The question of housing in Britain today reveals much about the character of the crisis that permeates our entire society. Through the medium of housing we can see almost every problem our society faces - from inequality to out of control speculation, health problems to overcrowding, groaning infrastructures to gross regional imbalances and distortions.

And finally to the extreme discord between the ideals of design and aesthetics and the (literally) concrete, ugly reality of our cities. Crisis is a word we hear being used a lot at the moment, almost to the point where it has little impact on us so familiar are we with it. But there can be no doubt at all of the impact on our communities of the scale of crisis in British housing.

Thousands face homelessness as they see their homes being repossessed. Old dwellings are gradually falling apart not to be repaired or replaced. The demand for housing already far outstripped the growth of national housing stock even before the housing market crash in 2007. Short-sighted speculation has pushed property prices to farcical levels, and the extreme concentration of workplaces in our cities without a corresponding housing plan has lead to an unnecessary strain on an already weakened and underinvested privatized infrastructure.

Conscious underinvestment and dismantling of council housing has led to stigmatized ghettoes, beset with massive health and unemployment problems as these run down communities become isolated, as well as creating a reflection of class society in our state education system as the rich populate the catchment areas of the best schools.

Since the mid 1970s, when capitalism in the UK entered a prolonged crisis that heralded Thatcherism and the end of social reforms for the working class, the British bourgeoisie and its parliamentary representatives have striven to undermine all council and social housing. Recognizing the root of the housing problem would of course mean dealing with unemployment and poverty by ending the anarchy of the market, clearly not an option for the bosses!

The appalling slums which came to dominate the cities and towns in the wake of the Industrial Revolution of the early 19^th Century showed capitalism at its worse. People were crammed into crumbling, unsafe and unhealthy buildings, enduring terrible conditions at the hands of ruthless landlords. With the growth of municipal housing in the 20^th Century, workers found themselves facing council landlords often every bit as bad as the private ones. Some councils took a stand against this such as those in Poplar and faced the full might of the bosses’ law as a result.

The huge damage to our cities caused as a result of wartime bombing meant that, after 1945, a huge new level of council house building was required. Many of the old Victorian tenements were gone and whole areas now required rebuilding. Initially, it was intended to build housing that would be of the highest standard. Later on such lofty aims would be abandoned in favour of tower blocks and the like. A number of so-called New Towns were also built to take up the overflow from cities such as London and Birmingham.

These new houses were looked on with envy by the private sector, who were themselves incapable of providing what we now call social housing. Indeed their only contribution to the post war history of housing was to introduce the word Rachmanism to general use. In 1979 Thatcher came to power at the head of a Tory government and decided that now was the time to take action to push large sectors of public housing into the private sector in a way that would benefit the later at the expense of the former.

Taking advantage of discontent caused by the running down of council estates as councils sought to save money, Thatcher brought in Right To Buy legislation, arguing that this would transform our inner cities. Apparently, we can create a prosperous society simply by transferring ownership of dwellings from the state to private individuals. These individuals, overwhelmingly working class, will then be compelled to break out of their “state dependent stupor” and become responsible participants in speculation by mortgaging themselves to the hilt, mysteriously leading to wealth creation. Indeed, the Right to Buy Act was an important element in providing a basis for the boom in credit and finance capital, during the 1980s and 90s, which temporarily enabled the capitalist class to artificially expand its markets and absorb growing levels of over production in commodities. It gave banks an excuse to lend large sums to workers to facilitate house purchases in particular – at a suitable rate of interest, of course. Building firms and property speculators did well as did the banks but many workers would find themselves saddled with a massive debt on their shoulders. The “freedom” to buy a house would become a chain round their necks. The mortgage scam means millions of working are no longer paying rent to landlords but instead are paying much higher levels to the banks for the illusion of “owning” their own homes – and the price for defaulting on this is just as ruthless.

But the activity of property speculation and the sale of dwellings are just as unproductive and incapable of creating wealth as any other exchange of commodities. Only the production of new housing (and repairs and upgrades of existing housing) by workers creates new wealth. Thus the crisis of housing is a crisis of the capitalist system as it finds itself unable to develop the means of production, and seeks instead quick enrichment at the expense of others through unproductive speculation in housing - the housing crash and credit crunch have proven this. That capitalism has no answer to endemic housing shortages, which can only really be solved by a plan of new homebuilding, and instead develops absurd theories of creating a wealthy society through speculation and the utopia of a 'property owning democracy.'

The Economics of Housing

Why is housing so absurdly expensive? The average price of a house seems completely out of proportion with its actual value (i.e. the quantity of socially necessary labour it embodies – the work of those who built the property and those who made the raw materials and machinery to enable that to be done), especially since it seems to have no reference to whether the home has just been built, or was built and already paid for one hundred years ago. Very often, the latter kind is more expensive, even allowing for refurbishments and repairs. Did Marx not say that, over time, the prices of commodities more or less corresponds to their actual value? Surely this is not the case here. The problem has tripped many up. But it is not at all arbitrary, as Proudhon imagined:

“The house, once it has been built, serves as a perpetual legal title to a definite fraction of social labour although the real value of the house has already long ago been more than paid out in the form of rent to the owner. Thus it comes about that a house that, for instance, was built fifty years ago, during this period covers the original cost two, three, five, ten and more times over in its rent yield.” [Proudhon, quoted in Engels, The Housing Question]

It is true that house prices are an exception, but as Engels points out not an arbitrary one - they are only exceptional because of the specific position housing occupies in capitalist economy and society:

"Here we have at once the whole Proudhon. Firstly, it is forgotten that the rent must not only pay the interests on the building costs, but must also cover repairs and the average sum of bad debts, unpaid rents, as well as the occasional periods when the house is untenanted, and finally pay off in annual sums the building capital which has been invested in a house which is perishable and which in time becomes uninhabitable and worthless. Secondly, it is forgotten that the rent must also pay interest on the increased value of the land upon which the building is erected and that therefore a part of it consists of ground rent...not all the legal titles in the world, no matter how perpetual, could give a house the power of obtaining its cost price back ten times over in the course of fifty years in the form of rent, but that only economic conditions (which may have social recognition in the form of legal titles) can accomplish this. And with this he would again be as far as at the start." [Engels, The Housing Question]

The anarchy of capitalist society is the underlying reason that house prices are in effect permanently inflated. This is manifested, above all, in capitalism's unavoidable tendency towards both concentration of wealth, leading to speculation, and the extreme concentration of wealth and employment in certain geographical areas (in particular as a capitalist nation completes the process of urbanisation and monopolisation):

"What is meant today by housing shortage is the peculiar intensification of the bad housing conditions of the workers as the result of the sudden rush of population to, the big towns; a colossal increase in rents...The growth of the big modern cities gives the land in certain areas, particularly in those which are centrally situated, an artificial and often colossally increasing value...The result is that the workers are forced out of the centre of the towns towards the outskirts; that workers’ dwellings, and small dwellings in general, become rare and expensive and often altogether unobtainable, for under these circumstances the building industry, which is offered a much better field for speculation by more expensive houses, builds workers’ dwellings only by way of exception...The building and maintenance costs of the house, or of the part of the house in question, enters first of all into the calculation; the land value, determined by the more or less favourable situation of the house, comes next; the state of the relation between supply and demand existing at the moment is finally decisive." [Engels, The Housing Question]

We may add to this that the housing boom we have just been through represents a particularly acute expression of this scenario. Monopoly capitalism creates a situation of extreme concentration of wealth at one end of society and extreme poverty at the other. The basis for this is, of course, the exploitation of the working class, who are paid far less than the value of what they actually, collectively as a class, produce - this is how capitalists make a profit by pocketing the difference. But as we know, this profit can only be fully realised if workers proceed to buy all the consumer products they have produced. Since they are not paid anything like the full value of what they produce, they cannot then buy all the commodities they produce – even if they wanted to! The madness of the system is reflected in the fact that capitalism produces for profit in the market not to meet needs. In the housing market this means that bosses are keener to build or renovate property for the rich than to knock out social housing which millions desperately require. So many go homeless or are stuck in substandard accommodation whilst houses lie empty in competition for those few who can afford them. This is one reason why socialists have long campaigned for such empty housing to be seized by councils and used to reduce the council housing waiting list.

As things stand at present, the property speculators have been required, like capitalism as a whole, to compete with their “brother” bosses in an inadequate market place with limited demand where some will do well but others go bust. One way this problem can be alleviated is through credit, which is set free from the huge concentration of wealth in the hands of capitalists, and given over to workers to buy stuff with - also a temporary solution, since it must be paid back with interest. For most people, mortgages are the largest debt they will ever have.

Indeed one of the clearest examples of commodities containing more value than a worker ever has in his or her bank account is, of course, a home, along with other things like cars. So there is a clear need for credit to the worker to keep the market moving. But the credit given for things like cars is a one off - because cars depreciate in value rapidly and can be easily and rapidly replaced with newly built ones. The bank cannot recover its loan by taking possession of and selling on the same car. In other words, the car industry is too productive, creates too ready a supply of new value, for speculation.

But a home does not depreciate in this way, and can be resold many times. The sale and resale of the same land and the same home is inherently unproductive, and means the bank can usually recover the value of the mortgage. This is the basis for the unproductive activity of speculating on property prices by offering workers large mortgages to provide the illusions of wealth. From the point of view of the individual capitalist, the purpose of this activity is to make money without recourse to actually producing real wealth, but from the point of view of the capitalist class as a whole, it temporarily sustains their system by stuffing credit down workers throats (which is only ultimately their own unpaid labour) so that they will buy more of everything. Housing is the perfect commodity for this, because it is such an essential commodity, as well as a commodity which is so long lasting and physically bound up with issues of land scarcity and the aspiration to appear to live in affluence. Capitalism can create speculation and bubbles wherever a commodity is more or less permanently scarce. But as the housing crash has shown, speculation does nothing to increase actual value, "no matter how much the landlord may overreach the tenant it is still only a transfer of already existing, previously produced value, and the total sum of values possessed by the landlord and the tenant together remains the same after as it was before." [Engels, The Housing Question]

In the final analysis, more or less permanent inflation in the housing sector is a sign of capitalism expending its historical role - to develop the means of production. The unproductive speculation on housing we saw prior to 2007 led to absurdly inflated prices, as professor Peter Ambrose shows:

"If house prices had risen since 1975 with general price inflation the average house price in 2005 would have been £60,000 (with a regional range of £39,000 to £93,000). Instead it is almost three times as much. Why is this?...the most obvious [driver] appears to be the massive and disproportionate flow of mortgage lending since the Thatcherite deregulations...The 1980 house purchase debt outstanding was £53bn. If one updates using the Retail Price Index the 2003 figure would be £144bn. If one allows for expanded owner-occupancy stock it would be £181bn. The actual 2003 figure was £774bn and it is now much higher... There are much more productive uses for this 'extra' £600bn of investment...but of course we live in a market economy dominated by a powerful and international finance sector. Short term returns for shareholders rule." [Peter Ambrose, Defend Council Housing]

The crash in the housing market has been a disaster for capitalism, and it is now common to hear bourgeois economists lamenting the passing of the boom and trying to find ways to get it back. But in truth, no one wants a situation of absurdly expensive housing they cannot afford, or can afford only by lumbering themselves with enormous debts. What we do want is an economy and society that functions properly, is going forward and that we have control of.

Part two »