HOUSING
Lebensraum
FRED PENNANCE
Housing i never long out of the news or off the screens. Some aspect or other is always on parade—the show never stops. Scarcely are the motorway martyrs placated than a council is Tv-ed evicting tenants in the best wicked landlord tradition. And last week, to preserve a fine sense of impartiality in these matters, an impenitent Mrs Elsie Raum of Penge was led away to Holloway prison protesting the plight of all small land- lords saddled with tenants they dislike and wish to be rid of,-paying rents that do not even cover repair bills.
Apparently Mrs Raum, weary of con- trolled rent and tenant alike, had illegally evicted a statutory tenant and refused a court order to reinstate. 'Morally right but legally wrong' a GLC member was reported to have commented. The sentiment was echoed widely and urgent reminders of Conservative election pledges to rationalise controlled rents are presumably now plopping thick and fast through Mr Walker's letter box.
Few would disagree that reform of the law relating to controlled tenancies is long overdue. If Mrs Raum provides a pin for the Minister's rear, that is all to the good. But not if that is where the matter ends. Hard cases make for bad law and, predictably, some doubtful generalisations and popular misconceptions are already circulating. A housing market that has been all but wrecked by well-meaning intervention in the past is as likely to suffer as gain from further doses of emotionally-based patchwork measures. The housing market is a single complex, sub- divided it is true (most markets are), but with all parts interrelated. Past policy has effec- tively fractionalised the market and blocked movement among its component parts. What IS now needed is a general strategy to restore the kind of flexibility to market arrangements that will present the maximum opportunities for consumers to make the best of the re- sources at their disposal and suppliers to adapt to consumers' demands.
Reform of the 1968 Rent Act would logic- ally form part of any such resuscitation of the market. But it is important not to allow long-term strategy to be sidetracked by Raum-type red herrings offering the lure of ending the injustice of the poor subsidising the less poor. 'Injustices' of this kind refer to the ownership and occupation of a given stock of housing assets and are more appar- ent than real.
Anyone investing in a controlled property with a sitting tenant buys (a) a fixed income, subject to (b) uncertain costs, plus (c) the possibility of capital gain in the future should vacant possession-or a change in legislation affecting (a) occur. If expectations about (b) and (c) are disappointed, it is illogical to blame rent control for (a)—especially when the price paid for the asset reflected the pur- chaser's assessment of all the risks involved. All that can be said generally is that when other costs and prices are rising, people with relatively fixed incomes lose (although the loss may have been foreseen and discounted in any capital sum paid for the income); those with relatively fixed outlays (for example, rent-controlled tenants) gain. Any resultant inequity is likely to be random between persons and related to general infla- tion rather than rent control.
So far as the long-term buoyancy of the market is concerned, the real issue in rent control is rather the obstacle it offers to private investment in rented housing. Exist- ing stocks shrink with every demolition, every sale rather than a relet on vacant possession: the pattern of less-than-market rentals (and the spread of rent regulation since 1965) dis- courages new supplies. Half-measures such as extending the 'fair rents' system to cover all rented property are unlikely to exert any real effect on long-term supply incentives. They thus fail the basic strategy test. Here lies the danger of the Raum furore: by bow- ing to the misplaced clamour about distribu- tional aspects the government can appear to be doing something while in reality doing nothing to resuscitate the market.
The growing polarisation of the existing market has long been apparent. In England and Wales owner-occupation forms half the market, council renting between one-quarter and one-third; the share of private renting once the dominant sector—is now less than one-fifth and shrinking. Of these privately. rented dwellings about a half consist of rent- controlled dwellings with rents fixed broadly at twice their pre-war level: most of the rest have their rents 'regulated' under official assessment procedures.
Unchecked, this shrinkage of the private rented sector will eventually produce a market comprising virtually only council tenants and owner-occupiers. Since funda- mentally, the housing market will always remain one in the sense that every household ultimately benefits as long as -Supplies con- tinue to increase somehow, somewhere in the market, will this matter? The answer is. yes. profoundly. The situation that has developed is not a reflection of consumer choice but of intervention in the market which has limited the ability of households to secure the form. character, duration and terms of tenure that best suit their means and needs. A single ex- ample will suffice. Many elderly persons are today living penuriously in homes of their own, with tied-up capital only partly realis- able—if at all—by selling out and buying a smaller or poorer dwelling (with attendant cost and upset). The lack of choice of rented accommodation denies them the alternative of realising capital and renting a place to suit their pocket. Anxious not to be caught by the Rent Act, few finance companies will envisage a sale and lease-back transaction which would free their capital and leave them in their familiar surroundings.
Any attempt to re-create a market in private rented accommodation is unlikely to succeed without simultaneous reform of both council and owner-occupation sectors. Con- versely, radical reform of these two sectors coupled with decontrol and deregulation of rents would automatically re-create a private rented sector.
The essential agenda is straightforward enough. All suppliers should charge freely- I determined market rents and the random hotchpotch of explicit and implicit subsi- dies should be replaced by income supple- mentation closely related to households' per- sonal means and needs. Local authorities should be steered towards the market by re- quiring them to offer long leases and to per- mit sub-letting, to sell to sitting tenants on request, to sell a proportion of vacant prop- erties at auction, to act commercially in fixing rents. The tax privileges now accorded to owner-occupiers should be withdrawn or recast so as to leave an unweighted choice between renting and home-ownership.
No one is likely to suggest that such an agenda presents no problems; but none IS insuperable and a surprising measure Of agreement in principle already exists in rela- tion to most of these points (the rationale and implications of the taxation of owner occupiers have largely been ducked while securing some consensus on the rented sector). Possible areas of disagreement relate mainly to the desirable form, scope and cost of housing allowances, their effects in inner city areas, the timing and method of a return to market rents and the degree and enforcement of personal security from sum- mary evicting in a `free' market. Related problems refer to wider fields of planning and urban structure, housing standards, per- mitted densities and the pricing of collective urban services such as roads, all of which
significantly affect the housing market. Fundamentally, the improvement of hous- ing standards, like those of any other com- modity, can only be achieved by maximising the consumer's freedom to manoeuvre within given stocks of housing, by encouraging (or not constraining) extension of supplies and --if these prove insufficient to achieve desired policy aims—by supplementing the disposable income of households. Mrs Raum may have started something moving. The important thing is to make sure we are moving in the right direction.
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