All Commentary
Saturday, March 1, 1969

A Housing Policy for Great Britain

The title is yours, not mine. My proposition is that there ought not to be a housing policy, any more than there is a food policy, a clothing policy, a furniture and carpets policy, a passenger cars policy, and so on. The same mech­anism which provides food, cloth­ing, furniture, carpets, cars, and the like, and has done so on an ever-rising standard for every­body, could provide houses, too. Why doesn’t it, then? Because we, the politicians, by the laws we make and maintain, prevent it. We use the law to keep the price of housing down to levels at which the mechanism cannot work, or at best, malfunctions. For fifty years we have practiced in regard to housing the oldest and the cruelest of all the deceptions which politi­cians practice upon their victims—to persuade them that we will make a thing cheap and plentiful for them by holding down the price of it by force.

The only price at which the mechanism will work properly is the best price that can be obtained. There is only one “right” rent for a house or flat: that is the best rent the owner can command. To the extent that houses or flats are let for a lower rent than that, either because of rent control or because of public subsidy, the gen­eral interest suffers. If there is shortage and squalor in housing, if people would like to have more housing rather than other things, the reason for it is what I have long since been accustomed to de­scribe, in public and in private, in speeches and in writing, at elec­tions and between elections, as the Two Giant Evils: rent control and subsidy. Your Federation in its evidence to the Prices and Incomes Board, though a shade less flam­boyant, was no less outspoken: “a combination,” you said, “of pri­vate rent restriction and subsi­dized municipal housing to let has proved fatal to the private mar­ket for rent and has been a root cause of slumdom and decay.”

Few of the nine million rented houses in Great Britain are let at the market rent, the best rent that could be obtained for them if none were controlled or subsidized. What the gap between present rents and market rents is, nobody knows, because, in the nature of things, when an open market does not exist, one cannot know the market price. In 1967, the 5.2 mil­lion municipal houses in Britain were subsidized from taxes and rates to the tune of about £130 million or, on average overall, £25 per annum. But we do not know if that represents the gap between ac­tual and market rents. Some munic­ipal houses and flats probably could not be let at their present high rents if there were a free market all round. Others, probably the great majority, would command a somewhat higher rent than that which would enable the housing authority to cover, without sub­sidy, its outgoings in respect of them. Nevertheless, that figure of £25 a year probably does give us a useful approximate notion of the sort of gap—something, perhaps, between 10s. and 12s. a week—which exists on average overall. As to the 3¹/3 million privately-owned rented houses, we are even more in the dark. There must, too, be large variations, from place to place and from house to house, in what would prove in fact to be the gap between the actual and the open market rent, owing to the vagaries and chance effects of sub­sidy policy and the rent laws.

Escapist Policies

So, we find ourselves in a situa­tion not without parallels else­where in politics. Politicians and public alike are standing on the brink of a gulf between common sense and things as they are, which is so wide and frightening that with one accord they shut their eyes and turn the other way. The politicians all think that if they tell the truth and try to bridge the gap, they will make themselves so unpopular as never to be elected again. The public, on their side, not unreasonably, feel that it is not incumbent upon them to push the politicians into unpleasant measures, however wise and necessary. So the conspiracy of pretense continues, and we keep producing new and ever new “housing policies,” and making new and ever new promises to “solve the housing problem.” The occasional politician here and there goes about denouncing the Two Giant Evils and appears to take no harm thereby, though if his colleagues could find a way to muzzle him, no doubt they would. Otherwise, nothing happens. You yourselves say: “that policy [of market rents] is presumably un­acceptable over a short-term pe­riod” but “it is clearly essential that some attempt be made to rationalize the present situation.”

Well, let us give ourselves a treat this morning. Let us just imagine that the will existed to return to common sense in hous­ing—to “rationalize the present situation,” as you put it—and set out what it would involve. At least, they can’t take our dreams away from us.

A Return to Common Sense

First, we must act both gener­ally and rapidly. The easiest way to get from an unnatural to a natural situation is to do it sud­denly. There are equally good po­litical and practical reasons for that. If, as we believe, people would soon begin to see and feel the benefit of open market rents, in terms of more housing and the disappearance of the phenomena of shortage, then it is best to get the painful part and the period of confusion over as quickly as pos­sible so that people have time to leave it behind them and grow ac­customed to the “brave new world.” If subsidies are reduced gradually and control removed bit by bit, the agony is protracted. The practical reason is that, if only a part of the whole is allowed to go free, prices and rents there rise above what would be the ulti­mate market level all round, be­cause all the scarcity from other parts is concentrated on that one. If everybody is put into the mar­ket at the same time, nobody can for long get more than the true market price or rent. So the first thing to aim at is to get all the subsidies and controls off in a matter of months rather than years.

Secondly, while we can safely leave the private owner to aim at the best rent, if he is allowed to, something more has to be done in the case of the municipal owner, who, for close on fifty years, has worn a triple character: not only landlord, but dispenser of charity and purchaser of tenant votes. If the sole function in the future is to be a good landlord, in the best commercial sense of the term, the elected local authority is about as bad and unsuitable a body for the purpose as can be imagined. All municipal houses should therefore be vested in a public corporation, charged with two duties: to maxi­mize the return from them and manage this public “estate” on the best commercial principles; and gradually to dispose of them—dare I say “denationalize them”?—to private property companies and private owner-occupiers.

There will be two financial con­sequences: one for the particular tenants, another for everybody. Rents generally will rise—that is essential—and therefore this ele­ment in the cost of living for over half the households in the country will undergo a once-for-all in­crease. For the majority of them this will be no more than they have sustained many times in re­cent years—though this time, as I will show in a moment, there will be solid compensations. In any case, wages will have to go up to match, because, as I wrote long ago, housing subsidies and rent control have been “Speenhamland in modern dress”—in other words, outdoor relief in supplementation of wages, a thoroughly bad thing. There will be a minority, however, who will need to have those bene­fits adjusted or be otherwise helped by their fellow citizens.

Taxes, Budgets, and Ideals

But now let us look at the pub­lic in their total character, as tax­payers and ratepayers rather than tenants. The rates will be relieved straight away of all housing costs—subsidy, administration, the lot because there will be no more municipal housing. Meanwhile, the National Housing Corporation, even after lowering some of the present very high rents, which are only obtainable in conditions of subsidy and control, ought to turn in to the Exchequer a sub­stantial surplus on its operations, while the Exchequer itself will benefit by the abolition of the tax-borne subsidies—in all, perhaps £150 million toward reduction of taxes and increase of social bene­fits for the persons affected by the higher rents.

That, however, is not the end of it. There is more still to come; for the Budget at the moment is car­rying between £300 million and £400 million a year for the capital which is lent to local housing au­thorities to build new houses and flats but has to be raised in taxes by the Chancellor of the Exchequer because in present circumstances it cannot be borrowed by the gov­ernment from the public. In fu­ture this capital will be raised by the private enterprise builders of new rental accommodation, just as the capital is raised for new owner-occupied houses, without recourse to the taxpayer. So, even if half the subsidies had to be given back in social payments, the huge sum of some £500 million would be available for relief of taxation. Most people would find the bargain a pretty good one; and remember that I have taken no credit at all in these calculations for any increased efficiency, and therefore lower real prices, which ought to result from the substitu­tion of private enterprise for mu­nicipal nonenterprise, and from the larger scale on which private enterprise builders would be able to plan and carry out their oper­ations.

There now! Were we dreaming, or were we awake? “Ideally,” and now I am quoting your own Federation again, “it would be desirable to sweep away the current jungle of rents in the public and private sectors by turning to a free market in rented housing which would allow to landlords a proper margin of profit and would bring invest­ment capital back into the private rented sector.” “Desirable?” Yes. “Ideally?” Well, that depends on us, whether we can make the de­sirable so clear to our fellow citi­zens that they will insist upon having it and will tell the poli­ticians to get down to the job.



Something Constructive!

From time to time, readers of Analysis urge upon me the es­pousal of some program they are pleased to call “constructive.”… The reform invariably rests its case on the good will, intelli­gence and selflessness of men, who, invested with the power to do so, will put the reform into operation. And the lesson of history is that power is never so used. Never. I am convinced, on the other hand, that all of the evils of which these honest people complain can be traced to the misuse of power, and am therefore inclined to distrust political power of any kind…. The only “constructive” idea that I can in all conscience ad­vance, then, is that the individual put his trust in himself, not in power; that he seek to better his understanding and lift his values to a higher and still higher level; that he assume respon­sibility for his behavior and not shift his responsibility to committees, organizations and, above all, a superpersonal State. Such reforms as are necessary will come of themselves when, or if, men act as intelligent and responsible human beings. There cannot be a “good” society until there are “good” men.

FRANK CHODOROV, Analysis, 1942