Sorry decline of English social housing

6th March, 2014

We are getting rid of homes that are compact, cheap, fully used and warm, writes Tim Harford

‘In 2012-13, the private rented sector overtook the social rented sector to become the second largest tenure in England.’ English Housing Survey Headline Report 2012-13, Department for Communities and Local Government, February 26

What on earth does it mean to be the ‘second largest tenure’?

You know you’re reading a government report when the top line of the “key findings” section is incomprehensible without an explanatory note. What they mean is that there are more English households renting private housing than renting social housing. Social housing is provided at a discount by local authorities or housing associations, and the number of households renting social housing has been in slow but steady decline for three decades despite a rising population.

And as traditional social housing has been in decline, privately rented housing has been rising to take up the slack?

Over 15 years, yes – the private rental sector has boomed. But the longer-term story is that home ownership is on the rise, from about 55 per cent to about 65 per cent. The private bit of the rental sector has a much larger slice of a smaller pie.

Well, that’s good. Private markets deliver prosperity.

Sometimes. But there are reasons to mourn the decline of social housing. A quarter of the people now privately renting are receiving a government handout in the form of housing benefit, so this isn’t an argument about needing help from the taxpayer – it’s an argument about which form of help might work best. Social housing is smaller, cheaper and less likely to be “under-occupied” than private housing. Yet social housing is also the best insulated by some measures – and private rentals are the worst insulated no matter how you look at them. There’s also a thing called the “decent homes” standard, meant to eliminate the worst damp, drafts and hazards. Social housing is the most likely to pass that standard, and is improving quickest. Private housing is the most likely to fail, and is improving slowest. Social housing is compact, cheap, fully used, fast-improving, safe and warm – and we’re getting rid of it.

But at least homes in general are more likely to pass safety and energy efficiency standards. That’s surprising: I keep hearing we’re in a housing crisis.

The crisis is that we’re not building enough houses. The quality of the ones we have is indeed improving.

You seem grouchy about social housing, but the big ‘right to buy’ sell-off did have one positive consequence: far more people now own their own homes.

I hadn’t realised that counted as a positive consequence.

Isn’t it? Isn’t owning your own home what prosperous people do?

You’re getting confused. It’s true that many people want to own their own homes, and that these days you need a good sock of cash to do so. But that doesn’t mean that it’s a good idea for a society as a whole to have very few rented properties. Have you heard of Oswald’s Hypothesis?

Didn’t they just put out a second album?

Oswald’s Hypothesis is that home ownership is a cause of unemployment. The idea was put forward by Andrew Oswald of Warwick University in the mid-1990s after he observed some worrying correlations. First, home ownership and unemployment had been on the rise across the OECD for many years. Second, countries such as Spain had high home-ownership rates and high unemployment, while countries such as Switzerland had low home ownership rates and low unemployment. There are similar correlations across US states.

It must be a coincidence. Surely you’re not saying that home ownership is hazardous to your job?

In the social sciences, who really knows anything for sure? But Mr Oswald’s story has some plausibility. If you own your house it’s not easy to move, so home ownership reduces the number of jobs you can consider.

So maybe the rise of owner-occupation isn’t good news at all?

It has its risks, for sure. But consider something that Mr Oswald wrote in 1999: “A key part of the problem is young unemployed people living at home, unable to move out because the rental sector hardly exists.” That’s no longer the reason young people live at home; the private rental sector has boomed. Maybe that helps explain why – despite all the economic woes of the past six years – unemployment in the UK was never as bad as economists feared.

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