The Downing Street Years (103 page)

State intervention to control rents and give tenants security of tenure in the private rented sector had been disastrous in reducing the supply of rented properties. The state in the form of local authorities had frequently proved an insensitive, incompetent and corrupt landlord. And insofar as there were shortages in specific categories of housing, these were in the private rented sector where rent control and security of tenure had reduced the supply. Moreover, new forms of housing had emerged. Housing Associations and the Housing Corporation which financed them — though they could be all too wasteful and bureaucratic on occasion — offered alternative ways of providing ‘social housing’ without the state as landlord. Similarly, tenant involvement in the form of co-operatives and the different kinds of trusts being pioneered in the United States offered new ways of pulling government out of housing management. I believed that the state must
continue to provide mortgage tax relief in order to encourage home ownership, which was socially desirable. (Far better and cheaper to help people to help themselves than to provide housing for them.) The state also had to provide assistance for poorer people with housing costs through housing benefit. But as regards the traditional post-war role of government in housing — that is building, ownership, management, and regulation — the state should be withdrawn from these areas just as far and as fast as possible.

This was the philosophical starting point for the housing reforms on which Nick Ridley was working from the autumn of 1986, which he submitted for collective discussion at the end of January 1987, and which after several meetings under my chairmanship were included in the 1987 general election manifesto.
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The beauty of the package which Nick devised was that it combined a judicious mixture of central government intervention, local authority financial discipline, deregulation and wider choice for tenants. In so doing it achieved a major shift away from the ossified system which had grown up under socialism.

Central government would play a role through Housing Action Trusts (HATs) in redeveloping badly run down council estates and passing them on to other forms of ownership and management — including home ownership, ownership by housing associations and transfer to a private landlord — with no loss of tenant rights. Second, the new ‘ring-fenced’ framework for local authority housing accounts would force councils to raise rents to levels which provided money for repairs. It would also increase the pressure on councils for the disposal of part or all of their housing stock to housing associations, other landlords or indeed home ownership. Third, deregulation of new lets — through development of shorthold and assured tenancies — should at least arrest the decline of the private rented sector: Nick rightly insisted that there should be stronger legal provisions enacted against harassment to balance this deregulation. Finally, opening up the possibility of council tenants changing their landlords, or groups of tenants running their estates through co-operatives under our ‘tenants’ choice’ proposals, could reduce the role of local authority landlords still further.

The most difficult aspect of the package seemed likely to be the higher council rents, which would also mean much higher state spending on housing benefit. More people on housing benefit means more welfare dependency; on the other hand, it seemed better to provide
help with housing costs through benefit than through subsidizing the rents of local authority tenants indiscriminately. Moreover, the higher rents paid by those not on benefit would provide an added incentive for them to buy their homes and escape from the net altogether.

These reforms will need time to produce results. But the new arrangements for housing revenue accounts are applying a beneficial new discipline to local authorities. And deregulation of the private rented sector will increase the supply of rented housing gradually, as ideological hostility to private landlordism recedes.
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But I have to say that I had expected more from ‘tenants’ choice’ and from HATs. The obstacle to both was the same: the deep-rooted hostility of the Left to the improvement and enfranchisement of those who lived in the ghettoes of dependency which they controlled. The propaganda against ‘tenants’ choice’, however, was as nothing compared with that directed against HATs and, sadly, the House of Lords gave the Left the opportunity they needed.

Their lordships amended our legislation to require that a HAT could only go ahead if a majority of eligible tenants voted for it. This would have been an impossibly high hurdle, given the apathy of many tenants and the intimidation of the Left. We finished up by accepting the principle of a ballot, limiting it to the requirement of a majority of those voting. In the summer of 1988 Nick Ridley announced proposals to set up six HATs, of which — after receiving consultants’ reports — he decided to go ahead with four in Lambeth, Southwark, Sunderland and Leeds. I later saw some of the propaganda by left-wing tenants’ groups — strongly backed by the trade unions — which showed how effective their campaigns had been to spread alarm among tenants who were now worried about what would happen when they moved out as their flats were refurbished and about levels of rents and security of tenure. One would never have guessed that we were offering huge sums of taxpayers’ money — it would probably have worked out at £100 million a HAT — to improve the conditions of people living in some of the worst housing in the country. Accordingly, the proposals for HATs in Sunderland, Sandwell, Lambeth, Leeds and finally Southwark had to be dropped, though we knew that a number of local authorities — even Labour-controlled ones — would have liked to obtain access to the HATs money if they could have overcome the opposition of the militants. As a result, no HATs were set up while I was Prime Minister, though three have been since I left office.

By the time of the July 1989 reshuffle the problems with the implementation of our 1987 manifesto housing reforms were all too apparent and it was clear that we should take stock and seek new ways of achieving our objectives. Unfortunately, in Chris Patten as the new Environment Secretary I had someone whose energies were principally (and rightly) directed at trying to smooth out the introduction of the community charge and who in any case was less interested in housing policy than in his other departmental responsibilities. This is not, though, to say that innovative thinking had come to a halt.

Since the spring of 1988 Peter Walker in Wales had been pressing a scheme which he christened ‘flexi-ownership’ under which public sector tenants unable to exercise the ‘Right to Buy’ — even with the large discounts available — would be able to acquire equity stakes in their homes that would increase as the years went by and whose value would be updated in line with local house prices. Initially, I had doubts about the idea — on financial grounds, in that people might choose to use this route rather than the ‘Right to Buy’ and sales and receipts would fall; on political grounds, in that those who had already exercised the ‘Right to Buy’ and made the sacrifices required to do so would be resentful. Both the DoE and the Treasury were strongly against. In Scotland, another variant on the same idea — called ‘Rents to Mortgages’ — had been devised. Under this, rent payments — less a sum for repair and maintenance — would be converted into mortgage repayments.

We discussed the possibilities of both schemes in the summer and autumn of 1988. Scotland was a different case from Wales, for — as I shall explain — home ownership was much lower. Another difference was that in Scotland the Government through ‘Scottish Homes’ was itself a substantial landlord: so no new legislation was needed. I therefore agreed to a Scottish experiment on these lines, while holding fire on Wales.

The ever ingenious Peter Walker now put his ingenuity to good use. He devised a similar Welsh scheme which would operate through the Development Board for Rural Wales at Newtown Powys. The DoE and the Treasury still objected on the ground that the idea could not in the end be limited to Wales and that if it were applied in England substantial ‘Right to Buy’ sales revenues would be lost. But I could see its political attractions; it was fairly modest, and, in any case, it
was Peter Walker’s brainchild and I thought he should be allowed to go ahead. I agreed to this at the end of June 1989.

The most disturbing political issue in housing at this time, however, was homelessness. It should immediately be said that the alarmingly large figures for the ‘homeless’ did not by definition reflect the number of people without roofs over their heads. Rather, the published ‘homelessness’ figures described the number of people in certain statutorily determined ‘priority groups’ who were accepted for housing. In other words, far from being homeless they had homes provided by local councils. Sad as the cases of some of these people might be, the problem which worried the general public — and me too — was the growing number of people (especially young people) sleeping rough on the streets of London and other big cities, who were better described as ‘roofless’.

While it was certainly true that there was an insufficiency of short-term ‘direct access’ hostel accommodation — as opposed to the larger, more traditional hostels — and while it was true that the shortage of private rented accommodation had worsened because of rent control, this was essentially a problem of wider social, not housing, policy. Nor are behavioural problems solved by bricks and mortar. I was not prepared to endorse changes in social security benefits relating to the under-25s which were suggested by Tony Newton and the Social Security Department: I thought it vital that we should not add to the already too evident lure of the big city for young people. We wanted them back with their families, not in London living on benefits. I urged the Department of the Environment to bring in the voluntary organizations to see what they rather than the state could do. I was also convinced that far too many disturbed people, who should have been in institutions, had fallen through the central and local government safety net and found themselves with nowhere to go.

In November 1989 Chris Patten announced a package which provided £250 million over two years to London and the South-East, the areas with the worst problems, with help also to improve the management of empty properties by councils and housing associations. But I insisted that whatever Government did to help, there must be a stick as well as a carrot. Crowds of drunken, dirty, often abusive and sometimes violent men must not be allowed to turn central areas of the capital into no-go zones for ordinary citizens. The police must disperse them and prevent their coming back once it was clear that accommodation was available. Unfortunately, there was a persistent tendency in polite circles to consider all the ‘roofless’ as victims of
middle-class society, rather than middle-class society as victim of the ‘roofless’.

At the end of July 1990 I asked Chris Patten and Michael Spicer, the Housing minister, to come in and discuss with me the whole of our housing policy — both about where we stood on existing initiatives and where we should go from here. I pinpointed three specific areas — what to do about improving the condition of council estates, whether to extend ‘flexi-ownership’ (or ‘Rents to Mortgages’) in England, and the timetable for getting ‘roofless’ people off the streets and into decent accommodation. In September Chris Patten duly submitted a paper containing his latest thinking. It was immediately clear to me that there were some important differences between his — or more accurately the DoE’s — approach and mine; this was confirmed when he and Michael Spicer came in to see me later that month.

The extension of home ownership over the last decade had been one of the Government’s greatest successes. It had (in England) risen from 57 to 68 per cent of the housing stock. ‘Right to Buy’ sales were still running at about 80,000 a year. Councils had almost completely stopped building new houses and were now concentrating on renovation, a trend which would be accelerated by the new housing finance system. Nine councils had transferred all or part of their housing stock to housing associations — though not in the major urban areas. What was clear, however, was that the DoE saw all this as raising more problems than it solved. In their view — something, indeed, which never seemed to alter — there was a ‘housing shortage’ which required the public sector to provide more new low-cost homes to meet the ‘demand’ from a growing number of households. Consequently, measures to increase home ownership — such as the ‘flexi-ownership’ proposal which would be particularly attractive to poorer families — were considered undesirable because they would reduce the supply of cheap local authority housing to rent. This analysis failed to grasp that selling a house to a tenant reduced the demand for as well as the supply of rented housing and that more home ownership — even partial ownership with a small equity stake — would make even quite bad estates that much more tolerable, as the pride of ownership improved the neighbourhood. More seriously, it also assumed that the ‘demand’ for housing was finite, which was not true if housing was subsidized. Indeed, perverse incentives were operating to encourage the break up of large households and the formation of new smaller ones, for instance in the treatment of the housing needs of unmarried pregnant mothers. To analyse demand and supply without considering the effect of price was a perfect prescription for policy failure.

The other difference of analysis lay in our opposing views of the role of local authorities. The DoE envisaged the main thrust of renovation coming from the extension of the Estate Action programme — which worked through local authorities — under which money was provided to improve the worst estates. Many of these individual schemes were good and imaginative. Indeed, I went further than the DoE in believing that the design of estates was crucial to their success and to reducing the amount of crime. I was a great admirer of the work of Professor Alice Coleman in this area and I had her made an adviser to the DoE, to their dismay. But what I did not believe was that local authorities should be the main agents for improvement. My Policy Unit was working on an interesting alternative route which would have combined a new QUANGO — at arms length from the DoE and not in collusion with the local authorities — which would have backed ‘Community Housing Trusts’. The latter were schemes which we envisaged would combine public and private investment to upgrade the infrastructure of the estate, give residents an equity stake in their homes and under which the estates would be managed by a commercial company. It would thus be a different route to the objective for which HATs had been created, but this time bringing in private enterprise from the start and giving residents a direct financial stake in its success.