blocks and the like. A number of so-called New
Towns were also built to take up the overflow from cities such as London and
Birmingham.
These new houses were looked on
with envy by the private sector, who were themselves incapable of providing
what we now call social housing. Indeed their only contribution to the post war
history of housing was to introduce the word Rachmanism to general use. In 1979
Thatcher came to power at the head of a Tory government and decided that now
was the time to take action to push large sectors of public housing into the
private sector in a way that would benefit the later at the expense of the
former.
Taking advantage of discontent caused by the
running down of council estates as councils sought to save money, Thatcher
brought in Right To Buy legislation, arguing that this would transform our
inner cities. Apparently, we can create a prosperous society simply by
transferring ownership of dwellings from the state to private individuals.
These individuals, overwhelmingly working class, will then be compelled to
break out of their “state dependent stupor” and become responsible participants
in speculation by mortgaging themselves to the hilt, mysteriously leading to
wealth creation. Indeed, the Right to Buy Act was an important element in
providing a basis for the boom in credit and finance capital, during the 1980s
and 90s, which temporarily enabled the capitalist class to artificially expand
its markets and absorb growing levels of over production in commodities. It
gave banks an excuse to lend large sums to workers to facilitate house
purchases in particular – at a suitable rate of interest, of course. Building
firms and property speculators did well as did the banks but many workers would
find themselves saddled with a massive debt on their shoulders. The “freedom”
to buy a house would become a chain round their necks. The mortgage scam means
millions of working are no longer paying rent to landlords but instead are
paying much higher levels to the banks for the illusion of “owning” their own
homes – and the price for defaulting on this is just as ruthless.
But the activity of property
speculation and the sale of dwellings are just as unproductive and incapable of
creating wealth as any other exchange of commodities. Only the production of
new housing (and repairs and upgrades of existing housing) by workers creates
new wealth. Thus the crisis of housing is a crisis of the capitalist system as
it finds itself unable to develop the means of production, and seeks instead
quick enrichment at the expense of others through unproductive speculation in
housing – the housing crash and credit crunch have proven this. That capitalism
has no answer to endemic housing shortages, which can only really be solved by
a plan of new homebuilding, and instead develops absurd theories of creating a
wealthy society through speculation and the utopia of a ‘property owning
democracy.’
The Economics of Housing
Why is housing so absurdly
expensive? The average price of a house seems completely out of proportion with
its actual value (i.e. the quantity of socially necessary labour it embodies –
the work of those who built the property and those who made the raw materials
and machinery to enable that to be done), especially since it seems to have no
reference to whether the home has just been built, or was built and already
paid for one hundred years ago. Very often, the latter kind is more expensive,
even allowing for refurbishments and repairs. Did Marx not say that, over time,
the prices of commodities more or less corresponds to their actual value?
Surely this is not the case here. The problem has tripped many up. But it is
not at all arbitrary, as Proudhon imagined:
“The house,
once it has been built, serves as a perpetual legal title to a definite
fraction of social labour although the real value of the house has already long
ago been more than paid out in the form of rent to the owner. Thus it comes about that a house that, for
instance, was built fifty years ago, during this period covers the original
cost two, three, five, ten and more times over in its rent yield.”
[Proudhon, quoted in Engels, The Housing Question]
It is true that house prices are
an exception, but as Engels points out not an arbitrary one – they are only
exceptional because of the specific position housing occupies in capitalist
economy and society:
"Here we have at once the
whole Proudhon. Firstly, it is forgotten that the rent must not only pay the
interests on the building costs, but must also cover repairs and the average
sum of bad debts, unpaid rents, as well as the occasional periods when the
house is untenanted, and finally pay off in annual sums the building capital
which has been invested in a house which is perishable and which in time
becomes uninhabitable and worthless. Secondly, it is forgotten that the
rent must also pay interest on the increased value of the land upon which the
building is erected and that therefore a part of it consists of ground rent…not
all the legal titles in the world, no matter how perpetual, could give a house
the power of obtaining its cost price back ten times over in the course of
fifty years in the form of rent, but that only economic conditions (which may
have social recognition in the form of legal titles) can accomplish this. And
with this he would again be as far as at the start." [Engels, The
Housing Question]
The anarchy of capitalist society
is the underlying reason that house prices are in effect permanently inflated.
This is manifested, above all, in capitalism’s unavoidable tendency towards both
concentration of wealth, leading to speculation, and the extreme concentration
of wealth and employment in certain geographical areas (in particular as a
capitalist nation completes the process of urbanisation and monopolisation):
"What is meant today by
housing shortage is the peculiar intensification of the bad housing conditions
of the workers as the result of the sudden rush of population to, the big
towns; a colossal increase in rents…The growth of the big modern cities gives
the land in certain areas, particularly in those which are centrally situated,
an artificial and often colossally increasing value…The result is that the
workers are forced out of the centre of the towns towards the outskirts; that
workers’ dwellings, and small dwellings in general, become rare and expensive
and often altogether unobtainable, for under these circumstances the building
industry, which is offered a much better field for speculation by more
expensive houses, builds workers’ dwellings only by way of exception…The
building and maintenance costs of the house, or of the part of the house in
question, enters first of all into the calculation; the land value, determined
by the more or less favourable situation of the house, comes next; the state of
the relation between supply and demand existing at the moment is finally
decisive." [Engels, The Housing Question]
We may add to this that the
housing boom we have just been through represents a particularly acute
expression of this scenario. Monopoly capitalism creates a situation of extreme
concentration of wealth at one end of society and extreme poverty at the other.
The basis for this is, of course, the exploitation of the working class, who
are paid far less than the value of what they actually, collectively as a class,
produce – this is how capitalists make a profit by pocketing the difference.
But as we know, this profit can only be fully realised if workers proceed to
buy all the consumer products they have produced. Since they are not paid anything
like the full value of what they produce, they cannot then buy all the
commodities they produce – even if they wanted to! The madness of the system is
reflected in the fact that capitalism produces for profit in the market not to
meet needs. In the housing market this means that bosses are keener to build or
renovate property for the rich than to knock out social housing which millions
desperately require. So many go homeless or are stuck in substandard
accommodation whilst houses lie empty in competition for those few who can
afford them. This is one reason why socialists have long campaigned for such
empty housing to be seized by councils and used to reduce the council housing
waiting list.
As things stand at present, the
property speculators have been required, like capitalism as a whole, to compete
with their “brother” bosses in an inadequate market place with limited demand
where some will do well but others go bust. One way this problem can be alleviated is
through credit, which is set free from the huge concentration of wealth in the
hands of capitalists, and given over to workers to buy stuff with – also a
temporary solution, since it must be paid back with interest. For most people,
mortgages are the largest debt they will ever have.
Indeed one of the clearest
examples of commodities containing more value than a worker ever has in his or
her bank account is, of course, a home, along with other things like cars. So
there is a clear need for credit to the worker to keep the market moving. But
the credit given for things like cars is a one off – because cars depreciate in
value rapidly and can be easily and rapidly replaced with newly built ones. The
bank cannot recover its loan by taking possession of and selling on the same
car. In other words, the car industry is too productive, creates too ready a
supply of new value, for speculation.
But a home does not depreciate in
this way, and can be resold many times. The sale and resale of the same land
and the same home is inherently unproductive, and means the bank can usually
recover the value of the mortgage. This is the basis for the unproductive
activity of speculating on property prices by offering workers large mortgages
to provide the illusions of wealth. From the point of view of the individual
capitalist, the purpose of this activity is to make money without recourse to
actually producing real wealth, but from the point of view of the capitalist
class as a whole, it temporarily sustains their system by stuffing credit down
workers throats (which is only ultimately their own unpaid labour) so that they
will buy more of everything. Housing is the perfect commodity for this, because
it is such an essential commodity, as well as a commodity which is so long
lasting and physically bound up with issues of land scarcity and the aspiration
to appear to live in affluence. Capitalism can create speculation and bubbles
wherever a commodity is more or less permanently scarce. But as the housing
crash has shown, speculation does nothing to increase actual value, "no
matter how much the landlord may overreach the tenant it is still only a
transfer of already existing, previously produced value, and
the total sum of values possessed by the landlord and the tenant together remains
the same after as it was before." [Engels, The Housing Question]
In the final analysis, more or
less permanent inflation in the housing sector is a sign of capitalism
expending its historical role – to develop the means of production. The
unproductive speculation on housing we saw prior to 2007 led to absurdly
inflated prices, as professor Peter Ambrose shows:
"If house prices had risen
since 1975 with general price inflation the average house price in 2005 would
have been £60,000 (with a regional range of £39,000 to £93,000). Instead it is
almost three times as much. Why is this?…the most obvious [driver] appears to
be the massive and disproportionate flow of mortgage lending since the
Thatcherite deregulations…The 1980 house purchase debt outstanding was £53bn.
If one updates using the Retail Price Index the 2003 figure would be £144bn. If
one allows for expanded owner-occupancy stock it would be £181bn. The actual
2003 figure was £774bn and it is now much higher…There are much more
productive uses for this ‘extra’ £600bn of investment…but of course we live
in a market economy dominated by a powerful and international finance sector.
Short term returns for shareholders rule." [Peter Ambrose, Defend
Council Housing]
The crash in the housing market has been a disaster
for capitalism, and it is now common to hear bourgeois economists lamenting the
passing of the boom and trying to find ways to get it back. But in truth, no
one wants a situation of absurdly expensive housing they cannot afford, or can
afford only by lumbering themselves with enormous debts. What we do want is an
economy and society that functions properly, is going forward and that we have
control of.
TO BE CONTINUED……
