At this time of economic crisis, there are a few things of which we can be certain. One is that, as electricity and gas prices soar, the companies providing them will continue to report record profits. And two; that these rapidly rising prices for energy, food and housing will cause a wave of homelessness in the UK.
Understanding Unaffordable Housing
Even before inflation hit current levels, in March 2022 the number of households assessed as homeless or threatened with homelessness rose by 5.4 per cent compared to last year. Whilst households on the brink of homelessness due to a section 21 notice to end an Assured Shorthold Tenancy, have risen a staggering 141.5 per cent compared to last year. Clearly, there is a problem with our housing market and the free market approach to housing has proved utterly incapable of dealing with homelessness and housing affordability.
Housing is a fundamental human right, as inscribed under article 25 of the Universal Declaration of Human Rights. The UK government is obligated, under international law, to ensure all its citizens have adequate shelter. Yet a privatised housing sector has guaranteed that this right will not be universal.
An inability to pay increasing costs to both rent and buy can result in homelessness due to a shrinking supply of social housing. Though schemes such as ‘affordable housing’ have attempted to deal with the issue, they continue to be based on house market values instead of real incomes, and therefore the tag ‘affordable’ is questionable. Our reliance on the free market to provide housing means that, as with any finite product, there are those with the money to buy more than they require and then sell (or rent) that for a profit. This artificially inflates property prices and leaves an increasing number of people unable to pay for a roof over their heads.
A Twisted Practice
In far less important situations, the above practice is generally frowned upon. We have all missed out on concert tickets due to universally detested ‘ticket scalpers,’ or have had to pay extortionate prices. The government even recognises ticket scalping as a problem, with the Competition and Markets Authority seeking to make the practice more difficult. But what is the problem? Scalpers simply leverage their capital to corner a market and artificially inflate prices for a profit — no different to Lloyds Bank’s plans to purchase 50,000 homes by 2030. If buying up housing in such a manner is acceptable, then surely ticket scalping should be an acceptable practice too. Of course, ticket scalping is far less problematic than house scalping. Affordable Taylor Swift tickets are suspiciously missing in the Declaration of Human Rights.
The ramifications of this free market approach on house prices have been astonishing. Young people, in particular, have been almost completely priced out. In January 2012 the average UK house price was £165,908. In July 2022, it stood at a staggering £292,000 — a 76 per cent increase. Against this inflation, average wages have risen by only 22 per cent since 2012. The free market has proven itself incapable of fulfilling its one core benefit: affordability by naturally meeting demand. Dramatic commoditisation of the housing market by national and foreign investors has resulted in a steady downward trend in home ownership.
Models of Social Housing Success
Social housing remains the most obvious solution to the housing crisis. There are several existing models that the UK should look to emulate. Whilst social housing in Britain has long been stigmatised, in the city of Vienna 75 per cent of the population qualify for it and more than 60 per cent makes use of it. This has had a noticeable effect on keeping private rent low. The UK has the potential for such a social housing project. However, owing to a lack of belief in the feasibility of such a project after decades of deliberate underfunding and downsizing of the social housing sector, it lacks political will.
The city of Vienna spends roughly €450 million annually on housing construction, €250 million of which is levied using a 1 per cent tax on all inhabitants. Finland has been solving its homelessness issue in a similar manner. Through nationally funded housing for the homeless, thousands of people have been rehoused and homelessness significantly reduced.
One obvious counterargument is that the UK simply doesn’t have the money to invest towards such a scheme. But this would be a falsehood. A study by the University of Greenwich found that a 1-10 per cent wealth tax starting at £3.4 million net wealth would raise a minimum of £70 billion annually. Even as a one-off, this would allow generous and high-quality social housing investment across the UK, providing much-needed competition to the private housing market.
There has never been a more drastic need for this kind of fundamentaláĒ change. The free market experiment of the last decade has failed catastrophically. It’s time to implement the proven alternative.
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