1 If housing was at the centre of Margaret Thatcher’s social revolution, it cast a long shadow over the Major years. Indeed, it compounded the economic problems John Major inherited when he came to power on 28 November 1990. The Major years are rarely regarded as distinct from the Thatcher years when it comes to housing. They are assumed to be the natural sequel to the housing policies pursued between 1979 and 1990. However, the reality is more complex. Those years can be summed up as trying to strike a difficult balance between sticking to Thatcherite housing principles and recognizing the limits of previous policies, in other words between continuity and change. Changes in the financial and demographic context forced the government to have a rethink. Broadly speaking, those years fall into two parts, with the government increasingly distancing itself from its predecessor’s housing legacy after 1994.
2This paper begins with a quick overview of the housing market under John Major before going on to outline the continuities with the housing policies implemented during Margaret Thatcher’s three terms. Finally, I will try to explain the discrete reordering that took place in housing policies at the end of John Major’s period in office.
3It is impossible to gauge the housing policies pursued under John Major without referring to the backdrop against which they were implemented and devised. The Major years opened under very black skies indeed. The government had inherited the worst housing slump since the 1950s. The last years of Margaret Thatcher’s term had been marked by the sudden end of the housing boom that had seen the number of housing transactions soar to an unprecedented high (15% of the owner occupied stock) and the proportion of mortgage debt against total personal disposable income rise to 80% in 1991 (Forrest and Murie, 1994: 59). House prices had doubled between those years and risen by 28% alone in 1988. The boom was primarily due to growing prosperity, low interest rates and easier access to credit. The opening of the mortgage market to banks by the 1986 Building Societies Act as well as the end of the building societies’ lending monopoly had been followed by a lending frenzy, as competition between mortgage lenders had increased. The housing bubble burst in 1989 following the decision by the Chancellor of the Exchequer, Norman Lamont, to raise interest rates from 9.7% in May 1988 to 15.4% in February 1990. This 60% rise was to have a disastrous effect on thousands of mortgage holders who found themselves unable to repay their mortgage instalments and so, were compelled to sell. The flood of properties depressed the market and sent a signal to other potential buyers to stay away. The result was falling real house prices between 1990 and 1995 (with the exception of 1993-1994), not only in real terms (measured against inflation) but in monetary/cash terms, too. Real houses prices fell spectacularly by 30% between 1990 and 1996 (Balchin and Rhoden, 2002: 272).
4This fall had a two-fold consequence on British home-owners: negative equity and repossession. All those who had bought their home at the peak of house-price inflation found themselves with a property being worth less than the price they had paid for it; their numbers reached 1.7 million in 1992 or 21% of all mortgages. The South East and the London area were particularly affected. For most people, negative equity remained an abstraction but for a small minority it became a searing reality. At a time of rising unemployment and economic recession, thousands found themselves unable to repay their mortgage instalments and fell into arrears. As a result, their homes were taken back by lenders; the number of repossessions reached 80,000 in 1993, 5 times the usual number and amounted to some 345,000 buyers between 1990 and 1995 (Malpass, 2005: 125). Those dwellings, when sold at a lower price, further depressed the market with spin-offs into the wider economy affecting all occupations connected with housing (builders, estate agents, insurance companies, etc.) thus boosting the unemployment rate.
5So the housing slump highlighted the limits of the policy in favour of home ownership pursued since 1979. Clearly, home ownership had proved unsustainable for thousands of British people and could not match the government’s official housing aim of: “a decent home [is] within the reach of every family” (DOE, 1995: 6).
6Despite the housing slump that started in 1989 and the economic recession, the government showed no signs of turning its back on its predecessor’s priorities, at first. Initially, Thatcherite housing policies were taken forward. The 1992 election manifesto of John Major (Conservative Party, 1992 : 52) and the 1995 White paper (DOE, 1995 : 6), indeed, largely read like a repeat of the 1987 Housing Paper of Margaret Thatcher (DOE, 1987 : 1) with the stress being put on home ownership and tenant choice in particular.
7The clearest evidence of continuity is found in the government showing no signs of giving up on extending home ownership to an ever wider section of the population.
8Faced with such a deep housing crisis the Major government could have chosen to retreat from a policy that had caused the housing market to collapse. The idea that home ownership represented security had been dealt a severe blow indeed. Instead, the government was determined to encourage more people to take a first step on the housing ladder. Home ownership was given pride of place in the housing section of the 1992 manifesto that read:
- 1 The Conservative Party, 1992 : 52.
We now need to make it easier for those council tenants living in high-cost areas or on low incomes to move gradually into home ownership, without taking on too heavy a financial burden at any one time1.
9Likewise, the 1995 housing White paper announced the government’s intention to raise by 1.5 million the number of additional home owners by 2005 (DOE, 1995: 11).
10Consequently, the Major government decided to press on with its predecessor’s flagship policy, the Right To Buy, that had led to 20% of the local authorities’ stock being sold by 1990 (see graph 1). The first RTB legislation had been introduced in the 1980 Housing Act and had proved tremendously successful. It had given to sitting council tenants the right to buy their home with huge discounts and had been followed by the 1984 and 1986 Acts that relaxed the requirements to buy a council home. Instead of the government pausing, official documents, such as the 1995 Housing White Paper, displayed its intention to extend RTB to new sections of the rented sector that had been left out by previous legislations, such as charity landlords (DOE, 1995: 15), although in the end they had to backtrack in the face of opposition in the Lords and a media campaign in this particular case.
Graph 1: Sales and Transfers of Local Authorities stock
Source: DETR, 2000.
11But the government did not give up. Other means of expanding home ownership that had been tried and tested before 1990, such as shared ownership schemes that allowed housing association tenants to buy a share, in their home or in a newly built one and pay a rent on the remaining value of the property, were expanded under the 1993 Housing, Land and Urban Development Act. Clearly, home ownership remained the government’s preferred tenure and the market the obvious way to meet Britain’s housing needs (DOE, 1995: 13).
- 2 The Conservative Party, 1992 : 51.
12Why did the Major government persist in trying to extend home ownership? The answer lies in what can be termed the home ownership dogma. The expansion of home ownership was believed to be crucial to the party for a number of reasons. The first was ideological: housing had enabled the government to achieve “a revolution in redefining the role of the state” in the words of the 1995 White paper (DOE, 1995: i). By 1979 housing had indeed come to represent to the Conservatives the clearest example of the culture of dependency created after WWII. This culture was vilified for having deprived citizens of any say or choice in public services and having led them to rely on the state for their needs, thus abolishing all notion of responsibility in their eyes. An easy means of rolling back the ‘Nanny State’ was to increase home ownership and tilt the balance in favour of the individual in the housing field by selling council homes. This purpose was reinforced by the belief among Conservative politicians (and some housing experts, see Saunders, 1990) that there was a natural desire to become homeowner in the British population because of the advantages that home ownership was supposed to have, namely independence, control over one’s dwelling and a sense of personal responsibility (DOE, 1995: 12). This was corroborated by all the polls and survey carried out from 1967 onwards that showed that as many as 73% of British people aspired to become home owners (Evens et al., 1998: 57). Home ownership also helped to create the property owning democracy that Anthony Eden, the first among all Conservative leaders, had promised to bring about. Home ownership was perceived as the dominant means of transferring assets to an ever wider proportion of the community, beside other privatization policies. It would give to an ever larger proportion of the population a stake in the country and so encourage political and economic stability. As the 1992 Conservative Party Manifesto put it “The opportunity to own a home and pass it on is one of the most important rights an individual has in a free society”2. Finally, there was a political dimension to it: the corollary in the minds of many Conservatives was that many new home owners would become Conservative voters naturally. This was born out by the much higher rate of Conservative voters among home owners (Forrest and Murie, 1988: 103) as well as the dealignment process that had taken place in the owner occupying working class (Saunders, 1990: 219). This motivation underpinned the decision of the party’s leaders to widen home-ownership as early as the end of the 19th century. The minutes of party conferences at the time show that the Conservatives were convinced that home-ownership in particular induced greater social stability and a natural tendency to vote for their party (NUCUA, 1892: 8).
13The Major government showed no sign either of going back on one of its predecessor’s key principles, the need to curtail the role of the public sector in housing. In the face of mounting council waiting lists- 171,576 households were accepted as being in ‘priority need’ in 1990 in the UK (Mullins and Murie, 2006: 55)- the government never expressed any will to revive the shrinking public sector and build more council housing. Instead, it kept on relying on the voluntary sector to provide new social housing which it funded through the Housing Corporation, although funding was cut from 1993 onwards (Balchin and Rhoden, 2002: 239) and the sector increasingly had to rely on private finance. Likewise, homelessness, although rising, was to be mitigated through foyers run by the voluntary sector although local authorities were given a small role to play in the Rough Sleepers Initiative introduced by the last Thatcher government and carried over under John Major. The number of Local authorities starts in England and Wales dramatically declined (see graph 2) from 14,600 in 1990 to 600 in 1997 (Holmans, 2005: 50) and the restrictions placed on local authorities’ building activity by the 1988 Housing Act were not lifted.
Graph 2: Tenure of New Dwellings built in England and Wales, 1980-1997
Source: Holmans, 2005 : 50.
14The act had tried to create a quasi market in housing and deprived local authorities of their building functions, relegating them to an enabling role, namely assessing local needs and making sure that private and voluntary providers met these. Housing’s share of government expenditure in Great Britain fell from 4.8% in 1979 to 2% in 1995 in real terms, due to gross capital investment by local authorities falling particularly steeply after 1990 (as a result of Housing Investment Programmes being gradually cut back by the central government after 1980) (Malpass and Murie, 1999: 90). In addition, Compulsory Competitive Tendering was extended to housing management in 1992 and eroded further local authorities’ housing powers by opening the management of councils’ housing stocks to voluntary and private bidders.
15In keeping with the choices made in the 1987 Green Paper, increasing choice in renting remained another priority as shown in the 1992 Manifesto and the 1995 housing White Paper. This was the reason why the government was so keen to step up a process that had started spontaneously in the 1980s before being officially encouraged. Transfers of properties from a council to a housing association had begun as a local initiative to get round the financial constraints imposed on councils and had been given official sanction for renovation purposes by the 1985 Housing and 1986 Housing and Planning Acts. The 1988 Housing Act had introduced the possibility for a council to transfer the whole of its stock, a process called Large Scale Voluntary Transfer. The Major government vowed to expand the programme (DOE, 1995: 26). In 1993 an annual transfer programme had been created (Pawson and Fancy, 2003: 6) and by 1997, 54 councils had transferred their stock representing a quarter of a million homes (see graph 3).
Graph 3: LSVTs of Council Housing in England by Dwellings and Councils
Source: Wilcox, 1998 : 147.
16The reasons for pressing on with the reduction of the local authority stock remained similar to Margaret Thatcher’s: from a political perspective, breaking up the monopoly of local authorities enabled to cut what the Conservatives perceived to be an electoral connection between left wing local authorities and their tenants; from an economic perspective it allowed them to reduce public sector borrowing and helped to control inflation by shifting the cost of building on to the voluntary sector that had been entrusted with building the new social units and sometimes managing the old ones since 1988. Finally, the Conservatives argued that the voluntary sector provided better management than local authorities who were often distant and careless landlords.
17However, concentrating on elements of continuity fails to provide the whole picture of the Major years and housing. Although housing policies under John Major were largely inspired by his predecessor’s, some of the measures taken or announced after 1995 testify to the government having to face up to reality and deal with the more negative fall-outs of the Thatcherite years. Gradually, the government sought to operate a limited and discrete reordering of housing policies, for a number of reasons.
18First, the government was indeed determined to bring housing finance under control. Despite the decline in net public investment in housing – by 76% between 1980 and 1998 (Balchin and Rhoden, 2002: 23) – the amount of money spent on housing subsidies to home owners, social tenants and private tenants ballooned as a result of the economic situation and the rent reforms inherited from the Thatcher governments.
19The 1980 Housing Act had indeed introduced a new rent subsidy system; it had given power to the DOE to determine the target rate of annual rent increase and this had resulted in rents rising rapidly, as much as 165% between 1979/80 and 1987/88 (Balchin and Rhoden, 2002: 166-68). Since the then government believed that council tenants could afford higher rents, a new mechanism was introduced under the 1989 Local Governement and Housing Act. The act gave power to the DOE secretary to determine guideline increases in rents on the basis of the capital value of each local authority’s stock calculated as a percentage of the total national value (Balchin and Rhoden, 2002: 169). As a result of constant rent increases, by 1997, housing benefit paid to tenants (both council ones and private ones since the 1980 and 1988 Housing Acts had introduced rent decontrol in the private rented sector) to help them pay their rent had ballooned up to £12,246 million, compared to £3,766 million in 1986 (Balchin and Rhoden, 2002: 100). These were made available by the DSS though, and as such not officially regarded as an item of housing expenditure but represented a worryingly growing part of public expenditure.
20Likewise, the Major government was faced with mounting housing subsidy to home owners. The economic recession meant that many home-owners had become unemployed and unable to repay their mortgage instalments. These households were entitled to claim Income Support for Mortgage Interest (ISMI) and by 1993 some 200 000 of them were relying on income support to pay their mortgage interest charges at a cost of £ 1,2 million for the state (against £m 351 in 1986) (Malpass, 2005: 152). This explosion in housing related expenditure led the Major government to look for ways of making savings. It compelled it to alter previous policies and take on a Thatcherite taboo in the end.
21The government set about restricting and tightening the rules to benefit from ISMI in 1995 and increasing the length of time required before receiving assistance for new mortgagors. It also opted in favour of reforming in 1994 the Housing Benefit system it had inherited which had shifted subsidies from house building (bricks and mortar) to individuals. It introduced a cap on it by creating a local reference rent for every area of the country which formed the basis for all benefit claims. In 1996 young people were hit by new rules that restricted the amount of their housing benefit to a single room rent. But above all, the government decided to phase out a financial device that Margaret Thatcher considered to be paramount in keeping the support of homeowners for the Conservative party. Mortgage Interest Tax Relief, the scheme that allowed mortgagors to have their interests to be deducted from their taxes, had risen to £7,700 million by 1990 (Balchin and Rhoden, 2002: 100) because of the previous housing boom. As a consequence of the slump, in a bid to save money, the Major government decided in 1991 to limit MITR to those paying the basic rate of tax (25%), first. Then further reductions took place in 1994 and 1995 that gradually restricted the tax relief to an ever smaller section of home-owners (Balchin and Rhoden, 2002: 117). This decision has to be seen as major departure from Thatcherite housing principles.
22Demography was another driver forcing the government to reconsider its housing policies. The problem was that there had been no attempt to measure housing need since 1979. The last attempt to do so dated back to the 1977 housing Green paper. This was deliberate and stemmed from the Conservatives’ conviction that the market would provide for most people and that, anyway, the 1977 housing Green paper had shown there was a crude housing surplus. The Major government at first appeared to be unwilling to move away from that position. In 1993 the government had turned down the request by the Environment committee to publish a regular assessment of the housing needed (HC, 1996: ix). But in 1995 it suddenly changed its mind and in a way reverted to demand-led housing policies, acknowledging the need for a greater supply of social housing. The government accepted the DOE’s estimations of the number of social housing units needed and pledged itself in the 1995 White paper to help deliver ‘180 000 additional social lettings over three years’ (DOE, 1995: 10). This change of heart was due to the recently published demographic projections that showed there would be an additional 4.4 million households over the next 20 years. This was 1 million higher than the previous estimations made in 1991 and translated into a need for 1.7 million additional dwellings over the next ten years (HC, 1996: xii). However, in keeping with its predecessor’s principles, the government was at pain to stress that these new social units need not be in public ownership and that, instead, it favoured the expansion of the voluntary sector:
Social housing at below market rents does not have to be publicly owned. There is a long tradition of private trusts and charities providing housing in this country (DOE, 1995, 28).
23 So despite acknowledging the shortage of social housing, it was clearly unwilling to face up to the conclusion that the Conservatives’ preferred partner, the voluntary sector, had been unable to make up for the end of public sector building. Despite readily available construction figures, the government refused to recognize the failure of Conservative housing policies in the social housing field.
24Because it was unwilling to consider more public house building, the Major government turned its attention to the planning system which it thought could help deliver more affordable housing. As a result, in 1991, rural authorities were given the right to exceptionally release small sites if they could prove there was a need for local affordable housing (DOE, 1992: §38). Likewise, after 1992, local authorities in England were required to develop formal policies on affordable housing (Mullins and Murie, 2006: 61) and to indicate in their local plans an overall target for the provision of affordable housing.
25Finally, a heightened environmental agenda combined with the disclosure that economy-led urban policies had had a limited impact to force the government to rethink its role in housing delivery. The changing context caused the government to step in and steer housing supply towards cities; housing took on renewed importance in urban regeneration.
26Whereas the Thatcher years had been marked by an aborted attempt under Nicholas Ridley in the mid-1980s to make the town and country planning system more responsive to the market and to release more land (Cullingworth and Nadin, 2003: 358), the Major years were characterized by the recognition that demographic pressures put new constraints on the government and that housing had a role to play in fostering sustainable development. This was clearly expressed in the 1995 White Paper that read: ‘As a nation we must meet increasing demand for homes in an environmentally sustainable way’ (DOE, 1995: 46).
- 3 The government’s goal was defined as: to “promote attractive and convenient urban areas, in which (...)
27The extra million households expected by 2016 meant that it was no longer possible to rely on the post-war practice of building on green fields around market towns and designated villages in the countryside. This was no longer the favourite option considering the opposition the demographic announcement had sparked off (DOE, 1996: 18). The campaign fought by CPRE in the early 1990s to draw attention to the alarming rate of land loss to development (CPRE, 1992) had convinced the government it was time to rethink the role of cities in accommodating those future households and housing units and ‘change the way we work’ (DOE, 1995: 10). The conclusions of the government were disclosed in 1996 in Household Growth: Where shall we live? The Green Paper translated the number of new dwellings into land and showed that 6,800 ha would be needed every year until 2016 if past trends continued (DOE, 1996: 18). While stressing that some rural land would still be needed for house building, the government announced its commitment to have 50% of new housing built on urban or rural re-used sites by 2005 (DOE, 1996: 19). Concentrating more new private build in cities would have a dual advantage according to the Government: it would help regenerate cities by improving the urban fabric (DOE, 1996: 39); it would also work towards its sustainable agenda set out in 19943, by making better use of the existing infrastructure (DOE, 1995: 46) and by reducing the need to commute.
28The shift in attitude towards housing embodied in the DOE 1996 Green Paper – from 1980s flagship residential or office developments used to lever in private money in the hope of creating more jobs to a means of revitalizing the social fabric of cities and protecting the environment (DOE, 1996: 24-25) – illustrates a broader change in urban regeneration policies from a predominantly economic and physical approach in the 1980s to a more social one in the early 1990s (Ying Ho, 2003: 46). The change was brought about by the publication of a review of urban policy (Robson et al., 1994) in 1994 which concluded on the relative ineffectiveness of the economic focus of the urban policies implemented in the previous ten years. Instead, it called on more local partnerships, greater coherence between departments and better targeting of social and community issues (Robson, 1994: xiv). Although physical and economic regeneration never went away and a new Urban Regeneration Agency was created in 1994 to tackle the issue of vacant land, housing benefited from this change of emphasis and was increasingly seen as one of many interconnected social issues (Malpass and Murie, 1999: 62) in need of greater attention and funding. New comprehensive urban programmes such as City Challenge (1992) and the SRB (1994) designed to solve ‘the current problems and apparent disadvantages of living in the city’ (DOE, 1996: 39) in an integrated and cross cutting way were set up. 40% of the successful bids included a pledge to improve local council housing (DOE, 1995: 35).
29So, because of the combination of demographic growth, greater environmental awareness and concern at the lack of progress in tackling urban deprivation, housing achieved renewed importance during the final years of the Major government. It became a key component in broader strategies designed to tackle urban social problems ‘on a number of fronts’ (Conservative Party, 1992: 60).
30 Housing policies during the Major Years display a curious mixture of perception and dogma. On the one hand, the government made the right diagnosis and its housing agenda pointed to the limits of Thatcherite housing policies centred on home ownership. On the other hand, it refused to move away from the principles developed under Margaret Thatcher. Housing policies still displayed the usual belief that the market would sort things out in the end by 1997.
31In the housing field, the Major years can be read as a delicate balancing act to combine the Thatcherite agenda with a need for modernization. By 1994, the housing shortage and the legacy of the 1980s housing policies had sunk in and caused the government to introduce new policies that were to pave the way for its successor. Because of increased demographic pressures, cities gradually moved up the political agenda as they came to be seen as a means of reconciling greater housing needs and sustainability. Regenerating them became more urgent and ceased to mean relying on the private sector and economic regeneration only. Instead, the urban agenda was widened to new actors and some social issues, such as housing, were given greater attention.
32This agenda that marks the Major years apart from the Thatcher ones, also paved the way for Tony Blair’s urban and housing policies. After all, the Blair governments retained the SRB until 2004, rebranded ‘urban regeneration’ as ‘urban renaissance’, ‘millennium villages’ as ‘millennium communities’ and simply turned the ‘multi-stakeholders’ approach into ‘statutory LSPs’. They were very slow to wake up to the need for more social housing, too, and did not move away from the principle that home-ownership should remain the dominant tenure. So in many ways the Major years represent the missing link between M. Thatcher and T. Blair’s housing and urban agendas.