By Nick Bano (@NickBano)
We republish Nick Bano's analysis of how Thatcher's legislation laid the groundwork for today's housing crisis, creating the 'rise' of the landlords, and how the contradictions of the system and the response of the organised renters movement may be ushering in the conditions for their 'fall'. It originally appeared on Legal Form: A Forum for Marxist Analysis of Law.
When telling a story, the old wisdom says that one should start with a simple, incontrovertible truth, and spin it out from there.
The simple, incontrovertible truth is that property laws affect land value and profits. To take a straightforward example, look at architectural critic Michael Sorkin’s account of the invention of ‘air rights’ in New York:
“The signal event in the creation of the modern concept of air right was the construction, in 1915, of the Equitable Building in lower Manhattan. […] The Equitable cast an enormous shadow that prompted the city to draft its seminal zoning code of 1916 […] This, at a stroke, created a special value for air — for the void — that restricted the absolute capacity of a developer to occupy the space above the plane of ownership”.[1]
To spin it out from there: the UK’s Housing Act 1988 was never really about housing. It was about profits from land. The Act has created a hugely profitable housing market out of virtually nothing.
The rise
The Thatcher government inherited an embarrassment of riches at the end of the 1970s: a surplus of council housing, with a very small private rented sector on the side. From the 1930s onwards, particularly in London, local governments had been interested in “wresting housing out of the hands of slum landlords”[2], and by 1979 that project had been broadly successful. The scale and quality of local authority-built homes had simply out-competed private landlordism in many areas by the time that Thatcher came to power.
The housing laws of the 1980s were designed to reverse that decline: to prioritise private housing over public housing, in keeping with the broader neoliberal project. The government was totally honest about that aim in its White Paper Housing: the Government’s Proposals, and pointed out that the private rented sector had fallen to just 8% of homes in Britain.
The major purpose of the legislation was to set the conditions for the creation, and then the constant expansion, of a profitable housing market. It was a market that would be created through legislation — the stroke of a pen — rather than anything to do with the actual homes that were going to generate these enormous new profits (the state was not, for example, about to build new homes for rent, or improve the condition of existing buildings). In effect this was a financial bill, not a housing one.
Others have explained the dramatic impact of the sales of council housing under the ‘right to buy’ scheme, and the important shift from state-backing of the supply side (through building housing) to state-backing of the demand side (through a housing benefits system of grants to private landlords)[3]. But one point that is often overlooked — or at least underplayed — is the effect of the very existence of assured shorthold tenancies under the 1988 Act (as amended by the Major government in 1996).
Before emergency Coronavirus measures came into force in 2020, assured shorthold tenants (by far the most common type of tenure in the private rented sector) whose ‘fixed term’ period (usually six or 12 months) had come to an end were entitled to just two months’ notice, after which a landlord could apply to the courts for an eviction order under a special ‘accelerated procedure’. The landlord does not need to give a reason for the eviction, and is entitled to a possession order as of right.
In economic terms, these assured shorthold tenancies walk softly, but carry a big stick. This extremely limited security of tenure — in reality the constant threat of eviction — means that landlords can demand new rents whenever the market allows by simply inviting the tenant to sign a new tenancy agreement. This, of course, means that private sector rents rise very quickly. The rent controls that technically apply to all assured shorthold tenancies (under section 13) are obsolete if a tenant can be evicted within weeks. Indeed, any calls for rent control are totally pointless unless security of tenure is introduced as well (i.e. unless the 1988 Act framework is effectively repealed). Easy no-fault evictions are the key ingredient of the profitability of the private rented sector.
By design, therefore, landlordism became increasingly profitable under the 1988 Act, and changes to tax arrangements and ancillary regulatory measures helped to nourish Thatcher’s landlords to a greater or lesser extent over the years. This profitability also spread outwards from the rented sector. The housing sales market doesn’t draw a distinction between buy-to-let and owner-occupier homes — they all come from the same pot — which means that an increase in the value of buy-to-let homes drives up all housing costs.
For 30 years, the 1988 Act performed its function perfectly. It created a profitable housing market out of nothing but statutory rules. That was its main purpose, and it worked.
As housing necessarily became less and less affordable, ownership has now become increasingly concentrated in a smaller and wealthier part of the population. We are now at the logical endpoint of the 1988 Act’s project. It is obvious that a former council flat in an unremarkable 1960s block is not worth one million pounds: the success of the 1988 Act was to open a gulf between the value of property as homes, and the amount for which that same property changes hands. This is a classic example of exchange value becoming completely divorced from use value.
Under this framework, the value of real property is consistently expanding, shielded (through quantitative easing and non-domestic capital investment[4]) even from the global financial turmoil of 2008. The luxury flats peppering the skylines of major British cities are not the manifestation of a prosperous and comfortably-housed population, but an aberration: financial securities that stand in gross contrast to the intolerable and overpriced living conditions of the populations of major cities.
The fall
There’s a moment in the film The Big Short when Steve Carrell’s hedge fund manager character reads the financial smoke signals and declares that, in the US, “housing is a bubble”, and we then spend the rest of the film watching it burst. What would it take to see that happen in the UK? More pressingly, has this already happened to Thatcher’s housing law framework? Have we seen the moment of its greatness flicker?
Like all models of perpetual growth and accumulation, the system created by the Housing Act 1988 must eventually reach a point of crisis.
For the moment — surprisingly — the housing market is “performing extremely well”. The government has pulled out all the stops to stop it from collapsing. A combination of a ‘stamp duty holiday’ (a temporary waiver of an expensive transaction tax on home buyers) and the sudden realisation that people don’t need to live near their workplaces seems to have caused something of a rush of demand among buyers. The tendency of furlough payments to fall into landlords’ pockets is probably also keeping things buoyant. But this house price stability shouldn’t be happening — the collapse of the top end of the rental market, falling rents in cities and the anticipated gridlock in the court system (delaying eviction cases) should be deflating them. If landlordism is what has driven house prices up, plummeting rental profits should surely undermine them. It seems that a collapse is being temporarily masked by a glut of urgent demand before the stamp duty holiday ends in March 2021 — and perhaps before a Steve Carrell figure tells us that the emperor is no longer wearing any clothes.
Housing activists are seizing this moment. We are already seeing a nascent mass movement in response to ‘Manctopia’ property boom. In Liverpool City Region a new land commission is leading by example in the struggle to wean local authorities off their addiction to land speculation disasters, and we must celebrate and encourage that. London Renters Union has doubled its membership in recent months.
This is a critical moment because the processes of the 1988 Act have been interrupted. The assured shorthold tenancy has dropped its big stick: under new emergency public health measures, almost no evictions have been allowed since March 2020. Under normal circumstances the profits of landlordism are underwritten by the landlords’ use of state-backed force, but that has suddenly fallen away. With that in mind, perhaps it is no coincidence that house price inflation had been so much slower in the North of Ireland than in Great Britain. This anomaly may be connected to the fact that in the Six Counties there are no bailiffs, and evictions are instead carried out by the Northern Ireland Executive’s Enforcement of Justice Office (there is also a strong tradition of anti-landlord organising in Ireland).
How is a landlord supposed to increase the rent now, during this moment of interruption? They cannot convincingly threaten an eviction, so they will have to rely on the statutory mechanism (which is pinned to ‘market’ rents, but market rents are falling), or hope that their tenancy agreement has a contractual rent increase clause. The law no longer meets the needs of a landlord class that has become dependent on staggering rent increases.
Just as in 1988, a Conservative government continues to be perfectly frank about the fact that its housing law policies are really about economics. Despite having promised the abolition of easy no-fault evictions in the 2019 manifesto and then again in the Queen’s Speech, the housing minister Christopher Pincher said in Parliament that the government won’t actually do this until there is a “sensible and stable economic and social terrain”. In effect, the government candidly admits that it can’t grant tenants rights until the economy recovers. This isn’t poor economics on the government’s part. As set out above, quick evictions are at the heart of the profits of the private rented sector, and the private rented sector is, in turn, at the heart of booming house prices. Land speculation is now one of the UK’s biggest industries, so it is unsurprising that the government is desperately clinging on to Thatcher’s model.
As the 1988 Act settlement has started to break down, the economic juggernaut of the booming housing market might be starting to turn around. For the first time in living memory, serious doubts have started to emerge about the perpetual increase in the profits that Thatcher sought to guarantee for private landlords. Those profits were the foundation on which the housing crisis was built. And tenants can play their part in this process by standing on their statutory rights, limited as they are: tenants are entitled to a valid notice (which can be complicated), and are entitled to occupy until the court orders their eviction. The more that tenants take up this unique opportunity to delay and interrupt the processes of the 1988 Act, the greater the threat to the housing market.
[1] 'The Fungibility of Air', reproduced in What Goes Up: The Right and Wrongs to the City, (Verso, 2018).
[2] Owen Hatherley, Red Metropolis: Socialism and the Government of London, (Repeater, 2020), p.69.
[3] See, e.g. Anna Minton, Big Capital, (Penguin, 2017); Raquel Rolnik, Urban Warfare, (Verso, 2019).
[4] Minton, p.14-15
Nick Bano is a barrister specialising in housing and homelessness cases, and a housing activist in London.
28 January 2021
