Bob Kerslake: the housing crisis could turn into social unrest

The former head of the Civil Service and the Homes and Communities Agency explains why the housing crisis is “fertile ground” for extremist politics.

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At the Conservative conference in Blackpool in 1985, Margaret Thatcher told her party that she planned to make “owning shares… as common as having a car”. Specifically, the PM was referring to shares in the newly privatised British industries, utilities, and transport networks. But at the same time, the British public was given the opportunity to invest in another aspect of British life being privatised by Thatcher policy: their council houses.

Bob Kerslake, who has worked as DCLG permanent secretary, head of the Civil Service and is now chair of Peabody, one of the UK’s largest housing associations, points out the difference between these two forms of investment. Housing, he says, “is an unproductive asset, as opposed to new manufacturing, or business, which are productive forms of economy.”

The country did not follow Mrs Thatcher’s plan. Quite understandably, people opted overwhelmingly to invest in the stable, unproductive assets in which they lived, rather than the riskier but more productive assets of the stock market. British citizens are now half as likely to own shares in UK companies as they were in 1985, but by late 2017, 4.5m council homes had been sold. The UK’s stock of social housing has fallen to its lowest level since records began.

Kerslake says that housing is the “visible and stark” aspect of an economy that “is not working for ordinary people”. Divisions created in the Thatcher era, he says, have eaten at the social fabric, and we are now seeing the results in how people feel about the gaps between rich and poor, young and old, white and non-white.

“This issue could create unrest,” he says, “because there are such massive disparities. Even those on reasonable incomes now see their prospects of buying as very low. At the same time, we have deprived a whole swathe of people on lower incomes of the opportunity for a stable, high-quality housing offer.”

Kerslake says this is a situation ripe for “exploitation by populist politicians. The reason you haven’t got a house is because of immigrants – that’s been a story for a long time.” It is a story that Dominic Raab, the new Brexit Secretary, used during his short tenure as Housing Minister earlier this year when he claimed ONS figures showed that immigration had driven house prices up by 20 per cent. The UK Statistics Authority questioned the accuracy and the applicability of the statistics, which were revealed to have been a decade old.

Kerslake calls this kind of claim “a very easy lie to use. And it is a lie,” he adds, “because we know that most immigrants go into the private sector.” But immigration is not the only social issue to be warped by the housing bubble’s magnifying lens. “People take longer to build a family. Older people cling on to properties that are larger than they need, and are isolated. You don’t get the mix that you used to get. In the 80s, the people who lived in social housing might have been a postman, or a care worker – not any more. You don’t get mixed communities.”

In cities, Kerslake says, the problem has been compounded by the fact that much of the social housing that was sold was not kept by the original right-to-buyers but “sold on to absentee landlords, who sub-let to people who often are from new communities. So you get higher churn in those populations, and that builds resentment, as well.”

“Unless we tackle this problem, it gets worse, and it will become fertile ground for people who want to exploit differences and disadvantages.”

In his years as the head of the Homes and Communities Agency and at the DCLG, Kerslake says he “lost count of the number of people who came to me with whizzo ideas, often founded on some technicality” to fix the problem of social housing supply. Not one of these, he says, addressed the fundamental problem that councils are limited in what they can borrow to build more social housing. “And yet we’re perfectly happy to see local authorities borrow to build swimming pools or buy shopping centres, but we won’t let them borrow to build desperately needed homes. It’s absolute madness.”

But rather than giving local authorities the means to build more social housing, Kerslake says governments have pursued the “insane” policy of reducing social housing still further. In 2015, the Conservative election manifesto committed to extending Right to Buy to housing associations, which hold around half of the UK’s remaining social housing. A pilot scheme was scheduled to start this month. Kerslake calls the policy “a double whammy” for social division, because even with the maximum discount of £108,000 applied to a London flat, “the only people who could buy it were people who could find the other £360,000, or whatever the property required.” Worse still, the policy states that the discount funded by the forced sale of high-value council housing, which Kerslake says will only deepen divisions still further because higher-value areas, being more expensive, are also the areas of greatest need for social and affordable housing. “You couldn’t get a more grotesquely unfair policy.”

Social divisions in Britain will only stop deepening, Kerslake argues, when the government stops seeing social housing “as a problem, stigmatising its occupants – and start seeing it as an important part of the social fabric of this country.” Nobody in government would argue with the fact that more homes need to be built, but for Kerslake “at least a third of the new housing built, the 300,000 that the government is talking about, must be for genuinely affordable, social accommodation.”

But for now, housing policy continues to be dictated, as it was in 1985, by the Conservative tenet that home ownership and prosperity are the same thing. Kerslake points to Germany as an alternative model; with the lowest rate of home ownership in the EU, at 52 per cent, German citizens also spend a lower proportion of their income on rent than any of the top 15 EU economies. In the UK, more people (63 per cent) own their home, but while people in Berlin spend 27 per cent of their income on rent, the average Londoner spends almost half their income on accommodation. People in the UK own more property, but they pay for it dearly with significantly higher levels of consumer debt, less disposable income, and higher economic inequality.

Kerslake says housing should not be seen as an asset, as Thatcher saw it, but as “core infrastructure” that must be managed and made resilient to market fluctuations. “A well-functioning housing market is a critical part of a well-functioning economy. If we don’t address it, our economy will continue to become less functional, and more unfair.”

Will Dunn edits the New Statesman's regular policy supplement, Spotlight.