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From Survey, International Socialism (1st series), No.50, January-March 1972, pp.2-5.
Transcribed & marked up by Einde O’Callaghan for ETOL.
The Tory Housing Bill, now going through Parliament, is designed to inflict massive rent increases on the 5.5 million families who live in council houses and on a further 1.3 million people who rent from private landlords. The device to be used is the fair rent system which was an invention of Labour’s 1965 Rent Act. For ‘fair’ rents read ‘higher’ rents. Labour made it all the easier for their successors to extend the fair rent concept, by arranging for a thorough whitewash to be done on the effects of the 1965 Rent Act. This was the Francis Committee which consisted of three lawyers, one surveyor and a Labour Party Alderman. Their Report (Cmnd 4609) appeared in April of this year and argues that fair rent is a splendid system. Yet most of the factual evidence which was quoted in the Report and ignored in its conclusions suggests that fair rents are splendid only for the landlords.
The fair rent procedure applies to houses and flats rented from private landlords, and whose rents were decontrolled by the Housing Acts of 1965 or 1969. Either landlord or tenant has the right to apply to a Rent Officer who fixes a fair rent, and there is a right of appeal against his decision to a Rent Assessment Committee which has the final say. The use of this procedure has resulted in rent increases averaging 30-40 per cent in the property affected.
In theory the Rent Officer operates as an independent assessor. Practice is something else. As Richard Crossman explained when he launched fair rents in 1965, ‘the Rent Officer will do the same sort of job as the Ministry of Labour conciliation officer does in the industrial field.’ Many Rent Officers have previously worked as valuers for property companies or local authorities. Others have a different qualification; ‘a good number of Rent Officers are retired senior members of the police force.’ (Francis Report, para 9.)
Fair rents make no pretence at objectivity. The rateable value or the gross value of the house is not considered. The evidence is that Rent Officers use current market rents as a standard, even though the legislation specifically rules out this criterion. There is a good deal of straightforward corruption. The Freshwater Group of Companies are the largest private landlord in the country, and have built up their £100 million empire largely by exploiting loopholes in the 1965 Rent Act. In the Sunday Times of 8 November, 1970, the Managing Director of Freshwater explained that the Company’s practice was to send out bottles of whisky and sherry to a selection of Rent Officers. This was confirmed by the Chairman of the Institute of Rent Officers (Lieutenant-Col. Phillips) who explained that ‘It would be churlish to misconstrue such an act of basic human decency and friendship.’
At the start there were some illusions about the aims of the fair rent procedure. In 1966, 50 per cent of the applications came from tenants; by 1970, only 20 per cent. By 1969, 70 per cent of all fair rent assessments raised the rent, and nine out of 10 landlord applications resulted in a rent increase. In a good many cases, tenants withdraw their applications for a fair rent assessment before the procedure is completed. Even the Francis Committee had to admit that, ‘ it would indeed be naive to suppose that there is not, in many of these cases, some form of pressure on the tenant from the landlord to withdraw his application .’ (para. 67.) Harassment and unlawful eviction were made offences by the last Labour Government in 1964-5. The results have not been impressive; a total of less than 800 convictions for, these offences in the entire country over the five year period 1966-70. The average fine in 1970 was £15.75 for unlawful eviction, and £16.75 for harassment.
If a landlord or tenant appeals against the fair rent set by the Rent Officer the final decision is made by a Rent Assessment Committee. The members of Rent Assessment panels from which these Committees are drawn will now become exceptionally powerful. Under the new Tory legislation they will be given the job of setting the rents of 5.5 million council houses.
The membership of Rent Assessment Panels is made up of people nominated by the Lord Chancellor. By statute, one third of the members have to be lawyers, and another third are professional valuers (who normally work for property companies in the district). A further third of members are the so called lay members – overwhelmingly drawn from the professional classes. The 55 lay members of the London Rent Assessment Panel include 17 social workers, five Housing Managers, 18 Councillors, three academics – and six trade unionists. At present the Rent Assessment Committee is the final court of appeal on fair rents. At the appeal the landlord is normally represented by a lawyer or a surveyor, but the tenant rarely has professional assistance. (No legal aid is available for rent appeals.) In England and Wales rents set by these Committees run at an average of £10 a year higher than those set by the Rent Officers; thus the tenants lose consistently in the appeals system.
From April 1972 all local authorities in England and Wales will have to set fair rents for their council houses under the close supervision of the Rent Assessment Panels. In the private sector the individual tenant can appeal to the Panel against the Rent Officer. But when council houses are subjected to the fair rents system, the individual tenant will have no right of appeal whatsoever. The rent will be negotiated between the Local Authority and the Rent Assessment Panel. Nor will the local authority be able to appeal to any higher authority than the local Rent Assessment Panel.
The nearest guess that can be made is that most council rents will double, to an average of between £4 and £5 a week, and more in London. The increase will be phased, rents rising by 50p a week in England and Wales and 75p in Scotland. (Fair rents for council houses will not be introduced in Scotland for two or three years, but in the interim annual rent increases are likely to be even more rapid than south of the Border.) The Government clearly anticipate resistance, and in the present Housing Finance Bill are giving themselves tougher powers to bludgeon local authorities than have figured in any previous piece of housing legislation. Any council which refuses to implement fair rents can have its Exchequer subsidy stopped at source. In the event of further resistance the Government are taking powers to move a Housing Commissioner into any local area to take over control of housing from the local authority. Any councillor or local official who withholds documents or information from the Housing Commissioner can be convicted and fined up to £400. A tenant who refuses to let a rent assessment officer into his house can be fined up to £50.
The second big extension of the fair rent system is to take place in the private rented sector. There are still 1,3 million tenancies whose rents are controlled under a series of Acts running back to the first Rent Act in 1915. Over the next three years these are all to be decontrolled and subject to fair rent procedure. The landlords will enjoy a massive rise in rents but will be under no clear obligation to spend money in repairs or improvements.
Under the new legislation, all council tenants and all tenants renting unfurnished in the private sector will be able to apply for a means tested rebate or allowance to help pay the rent. In terms of the numbers of people affected, this scheme represents the biggest single extension of the means test principle which has ever occurred in British welfare. More than one third of all households will be affected. An example of the scale to be used both in the council and private rented sectors is given below. The Table shows the weekly rents which families at various income levels will be required to pay, in addition to rates.
|
Rent to be paid |
|||||
|
|
Gross |
|
|
||
|---|---|---|---|---|---|
|
|
£4 |
£5 |
£6 |
||
|
£16 |
£1.00 |
£1.37 |
£1.77 |
||
|
£20 |
£1.85 |
£225 |
£2.65 |
||
|
£30 |
£3.55 |
£3.95 |
£4.35 |
||
|
£35 |
£4.00 |
£4.80 |
£5.20 |
||
Rates have to be paid in addition to the above rents. Weekly income includes overtime, bonuses, family allowances, and all of wife’s earnings except for £2.50 a week. The calculation will be based on gross income, before tax and other deduction.
It is clear from the Table that the rent to be extracted rises steeply as income increases. In fact – apart from those with exceptionally low incomes or exceptionally large families – for each extra £1 of income an extra 17p will be taken in rent. To this has to be added the 33p out of each extra £1 which is lost in income tax and national insurance, plus – for those at the lower end of the income scale – the loss of family income supplement at a rate of 50p in the £1, and loss of entitlement to free school meals. Wage demands must in future make allowance for the fact that over the whole spectrum of working class incomes 50 per cent of wage increases will be lost in extra tax and extra payments of rent. And for substantial groups of workers with below average earnings there will be loses of up to (or even more than) 100 per cent of any increase in earnings. More and more it is the case that a modest wage increase of £2 a week is liable to leave workers with less money in hand than they had before the increase was awarded. For many workers the wage/tax system has become like the bottom of a well; only by a large improvement in wages is it possible to jump out of the well and achieve any effective rise in living standards.
On the face of it, the Tories are quite mad. Means testing -however ineffectively – on a large scale, requires a massive bureaucratic apparatus. This autumn they introduced the Family Income Supplement which can be claimed by many lower paid workers who have one or more dependent children. When the school meal charge was raised in the spring, hundreds of thousands of families became eligible for free meals. Certainly the administrative toad is lightened by the fact that a large proportion of those entitled to such benefits do not claim them. The Government has just spent £300,000 advertising the new FIS scheme; yet more than half those families in theory entitled to an FIS have yet to apply for it Means tested welfare has become a bewildering jungle of complex schemes and regulations which leaves many people unsure of what they might claim, at a loss as to how to claim, or simply unwilling to expose themselves to the inbuilt humiliations of bureaucratic investigation.
Now the Tories are setting out to means test about 6-7 million tenants in respect of their rents. It is reckoned for example that 90 per cent (i.e., nearly 5 million) council tenants will be eligible for a rent rebate. Of the 2.5 million tenants who rent unfurnished from a private landlord, a substantial proportion will be entitled to a means tested housing allowance to help with the rent. Neither rebate nor allowances will be given automatically. In every case it will be left to the individual tenant to make a special application. The Government have offered no estimates of how many extra thousands of staff local authorities will require to administer the rebate and allowance schemes. Nor of the annual cost of the mind-boggling investigations of income and family circumstances and checks with employers, etc. which will be involved. In calculating entitlement to rent rebate or housing allowance, account has to be taken of all changes in household income – people getting a wage increase or promotion, moving jobs, wives entering or leaving employment, sickness, death, unemployment, retirement, divorce, separation, variations in family allowances as children are born or leave home, etc. If a tenant is blind his rent rebate will be a bit higher, and another bit higher if his wife is also blind. Account has to be taken of 0.1 per cent of any uninvested capital over £300. Allowance has to be made for each non-dependent age over 18, unless undergoing full-time education. Large sums of money will be spent advertising the scheme, and the Government are full of happy optimism that everyone will eventually understand exactly what they are entitled to. Which means, for example, that 8 million tenants, of whom perhaps a quarter are pensioners, must clearly grasp the implications of such regulations as:
‘If the tenant’s income equals, or is less than the needs allowance, the amount of the rebate or allowance is to be the sum equal to the difference between the rent of the dwelling and any minimum rent, subject to various conditions affecting minimum and maximum rebate and the reduction for non-dependents. If the tenant’s income exceeds his needs allowance, the minimum rents will be increased by 17 per cent of the excess. If the resultant amount is less than the rent of the dwelling, he will receive a rebate or allowance equal to the deficiency.’ Fair Rent for Housing, Cmnd 4728, Pg.21
All of this gigantic scheme has one main objective – to cut the subsidies currently paid from the rates and by Central Government into the council house sector. In the current year these subsidies total some £220 million, i.e., £157 million from the Exchequer and about £63 from the rates. These are smallish sums, and mean in effect that housing is one of the minor and marginal sectors of the welfare state. Combined expenditure on education, health and social security amount to about £10,000 million. Public expenditure on sewage (about £300 million annually) is a good deal higher than on housing subsidies. The average council house gets a subsidy of 0.60p a week. This year local authorities will rake in nearly £200 million from rates – a large part of which will in any case be paid by council tenants themselves. At present a local authority Housing Revenue Account pays for all sorts of expenditure (e.g., slum clearance, redevelopment) which is of direct benefit to the whole population, not just to council tenants. Council house subsidies of £220 million are a lot less than the £300 million which is being handed out in the current financial year to owner occupiers claiming tax relief on mortgage interest.
The Government forecasts that if the present subsidy system were to continue council house subsidies would rise by some £300 million a year over the next decade. The intention behind the present legislation is to make council tenants pay out the £300 million a year in higher rents. But increasing costs of land, labour, and materials are a minor factor in the steep increase in the cost of council housing. For a new council house the local authority can borrow at a 4 per cent rate of interest under Labour’s 1967 Housing Act. But most local authority borrowing is made necessary by the massive accumulated debts from earlier building. To service this debt Councils must keep up a high rate of new borrowing which has to be at the interest rates current on the market. In addition, local authorities are compelled by the Government to repay money borrowed for housing over a 60 year period, and this adds greatly to the cost of borrowing. The total interest charges for a loan of £1,000 at 8 per cent are £1,500 if the principal is repaid in 10 years and £5,000 if repayment is spread over 60 years. Thus by the time interest has been paid over 60 years at current rates of interest a council flat costing £5,000 will ultimately cost nearly £30,000. Of this total only 15 per cent represents the cost of land, labour and materials. The remaining £25,000 goes in interest charges.
Thus council rents will double over the next 2-3 years not to meet increasing costs of council house building, but to pay for the interest charges incurred by local authority borrowing. The pattern will continue as in the past. In 1961, £250 million in rent was taken from council tenants, and local authorities paid rent £250 million on loan charges. By 1968 rents had doubled to £500 million a year – and loan charges had also risen to £500 million. All of the rent increases levied over this period were absorbed by the extra burden of debt interest. Seventy per cent of all local authority spending on houses goes on loan charges, and the proportion is increasing all the time.
The introduction of the fair rent system for council houses means that in future there will be no connection between the level of rents in a given local authority and the state of its housing budget. In many areas council housing will start to throw up a fat profit. This process will be helped along by the fact that the fair rents set in the council sector will be based on those operating for houses of equivalent standard in the private rented sector. Private fair rents allow for a profit to the landlord, and this profit allowance will be translated over into the public sector.
Local authorities making a profit on council houses will have to pass half of this surplus over to the Exchequer which will use the money for subsidies to those authorities with particularly expensive housing programmes. It is a neat trick; a large part of the cost of replacing the slums in areas with bad housing problems is to be met by raising council rents in other parts of the country. The effect is a redistribution of income – confined within the population of council tenants.
Thus, in summary, the Tories intend to decontrol all unfurnished rentings from private landlords, and substitute instead the fair rent mechanism – which will also be extended to the council house sector. A uniform means tested system of rent rebates and allowances will be introduced for council house tenants and people renting unfurnished from private landlords. The subsidy arrangements will be recast so that council tenants will pay a large part of the extra cost arising in areas with serious housing problems.
The present pattern of tax-relief subsidies for owner occupiers gives the biggest rewards to the richer beneficiaries. The cash value of such a tax relief is greatest for those with high incomes who are buying the more expensive houses and who have been able to obtain the largest mortgages. The Government are leaving this system intact.
The rent rebate scheme is not being extended to the 500,000 tenants who are renting furnished accommodation, although this group is one of the most heavily exploited on the housing scene. A few sticks of ancient furniture make a house or flat ‘ furnished’ in the legal sense. The Francis Committee found that the typical furnished tenant in London was paying one-third of his income on rent. It is in the furnished sector that the broadest loopholes exist for escaping any form of rent restriction. Many landlords by switching over to furnished lets have evaded even the minimal restrictions which the fair rents system exercise over unfurnished rents. In 1963, 90 per cent of the flats and houses advertised for let in London were unfurnished; in 1970 only 5 per cent – the rest being furnished. The Government are not even making a pretence of attacking the multiple rackets of the furnished sector.
The extension of fair rents to the council sector marks a change in the conditions of struggle on the housing front. More visibly than ever before, the housing policy of each local authority will be directly dictated from Whitehall. Rents will be fixed by committees selected by Central Government. The rent rebate scheme will operate uniformly throughout the country. The changes imposed by the new Housing Finance Act will come into operation on a single national timetable starting in April 1972. The integration of local tenants associations into some form of national organisation becomes more than ever an urgent necessity and a basic precondition of effective resistance. The vast extension of the means tested principle as applied to rents, offers a further wide field of operation to the growing claimants movement, and requires in fact an interlinking of tenants and claimants organisations. It is clear that in 1972 housing will be a major arena of organised conflict between the Government and the working class movement.
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