What were the causes and long-term consequences of the residualisation of council housing in 1980s?

What were the causes and long-term consequences of the residualisation of council housing in 1980s?

What were the causes and long-term consequences of the residualisation of council housing in 1980s?

Introduction

The essay examines the process of residualisation of council housing in 1980s by discussing the causes and long-term consequence. It examines the broader context of council housing before 1980s and seeks to avoid taking only the narrow view. It aims, therefore, to connect residualisation of council housing concerns both to government policy in other areas and to a range of social political and economic issues and debates that are concern in the UK today.

To achieve it , the essay begins by briefly mentioning the context of council housing in order to explain the process of residualisation . These include the housing stock and the social composition of council housing .The Right to Buy Act in Housing Act 1980s will come out as well since most of the changes related to this act. Given the detail of the Right to Buy Act, the essay starts to discuss the causes and consequences of the residualisation of council housing in 1980s, we can says it as the process of privatization.

The Context of Council Housing

In the late 1940s the level of output of council housing was high, quality was good, in the sense that most new housing was in form of two-storey, three-bedroomed houses of generous proportions, and the image of council housing was generally positive. Forty year later the position were totally different: output is barely a tenth of the level achieved in 1948; new building increasingly emphasizes small, one-bedroomed flats for the elderly and so called ‘special needs' group; there are serious problems of disrepair; and the popular image of council of council housing has become much less attractive. The decline of council housing is a complex process and can be measured in a variety of ways. To further investigate the process, social composition of council housing will be the first issue to look at.

The social composition:

It is hardly surprising that fewer and fewer people aspire to be council tenants,

Employment and age group

Forrest and Murie state that by 1984 more than half (53 percent) of household in council housing were headed by an economically inactive person, and that overall nearly two-thirds of council housing heard of households were not working. Two significant factors here are the high incidence of unemployment amongst council tenants and the increase in the proportion of elderly tenants. In 1981 in England council housing comprised just over 8 percent of the total stock, but 36 per cent of household hears over the age of 60 were in this tenure , and it has been claimed that retired people provide up to a quarter of all new council tenants. Table 1.1 shows how elderly have become heavily over-represented in local authority authority housing since the early 1970s. These figures also indicate important changes in younger age groups, with the under 25s becoming over-represented, whilst there have been reductions in the proportions of people aged 30-39 who are council tenants.

Table 1.1 Proportions of households of different ages in local authority housing

Age of head of household

1971

1985

%

%

24 and under

21

32

25-29

24

24

30-44

29

19

45-59

35

27

60-69

32

37

70-79

31

36

80 and over

31

39

All households

31

28

Source: Social Trends 1988, HMSO, London, 1988, Table 8.20

Benefit claimants

Another set of indicators to be considered is provided by the social security statistics. Forrest and Murrie have brought together figures for the period 1967 to 1984, showing that in that time the proposition of supplementary benefit claimants who were council tenants rose from 45 percent to 61 percent , whereas the proportion who were owner occupiers rose only from 17 percent to 21 percent despite the considerable growth in home ownership .Table 1.2 breaks down supplementary benefit claimants into various categories , showing that in each group council tenants predominate. The slight decline between 1984 and 1986 reflects the contraction of the public sector.

Table 1.2 Supplementary benefit recipients by tenure, 1972, 1984, and 1986

Tenure

All recipients

Supplementary pensions

Unemployed

Sick and disabled

Single-parent failies

1972 No.(000s)

2482

1796

269

183

164

%

%

%

%

%

Owner Occupiers

17

18

14

14

7

Local anthority tenants

55

53

53

60

63

Private tenants

29

29

33

26

30

1984 No.(000s)

3389

1550

1069

151

425

%

%

%

%

%

Owner Occupiers

21

22

22

22

14

Local anthority tenants

61

61

55

65

75

Private tenants

17

16

23

13

12

1986 No.(000s)

3650

1556

1226

174

501

%

%

%

%

%

Owner Occupiers

22

22

23

24

13

Local anthority tenants

60

62

52

63

74

Private tenants

18

16

24

13

13

Source: 1972 and 1984, R. Forrent and A. Murrie, Selling the Welfare State, Routledge, 1988, p.68 1986, Social Security Statistics 1987, DHSS, HMSO, London.

A more striking contrast between the two main tenures is obtained by looking at the proportions of owners and council tenants claiming supplementary benefit. According to Forrest and Murie the proportion of home owners calming supplementary benefit rose from just 4 percent to 5 percent between 1979 and 1984, despite a very substantial increase in the total number of owners. At the same time the proportion of claiming council tenants rose from 21 percent to 34 percent , in a shrinking sector.

Household type and ethnic minority group

A final source of information about the composition of council tenants is the London Housing Survey, 1986-7, which showed that, amongst other things, in London as a whole 4 percent of all households were headed by single parents, but in the council sector the proportion was 9 percent. On ethnic origin the report showed that nearly half (48 percent) of Afro-Caribbean households were in council housing, and that this group was underrepresented in owner occupation.

Sub-conclusion

All the indicators referred to in this discussion reflect the tendency of council housing to become the tenure of the least well off and others who are socially and economically disadvantaged. In the region of half the poor live in social housing, a sector that accounts for about 15 percent of households overall. This is not to imply that all council tenants are poor, nor that there are no poor home owners. In the case of owner occupation the emphasis on increasing house prices and access to wealth accumulation should be allowed to obscure the fact that there is very considerable variation in the incomers of owners, both within and between different regions. The dominant feature of home ownership is its heterogeneity, embracing rich poor. Council housing, on the other hand, is becoming increasingly homogeneous by comparison, with fewer and fewer tenants on above-average earnings and increasing proportions of tenants on above-average earnings and increasing proportions of tenants who are outside the workforce altogether.

The final point to make here is to reiterate that the social composition of council housing has been changing for many years and in response to a variety of forces, some of which are relatively specific to housing, whilst others are to do with wider processes of social and economic change.

Housing Policy in 1980s - Right to Buy Act

In this section, the policies that lie behind the decline and residualisation of council housing will be reviewed. The broad objectives for the 1980s were set out by Michael Heseline in a speech in June 1979 shortly after his appointment as Secretary of State for the Environment. Addressing the Institute of Housing Annual Conference he identified four objectives:

(i) To increase individual freedom of choice and sense of personal opportunity. This, he explained, meant expansion of opportunities for home ownership claiming ‘Dreams are going to come true for many more people'.

(ii) Continuing improvement in the quality of housing.

(iii) Greater value for money (to be achieved partly by removing restraints on private house builder).

(iv) Better use of resources, by concentrating them where housing needs are more acute.

The decline of council housing in 1980s has to be seen in the context of a growing commitment to private market solutions, and gathering, wider hostility to local government as such. Policies directly into three categories:

1) Measures designed to privatise the existing stock;

2) Restriction on capital investment by local authorizes;

3) Changes in the terms on which tenants rents their homes.

After taking office in May 1979 the new Conservative government lost no time in moving towards implementation of its first wave of policies directly affecting council housing implementation of its first wave of policies directly affecting council housing tenants to buy their homes the Secretary of State announced that local authorizes were to be permitted to sell at discounts of up to 50 percent less than the market value. The actual right to buy was introduced as the centerpiece of the Housing Act 1980, and took effect from October 1980. Secure tenants of three years' standing were given the right to buy at a discount of 33 percent , increasing by 1 percent for each additional year's tenancy, up to a maximum of 50 percent after twenty years. In additions, tenants were entitled to a mortgage from their local Authority. As Table 1.3 shows, there was a rapid increase in sales in 1980, 1981and 198, reflecting pent-up demand, but in subsequent years the rate of sales declined to less than half the 1982 peak.

The figure below indicate that sales exceeded new building in each year after 1980, something which had happened before, but in additional it is worth pointing out that in the early 1980s , when private-sector building was experiencing a slump in output, the sale of council houses served to sustain a rapid growth in owner occupation. In the period 1980-4 sales exceeded new building by private developer, something else which had never happened before.

Table 1.3 Sales and new building by local authorizes 1979-87

Sales and new building by local authorities 1979-87

All sales

New building

1979

41665

69734

1980

81485

70824

1981

102825

49407

1982

201880

30176

1983

145585

29823

1984

103180

29185

1985

92295

23478

1986

88748

18532

1987

105567

16089

Source: Housing and Construction Statistics, HMSO.

The Peak & Bottom of council housing

The sale of council housing has been a major factor in the changing character of public housing in the 1980s. In the UK as a whole over one million dwellings have been sold so far. The fullest analysis and discussion is that provided by Forrest and Murie, and it is sufficient here to note that their research confirms earlier predictions that the best and most desirable dwellings, on the most attractive estates, would sell in greater number than the flats and dwellings in unattractive estates; and that purchases are not representative of council tenants as a whole but in the contrary they tend to be middle aged people in relatively well-paid employment. Thus the right to buy has tended to remove selectively the better-off tenants and the better parts of housing stock, leaving behind the poorer tenants (as mentioned in the social composition part ) and those living in dwellings that no one wants to buy, even at discount.

Policy factors

To maintain demand and spread sales across the wider spectrum of dwellings discount were increased, first in 1984 and then again in 1986. The housing and Building Control Act, 1984, reduced the residential qualification from three years to two , providing tenants with a 32 percent discount after two year' occupational; at the same the maximum discount was raised up to 60 percent for tenant of thirty or more years. In 1986 the Housing and Planning Act raised the level of subsidy on flats to 44 percent after two years, raising it by 2 percent to a maximum of 70 percent after just fifteen years.

Causes of residualisation

From the context of council housing, the council housing seems to be not attractive for those people in higher status, the following section will discuss what factor have contribute to the residualisation of council housing and then different perspectives on the interpretation of observable trends.

Political factors

Forty years ago the public sector was the fastest growing part of the housing system, favored by the then Labour government as the main provider of new homes to tackle the huge post-war housing problem. However, the view of the Conservative Minister of Houisng in 1987, William Wadegrave was totally different:

I can see no arguments for generalized view build by councils, now or in the future…The next great push after the right to get rif of the state as a big landlord and bring housing back to the community [sic].

Macro-level -Globalisation


i) Continuing decline of municipal housing

ii) The relative attraction of Home Ownership

A succession of surveys of public opinion has revealed growing number of people expressing a clear preference for owner occupation.

Long Term consequence

The structure of the housing market

Table 1.4 shows how the structure of the housing market in the UK changed after 1970. During the period of Conservative government (1979-1997) the housing stock increased by almost three million dwellings, the owner-occupied sector expanded by 10 percentage points, and local authorizes started the period housing almost one in three household and ended it housing less than one in five. Housing associations increased their market share, while the private rented sector continued to decline until 1991 , with a small recovery in size thereafter.

These statistics obscure more complex changes. More than half of the growth of the owner-occupied sector was a direct result of the sale of public sector housing stock, especially through the ‘Right to Buy' Scheme. Thus the owner-occupied sector included properties that were not originally built for sale and were situated in locations not previously associated with home ownership. These were also older properties, and when they had been bought under the Right to Buy their purchasers were generally older first-time buyers who benefited from substantial discounts on their house purchase. In many case former council properties formed a separate submarket, not fully absorbed into mainstream home ownership (Forrest et al., 1995) . The Right to Buy and stock transfers also altered the structure of the local authority housing, the disproportionate sale of more attractive and better quality stock left the authorities with a greater proportion of flats and non-traditional dwelling tpes/

Large-Scale Voluntary Transfer (LSUT)

There was a significant change to the organization of housing in the UK for the LSUT of council housing. These transfers were most extensive in England , although the sale of Scottish Homes housing stock and the transfer of a significant number of properties elsewhere in Scotland also merit attention. Between December 1988 and March 1997, 54 local authorities in England transferred around 250000 dwellings. These transfers, as well as the changed financial environment for housing associations, contributed to the growth of the latter sector and this continued under Later Labour government.

Deregulated of Private rented sector

In 1988, 59 percent of lettings in the private rented sector had been dereglated but by 1997/98 this figure had fallen to 9 percent . There were implications for both rents and tenants' right. The Housing Benefit system only partly protected tenants against rising rents. There had always been rent caps, and these became more significant following in the mid 1990s. This broad picture needs to be modified in relation to particular regions and localities. For example in 1997, 67.9 percent of household in England owned in Northern Ireland and 60.3 percent in Scotland. The proportions of public sector tenants were 16.1 percent, 16.2 percent, 23 percent and 27.8 percent respectively. Key indicators of housing changes in the period 1980-97 are presented in Table 3.4.

Rental housing

The combination of public expenditure changes and the sales of public housing led to a steady decline in the size of the public housing sector. The private rented sector also declined, although there was a temporary expansion in the late 1980s and early 1990s when people who were unable to sell their homes turned to renting, and when the Business Expansion Scheme was extended in 1988 to cover new equity investment in companies that engaged in residential lettings. This provided investors woth tax relief at their marginal rate for up to £40000 a year for new shares in qualifying companies. Investors had to hold their shares for at least five years, after which they could be sold free of capital gain tax. Residential letting companies could raise up to £5 million in this way to acquire and let properties. After five years they were free to sell the units, the resulting capital gain being tax free. Between 1988/89 and 1993/94, 4527 business expansion schemes were established in the UK for housing. The total investment was in London and the South-East. The value of the income tax relief was in excess of £1 billion, or £ 16450 per letting (Wilcox, 1997).

The availability of housing to rent was affected by the decline in the construction of new council dwellings, and construction by housing associations fell far short of compensating for this. The Right to Buy scheme also had a long-term impact on the supply of re-lets as purchased properties would not be available to council tenants in the future . In England lettings to new tenants fell from some 275100 in 1980/81 to 247000 in 1985/6 and 239600 in 1990/91. However they did not continue to fall and fluctuated between 220000 and 260000 between 1989/90 and 1997/98. These figures reflect an increasing turnover ( the ratio of new letting to dwelling stock) in the council stock: from 5 percent per annum to 7 percent per annum - an increase of 33 percent . This and the changing profile of new tenants reflected the changing nature and role of council housing (cole and Furbey , 1994).

Tenants' charters and rights

The Tenants' Charter (introduced in the Housing Act of 1980), changed the conditions and rights associated with public sector tenancy. In 1987 a new phrase of the discussion of tenants' rights commerced. The conseration manifesto f 1987 introduced the idea of a ‘Choice of Landlord' scheme under the heading ‘Right for Council Tenants'. The proposals sought to add the right of exit to thoise of voice. As the manifesto put it, ‘If they are ever to enjoy the prospect of independence municipal monopoly must be replaced by choice in renting.'

The Housing Act of

The Housing Act of 1988 gave tenants the right to choose their landlord

Maturation crisis

Conclusion

The privatization programme was certainly unique. The level of discount and financial support for the Right to Buy scheme were consistent not with global economic pressures but with an ideological stance. By 1997 some two million council houses had been transferred to owner-occupation. Similarly , under large-scale transfer there was a further shift away from local authority landlordism, with more then 50 local authorizes transferring their total housing stock to housing associations by 1997.

Housing associations had been the preferred vehicles for the provision of new rented housing since the 1980s.

The residualisation of council housing and the changing roles and balance of tenures , were reinforced rather than initiated in this period. Many were the product of wider economic policies and of general movements in the economy rather than housing policy itself. For example inflation and interest rates affected housing subsidies and other expenditures and costs. House price inflation, economic recession and rising unemployment affected individual housing costs, mobility, maintenance and repair. These factors overwhelmed the formal housing policies set out by the government.

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