The Price of Housing
By NICHOLAS DAVENPORT
WE all know that Govern- ment White Papers are writ- ten by the cleverest Oxbridge bureaucrats divorced from and uncontaminated by ordinary business life, but I did cling to the hope that the important one on housing (Cmd. 2050) would reveal the hand of that realistic,
business-trained Minister, Sir
Keith Joseph. Such homely remarks as 'housing has to be paid for' kept my hopes rising and When I came to this statement—'unless the real cost is faced the country will never achieve a healthy housing position'--I felt that we were at last getting at the truth. But, alas! thereafter, as in Genesis ii, 6, there went up a mist from the earth and obscured everything. We are never told that rent is simply interest on an all-in building cost and that all rents in this country (i.e. the price of housing) have been distorted by the artificially high rates of interest which we— alone of all civilised industrial nations—have Put upon our social investment since 1951. It is irrelevant to argue, as the Economist does, that it is necessary to maintain artificially high rates of interest because of the historical accident that we run an international banking currency. If that were true, which I do not admit, then any sensible Government would seek to niPerate a two-tier system of interest rates, con- tiling the artificially high market rates to profit- seeking business enterprise and applying an ,anrtificially low rate to social investment in hous- ing, hospitals, schools and so on. Most European tg:vernments use a manipulated low rate of in- _rest for public housing and must be laughing 'heir heads off at the sight of the British Govern- ment using high rates to attract foreign money ih° London to protect the £ and then applying „,,13se high rates to local council houses via the ortgage market! Is not Sir Keith Joseph, as tne. business-like Minister of Housing, aghast at this folly? If so, why does he not mention the t of it in his White Paper? Assuming that 6 Per cent is the market interest rate for profit- set enterprise (including houses built Privately for sale), then, under the two-tier 2„stein, a proper rate for public housing and' ointener forms of non-profit-making social invest- .11 et 'would be 3 per cent. And that would re- ho° ce rent (excluding rates) for a £3,500 council I n she from approximately £4 to £2 a week. ha a personal experience of the distortion `agrtu. ed. to the Price of housing and rent by the boardh;
-.gu rates of interest when I was on 11,3ssexoard of one of the new towns—Basildon in When the late Lord Dalton was Minister
chteflueusing we drew our money from the Ex- fowqed rk. at 3 per cent. When Mr. Sands fol- io "Hit We were before long borrowing it at the board Per "nt (and I 1 ft ater at 7 per cent). Before I e Committe 11-1Y job as chairman of the Finance all the rents was to prepare a scheme putting up
doubtnts to take account of the 6 per cent.
living we added our bit to the inflation of all g cost
which these and so to the price-wage spiral-
duced. artificially high rates of interest in- Si nee the war coura,,e, Private enterprise has been dis- fear of 'dela from building houses to let through lasePh declares in this White Paper that he will gap by getting non-profit-making housing societies to do the building and letting job. These altruistic bodies will borrow two-thirds of the costs of houses from the building societies on forty-year loans and the balance on second mortgage from a new Housing Corporation which Sir Keith is setting up with a capital of £100 million. The societies will be either managed for love, charging rents to cover the loan service, maintenance and administrative costs, or act as co-ownership societies in which individual mem- bers can get tax relief on their individual bor- rowings like any owner-occupier. But in every case they will have to pay the current market rate of interest. If they are not to have the privilege of borrowing at a lower-than-market rate, where will they get the impetus, the drive, to go out and build by the thousand that Sir Keith Joseph expects? It is said that the impetus will come from developers anxious to make a profit out of building contracts awarded in bulk by these housing societies, but in that case we are not likely to get cheap housing. The Economist is probably right in saying that the result will be 'a driblet of high-cost and thus almost entirely middle-class new houses . . . let at an average rent and rates of perhaps between £6 and £8 a week.' Certainly this is not the way to secure the national target which Sir Keith is setting himself, namely 350,000 new houses a year, an increase of 45,000 on completions in 1962. The new Housing Corporation could certainly be a useful government instrument in the hous- ing drive. It is to be given power to acquire and prepare land for development by the housing societies, perhaps by compulsory purchase. But it needs to have its powers widened. It should be developing and promoting new building techniques, for we lag behind pitiably in our old- fashioned ways of building. (I saw recently at Basildon experimental houses being built by a contractor with prefabricated slabs of aerated concrete easily fitted together and not requiring any interior plastering—an immense saving of cost.) But, above all, a Government Housing Corporation should be the agency for providing loans at cheaper than market rates of interest to the non-profit-making housing societies.
The best part of the White Paper is the end, which proclaims its good intentions. Sir Keith has invited the local authorities to join with him in a complete overhaul of housing subsidies. It is obvious that all subsidies should be related to needs: they should not be given to those who do not need them or in respect of houses which were built at pre-war costs or at low rates of in- terest. All subsidies should therefore be paid into a pool and re-arranged according to needs. Rent rebate schemes should be universally applied, so that no one in genuine need of a house should pay more than he can reasonably afford, which is not more than a fifth of his in- come. The Government is prepared to see, the White Paper says, that local authorities receive whatever subsidy they need to carry through their housing responsibilities. Clearly, what they most need is a 3 per cent rate of interest.
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