IEA Blog

David Cameron has stated that his government will consider ending security of tenure for social-housing tenants. Those tenants who were in employment would be “encouraged” to rent in the private sector or to buy, so freeing up a scarce resource for those in severe housing need. Such a policy would bring social housing into line with the private rented sector where assured shorthold tenancies are the norm.

Currently social housing is means-tested only at the point of entry, and this means that a lucky few can receive a tenancy for life regardless of how their circumstances might change. However, time-limiting tenancies means that households can be means-tested at regular intervals (perhaps every three or five years). If their income is above a certain threshold their tenancy would not be renewed. A less punitive scheme would be to offer incentives for a household to leave, such as helping with a deposit to purchase a dwelling.

The idea of time-limited tenancies is not, however, a new one. It has been around for a number of years and Ruth Kelly was apparently very keen on the idea when she was Secretary of State at DCLG in 2007. New Labour saw this a means of helping the homeless without the huge outlay of building new social housing. But, as with many policies, changes in ministers and the dead hand of Gordon Brown put paid to it.

Whilst the idea has some attraction, especially with over 1.5 million households on housing waiting lists, it does have a number of problems. In particular, it runs completely counter to the government’s welfare to work agenda: time-limited tenancies mean that households would have to leave when they find work to be replaced by workless households. This would massively increase their housing costs and perhaps encourage them back onto handouts. A social tenancy would remain for life only if you stayed poor and on benefits.

Second, we should consider the impact that the policy might have on social housing estates. As Iain Duncan Smith argued last week, there are certain estates in Britain that are work-free zones, inhabited by families who have not been in employment for several generations. The policy of time-limited tenancies will institutionalise this and ensure that an even larger percentage of tenants are dependent solely on benefits.

Third, the policy contradicts policies aimed at encouraging shared ownership and key worker housing funded by housing associations. It would seem perverse to insist that working tenants leave their dwelling, whilst allowing nurses, teachers and policemen to become part-tenants of social housing.

More sensible, as I argued in my IEA monograph in 2006, would be a common tenancy for all rented housing – private and social – with financial support offered to households and not landlords. This reform could be quite readily tied into the DWP’s proposed unified benefit system and allow for proper competition between landlords instead of the collusion that exists at present where social rents can be set according to government targets and not based on the market. Imposing time-limited tenancies on the social sector without undertaking more fundamental reforms would be counterproductive.

Classical liberals, and many Conservatives, will tend to take a dim view of government intervention, but should they be equally dismissive of all government action?

Take a couple of examples from housing policy. First, social housing is funded in part by government subsidy and is allocated to those households that are considered vulnerable and in greatest need. However, because of their vulnerability they are deemed to need continuous support to maintain their tenancy. And of course, they are likely to be out of work and so are eligible for Housing Benefit to fund their rent. So the majority of social housing tenants receive a subsidised tenancy and a further subsidy to pay their rent, all backed up by a support system of housing professionals. So, even though their housing need is fulfilled by the granting of a tenancy, these households remain dependent on continuous support.

Second, the Right to Buy allowed social tenants to purchase their existing dwelling at a discount that depended on their length of tenancy. After a number of years they may sell the dwelling and keep any capital gain. In many cases this provided a considerable financial benefit to households. However, the key point about Right-to-Buy discounts is that this subsidy is a one-off: once they receive it households can no longer claim any state support for their housing costs and are expected to maintain the dwelling themselves. The result in this case is independence and heightened personal responsibility. They are given initial support, but after that they sink or swim on their own.

I would argue that the Right to Buy was a thoroughly benign form of state intervention that created greater freedom and independence rather than tying households permanently to state support. Perhaps we should see this as the model for how a newly elected Conservative government should act: they should seek to develop forms of support that make a permanent difference through a specific limited intervention.

Peter King’s new book, Housing Policy Transformed: The Right to Buy and The Desire to Own, will be launched at the IEA tonight. Click here for details of the event.

It is now almost exactly 30 years since one of Mrs Thatcher’s iconic social policies was launched. On 20 December 1979 the Conservative government published a Housing Bill which included the Right to Buy. This allowed council tenants to purchase their dwelling at a discount of up to 50 per cent. Since then over 2.5 million council dwellings have been sold, making the Right to Buy one of the most transformative pieces of social policy of the last century.

There are several useful lessons that can be learnt from the Right to Buy. The first is the need to go with the grain of human nature and not to try and force people to behave in ways that are not natural to them. The Right to Buy played on our natural self-interest, to do the best for ourselves and our families. The policy encouraged households to be independent and to take responsibility for themselves.

This brings us to the second lesson: the Right to Buy involved a one-off intervention – the offering of a right – but then left households alone. Unlike much of New Labour policy, which involves continual interference in the lives of people, it was an example of government offering something and then withdrawing. In that sense it can be genuinely said that it liberated people.

But perhaps of most significance, the Right to Buy demonstrates just how difficult it is to develop successful policy. It worked because the basic resources existed in the form of 6 million council houses, there were enough households willing and able to take up the offer, it was affordable for both households and government, and, most importantly, the policy could be readily explained and its appeal was obvious: in other words, the incentives and benefits were clear to all.

This combination of circumstances is very rare – so perhaps the key lesson we can learn from the Right to Buy is that really transformative actions by government are also very rare, and this might just be for the best.