WHEN FULL LVT HAS BEEN ACHIEVED, WILL WE STILL NEED SOCIAL HOUSING?
No more social housing? Everyone choosing and buying or renting their own preferred housing. That’s such an odd idea for us to take in now. So it’s not surprising that current wisdom can only conceive of a world where Big Brother in one form or another organises housing for the ‘less-well-off’. Consider these recent papers from wise and sensible commentators:
UBS — UNIVERSAL BASIC SERVICES is an idea from The Institute for Global Prosperity. They are not comfortable with Basic Income, and consider that a commitment to Universal Basic Services would be better. For some of the debate around this subject click https://neweconomics.org/2018/08/ubi-debate-continues?mc_cid=474d9022ae&mc_eid=724317ec5c .
Basic Services are provided universally by the State, using taxpayers money. A prime example is the NHS where the rationale for free-at-point-of use services provided by/organised by the State seems well established. So too is Education, and the proponents of UBS take it for granted that Housing too should be, at least in part, a Basic Service.
From another quarter we find a similar argument in favour of ‘affordable housing’ be provided/organised by the State or local authorities. This is the theme of a recent NEF paper says. “WHAT LIES BENEATH HOW TO FIX THE BROKEN LAND SYSTEM AT THE HEART OF OUR HOUSING CRISIS”. New economics foundation 2018 August BY Sara Mahmoud and Joe Beswick. https://neweconomics.org/uploads/files/what-lies-beneath.pdf
Here’s an excerpt from what they say: “The public land sale should be stopped, and the land instead used to form the basis for a People’s Land Bank, to be used strategically in partnership with communities to meet their needs, primarily affordable housing”. This looks like Social Housing should take priority over all other forms of delivery, it is so vital for society?
BUT why has HOUSING become a ‘social service’? Once, before 1914 poor people rented from private landlords. So in fact did the vast majority of households. Ninety per cent of all homes were rented privately in those days. The landlords were often old aristocracy exploiting their land-holdings to develop the Victorian and Edwardian housing that is so fashionable today. This was top-hatted capitalism, and the rich got very rich. But the working- and middle- classes were housed reasonably well, at a rent they could afford. But, yes, there was exploitation, there were slums too.
World War One changed everything. Social reform was in the air. Lloyd George promised “homes fit for heroes”. His 1909 Budget brought in Death Duties, aimed at the aristocrats ill-gotten wealth. Rent control may have prevented a Red Clydeside revolution, but landlords saw no future in building houses to let. Social housing, usually developed by Local Authorities boomed, helped in no small way by the 1930s housebuilding miracle (see my article about this http://www.conallboyle.com/housing/HOUSEBUILDINGBOOMINENGLAND1930sIAHS1992.pdf)
That’s how social housing started, not as a service for the poor but to serve the needs of the whole working class. In some ways ‘brought up in a council house’ (as these local authority social houses were called) was a slur, a blight to be overcome. But this collective provision was quite popular, rents were kept low because politics came into play. One way that costs were held down was through ‘historic cost pooling’. Commercial landlords use opportunity-cost and charge rents proportionate to today’s prices; local authorities took the total amount borrowed to build as a baseline. Rents which covered interest charges and operating costs were deemed adequate. (One might add that costs were kept low because housing departments were staffed by low-paid workers, yet often proud to be operating a social service not a profit-making business)
Even so, today, we still need social housing: Because of the current situation of wildly over-priced housing, there still has to be some kind of fix in order to house the ‘poor’. Hence a temporary resort to council house-building is still needed. But long term a home is an individual purchase, not ‘housing’. Once LVT is implemented at the full rate, a near-total collection of all the unearned land rent value created by Society will be reclaimed. This will lead to a housing market functioning properly, as it should. Houses will be genuinely affordable, but they will also be in plentiful supply, and of good quality too. All because of LVT. It won’t happen overnight, but in 30 or 40 year’s time. And then will there be any point any need for ‘social housing’? Surely not.
Will we miss the state-controlled provision of ‘affordable’ housing? Affordable is one of those Weasley words—it really means subsidised, paid for by a levy on other taxpayers, or by undercharging the tenants deemed worthy to be supplied with such social, affordable housing. Nevertheless, the NEF paper is probably right that in the short-run the housing market is such a miasma that only intervention will be required to muddle through. The problems of market distortion and under-use would be worth tolerating to prevent rough sleeping on a massive scale.
But is there a long-term case for social, affordable housing in a full-LVT world? The NHS is a brilliant bargain both for its users, the taxpayers. Collective universal provision is far less costly, and just as, if not more effective than market systems. Universal education embodies common cultural and community values, and is a valuable common experience for obedient citizens-to-be.
Can the same effects for the NHS and Education be said about collective provision of housing? There are few economies of scale, no asymmetry of information as with medicine. A home is a place where individual families live separate from others. In a post-LVT world shortages and consequent exploitation should not exist. Discrimination can be legislated against, but effective markets like house-building post full LVT are quite capable of providing everybody with a product at a reasonable price so long as they can pay.
Housing poor people in rich boroughs
But, as the NEF paper points out, the greatest housing need is in the most affluent areas. How will those on minimum wage be able to pay the sky-high LVT that this affluence invokes? In order that the hyper-rich in their Chelsea mansions have cooks and cleaners, won’t we still need Grenfell-Tower style buildings to rent at subsidised rates to the low paid workers?
Notice that I said ‘workers’. There are many retired folk in Chelsea living in large properties who at present have no incentive to move to what will be lower-LVT areas. Also that villain of the Daily Mail, the parasite social security scrounger may be happy to live on benefits especially the housing benefit that is currently available in highly expensive housing areas. The ‘bedroom tax’ was obviously a malicious Tory attempt to hit the poor, but done gently, trying to move non-workers to less expensive housing is a worthy motive.
Full LVT incentivises non-workers, both rich and poor to move to lower-lvt areas. Builders who will seek to provide all types of property including smaller cheaper property will have their incentive to build in high LVT areas, and will do so more efficiently (cheaper, better). If cheap to buy apartment accommodation is wanted then they will provide. This can be rented to the workers whose presence in the high LVT area is essential. Market signals will underscore the fact that they need to have higher rates of pay as well to pay their LVT. Because of the allowances in my scheme (see earlier article***) these built more cheaply utility accommodations will be fully utilised. [perhaps a nudge from the planners might be needed to allow such housing]
So the incentives of LVT — to encourage those who don’t really need to live in a high LVT area, and the builders given the right signals produce, it seems to me, a situation where no general state or local authority organised ‘affordable’ (subsidised) housing is necessary. I have always felt that it is undesirable too.
A small residium
There might be some exceptions to this. Special needs accommodation will never be suitable for marketing. By definition the customers are not competent to engage in the rough and tumble of the market.