Housing Policy and Finance

John Black, David Stafford

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781317858614
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Geography
• Index: Geography

This book provides a comprehensive introduction to housing policy and finance in Britain. It describes changes in the condition and tenure of housing in the post-war period, and contrasts the massive investment in house building and improvement with allegations that housing conditions are deteriorating. It describes the rise of the public housing sector and the slight decline in the face of the Thatcher government's policy on council house sales, which followed. The book thus provides a background for the development of housing policy over the next decade.

Part I
Housing Facts and Fiction

1
The Political Economy of Housing

GENERAL AIMS OF HOUSING POLICY

One could summarise the general aim of housing policy by saying that one would like to see everybody housed at a standard consistent with civilised living, and in an acceptable location. What constitutes an acceptable standard will depend on the standard generally attained in a country. For the UK this would include sufficient rooms for decency, adequate cooking and washing arrangements, and a normal state of repair. The point about location is that people have needs which can only be satisfied by living in acceptable places. For some people this means the ability to continue living in an area where they have family and friends within easy reach. For others, it means the ability to move in pursuit of employment. If areas change in relative popularity this may give rise to problems — it may not be possible for everybody who would like to live in a particular area to do so.

Organisation of housing

There are several possible methods by which housing could be organised and allocated. These have varied merits and drawbacks, and it is probable that no single method on its own could allow the aims of housing policy to be achieved.

One method is owner-occupation. This has the great attraction that an owner has more discretion over the quality of a dwelling, through control over maintenance and improvements, than a tenant. Ownership usually has the advantage that one can choose to stay put if one wishes (subject only to the possibility of compulsory public purchase for some purpose such as road building). Also one can move if one wants to, since a property can be sold and the proceeds spent on buying a house elsewhere.

The main disadvantage of ownership is that the owner is left with the entire financial responsibility for maintenance and repairs, and the burden of organising them. This can be very expensive, and many items of repairs are not insurable. An owner-occupier also has to have a lot of capital tied up in a house, which may be impossible if one’s total assets are small, and awkward even if they are just large enough to make it possible.

A second method is that ownership and occupation should be separated, houses being owned by one body, either private or public, which is responsible for maintenance and improvements, and for providing the necessary capital; and occupied by another who then pays rent. This system is convenient for many types of household: for those who are too poor to be able to afford to own a house; for those who are unsuited through age, disability, or mere lack of energy and intelligence, to take responsibility for repairs; and for those whose careers involve frequent mobility, who would find the costs and trouble of frequent sales and purchases burdensome.

The disadvantage of renting is lack of control over the quality of the accommodation, and a lack of security of tenure if the landlord decides that the property could more profitably be used for some other purpose, or merely wants to let it to somebody else. A third disadvantage, from the point of view of would be tenants, is that landlords will not want to let to people whom they expect, for whatever reason, to be likely to fail to pay rents promptly or to misuse the property. The grounds for such expectations may vary from the purely factual, i.e. past bad experience with the same people, to mere prejudice against ‘alien’ groups. People who are regarded, for whatever reason, as likely to be arsonists, vandals, or dilatory in paying the rent, are unlikely to find willing private landlords. People who are expected to make unsatisfactory tenants will probably need to be housed by public authorities if they are to be decently housed at all.

Which form of housing tenure people choose, both as occupiers and property owners, will be affected in various ways by public policies.

Public policy affects owner-occupation through various channels. The tax system affects both people’s ability and desire to be owner-occupiers. Owning dwellings gives rise to a stream of incomes — if they are let out, this will be rent and the landlord will pay tax on it. If owners occupy their houses themselves there is a similar stream of real services, which accrue to the owner-occupier as an ‘imputed’ income. The tax system could treat these incomes like any other and tax them; or it could tax them on some special basis; or it could ignore them, as is currently done in the UK. The more leniently the imputed income of owner-occupiers is taxed, the more attractive it will be to become an owner-occupier. Similar decisions have to be made as to how to treat owner-occupied housing in any taxes which are levied on wealth, capital gains or capital transfers.

Many people become owner-occupiers without themselves having sufficient wealth to purchase a house outright. This is done by borrowing the money on a mortgage; the house is pledged as collateral for a loan, and the borrower pays interest and pays off the principal gradually, often over 25 years. The attractiveness of owner-occupation will be affected by the way in which the tax system treats these interest and redemption payments. In the UK interest on the first £30,000 of a mortgage is tax deductible, but redemption payments, and interest on the part of a mortgage in excess of £30,000 are not deductible.

A second way in which public policy can affect housing is by the provision of housing by the public sector. Public bodies, such as central or local government, or special institutions such as new town corporations in the UK, can buy or build housing for the purposes of letting it. They then have to decide how much rent to charge and what conditions of tenancy to offer, and how to select tenants. Clearly the lower the rents and the more generous the conditions of tenure, the more attractive renting houses from the public sector will be. If the rents are sufficiently low and the conditions sufficiently attractive there will be excess demand for public authority housing. If the authorities decide that they should let to those in the greatest need, they need to decide how need should be assessed. They must also weigh up the balance of advantage between security of tenure for existing tenants and availability of houses to meet the needs of those applying for tenancies. Lower rents, better conditions and more secure tenure for sitting tenants mean fewer vacancies for anybody else.

A third aspect of public policies is control of the rents and conditions of private letting, and the tax treatment of private landlords and tenants.

It would be possible, at one extreme, for the government to leave decisions about rents, conditions and tenure entirely to the market. Landlords would then offer tenants whatever combination of rent, conditions and tenure provisions seemed most profitable; tenants who wanted better maintenance and more secure tenures would have to pay more for them.

Alternatively, the government could seek to regulate the terms of private tenancies; this could comprise restrictions on the level of rents, provisions about minimum standards of maintenance, and regulations concerning security of tenure. Such controls would have effects on the supply of and demand for rented housing, which need to be investigated in detail to predict the effects of controls.

CHARACTERISTICS OF HOUSING

An analysis of the housing market requires a broad elaboration of its structure and mechanism and the influences on demand and supply in the determination of the production, allocation and price of dwellings. While income, tastes and household and financial circumstances determine the demand for the quality and quantity of housing, the resultant stock and standard acquired represents an important contributor to the growth, development and welfare of a society. For these reasons, it is not surprising that housing has always been subject to considerable political controversy; it ranks with education and the health services as a focal point of social provision.

Durability and cost

Housing is a highly durable asset and, once produced, is wholly immobile. Moreover, new building in any one year represents such a small percentage of total stock that it is difficult for supply to respond in the short run to changes in demand except through house conversion or improvements.

While housing is generally defined for statistical purposes as dwelling units (housing units occupied separately by households), it comprises a great variety of qualities and quantities. Indeed, the spectrum of housing units embraces shacks and ducal palaces, as well as the more familiar classifications of detached houses, bungalows, semi-detached houses, flats and maisonettes, etc.. Moreover, these classifications hardly do justice to the very wide variety of types of housing units that exist.

The high capital cost of producing a dwelling unit is such that...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Figures
• Table
• Preface
• Part I Housing Facts and Fiction
• Part II Housing Tenure and Finance
• Part III Housing Finance and Policy Reforms
• Bibliography
• Index