James Max: Believe in the living wage? Then get rid of social housing

Companies should shoulder the responsibility of affordable living, argues our controversial columnist

Politicians, industry groups and think-tanks believe social housing and building programmes are the answer to Britain’s economic and social problems.

It isn’t and they aren’t.

Like “class A” drugs, these things are the cause of social problems, not the cure.

The RICS, The Royal Institution of Chartered Surveyors, (of which I am a professional Member) published a report suggesting the Bank of England intervene if house prices rise above 5%. Wrong.

The Labour Party want a programme of mass house building and will reverse the cuts in housing subsidy, often called the “bedroom tax”. Wrong and wrong again.

The Lib Dems want a Mansion Tax. Just wrong.

The Conservatives imposed the “bedroom tax” whilst advocating building on greenbelt land. Wrong.

And the UN thinks the cuts in subsidy for social housing are a violation of human rights. Again, wrong.

Britain’s obsession with social housing has forced up rent, created a shortage of supply, generated a sector of the population that’s dependent upon the state and subsidised big corporations by allowing them to pay less to their workers.

There are just under 25 million homes in the UK. Around 64% are owner-occupied. As our population grows and the family unit changes, so more homes are required. What is required to solve our housing crisis? Change in our taxation and planning systems, combined with a change in social attitude and, believe it or not, greater corporate social responsibility.

Housing is an investment. If you are going to put money into something then it’s reasonable to assume that your investment can or will keep pace with inflation.

It’s also related to the opportunity cost of your money. If you could put it elsewhere and receive a better return, why wouldn’t you? Technical economics? Maybe. However, the first principle that has to be established in any rational discussion about housing and creating solutions is that it costs money.

To build, maintain and fund all costs, money and the opportunity cost of capital is the determining factor. There are some who think housing is a right. Yet there is a cost, and if you tinker or interfere with a market there will always be unintended consequences.

The root of our nation’s problems arose after the end of the Second World War. The “deserving” working class were provided with housing under a programme of social reform instigated by the Labour Party. Indeed, given the devastation caused by the German bombings of our major cities it was the only option available. It served a purpose.

The 1960s move to “new towns”, again to reward the “deserving” working classes, was an experiment in social engineering that went horribly wrong. Instead of helping working people, it trapped them. They couldn’t move to new jobs. They couldn’t benefit from the market.

If anything, social housing created a class that could never and would never have any social mobility.

What these programmes also created was a legacy that has, in some cases, had a significant and negative effect upon the rest of the economy.

Social housing is artificially cheap. Living costs are reduced for those who live in such properties. For some it’s essential. If for any reason you cannot work, then there is a reasonable assumption that it is the job of a civilised society to ensure you have a roof over your head. I get that.

For those who do work or don’t want to work, it allows corporations to pay less than they should for the jobs they create, and others to sit on their rear ends doing nothing but watch the Jeremy Kyle Show.

It gets worse. The reason we have a booming housing market is not because of the government’s latest plans to help first-time buyers. Indeed, that policy has some merits.

It’s because there is a lack of supply. Stamp Duty has clogged the top end of the market. People are now selling if they have to rather than because they feel like moving. Supply has contracted. Prices have risen.

At the lower end of the market, supply has been constrained by planning permissions having strings attached; demanding planning gain and social housing in any new scheme. That has pushed up prices for those properties available to be sold, reduced supply and made it more difficult for house builders to make their returns. So they haven’t built as many homes.

While some advocate mass house-building, what would that actually do? Yes, you may create more homes in the short run, but who would build them? British workers? Unlikely. So there would be massive leakage to the economy.

And who would pay for them anyway? Taxpayers. Either directly or indirectly through the increased borrowing by government to fund such a programme.

Then there’s the cost that everyone forgets. Maintenance. Once you’ve built your housing, who is going to maintain it? Fix it? Redecorate it? It’s madness.

Taxpayers pay to keep people in houses that they could not afford themselves. They pay higher prices to buy homes because of the imposition of social housing on society. They pay because lower paid workers are available for work near to corporations who then don’t feel they have to pay proper salaries because of the availability of a workforce.

It’s a mess. However it’s too controversial to suggest to those in social housing that perhaps they should pay the true cost of living. And to move if they cannot afford to live where they want to live.

And it’s too controversial to expect big corporations to pay more to their staff and to consider that they have a wider responsibility to their workers.

It’s time to look back in history to find the solutions. In 1893 George Cadbury bought land near to the family’s chocolate factory. Over the next few years they built Bourneville for their workers.

It isn’t the only example of such philanthropic corporate behaviour either. Port Sunlight, railway workers, coal miners and other industries supported their workers with good quality housing.

While Google is busy building its new European HQ in Kings Cross with swimming pools and other fine facilities for their workers, perhaps it’s time we saw companies of this magnitude and profitability taking more responsibility to provide housing for their worker. Or they could enable staff to borrow at preferential rates through the company to buy their own homes. It would encourage companies to help us solve this crisis while providing extra incentives to work or indeed work harder.

Some will argue that if you pay staff more, we as a country become uncompetitive. I’d argue that a happier workforce would be more productive. A workforce that receives benefits from the companies they work for will be keener to stay and feel that their efforts are rewarded directly.

The true consequences of social housing are that it drains an economy and consigns people to social immobility. At its base level housing should be provided for those who need it. But it should not be for life. It should be a stepping-stone and a safety net. Not a solution or tool to garner votes at an election.

If you are looking at the amount you are paid and think it’s not enough, it isn’t.

Government is spending too much money on welfare for those who want it rather than those who need it. Corporations are paying you too little in wages because of the artificial supply that’s created in the jobs markets. You are paying too much in income tax, VAT, council tax and duty, allowing this ridiculous system to continue to run out of control.

We have some hard choices to make. Central to these would be a reduction of social housing. We should increase incentives for companies to pay the true cost of hiring staff, and remove the onerous demands on developers to provide social housing where it isn’t wanted and can
not be afforded.

And ultimately? Sell off social housing in expensive areas and incentivise companies to buy to redevelop, while providing cheaper, private accommodation elsewhere. If you want the housing market to recover, government has to stop treating it as a cash cow and instead reduce tax, reduce red tape and ease credit.

Housing will be available to all. And that’s what everyone wants. A home to call their own.

James Max is a property and business expert who is a former LBC radio presenter, qualified surveyor and worked in property and finance for 15 years. After working for one of the country’s leading property advisory firms, he completed healthy stints in investment banking and private equity, before becoming a candidate on The Apprentice, which launched a career in broadcast media. Visit JamesMax.co.uk.