The Sunday Times

July 24th, 2011

Crisis solved: ship the poor out of their costly homes and sell them

Pessimists such as me tend to think that most complex social problems are pretty much insoluble. Take housing. Thinking about insane property prices in this country, the extreme shortage of property that ramps them up, the dearth of housebuilding, the frustration of working people who cannot hope to buy their own homes and the 4.5m on the social housing queue, one is tempted to despair. London, for example, is becoming a city inhabited only by the very rich and the very poor on benefits.

But there is a radical way to help solve all these problems and it has the advantage of being simple and obvious. It is to sell off social housing in the most expensive parts of central London and similar places and use the money to provide more and better housing elsewhere.

Prime London property sells for about £2,000 a square foot: only millionaires can afford it. But surrounding such prime properties are huge numbers of council houses, council flats and housing association homes — more than 790,000 in a city with a population of 7.8m — many of which could be sold for enormous sums. I recently saw a two-bedroom former council flat in a council block, close to several other such blocks, that was on the market for £750,000. Many other people there were council tenants on low rent; the true market rent would be of the order of £26,000 a year, or £500 a week.

I know of another large house in west London that is occupied by about eight housing association tenants. It would probably fetch more than £10m. That would buy or build a huge amount of social housing somewhere cheaper. And obviously building more housing, regardless of who lives in it or owns it, will bring down property rentals and prices for everyone.

This solution does mean moving poorer people out of the most expensive areas. So does the government’s policy of capping housing benefit. Not surprisingly, there are many who object violently to this, seeing it as a kind of social cleansing, as Boris Johnson, the mayor of London, put it. The Child Poverty Action Group, for instance, brought a legal challenge to the High Court last week in an attempt to overturn both the housing benefit cap and the government’s new restriction of the maximum subsidised house size to four bedrooms.

One of the group’s concerns is that the government’s plans will inadvertently discriminate against the poor black and ethnic minorities, because 45% of such people live in London and make up almost a third of its population. One could take the other view, however: that giving enormous subsidies to some people is discriminating against others in need who get nothing. Perhaps a similar class action should be brought by those people on council house waiting lists.

Of course, many people won’t want to move. All the same, no one has a universal human right to live in expensive streets at public expense. Nor is it fair to other people — those who do not get council housing or housing benefit — to expect them to pay taxes for others to live in prime locations. Again and again opinion polls show that most people feel the injustice of this.

Human beings have moved home, time out of mind, out of necessity, just as children today have to move far away from where they grew up to somewhere much cheaper. It is just that in this case the idea of necessity has been disguised by the erratic and unfair workings of the welfare state.

It is not right that there should be one group of people that gets this strangely preferential treatment from the state, this curious protection from necessity, while the necessities of others are neglected. Moving home may be difficult and disruptive, but if it were merely a couple of miles across London in the company of friends and relations (policy makers would have to be very careful about that) it would hardly be a disaster. In some cases, such as a move from a cramped flat to a pleasant new ground-floor home in a leafy suburb, life would be much better.

No doubt many people would complain that moving people around like this is social engineering. But the existence of heavily subsidised housing is in itself social engineering, particularly in the most expensive areas.

It’s a form of social engineering that is not often questioned: there’s a fixed belief, especially on the left, that mixed communities are a social good. Last week Kathleen Kelly of the Joseph Rowntree Foundation strongly defended them partly as a protection against growing social inequality. Unfortunately the evidence is the other way. Mixed communities aren’t mixed in practice and don’t help those in social housing: this particular form of social engineering does little or nothing to make people more equal.

This point is made in an authoritative report, Making Housing Affordable, published by the Policy Exchange think tank. It repeats the well known fact that people in social housing are much less likely to work than people in private housing — 46% employment as against 92% in the private sector, what’s known as the “unexplainable gap”. In London, where social housing is mixed into rich areas very close to plenty of job opportunities, unemployment is at this same terrible level. This goes along with other disadvantages, such as poor mental health and poor progress at school. Yet the report says the cost to the exchequer of social housing (in direct housing costs) is £15 billion a year — and this to house only about 4m people rather badly.

Social housing clearly needs radical form, as Policy Exchange argues at length, particularly in its perverse incentives that encourage people to stay needy if they want to stay in their homes. But such reform is cumbersome, expensive and unlikely. Pending any such reform, to put it crudely, if people in social housing are not working and not thriving in one place, they might as well do the same thing somewhere much less expensive.

Many of them might do better. One of the great blights of inner city social housing ghettos is the prevailing culture of worklessness and dependency across generations, and a loss of self-respect and autonomy, to say nothing of the endemic violence. Breaking up those toxic estates might well destroy their toxic culture and enable people to start again somewhere new. Simple, obvious and probably politically impossible.