Revenge of the Repossessed
This April marked four years since the collapse of New Century Financial, a top US sub-prime mortgage lender, which arguably lit the fuse of the global financial crisis. The scale of home loss in the US continues to shock. More than five million homes have been repossessed since 2006 and distressed mortgages account for a third of the entire US housing market. New tent cities have sprung up to house the millions who have lost their homes, while millions of homes lie empty.
Although Britain has so far avoided the extremities of the US, Spain and Ireland, all the elements of a perfect storm are gathering in the wider housing system. Large numbers of households can simply no longer afford their mortgage. In 2004, there were 8,200 repossessions in the UK; in 2009, that figure had jumped to 48,000. Last year it was 36,300 and similar numbers are predicted for the coming years due to low growth, mass unemployment and public sector cuts.
The implications are serious for an economy so indelibly tied to the fortunes of the housing market. Repossessions further depress house prices, in turn reducing household wealth, increasing crime, hitting consumer spending, making it more difficult for people to move home because of falling equity and worsening credit ratings for large numbers of people, which will increase their cost of borrowing in future years. And none of this compares to the destructive effects of home loss to people and community.
Falling house prices should have helped those first-time buyers previously locked out by the bubble. Yet despite a 25 per cent average fall in house prices since 2008, unaffordability remains endemic. Shelter recently calculated for England that a household would need a £60,000 deposit and an annual salary of at least £55,900 to afford the average house price of £226,648. But most first-time buyers cannot even muster the £25,000 deposit typically needed to get a mortgage at affordable rates in the new era of risk-free lending. There is also a wider threat to the banking system – should repossessions keep rising and first-time buyers fail to get on the housing ladder, then banks will be left holding hundreds of thousands of devaluing properties, threatening their balance sheets and liquidity.
But the contradictions go much deeper. As more and more households join the queue for a home of their own – the numbers on local authority housing waiting lists have nearly doubled since 1997 to around five million – the combination of a dysfunctional housing market and a precarious economic outlook is wreaking havoc on new supply.
Since 2006-07, house building completions have slumped dramatically to their lowest levels for nearly 90 years. Increasing numbers of would-be owners are thus remaining in the private rental sector. This is causing demand to outstrip supply in many parts of the country, not least London where over the past year rents have soared by 7.3 per cent and will soon hit £1,000 per month on average.
Around 10 per cent of all rent is unpaid or late. Companies specialising in helping landlords to evict tenants say that evictions relating to rent arrears rose by 12 per cent in 2010 compared with 2009.
Rising food and energy bills, falling incomes, increased economic insecurity and the associated reduced access to credit mean for growing numbers of people a weekly battle to keep a roof over their heads. Shelter believes that more than two million people used their credit card to pay their mortgage or rent during 2010, an increase of almost half on the previous year. No wonder homelessness and rough sleeping are on the rise again.
The coalition’s housing nightmare
If things are bad now, the coalition government is about to make them a whole lot worse. Top of the bill are the draconian cuts and changes to housing benefit (see Red Pepper, Feb/Mar 2011). Private tenants will be hardest hit, especially households in inner London and other high-cost rental areas who will be displaced to the urban periphery in their tens of thousands because they won’t be able to afford the rent.
Grant Shapps, the millionaire Conservative housing minister, summed up the coalition’s revanchist attitude to the urban poor to the Guardian back in October 2010: ‘Just because you are on housing benefit, that shouldn’t give you the ability to live somewhere, where if you are working and not on benefit you can’t. We’d all love to live in different areas, but I can’t afford to live on x street in y location. The housing benefit system has almost created an expectation that you could almost live anywhere, and that’s what has to stop.’
The government’s Homeowner Mortgage Support Scheme, which enabled homeowners facing a loss of income to reduce their monthly mortgage payment for up to two years, was closed down in April. Inside Housing recently revealed that homeless ex-offenders in Nottinghamshire are being issued with tents and sleeping bags by the probation service because of government cuts.
More fundamentally, the coalition is declaring war on the most affordable and secure housing we have in the social rented sector. The small but symbolic return of new council housing in the dying days of the Labour government has been killed off, along with the previous model of government grant funding to support housing associations’ commercial borrowing to build social housing.
Enter stage right the coalition’s so-called ‘affordable rent’ scheme under which housing associations that want to build new housing will compete for a far smaller pot of subsidy and be allowed to (read: must) charge 80 per cent of local market rents. The government is also empowering all social landlords (including councils) to offer flexible two year tenancies to all new tenants. We are witnessing the death of social housing as we knew it. On top of this, the government is preparing to make squatting a criminal offence in England as in Scotland.
Origins of the crisis
We should be under no illusions about the coalition’s purpose – it is the return of what Ralph Miliband called ‘class war Conservatism’, this time with a Liberal face. But to understand fully what is going on here requires an historical perspective, which tells us three things vital to a politics of resistance.
First, the UK housing crisis did not originate in the boardroom of Lehman Brothers. It is, as Engels explained 140 years ago, an endemic feature of capitalism everywhere that it continually condemns significant numbers of people to housing misery, and periodically blows up into a wider crisis.
It was the catastrophic failure of private landlordism during the 19th and early 20th centuries that gradually impelled state intervention in the form of public housing. During the post-war era, a mixed economy of public and private house building helped to constrain the boom-bust cycle and replace the dominance of the private landlord with a mix of home ownership and council housing. The long-term withdrawal of local authorities from housebuilding has coincided with a highly volatile period of housing market instability, with no fewer than four boom-bust cycles since the early 1970s.
Second, the roots of the present housing crisis can be traced to the over-accumulation crisis of capital of the 1970s, which arguably gave birth to the evil twins of financialisation and neoliberalism. Expanding home ownership was vital for finding new sources of accumulation for finance capital. This is why neoliberalism made the privatisation of public housing in Britain its flagship policy, shutting down affordable and secure alternatives to the market and co-opting key sections of the working class into what Thatcher called ‘popular capitalism’.
All our eggs were placed in the home ownership basket, and it was the potent combination of extravagant lending, speculation and the financial commodification of housing that drove the market higher and higher. Mortgage securitisation – selling on mortgage debts of varying degrees of risk as investment bonds and using the capital to start the process again – generated the so-called ‘cheap and easy credit’ necessary to enable the poorer and more precarious sections of the working class to buy: the so-called ‘sub-prime market’. As the bubble grew, and competition between lenders intensified, those at the front-end of sub-prime lending responded with ever-riskier lending that was only sustainable if house prices continued to rise and interest rates remained low forever. They didn’t.
Third, New Labour fundamentally embraced the privatisation agenda and oversaw a disastrous decade of pro-market housing policies that only fuelled the problem. Now in opposition under Ed Miliband, the Labour Party is undergoing a housing policy ‘review’, but it is unlikely to move substantially away from its longstanding belief in home ownership and housing market wealth, nor its misguided faith in a market-dominated approach to providing affordable housing.
Building a movement
We urgently need to resist the coalition’s current housing onslaught, yet resistance has so far been slow to take off. A new housing coalition has been launched called Housing Emergency, which involves Defend Council Housing with a number of trade union and housing groups, including the Christian body Housing Justice, and the more community-based direct action of London Coalition Against Poverty (see www.defendcouncilhousing.org.uk). It aims to bring grass-roots pressure to bear on MPs and councillors in opposing a raft of government measures.
Naturally, Housing Emergency faces real obstacles to mobilising outright mass resistance, such as the weakness of the tenants’ movement, the lack of support from official tenants’ bodies and housing charities and the government’s clever stigmatisation of housing benefit claimants and social housing tenants. On the tactical front, pressurising MPs and councillors is going to achieve very little unless targeted directly at bringing down the coalition, and much of the legislation is already through.
But what the campaign really lacks is a genuine cross-tenure approach that mobilises around every aspect of housing precarity – and that includes homeowners in mortgage arrears or being repossessed. Individual home ownership (and mortgage-bondage) might form an essential pillar supporting capitalism, but when a household is repossessed for failing to meet mortgage payments or is compulsory purchased by the state to make way for a new housing or commercial development, we should fight to defend the homeowner. Commodification and displacement, not tenure, should be our enemy.
Perhaps the anti-cuts movement’s lack of inspiring alternatives to decommodify the provision of a decent, secure, affordable home partly explains why some housing activists appear more inclined to take advantage of the ‘big society’ agenda than resist it. The opportunities for genuine community ownership and control being floated as part of the localism bill might be limited, but they are attractive to people looking to generate more co-operative housing schemes.
Co-ops have long been advocated by some socialists and anarchists as a superior housing alternative to the market than what the writer Colin Ward called the ‘municipal serfdom’ of state housing. In the past decade, the potential of community land trusts (CLTs) to create affordable, secure housing has become increasingly attractive. Popularised in the USA and gaining ground in rural Britain, a CLT is a community-controlled organisation that owns the freehold of land and thus controls land use in perpetuity. By taking land out of the private property market, CLTs stop speculative and inflationary forces driving up property prices and rents for the existing community. At the same time any increase in value (or equity growth) stays with the local community and does not becomes private profit. Communities can therefore, in theory at least, build their own permanently affordable housing geared to individual income levels and available across all tenures.
While we should embrace, not fear, the creation of non?hierarchical, directly democratic, and collective forms of housing, I seriously doubt whether CLTs can create real housing alternatives to the market on the scale and timeframe required. Given their desire for community control, the length of time it takes to get a CLT off the ground and the need for private borrowing to build, they appear best suited to very small residential developments favouring those on above-average incomes.
Proponents of CLTs openly acknowledge that their favoured approach depends almost entirely on the discounted sale or gifting of public assets while private property itself remains untouched. The fear is that proponents of CLTs and co-ops will side with the privatising state when it attacks council housing in order to unlock housing land for community ownership. Public housing might be an imperfect and corrupted commons, but it has protected people against private landlordism, and guaranteed tenants much lower rents and much higher housing rights and protections than the private market. There is no guarantee that CLTs will do this.
We thus need to find a way of building a housing movement that simultaneously resists the commodification of housing and its consequences, and creates alternative forms of decommodified housing without undermining what we have already got. Following the proposals of Peter Marcuse for the US context, at one level this would be a movement demanding radical reforms that would seek to ameliorate the effects of the housing crisis and tackle its root causes.
These would include: a moratorium on all evictions, repossessions, compulsory purchases, privatisations, demolitions, and benefit cuts; the right of home owners to sell their homes at a fair value to the local authority in return for security of tenure as tenants in their existing homes; full funding for the existing public housing stock to be refurbished and maintained at a decent standard; and stronger rent controls in all sectors to bring down the cost of housing and undermine speculation. A land value tax might also be useful here.
Because such measures will be resisted by capital and neoliberal politicians, the political strength of this housing movement will depend on two core attributes. First, its ability to bring together public tenants, homeowners, private renters and the homeless around a shared agenda to build at every scale a broad-based campaign for affordable, secure, dweller-controlled housing regardless of tenure. And second, the creation of non-market alternatives – whether using the existing legal apparatus or through extra-legal activities – in the here and now that provide people with degrees of security from eviction or repossession.
No single tenure or housing model should be given preference but a key principle must be that no initiative should undermine any existing provision of affordable housing or the ability of people to stay in their homes and neighbourhoods. Empty or misused private land and property could be occupied to provide free squatted housing that would be defended from repossession attempts.
Existing homeowners, meanwhile, looking for more collective ways of living together, could sell their homes to a new housing cooperative, swapping their existing mortgages for rents that build up an equity stake in the now collectively-owned asset. Significantly, these homes could no longer be bought and sold in an anonymous competitive market place, creating a collective shield against the speculative and competitive forces driving up the high and inflating prices in the private housing market. If such a model could be generalised to the point that it had critical mass in any defined geographical neighbourhood, it could play a huge role in regulating the private housing market, and in turn, the enormous cost of housing.
These actions to decommodify and socialise public and private housing cannot by themselves mean the end of capitalism and thus the end of the housing question. But the process of tenants mobilising for community control is an essential part of building an anti-capitalist movement, creating social relationships, providing examples of what a society based on use-value could be like and helping to create the social and moral basis for a movement to bring that society into existence.