Owner-Occupation in Britain

Stephen Merrett

• Editorial: Routledge
• Año: 2021
• ISBN:
  9781000325942
• Edición: 1
• Categoría: Ciencias sociales
• Categoría: Sociología urbana

Originally published in 1982, this is a companion volume to State Housing in Britain. Together the 2 volumes cover the tenure of some 85% of all British households in much of the 20th Century. The development of the tenure between 1918 and 1970 with special reference to its position in state housing policies is examined. Subsequent chapters analyse effective demand since 1970, both with respect to its demographic base and as regards the capacity to buy. In particular the question of why people want to buy is asked and the supply of housing (both council houses and former private rented accommodation) as well as the output of speculative housebuilders is considered. A detailed survey of the perturbations in the housing market during the volatile experience of the British economy since 1970 is also covered.

1 The First Boom

1 Introduction

Although it was apparent to no one at the time, the year 1914 marked a watershed in the history of housing in Britain. Before that time the vast majority of dwellings, except the largest, had been constructed for private rental. Typically they were erected by builders, large or small, and sold to persons and institutions placing their capital in domestic property, who in their turn rented the houses out to the mass of the population. Of the total stock of dwellings in 1914 perhaps 10 per cent were owner-occupied, less than 1 per cent were in the local authority sector, and the rest were the property of private landlords.¹ After 1914 housebuilding for rental contracted so violently and remained so unattractive for the purpose of the accumulation of capital by private landlords that, except in the 1930s, it has played only the most marginal role in the provision of new housing for the British people until this very day. Instead, housebuilding for owner-occupation and local authority rental became the dominant forms of production.

The explanation of this vast metamorphosis in the system of housing provision constitutes a substantial part of later sections in this chapter. Here I merely want to stress that whilst the extent of home-ownership was relatively narrow in 1914, it was already the case that the policies of the state directly affected the sector in a variety of ways.

With respect to land and planning, intervention was fairly minimal. Transactions in land were basically unconstrained and although a betterment levy of 20 per cent existed, this had been introduced only in the 1910 Finance Act. The first Act explicitly relating to town planning was passed in 1909 and there was further legislation in 1919, 1932 and 1935, the contents of which are briefly summarised in appendix 1. But Cullingworth concludes in a brief review of its implementation that it had little material effect on the scale or location of development.²

In reference to housing production, the most significant form of state intervention before 1914 was in regulating the quality of the units erected, principally by means of the building by-laws enacted under the 1875 Public Health Act. Minimum standards were set for newly built houses dealing with sanitation, lighting, ventilation, structural stability and with questions of layout and density such as the width of streets and prohibition of the building of back-to-backs and ‘courts’. After the 1870s, new houses in most towns had to be provided with a piped water supply and water-borne sanitation.³

The role of the state in the field of mortgage finance primarily consisted in setting the legal framework within which the building societies operated. These had first emerged out of the variety of co-operative and friendly societies which arose in the eighteenth century supporting the uprooted migrants to the new industrial areas. The Act of 1836 had for the first time accorded them specific legal recognition. The development of the societies in their modern form, however, began only in the mid-nineteenth century and the most important Acts, those of 1874 and 1894, lay down the foundations in law for their operation.⁴ (See appendix 1 for details.) One must also mention the existence of the Small Dwellings Acquisition Act of 1899 which permitted the municipal provision of mortages for owner-occupation. But before the First World War the sums made available were trifling.

It is necessary also to examine some aspects of government taxation which had a direct effect on the stream of payments made by the owner after the purchase of the house had been completed. Income tax was originally imposed in 1799 and our present system has grown from the Act of 1803. Under this certain annual payments, including interest, were paid to their recipients net of tax. Those persons making the payments, and deducting tax, could retain the tax so deducted and in this way would obtain tax relief. Thus in 1914 this relief embraced, amongst others, owner-occupiers of domestic property making interest payments on their mortage.

As the author of the Housing Policy Technical Volume notes:⁵

From 1925/26, under a special arrangement, interest on building society mortgages was payable in full, without Reduction of tax. To balance this departure from the normal arrangements and to obtain the same relief as would be available if tax were deducted and retained, borrowers could set these interest payments against their own liabilities for tax. This special arrangement was given legislative force in 1951, and consolidated in the Income Tax Act 1952. Since the introduction of PAYE (1944) this relief is normally given to employees through the borrowers PAYE coding.

The effect of this was to provide a state subsidy to the home-owner equal to his (or her) mortgage interest multiplied by his marginal rate of taxation. Estimates for the aggregate value of this subsidy exist only since the mid-1960s. (See appendix 4.) However, before 1939 a married man on average earnings would have incurred no tax liability, so this subsidy was limited to the higher income groups.⁶

Thus for mortgagors, i.e. the recipients of loans for house purchase, income taxation carried with it an automatic subsidy. But the system also brought with it a most peculiar tax. From its inception income tax was charged on income from letting properties, as well as earned income, and this was collected under Schedule. A by reference to the assessed rental value of properties. As owner-occupation developed this tax was also charged on home-owners, whose properties clearly could be assessed in terms of their rental value, even though they actually received no rental income. So the Schedule A tax on owner-occupiers (like the subsidy via tax relief described above) was a by-product of the general system of income taxation and was not originally introduced as a policy measure designed to impede (or encourage) the growth of this tenure.⁷

Finally, we should note that owner-occupiers have always been liable for the payment of domestic rates, just as council tenants are. Having completed this brief review of the general character of the state’s relation in 1914 to the system of owner-occupation, we can turn to consider the extraordinary history of housing policy in the years 1915-21.

2 The First Housing Subsidies

During the First World War housebuilding had come to a virtual standstill, partly because of the war-time building controls. In 1915 the control of rents had also been introduced, in response to working-class agitation in Glasgow. The dwelling shortage, which existed before the war, the accumulated backlog of the war years themselves, and the continued growth of the British population all pointed to the need for a vigorous peace-time housebuilding programme. The government and the civil service realised that the task could not be left to private enterprise, if only because of the fall in real wages in 1914-18 which cut the rent-paying capacity of families, and because of the exceptionally high level of building costs anticipated after the war. Such cool appraisals of the temporary necessity of state intervention were reinforced by the angry social and political climate, for which the appalling housing conditions of British workers were held partly responsible.

In this context the state embarked at the end of the war on a twofold strategy: the stimulation of the state housing sector and the subsidisation of speculative building of small houses for sale or rental. In addition the prolongation of rent control on existing houses was announced in 1920.

Council housing already had a long history and in the half-century preceding 1914 had provided about 24,000 dwellings, of which about 90 per cent had been built after the 1890 Housing of the Working Classes Act. Construction had been carried out both in relation to slum clearance and for general needs purposes. Rents had never been formally su...

Índice

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Table of Contents
• Figures and Graphs
• Tables
• Preface
• Abbreviations
• 1 The First Boom
• 2 War and Reconstruction
• 3 The Second Boom
• 4 The Demographic Context
• 5 The Willingness to Purchase
• 6 The Capacity to Purchase and the Building Societies
• 7 Owner-Occupation at the Margin
• 8 The Sale of Council Houses
• 9 The Sale of Privately Rented Accommodation
• 10 The Stock Supply from Owner-Occupier Households
• 11 The Speculative Housebuilding Industry
• 12 Owner-Occupier Rehabilitation
• 13 The Exchange Process
• 14 Stock and Flow
• 15 Owner-Occupation and Social Relations
• 16 Perturbation and Decline
• 17 A Strategy for the Future
• Appendices
• Notes
• Select Bibliography
• Name Index
• General Index