Building on Sand: The Legacy of Margaret Thatcher’s Housing Policies

Carolyn Thomas MS

Across the UK, housing represents one of our greatest domestic challenges. Our housing system has been in crisis for decades; it remains in crisis because the fundamental foundations of the system have been broken. The idea that a home is a human right and that everybody is entitled to a roof over their head, like so many other areas of our economy, is now subordinated to the whims of market forces, privatisation, and the pursuit of profit.

When Margaret Thatcher came to power, her government withdrew funding for councils to build housing. Instead of subsidising economically productive housebuilding, Thatcher’s government chose to support mortgages and rents instead. The disastrous right-to-buy policy further entrenched neoliberal dogma into UK housing policy. The majority of the homes sold under this policy were never replaced; it represented a mass sell-off of state assets into the private sector.

These policies ripped up decades of mainstream political agreement on the need for councils to provide social housing. Starting with Clement Attlee’s Labour government, the state had directly provided funding to councils to be invested in increasing social housing. The results were that for decades, hundreds of thousands of social rented homes were built on average every year. From an economic point of view, the justification was obvious: with the state building large numbers of homes, house prices and rents remained affordable because of high supply. When housing is viewed as a financial investment, the opposite is true: there is pressure to restrict supply in order to drive prices up, maximising the profits of those who own the assets.

Thatcher’s state-led transformation of the tenets of housing policy still scar the UK’s housing system. In the eyes of the British state, houses became viewed as assets, investments, and instruments of financial speculation by banks and landlords. The fire-sale of council homes has caused a severe lack of affordable housing, a problem exacerbated by the continued absence of social home building across the country. Decades of underinvestment and an increasing imbalance between supply and demand has fuelled the housing crisis, which now affects millions of people.

Where housebuilding does take place, it is now largely left to private property developers, whose prime motive is to make profit for their shareholders. This leads to the grotesque scene that plays out across Wales and Britain regularly today, in which private housing companies dispute their obligations to provide adequate affordable homes under the threat of not developing the land. It is these same private housebuilders that then pay out obscene bonuses to their shareholders and CEO’s, as was most deplorably manifested in the £75 million bonus that was paid out to former Persimmon CEO, Jeff Fairburn in 2018: making him the highest paid CEO in the UK. The green land itself which these houses are built upon becomes just another asset to be turned into a profit, with landowners able to profit from speculative land values.

Triple Threat: Empty homes, second homes and holiday homes

Perhaps one of the most glaring signs of the problems is the number of homes which stand empty. There are approximately 25,000 empty homes in Wales, whilst at the same time an even higher number of people sit on housing waiting lists and thousands are homeless. Often, one of the reasons given by owners of empty homes for keeping them is that they are waiting for the property market to improve before selling. Because of the lack of supply of housing, owners know that if they hold on to a property long enough, it is likely to increase in value.

Of particular threat in North Wales is the proliferation of second homes and holiday homes. Some of this growth is a consequence of the Covid-19 pandemic. As more and more people are being given the opportunity to work from home, there is often a reduction in the incentive to live in a city, whilst the restrictions on foreign travel have led to an increase in the numbers looking to holiday domestically.

A second home is a luxury that the vast majority of working people in this country will never have — it is difficult enough for most to get a first home for the reasons outlined above. All of these issues are interlinked; those who own second homes have realised that they can now monetize this luxury by listing their second home on websites such as Airbnb. To compound the matter, currently, this indulgence is further incentivised through tax breaks which allow second homeowners to register as business ratepayers instead of paying council tax. They are then able to claim small business rates relief, meaning many of these properties have a tax bill of £0.

Rebuilding Foundations

The housing crisis in this country is an illness which displays many symptoms, and those symptoms can all be traced back to the cause: the propagation of the idea that houses are assets to be turned into a profit. The foundations of the UK’s housing market are metaphorically built on sand — this is reflected in the fact that the bubble occasionally bursts, and house prices collapse as they did in the 2008 financial crisis.

The problems are structural and manifold; so our solutions must be wide-ranging and radical. We desperately need to start building social housing on such a mass scale again as to ensure supply can meet demand. This cannot be done overnight. In the meantime, we should look to curb the excesses of the current system.

We must use our powers to protect those at the sharp end of this crisis — the young and working class, an increasing number of whom are shut out of home ownership entirely. To begin with, Council Tax should be replaced with a Land Value Tax, paid for by the owner of the property. Council Tax is a regressive form of taxation whereby the poorest pay a greater proportion of their income on Council Tax than the rich do. Any system which places a greater burden on those with the least ability to pay is not fit for purpose and it is a travesty that such a system has remained in place for so long.

In the private rented sector, we need an increase in legislative protection for tenants:

- Rent controls

- The right to secure tenancies

- Ban the use of ‘no fault’ evictions

- Ban the use of blanket ‘no pet clauses’ in Welsh tenancy agreements

- Ensure that banks and building societies take historic rent payments into account when assessing mortgage applications

As environmentalists, we must also be aware of the impact that mass-scale building can have and therefore consider ways of increasing the existing stock of social housing. One way to do this would be to create a Right to Rent. Under a Right to Rent scheme, homeowners would be able to sell their properties to their local councils who would then rent those houses back to them. This would both increase the stock of social housing, whilst also protecting people from the threat of mortgage repossession and eviction by allowing them to pay a social rent instead.

A by-product of such a policy would be an increase in mixed development; with local councils taking ownership of homes in non-council housing estates — mixed developments are increasingly pursued by councils because they build a sense of social solidarity amongst mixed communities; a Right to Rent would turbocharge mixed developments.

These solutions may be radical, but radical is what is needed to upend a housing system which has been in perpetual crisis for decades. The side effects of that crisis are felt most keenly by working people, but also by the young. If we fail to act now, we will consign tomorrow’s young to a future without housing security.

It is our duty to act.

Carolyn Thomas is the Labour regional Senedd member for North Wales