New Labour’s culpability for the housing crisis

At the end of New Labour’s 13 years in government there were 655,000 less ‘social homes’ than when they were first elected.”

Keir Starmer recently told Labour members that they should be proud of what the Blair government achieved. What did it achieve in relation to housing? If you examine New Labour’s record there is no doubt that it was culpable for the worsening of the housing crisis during its period in office. Housing campaigners who lived through that period had to defend council housing against the Blair government’s attempt to eradicate it.

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)

At the end of New Labour’s 13 years in government there were 655,000 less ‘social homes’ than when they were first elected. How did this happen?

  • 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 homes were demolished during this period.
  • Councils were barred from applying for ‘social housing’ grant to build new homes. Only Housing Associations could apply.
  • The government pursued a policy of selling off 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. Yet Gordon Brown refused to do that for if tenants voted against ‘transfer’. Councils were provided with no resources to improve their stock if tenants voted against transfer.
  • To overcome resistance from tenants to selling off their homes 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. The cost of the programme for improving ALMO stock, £5.7 billion, was simply added to the supposed council housing debt. This meant that council tenants everywhere were paying for for the cost of servicing this debt through their rent.
  • 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 councils 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 carried out any work! Hence, the number of BTL properties increased by 2.1 million 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 allowed rapid house price inflation to rip.

It wasn’t until the Great Crash of 2007-8 that the government relented and allowed councils to apply for social housing grant and that was only because it decided that, given the financial situation, it 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 in relation to council housing was the Major Repairs Allowance associated with the Decent Homes Standard which enabled councils to renew homes with double glazing, central heating and UPVC doors. 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 that was because John Healey’s system imposed a bogus debt on councils which has to be serviced from council tenants rent. Their own research estimated that in order to modernise homes a 67% increase in funding was needed, but a much lower increase was given under the new ‘self-financing’ system.

This is the real record. An honest recognition of it is necessary, though it’s not just of historical interest. We don’t want a return to the ‘playbook’ of this era. The key to addressing the housing crisis which New Labour helped to create lies in the commitments in the 2019 manifesto. The view of the membership in 2019 and 2021 was overwhelmingly in favour of a large scale council house building programme and ending RTB. We not only want a commitment to that if Labour were to be elected, we want campaigning now, along the lines of the 2021 composite resolution passed at the conference, which called on Labour to “demand that the government takes action now to end the housing crisis”.

Martin Wicks

January 22nd 2022

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