New Labour’s culpability for the housing crisis

After 13 years of New Labour in government there were actually 655,000 less ‘social’ homes than there were when they came to power.”

Keir Starmer’s injunction that Labour members should be proud of what the Blair government achieved will not be well received by housing campaigners who lived through the experience of having to defend their council housing against the Blair government’s attempt to eradicate it. If you examine its record there is no doubt that it was culpable for the worsening of the housing crisis during its period in office.

When it came to power in 1997 there were more than 4 million council homes in the UK, compared to just over a million housing association properties and just over 2.3 million private rented homes. In this table you can see the result of their 13 years in office.

YearOwner occupiedPrivate rentedHousing AssociationsCouncilCombined HA & Council
+ or minus+ 1,335,000+ 2,104,000+ 1,444,000– 2,099,000– 655,000

Extracted from: Ministry of Housing, Communities & Local Government

Live Tables: Table 101, Dwelling stock by tenure (historical series)

After 13 years of New Labour in government there were actually 655,000 less ‘social’ homes than there were when they came to power. How did this come about?

  • New Labour maintained the disastrous Right to Buy policy which it revered as a sign of “aspiration”. Councils lost 484,000 homes to RTB under New Labour.
  • 107,468 council were demolished during this period.
  • Councils were barred from applying for ‘social housing’ grant to build new homes.
  • The government pursued a policy of transferring council housing stock to housing associations. They set a target of transferring 200,000 council homes a year. Tenants were blackmailed into voting the ‘right’ way. If they agreed to transfer then council housing debt was written off. Councils were provided with no resources to improve their stock if tenants voted against transfer.
  • To overcome resistance from tenants the government introduced Arms Length Management Companies. The transfer of council housing to these could take place without a ballot, so tenants had no say.
  • New Labour introduced a policy of ‘rent equalisation’ which essentially meant driving council rents up to the level of housing associations. The latter were around 20% higher than council rents because they had to borrow money from commercial markets whereas council borrowed at cheaper rates from the public works loans board. Council rents were consistently raised above the level of inflation. Council rents (in England) were on average £45.62 in 2000-01. By 2012-13 they had risen 72% to £78.78, way above inflation at 39%.
  • The government encouraged the growth of ‘buy to let landlords’ by providing tax incentives and handing out grants for work on their properties, though the landlords did not have to prove they had spent any money! Hence, the number of properties increased by 2.1 million under New Labour whilst council stock was nearly halved.
  • From 1997 to 2010 median house prices in England tripled from £58,000 to £174,950. The ratio of median house price to earnings increased from 3.54 to 6.85. Even the cheapest (lower quartile) homes increased from 3.57 to 6.86.
  • New Labour allowed mortgage lenders to lend more than the price of the house being bought. They allowed the property market to become a magnet for investment at the expense of productive investment in the economy.
  • Before the Tories won the 2010 general election New Labour drew up a new council housing finance system which proposed to impose bogus additional debt onto council housing revenue accounts. They refused the demand to cancel this so-called debt despite the fact that council tenants had been fleeced of £31 billion in the 25 years up to 2008. Under the finance system of the time councils had been given ‘allowances’ of £60 billion whereas tenants had paid £91 billion in rent.

Essentially New Labour abandoned Labour’s traditional support for council housing, worshipped home ownership, and facilitated the growth of the exploitative private rented sector. It let house price inflation rip.

It wasn’t until the crash of 2007-8 that New Labour relented and allowed councils to apply for social housing grant and that was only because they decided that, given the financial situation, they could not afford debt cancellation for councils transferring their stock. Yet the amount of grant available was puny. Council house building remained on a small scale, reaching its peak under New Labour’s programme of only 3,100.

The only positive thing which New Labour did was the Major Repairs Allowance associated with the Decent Homes Standard. Even then it initially used the DHS as a means of trying to pressure tenants into transfer. Whilst a Parliamentary Committee welcomed the improvements brought about by the DHS it said that the standard set the bar “too low”.

New Labour also shares responsibility for the fact that when ‘self-financing’ was introduced in 2012 existing council housing was grossly under-funded, in part because John Healey’s system imposed a bogus debt on councils which has to be serviced from council tenant rent.

This is the real record. An honest recognition of it is necessary. Minor amendments to the current policies are insufficient to resolve the housing crisis. That can only be done by a return to large scale council house building and funding existing homes to prevent their deterioration and to improve their quality.

Martin Wicks

August 21st 2021


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