Complementary Housing (CH) is a spectrum of investment housing that delivers the advantages of equity with different timings to suit the incomes or inclinations of every household. A Complementary Housing Policy recognises that the power of equity can be used in different ways and it asserts that they are mutually supportive. A policy should be designed to provide this full spectrum of choices in order to best meets the demands of all households.
Equity is the normal growth in value of a house from the day it is bought or for rented stock, from the day that it is built. It is a resource that should be placed at the heart of housing policy because investment in ownership or in a rented stock provide the huge advantages of equity growth and the decreasing cost of a loan that is fixed on the day of purchase.
The equity of ownership is entirely at the disposal of the owner, while the equity of rented investment housing is used entirely to reduce the cost of rents. These two options lie at the opposite ends of an equity spectrum. Intermediate between them are different types of investment housing; such as mutual cooperative and part ownership investment schemes, that use the growth of equity in different ways! They are distinguished by differences of timing, which cause them to be mutually supportive, but for this to happen, the legal ownership of the rented stock must be protected from carpetbaggers; people who break up an enterprise and sell its assets for short term gain. It can be protected as a Mutual Trust, either by government or by charitable ownership. But this is a modern dilemma, about the extremes of business and economic planning about which, we must be more discriminating. The short term objectives of short term directors have lead to the loss of most building societies, of pension funds, school playing fields and essential public assets; the slights of hand that suck value from the future. The squandered assets of housing have been replaced by rent subsidies that bleed the public purse.
Within the equity spectrum, the common means of provision is investment and within the investment market, we can make like-for-like comparisons that open a whole new understanding of the housing market. It is like comparing different types of apples. They don't compete negatively, as homeownership and private rented housing does, they are choices that serve different needs.
Private rented houses are a different species from which the benefits of equity have been extracted and removed. They are expensive, they are suitable to serve specialist needs, but they cannot be compared, either with homeownership, or with rented investment stock and they are particlarly unsuitable to the role of providing homes for the poor, which is the purpose assigned to them by current policy. The public purse, simply cannot afford the rent subsidies established to support the dominance of high private rents.
There is a permanent necessity for adequate, decent and affordable homes, but about half of the nation cannot yet afford the high initial cost of a mortgage loan. But, there is a solution. The cost of provision compared to the life period of a house is actually very low. This means that the rents of an investment stock are very low. To establish such a stock, requires a relatively short period of investment. It can be regarded as a temporary and decreasing subsidy for about thirty years that will then provide surpluses from a low rent stock for hundreds of years!
The choices of CH are mutually supportive because they provide:
The durability of houses can be focused by investment to provide accommodation very cheaply. It is a policy that brings affordability to the millionaire or the labourer and allows them equally to contribute to the expansion of rented investment stock and the care of the local environment. They can be equal neighbours. The idea of Complementary Housing owes much to the vision of Aneurin Bevan, but it earns just as much from the failed experiences of Conservative policy .
For instance, Rented Investment Housing is a low-cost alternative choice of accommodation that stabilises house prices and provides an economic refuge while saving to buy. Graph 1 shows the powerful interaction of Rented Investment Housing and Homeownership. Heath announced the doubling of council rents and the market doubled house prices. If Macmillan had not unpicked Bevan's rich tapestry of mixed communities, segregated 'Social Housing' may never have existed. The access to homeownership is limited, by the price to income ratio. But a rented stock can provide housing that is affordable to virtually every household in the country.
This was the low-cost method of housing provision used to finance council housing. It was abolished in 1972, just as it began to mature in to a rented stock that no longer needed subsidies.
It was the low-cost choice of preference that caused the decline of the private rented sector, but it is no longer an available choice because the equity of the stock is systematically destroyed by RTB discounts.
There is talk of a "generation rent" , which if it happened, would result in a massive increase of rent-subsidies, then equally massive cuts and presumably, by unrest that would escalate until the policy was changed. A boomerang generation describes the increasing trend of young adults returning to the family home to share the resources of their parents. These trends strike at the confidence of our young people and diminish their hopes for the future.
The chaos of the housing market since 1980 has become confused with our fears about the global economy, which doesn't help our search for solutions. The housing crisis is not caused by the global credit crunch; it is due to policies that were completed twenty-eight years before the credit crunch of 2008. Houses are localised, which probably makes their provision the last of the non-global industries. Of coarse it has made the crisis worse because banks insist on much larger deposits for their loans, but unlike the American bubble, it was not caused by bank miss selling in their sub-prime housing market. Our housing problems are very much of our own making.
Bevan's big mistake was to place his scheme into the hands of politically divided local governments. This allowed him to accelerate his building programmes, but it gave the same control to Macmillan and co, who eventually destroyed our low-cost rented system. The post-war rebuilding programmes of our European peers involved a diversity of agencies, trade unions, charities, churches, other voluntary groups and governments, that continue to provide resilient low-cost rented sectors.
Bevan's policy of open access was designed to meet demand. It was not restricted to housing the poor and did not question the choice of tenants with high incomes, though of coarse, local authorities could operate priority schemes in times of shortage. It was a plan to establish an unsubsidised low-cost rented stock that was open for access to everyone. It had so many advantages that the short period of seeding subsidy was well worth it by comparison with any alternative subsidies. It was a policy to stabilise house prices by offering an alternative low-cost rented option. With a larger stock, built to meet this wider demand, it would have a greater capacity to respond to urgent need. It was a policy that would never have needed a bed and breakfast solution for the homeless or created the circumstances of 'Cathy Come Home'. It offered flexibility to a more mobile workforce and an economic refuge for those on their first flight from home or those saving to buy. With a stock freed from subsidies and patronage, tenants with mixed incomes and experience would demand a more flexible modern management with a percentage of empty properties designed to facilitate prompt access and ongoing modernisation programmes.
The discounted sale of social houses boosted the size of the ownership sector, but as former tenant owners move on, it is again declining. Ownership doesn't usually transmit between generations, because a parent's occupation extends beyond the start of their children's families. The equity of ownership makes little contribution to the provision of houses. It is withdrawn as equity when downsizing or it boosts the comforts of middle aged children and the property returns to the pool of houses for sale.
Without solving a single housing problem or even causing a change of residency, the tenure of two million, mostly older tenants, was reassigned to the status of ownership and ten years later, the market suffered negative equity. This Conservative policy of tenure is not a policy of housing provision, it is a political dogma that the market has rejected and it is not surprising that it has failed to provide an adequate rented sector.
The provision of housing by a private rented consumer service (PRCS) is fundamentally more expensive than the provision of housing by investment, whether it is investment for homeownership (HO) or to establish a rented investment housing (RIH) stock.
The former is too expensive for those on lower incomes because business rates expect 5-10% returns on the capital value of their properties. For a £250,000 house to return a 5% profit, it requires a rent of: 250,000 x 5/100 / 52 = £240 / week
It is estimated that a PRCS requires rents that are five or six times more expensive than RIH.
Currently, we have high unstable house prices, the poverty trap of social housing, unsustainable housing benefit and the increasingly isolated property-less poor, while 46% of emerging households believe they will never be able to buy their own home.
The dogma of the PRCS is the unsubstantiated belief that it would encourage a mass movement to buy. But this final state of the political dogma was implemented 32 years ago. It takes about a generation to experience the effect of housing policies, so now it is time to make a judgment. Has this policy advanced the realisation of a property owning democracy? Or more simply, has it improved the quality and affordability of our homes? On the contrary, all of the reports are negative. Older generations look with pity on the prospects of current and future generations as 40% of first time buyers now rely on the support of property owning parents.
The provision of housing is trapped within the rigid constraints of a PRCS. By realising this, we can understand and solve our housing problems. We can begin to understand why these structures must be replaced with policies of provision that make both the ownership and rented sectors mutually supportive. The unfolding consequences of the PRCS began in 1971, with the abolition of the cost-balancing principle on which the low-cost rented sector was based. It has nothing to do with the global credit crunch, which merely has the effect of emphasising the size of the hole that we are in.
Our peers in Europe have maintained large low-cost rented housing sectors.
We forgot, just how important, Bevan's policy of open access was. Everyone has the need for rented accommodation at some point in their lives and it is only by serving this general need that the value and efficiency of a rented investment stock can be understood. Then the cumbersome operation of our democracy must be our protection against the carpetbag policy of the RTB as it has been for the NHS so far.
1948 Council built houses at Worsley, near Manchester,
their only cost now would be maintenance.