“But there would be consequences.” Some thoughts on Jeremy Corbyn’s promises on housing

Jeremy Corbyn in Brighton today. Image: Getty.

Labour leader Jeremy Corbyn – the absolute boy, who inspired a generation, won the 2017 election and is even now literally the prime minister – just made his closing speech to the party conference in Brighton.

A large chunk of it was on housing. That’s not a huge surprise: it’s a huge issue for younger voters, from whom Labour draws much of its support, and a clear red line with the Tories who seem incapable of even admitting that they’re presiding over a problem. In that election, Labour’s unexpectedly strong performance came in part from the party’s strong performance among renters.

But what did Jez We Can actually say? And will his policies fix anything? You can read the full speech over at the Staggers, but here are some extracts, with my commentary.

We will insist that every home is fit for human habitation, a proposal this Tory government voted down.

This is not 100 per cent accurate, but it’s at least 96 per cent accurate, which is a lot more per cent than the Tories should really be comfortable with.

The government did vote down an amendment which would have required both private and social landlords to make homes fit for human habitation. It claimed that existing regulations were adequate, and that this amendment amounted to “unnecessary regulation and cost to landlords, which will deter further investment and push up rents for tenants”.

But it’s far from clear that existing regulation is strong enough – and anyway, if it is, surely this wouldn’t be imposing any extra burdens on landlords?

At any rate, this is a huge great open goal for Corbyn, and the Tories have nobody to blame but themselves if it costs them votes.

And we will control rents – when the younger generation’s housing costs are three times more than those of their grandparents, that is not sustainable.

Rent controls exist in many cities across the world and I want our cities to have those powers too and tenants to have those protections.

This is more complicated.

Rent controls are certainly popular – not surprising, when you consider the state of actual rents – but economists all hate it, including those on the left. They argue that it reduces the supply of rental property. Moreover, it splits tenants into insiders (who live forever in rent controlled homes) and outsiders (who can no longer find anywhere to live because nobody is moving out of those rent controlled homes). San Francisco has rent controls, yet is one of the few cities on the planet where housing is more of a problem than in London.

That said, it’s not entirely clear what these rent controls would look like – whether they’d cap prices or link them to inflation; whether they’d be temporary or permanent; even whether this is just misleading code for things like changing the length of tenancies. The devil is in the detail.

And once again, it’s very difficult to look at the actual British housing market and conclude that the status quo is just fine (at least, unless you’re a landlord). As more and more people are forced to live in rented homes for the long term – even bring up children in them – there is certainly a strong case for changing the balance of power between tenants and landlords.

So while there is likely to be much squawking from Tories about the dangers of rent controls, once again I’m forced to point out: your total complacency on this issue is a big reason Labour is now eating your lunch.

(More on rent controls here.)

We also need to tax undeveloped land held by developers and have the power to compulsorily purchase. As Ed Miliband said, “Use it or lose it”. Families need homes.

This is probably broadly a good thing: the big housebuilders do tend to sit on land with planning permission for a while, to help them maximise their profits, and during a time of enormous housing shortage this is pretty gross.

But (there’s always a but, isn’t there?) developers move at the pace they do for a reason. If they moved much faster, prices would fall, and they’d lose money. Builders are not going to build, if it puts them at risk of going bust.

So while this may help at the margin, and it’ll certainly change house builders’ behaviour, my suspicion is it’s not going to be enough to magically double their output and fix the housing crisis. Although I’d love to be wrong on this.

Now for the bit where I get really conflicted.

Regeneration is a much abused word.

Too often what it really means is forced gentrification and social cleansing, as private developers move in and tenants and leaseholders are moved out.

(…)

Regeneration under a Labour government will be for the benefit of the local people, not private developers, not property speculators.

First, people who live on an estate that’s redeveloped must get a home on the same site and the same terms as before.

No social cleansing, no jacking up rents, no exorbitant ground rents.

Okay. This looks great, obviously. Of course housing should be about people. Of course regeneration should benefit residents, rather than clear them out altogether. We can all get behind that.

But, in what is now becoming a theme, things happen the way they do at the moment – developers chipping away at their social housing commitment, tenants being offered a choice between replacement homes elsewhere and paying much higher rents – for a reason. And those reasons are a bit more complicated than “uncaring councils and parasitic developers”.

One is the squeeze on council funding, combined with their statutory responsibility to sweat their assets. In expensive bits of the country, that’s forced inner city councils – often Labour ones – to come up with creative ways of using the highly lucrative land their housing estates sit on. Because they’re not swimming in cash themselves, that’s often meant partnering with developers, who by definition care more about shareholders than tenants. So: tenants get screwed.

Could we stop this? Sure. But there would be consequences. It’d be less profitable, so it’s plausible fewer regeneration schemes would happen. You might be okay with that, but it would mean crumbling estates keep crumbling, fewer homes get built, and those inner city councils are forced into making even more cuts.

We could probably deal with the consequences of that, too – but only if we’re willing to chuck more money into the system. In other words, better regeneration would inevitably be more costly regeneration.

Oh, and if we’re not going to “regenerate” council estates any more, that’s yet another place we can’t build to meet demand for housing in London. Again, that’s a legitimate policy choice – but it will have consequences in terms of worsening the housing shortage, placing yet more pressure on other sources of land (hello, green belt).

Last but not least:

And second councils will have to win a ballot of existing tenants and leaseholders before any redevelopment scheme can take place.

Again, this seems like common sense. But if implemented literally, I fear it would result in no redevelopment ever taking place, because NIMBYism is a thing and anyway who in their right mind would vote yes on having their home demolished?

And yet. As with so much else in the world of housing, the status quo is very clearly awful. Of course tenants shouldn’t be forced out, promised homes that will never arrive, and end up living miles and miles from their homes. Of course we should do this better.


What’s more, it’s no longer clear that what Richard Florida has termed “superstar cities” like London are even capable of generating affordable housing any more. Since London isn’t going to stop needing nurses or teachers any time soon – not to mention carers or retail workers – that’s a very strong argument for defending the idea of state subsidised housing, in a way that no government has done in decades.

So. I’d like to believe this is going to work. And I’m certainly pleased that someone is trying to defend council housing once again. But I have worries.

And the biggest is what was not in the speech. Ending the housing crisis will mean building a lot more houses. Corbyn has said in the past that he’s in favour of that. But where or how a Corbyn government would do so is very far from clear.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and Facebook. Want more of this stuff? Follow CityMetric on Twitter or Facebook.   

 

 
 
 
 

How the pandemic is magnifying structural problems in America's housing market

Justin Sullivan/Getty Images

Long before Covid-19, the United States suffered from a housing crisis. Across the country, working class and low-income Americans struggled to pay rent, while the possibility of home ownership receded into fantasy. In hot markets, affordability became a struggle for even the middle class: In California, 41 percent of the population spends over a third of their income on housing costs. 

The coronavirus pandemic will only make these trends worse as millions are unable to work and the economy dives into a recession. Building could slow down in the medium term, as construction loans (risky bets in the best of times) become harder to come by. Unsubsidised affordable housing is often owned by small landlords, who are more likely to struggle during recessions, prompting flips to home ownership or sales to rental empires. 

New York Times reporter Conor Dougherty documented America’s longstanding housing crisis – and California’s efforts to battle it – in his book Golden Gates, which debuted just before the pandemic hit. “My sense is that right now coronavirus is magnifying a lot of things that were already happening,” Dougherty says.  


While Covid-19 adds new pressures, he says that many of the same issues we were facing still loom over the issue, from developers crowding the higher end of the market, to escalating construction costs, to stagnating wages and vulnerable service-sector jobs that leave ordinary Americans struggling to keep a roof over their heads. “That’s my larger message,” Dougherty says. “I think the structural problems continue to be a much bigger deal than the cyclical problem in housing.”

CityMetric spoke with Dougherty about how his thinking has changed since Covid-19, Donald Trump’s pro-suburban rhetoric, and the apparent exodus from San Francisco. 

I’ve really been struck by how strong the housing market seems to be despite the epic economic crisis we are facing. Costs seem to be higher everywhere. I've heard realtors talk about bidding wars like they haven't seen before in Philly, where I live. But perhaps that's just pent up demand from the big shutdowns?

What you have is an economy that has bifurcated. You have fewer middle-income jobs, more lower-income service jobs, and more higher-end jobs in software and finance. That's how our economy looks and that's a problem that is going to take the rest of our lives to solve. In the meantime, we have this housing market where one group of people have so much more money to spend than this other group. Cities reflect that. 

What's important about this bifurcation isn't just that you have gross inequality, but that these people have to live next to each other. You cannot be someone's Uber driver and telecommute. You cannot clean someone's house remotely. These lower-end service workers have to occupy the same general housing market as the super-high-end workers. 

All the pandemic has done is thrown that even more out of whack by creating a situation where one group of people is buying and expanding homes or lowering their home cost by refinancing, while another group are at income zero while trying to live in the same housing market with no demand for their services. When you see home prices booming and an eviction tsunami coming in the same newspaper, that tells you the same thing the book was trying to show you.

Does America writ large have the same housing shortage crisis as California and the Bay Area more specifically? There are other super hot markets, like New York City, Boston, or Seattle. But in Philly, or in Kansas City, is there really a lack of supply? 

There are three kinds of cities in America. There are the really out of control, fast-growing, rich cities: the Bay Area, Seattle, New York. There are declining Detroits and Clevelands, usually manufacturing-centric cities. Then there are sprawling Sun Belt cities. This book is by and large concerned with the prosperous cities. It could be Minneapolis, it could be Nashville. But the housing crisis in places like Cleveland is much more tied to poverty, as you pointed out. 

Those kinds of cities do have a different dynamic, although they still do have the same access to opportunity issues. For instance, there are parts of Detroit that are quite expensive, but they're quite expensive because that's where a lot of the investment has gone. That's where anybody with a lot of money wants to live. Then you have Sun Belt cities like Dallas and Houston, which are starting to become a lot more expensive as well. Nothing like the Bay Area, but the same forces are starting to take root there. 

I think that the Bay Area is important because throughout history, when some giant American industry has popped up, people have gone to Detroit or Houston. Now tech, for better or for worse, has become the industrial powerhouse of our time. But unlike Detroit in its time, it's very hard for people to get close to and enjoy that prosperity. There's a certain kind of city that is the future of America, it has a more intellectual economy, it's where new productive industries are growing. I think it's an outrage that all of them have these housing crises and it's considered some insane luxury to live there. 

A recent Zillow study seemed to show there hasn't been a flood of home sales in the pandemic that would signify a big urban exodus from most cities, with the glaring exception of San Francisco. Do you think that could substantially alleviate some of the cost pressure in the city proper?

On the one hand, I think this is about the general economy. If unemployment remains over 12% in San Francisco, yes, rent is going to be a lot cheaper. But is that really the reality we're all looking for? If restaurants and bars that were key to the city's cultural life remain shut, but rent is cheaper, is that what everyone wants? I bet you when this is all over, we're going to find out the tech people left at a much lower rate than others. Yes, they can all work from home, but what do you think has a bigger impact on a city: a couple of companies telling people they can work from home or the total immolation of entire industries basically overnight?

I don't want to make predictions right now, because we're in the middle of this pandemic. But if the city of San Francisco sees rents go down, well, the rent was already the most expensive in the nation. It falls 15%, 20%? How much better has that really gotten? Also, those people are going to go somewhere and unless they all move quite far away, you're still seeing these other markets picking up a lot of that slack. And those places are already overburdened. Oakland's homeless problem is considerably worse than San Francisco's. If you drive through Oakland, you will see things you did not think possible in the United States of America. 

Speaking of markets beyond San Francisco, you have a chapter about how difficult it is to build housing in the municipalities around big cities – many of which were just founded to hive off their tax revenues from low-income people.

That’s why you see Oregon, California, or the Democratic presidential candidates talking about shaking this up and devising ways to kick [zoning] up to a higher level of government. We've always done this whenever we've had a problem that seems beyond local governance. Like voting rights: you kick it to a higher body when the local body can't or won't solve it. 

But for better or for worse, this suburban thing is part of us now. We cannot just undo that. This notion of federalism and local control, those are important American concepts that can be fiddled with at the edges, but they cannot be wholesale changed. 

The first time I ever met Sonja Trauss [a leader of the Bay Area YIMBY group], she told me she wasn't super concerned about passing new laws but that the larger issue was to change the cultural perception of NIMBYism. We were living in a world where if you went to a city council meeting and complained about a multifamily development near your single-family house, you were not accosted for trying to pump up your property values or hoard land in a prosperous city. You were seen as a defender of the neighbourhood, a civically-minded person.

What is significant about YIMBYism is that the cultural tide is changing. There is this whole group of younger people who have absorbed a new cultural value, which is that more dense housing, more different kinds of people, more affordable housing, more housing options, is good. It feels like the tide is turning culturally and the movement is emblematic of that. I think that value shift will turn out to have been much more lasting than anything Scott Wiener ever does. Because the truth is, there are still going to be a bunch of local battles. Who shows up and how those places change from within probably will turn out to be more important. 

As you said, we've been seeing a lot of Democratic candidates with proposals around reforming zoning. How does Joe Biden's plan compare to the scope of the ambition in the field? 

There are two big ideas that you could pull from all the plans. First, some kind of renter's tax credit. It is obscene that we live in a country where homeowners are allowed to deduct their mortgage interest, but renters aren't. It is obscene that we live in a world where homeowners get 30-year fixed mortgages that guarantee their house payment pretty much for life and renters don't. If we think that it's a good idea to protect people from sudden shocks in their housing costs, that is as good of an idea for renters as it is for homeowners. 

I tell people that in this country, homeowners are living in the socialist hellscape of government intervention and price controls. Renters are living in the capitalist dream of variable pricing and market forces. Homeowners think they're living in this free market, but actually they're in the most regulated market – there are literally price controls propping up their market mortgages. 

Then there is Section 8 housing. Right now homeowners get access to the mortgage interest deduction. That programme is available to as many people as can use it, yet only about a quarter of the people eligible for Section 8 can get it. I think rectifying that is hugely important and a lot of the plans talked about that. 

The second big idea is using the power of the purse to incentivise people to more robustly develop their regions. You should have higher density housing in fancy school districts, near job centres, near transit. We're going to use the power of the purse to incentivise you, within the bounds of your own local rules, to do this right. Of course, that’s what Donald Trump is running against when he talks about Affirmatively Furthering Fair Housing (AFFH). 

When I was a local reporter in Philly, the city went through with that AFFH regulation despite Trump and HUD Secretary Ben Carson not being interested in enforcing it anymore. The city produced a fat report that maybe a few people read, but I don't think it changed policy. It's this phantom that Trump is running against, an ideal version of the policy that did not exist. It's also a phantom no one's heard of until Trump started tweeting about it. 

It’s been bizarre to watch. But Trump does seem to recognise that suburban politics don’t neatly fit into a red or blue construct. People who live in Texas and claim to want a free market system will turn around and erect local regulation to make sure nobody can build apartments near them. People in the Bay Area who claim to be looking for a more diverse place will use different logic, anti-developer logic, to keep apartments being built near them. 

People like that regardless of how they feel about things nationally. The bluntness with which Trump is doing it is discordant with the electorate and quixotic because people don't know what he's talking about. But the basic things he recognises – can I make voters feel like their neighbourhoods are threatened – he's onto something there. As with many things Trump, his tactics are so off-putting that people may ultimately reject them even if under the surface they agree.

You hear people on the left say the scary thing about Trump is that one day a good demagogue could come along. They're going to actually tax private equity people and they're actually going to build infrastructure. They're going to actually do a lot of popular stuff, but under a racist, nationalist banner. I think the suburban thing is a perfect example of that. There's a lot of voters even in the Bay Area who [would support that policy] in different clothing.

The world has changed completely since Golden Gates debuted just a few months ago. Has your thinking about housing issues changed as a result of the seismic disruptions we are living through?

The virus has done little more than lay itself on top of all of the problems I outline in the book. Whether we have an eviction tsunami or not, a quarter of renters were already spending more than half their income on rent. There's a chapter about overcrowded housing and how lower-income tenants are competing with each other by doubling, tripling, and quadrupling up for the scant number of affordable apartments. We now know that overcrowded housing is significantly more of a risk [for Covid-19] than, say, dense housing. If you live in a single-family home with 15 people in it, that's a lot more dangerous than 40 apartments in a four-story building.

Housing is just a proxy for inequality, it's a way of us building assets for one group at the exclusion of another. It is an expression of the general fraying of American society. I don't feel like that larger message has been affected at all, it's only been enhanced by the pandemic. With the caveat that this can all change, it just doesn't seem to me like there's some uber housing lesson we can learn from this – other than having a bunch of people crowded together is a really bad idea. 

Jake Blumgart is a staff writer at CityMetric.