Like many advanced economies, Britain is in the grip of a housing affordability crisis. Average home prices are now nearly eight times that of incomes, more than double what they were twenty years ago. For property owners, this has provided enormous benefits. Since 1995 alone, the value of Britain’s housing stock has increased by over £5 trillion — accounting for three-quarters of new household wealth. In the early 2000s, home price inflation was so great that 17 percent of working-age adults earned more from their house than from their job.
But as home prices have continued to increase and the gap between home prices and earnings has grown larger, the cost of housing for those locked out of property ownership has become prohibitive. In the absence of adequate social housing, many have increasingly found themselves with little choice but to rent privately. For those stuck in the private rental market, the proportion of income spent on housing has risen from around 10 percent in 1980 to 36 percent today — among the highest in Europe.
The consequences have been severe. The number of homeless people in England has hit a record high, having more than doubled since 2010. Across the country communities are being segregated along socioeconomic lines. The result is a growing divide between those who own property (or have a claim to it), and those who do not.
The housing crisis in Britain is not natural or inevitable. Instead, it is the product of a carefully planned political project first developed by the Conservative Party in the 1950s, accelerated under Margaret Thatcher, continued by New Labour in the 1990s and 2000s, and then reinforced by Conservative-led governments since 2010.
Property Owning Democracy
After the end of the Second World War, housing was widely viewed as a national priority. Half a million homes had been destroyed during the conflict, and a further 250,000 were badly damaged. The properties that remained were often crowded and unsanitary. The response of Clement Attlee’s 1945 Labour government was to undertake a vast program of public home-building.
Together with a set of other complimenting reforms, the aim was to provide universal access to high-quality homes that met the needs of working people. The Labour government’s 1947 Town and Country Planning Act kept land in private hands, but nationalised the right to develop it — meaning that landowners and developers had to apply to their local authority for planning permission to build new property. Strong compulsory purchase powers ensured that land could be acquired at low cost for housing development, while rent controls limited the excesses of private landlordism.
For Conservatives in Britain, the Labour’s Party’s radical agenda was deeply concerning. In 1946 the member of parliament and future prime minister Anthony Eden warned the Conservative Party conference that Labour was creating a society where “everyone must rely on the State for his job, his roof, his livelihood.” In order to turn the tide against Labour’s socialist advances, Eden declared that Conservatives must embrace the vision of “a nation-wide property-owning democracy.”
Eden borrowed the term “property-owning democracy” from his Conservative colleague Noel Skelton, a Scottish lawyer who coined the term in 1923 in a series of articles for the Spectator. Writing in the wake of the Russian Revolution, Skelton believed that an expansion in the number of property-owners was the best way to neutralise the appeal of socialism among workers.
Eden did not have to wait long for his vision to have an impact. In 1951 the Conservative Party was elected into government after a snap general election on a promise to build 300,000 houses a year. Responsibility for delivering this pledge fell to the new housing minister, Harold Macmillan. Despite publicly championing the superiority of the private sector, Macmillan quickly realised that the only way to meet his party’s ambitious target was to dramatically increase public home-building. But despite increasing the supply of social housing, inspired by Anthony Eden’s call to arms, Macmillan also introduced a series of policies aimed at encouraging homeownership. These included measures to increase the availability of cheap mortgages and make it easier to construct private homes, which together kick-started the dramatic rise in homeownership that would continue for half a century.
During this time, the idea of allowing public housing tenants to buy their homes also began to gain traction in Conservative circles. Though Macmillan himself was skeptical of the idea, he oversaw the removal of restrictions preventing the sale of public housing. Over the course of the next two decades, a growing number of Conservative-controlled local authorities began to sell their housing stock to tenants, and the popularity of such transactions sparked interest at the national level. By the mid-1970s the selling-off of public housing enjoyed widespread support among Conservative Party leaders. All they needed was a prime minister willing to implement it on a mass scale.
“The Object Is to Change the Soul”
Margaret Thatcher swept to power in 1979 on a manifesto that promised to deliver Eden’s vision of transforming Britain into a “property owning democracy.” The first step towards this came in October 1980 when the government passed its first Housing Act, launching the flagship “Right to Buy” policy.
Right to Buy gave public housing tenants the legal right to purchase their homes from local authorities at a discount of up to 50 percent. The Housing Act 1980 also included a number of incentives to encourage the Right to Buy option. Despite some initial resistance in Labour-controlled councils, the policy proved immediately popular across the country. Because local authorities were prevented from using the proceeds of sales to build more public housing, the effect of the policy was to dramatically reduce the stock of, and the number of people living in, public housing.
During Thatcher’s time in office, 1.5 million publicly owned properties were transferred into private hands, and many more followed in decades after. Today, just 2 million public houses remain in Britain — down from 6.5 million when Right to Buy was introduced.
As wealthier tenants were better placed to take up the Right to Buy, its effect has been to concentrate the poorest and most disadvantaged households in public housing. While in 1979 20 percent of households in the top decile of the income distribution lived in public housing, by the mid-2000s this had fallen to close to zero. Not surprisingly, the policy has also led to a marked decline in the quality of properties that are available in the public sector.
When Right to Buy was introduced, it was justified on the basis that it would reduce public spending. However, the policy has been remarkably poor value for the money: taxpayers funded the initial building of the council houses, subsidised the substantial discounts offered to tenants and then — once the homes were sold — missed out on the rental income that would otherwise have been received. In addition, the lack of public housing has meant that the government has had to spend ever-greater amounts subsidising individuals so that they can afford to pay private rents.
Today nearly one in five households in Britain is reliant on housing benefit, which costs the British government £25 billion a year — more than it spends on the police, roads, and buying military equipment combined. Much of this ends up in the pockets of private landlords. A recent study found that four in ten homes sold under the Right to Buy scheme are now owned by private landlords, who charge tenants more than double what they would pay in public housing.
On its own, Right to Buy was a powerful policy. But its true potency came from its interaction with a series of other reforms introduced by Thatcher. The most significant of these was financial-sector deregulation. Up until the 1970s, mortgage lending was mostly carried out by mutually owned building societies which were limited in their ability to extend credit. But under Thatcher, restrictions on lending were removed and commercial banks were incentivised to become active players in the mortgage lending market.
This deregulation triggered a shift in the role that retail banks played in the British economy, from mainly lending to businesses for productive investment, to primarily lending for family home purchases, taking property as collateral. This unleashed a flood of new credit into the housing market, fuelling a house price boom. In turn, households were incentivised to take out ever-larger mortgage loans to get on the “housing ladder” and reap sizeable capital gains. Thus, a feedback loop emerged between mortgage lending, home prices, and increasing levels of household debt.
The normalisation of double-digit home price growth, combined with the expectation that prices will continually increase, stimulated demand for houses as financial assets. Today mortgage loans collateralised against property are the main source of the money supply in Britain, and bank balance sheets are largely secured against property values. Debt-fuelled home price inflation has become a key source of demand in an otherwise stagnant and unproductive economy. Volatility in home prices is quickly transmitted into volatility in the wider economy, meaning that Britain’s economic performance is intimately tied to the housing market.
Simply put, Thatcher’s push to privatise housing and deregulate finance remade British capitalism. But perhaps more significantly, it took aim at traditions of collective solidarity in working-class communities. There, by giving more people a direct stake in the system of private property and unearned wealth, Thatcher’s reforms did much to erode socialist sentiment. This was no accident: as we have seen, the Conservative Party has long understood that domestic property relations have a significant bearing on people’s ideological outlook and voting preferences. This is a lesson that Conservative politicians still hold dear today, as was evidenced in 2016 when former Liberal Democrat leader Nick Clegg revealed that the Conservative chancellor George Osborne once remarked to him: “I don’t understand why you keep going on about the need for more social housing — it just creates Labour voters.”
In this sense Right to Buy has been a remarkable success. As homeownership in Britain has increased over time, the number of voters with a vested interest in the buoyancy of a financialised housing market has increased, while the constituency of voters with an interest in high-quality public housing has declined markedly. For the majority of households, the family home is now the primary source of wealth. This has placed the Left in somewhat of a bind. Any policies aimed at addressing the affordability crisis for the minority of non-homeowners risks generating an electoral backlash from the majority, while also risking financial instability and a possible recession. As a result, the Labour Party largely abandoned its focus on public housing and instead began to place greater emphasis on meeting homeowners’ aspirations.
Under Jeremy Corbyn’s leadership, this started to change. In 2018 the party published “Housing for the Many” — an ambitious plan to undertake the largest public home-building program in over thirty years. Despite this, the party remained officially committed to policies aimed at helping more people onto the property ladder and widening access to the benefits of homeownership.
In 1981 Thatcher remarked that “Economics are the method; the object is to change the soul.” Right to Buy is perhaps the best example of what this looks like in terms of practical policy. We’re still living with its bitter success.
For socialists, the aim must be to move towards a society where houses function as somewhere to live, not as vehicles for accumulating wealth. Achieving this requires building mass support for the decommodification of housing. Such a task will be challenging as long as most of the electorate have a material stake in a highly financialised housing market. But the experience of Right to Buy offers several lessons.
The first is that stories and narratives matter. Thatcher’s housing revolution did not take place in a vacuum: it was part of a wider project that was rooted in a specific view of how wealth is created and distributed in society. This was a world where, so long as there is sufficient competition and free markets, every individual will receive their just rewards in relation to their true contribution to society. There is, in Milton Friedman’s famous terms, “no such thing as a free lunch.”
In Britain, this narrative helped to normalise the idea that wealth accumulated from rising home prices is normal and just. But of all the different areas of the economy, housing is perhaps the area where this is most glaringly wrong. The driving force behind rising house prices is typically rising land prices, and we have known since the days of Adam Smith that land is not a source of wealth but of economic rent — a means of extracting wealth from others. The truth is that most wealth made through the housing market is gained at the expense of others who will see more of their incomes eaten up by higher rents and larger mortgage payments. The case for decommodification must therefore accompanied by a compelling narrative about how wealth is really created and distributed in society — one which must be rooted in an analysis of power and exploitation.
The second lesson is that experimenting with alternative approaches at the local level can produce powerful case studies that can become the basis for new national policies. Right to Buy was only adopted as party policy after a number of Conservative-controlled councils demonstrated that the sale of public housing was feasible and popular at a local level. Already there are many alternative housing solutions being incubated across Europe and North America, from community land trusts to cooperative housing projects. These should be supported and, where possible, scaled up.
The third lesson is that the language of control can be incredibly powerful. One reason why Right to Buy proved so popular was that it was sold to families as a means of achieving greater control over their lives. Often this control was of a narrow and individualistic nature, such as the ability to redecorate or refurnish a home. But in a world where many people feel a growing sense of alienation in relation to the places where they live, there is a significant opportunity for the Left to tap into a latent desire for greater democratic control over the decisions that affect people’s communities.
Material pulls also matter. It is unlikely that Right to Buy would have been as successful had tenants not been offered steep discounts on the value of their property. In order to win popular support, any strategy for the decommodification of housing must also include sufficient material incentives to make it attractive, particularly for working-class households.
The final lesson is that the transformation of housing cannot be pursued in isolation, but must be accompanied by a suite of complimentary reforms — particularly policies that target the financial sector. Ever since land became private property it has been intimately bound up with the evolution of finance, acting as collateral on which it is possible to secure credit and enjoy capital gains. Today real estate functions as the prime asset class in the global financial system, meaning that it will not be possible to decommodify housing without simultaneously introducing measures to bring finance under greater democratic control.