Memorandum-to-the-Prime-Minister-on-Unaffordable-Housing

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What does ‘privatisation’ mean? Appendix 8 - An international comparative study of housing privatisation (Peter Ambrose) The housing policies of <strong>the</strong> Thatcher administrations, which have been broadly adhered <strong>to</strong> by <strong>the</strong> two post-1997 New Labour governments, have brought about a marked shift in <strong>the</strong> private <strong>to</strong> public balance of housing provision, ownership and management.This has been loosely termed ‘privatisation’. But in a complex and segmented activity like housing production this term is not an especially helpful one unless carefully defined. With reference <strong>to</strong> <strong>the</strong> five-stage model in Appendix 1 <strong>the</strong> private/public balance at Stage 1 (promotion) matters because this sets in train <strong>the</strong> pattern of new production. It also matters at Stage 2 (financing) because housing provision is capital-intensive and <strong>the</strong> outcome depends very much on <strong>the</strong> terms at which loan capital and grant subsidy is made available. If capital is available only at full market rates and repayment terms <strong>the</strong>n costs will be higher than if some preferential arrangements apply. Stage 3 (construction) has always been mostly in private ownership so <strong>the</strong> issue is less sensitive here. At Stage 4 (allocation) <strong>the</strong> private/public balance is crucially significant because it determines how much housing is allocated according <strong>to</strong> market power and how much according <strong>to</strong> need.The more that market power is <strong>the</strong> determinant <strong>the</strong> more income inequalities will be reflected in, and reinforced by, housing inequalities.The private/public balance of s<strong>to</strong>ck will be affected only marginally by <strong>the</strong> balance of new production since this is provides only about a 1% increment per year.What matters much more is any transfer of <strong>the</strong> existing s<strong>to</strong>ck from allocation on <strong>the</strong> basis of need <strong>to</strong> allocation on <strong>the</strong> basis of market power - in o<strong>the</strong>r words sales and transfers of <strong>the</strong> public s<strong>to</strong>ck. Apart from <strong>the</strong> issue of <strong>the</strong> differences in sensitivity by stage it should be noted that <strong>the</strong>re are at least two meanings of <strong>the</strong> term ‘privatisation’. It can mean privatisation of <strong>the</strong> actual s<strong>to</strong>ck (by means of ownership transfer) or it can mean privatisation of <strong>the</strong> rights of <strong>the</strong> owner (by means of deregulation of rents, tenure security and management practices). What effects does ‘privatisation’ have? While privatisation, broadly defined, is likely <strong>to</strong> have profound effects on housing supply, access and management, <strong>the</strong> methodological problems of carrying out any before and after study of its effects are obvious. The processes are complex, <strong>the</strong>re are a host of intervening variables and <strong>the</strong>re is no control group.There is also no very clear view of what <strong>the</strong> housing system is trying <strong>to</strong> achieve so <strong>the</strong>re is no self-evident test of ‘success’. Never<strong>the</strong>less in <strong>the</strong> early 1990s <strong>the</strong> question of <strong>the</strong> effects of housing privatisation became of keen interest <strong>to</strong> <strong>the</strong> Russian and Swedish governments.The Russians were passing through a rapid process of privatisation Zacchaeus 2000 Trust - <strong>Memorandum</strong> <strong>to</strong> <strong>the</strong> <strong>Prime</strong> <strong>Minister</strong> - May 2005 53
following <strong>the</strong> political changes and <strong>the</strong>y were keen <strong>to</strong> assess <strong>the</strong> likely effects in <strong>the</strong> field of housing.The Swedish government had recently partly dismantled <strong>the</strong> previous housing arrangements following <strong>the</strong> 1991 Election that had produced a marked swing <strong>to</strong> <strong>the</strong> right. Housing experts in both countries sought <strong>to</strong> learn what <strong>the</strong>y could from <strong>the</strong> housing privatisation in <strong>the</strong> UK following <strong>the</strong> rapid ascendancy of market forces during <strong>the</strong> Thatcher years. The INTAS comparative study Consequently a study was initiated funded by INTAS (The International Association for <strong>the</strong> Promotion of Cooperation with Scientists from <strong>the</strong> New Independent States of <strong>the</strong> Former Soviet Union) and <strong>the</strong> Swedish Council for Building Research.The study was carried out by teams from <strong>the</strong> EUROGRAD Institute in St Petersburg (led by Professor Boris Grinchel), <strong>the</strong> University of Örebro (led by Professor Berth Danermark) and <strong>the</strong> Centre for Urban and Regional Research at <strong>the</strong> University of Sussex (led by Dr Peter Ambrose).The project reported in 1998 (Ambrose, Danermark and Grinchel 1998). It was agreed between <strong>the</strong> three teams that <strong>the</strong>re was no feasible way of carrying out a comparative study through time o<strong>the</strong>r than by using <strong>the</strong> framework set out in Appendix 1.The analysis was designed <strong>to</strong> include all forms of housing, private, public and voluntary sec<strong>to</strong>r.The Swedish and UK data on promotion, financing and sources, construction, allocation, re-allocation and s<strong>to</strong>ck balance were sufficiently robust <strong>to</strong> calibrate <strong>the</strong> model. The Russian data had been collated in entirely different forms and was judged <strong>to</strong> be less reliable. The timescale of <strong>the</strong> privatisation process was also very different in each case. In <strong>the</strong> UK case <strong>the</strong> years 1978 <strong>to</strong> 1995 were chosen <strong>to</strong> illustrate <strong>the</strong> spread of effects whereas in Sweden <strong>the</strong>re was a shorter timescale, 1990- 1995, since <strong>the</strong> move <strong>to</strong>wards market processes had started only in 1991.The Swedish team felt that most benefit for <strong>the</strong>m would come from learning from <strong>the</strong> experience of <strong>the</strong> UK case about how <strong>the</strong> early effects of privatisation might develop in<strong>to</strong> later effects. For this reason a separate analysis of <strong>the</strong> early period of UK privatisation, from 1978 <strong>to</strong> 1984, was built in<strong>to</strong> <strong>the</strong> study. Definitions of ‘success’ Socio-political differences made it extremely difficult <strong>to</strong> arrive at any consensual set of indica<strong>to</strong>rs of ‘success’ in <strong>the</strong> three countries since, in one case, <strong>the</strong> test might be <strong>the</strong> increase in executive housing in smart city-centre locations whereas in ano<strong>the</strong>r it might be better access for lower income households. Never<strong>the</strong>less several very simple tests seemed valid across <strong>the</strong> three systems - <strong>the</strong> main one was <strong>the</strong> extent <strong>to</strong> which investment committed at Stage 2 turned in<strong>to</strong> housing output and more allocations at Stages 3 and 4. Clearly in any cultural setting it is reasonable <strong>to</strong> expect that more input should be matched by more output. Results - reduced cost-effectiveness Applying this test <strong>the</strong> results for Sweden and <strong>the</strong> UK were quite clear. In <strong>the</strong> UK <strong>the</strong> first period of privatisation saw an increase in investment from index 100 <strong>to</strong> 118 (in real terms) and a decrease in output in units from 100 <strong>to</strong> 75 - a clear loss of system efficiency.The owner-occupancy component in <strong>the</strong> output rose from 53% <strong>to</strong> 79% producing a narrowing of housing options.The effects in <strong>the</strong> Swedish case was more extreme - a 1990-95 decrease in investment from 100 <strong>to</strong> 18 and a decrease in output 54 Zacchaeus 2000 Trust - <strong>Memorandum</strong> <strong>to</strong> <strong>the</strong> <strong>Prime</strong> <strong>Minister</strong> - May 2005
Page 1 and 2:
Z2K ZACCHAEUS 2000 MEMORANDUM <stro
Page 3 and 4: 2 First published in Britain in 200
Page 5 and 6: Introduction The Prime</str
Page 7 and 8: 6 Zacchaeus 2000 Trust - Me
Page 9 and 10: 8 Zacchaeus 2000 Trust - Me
Page 11 and 12: Recommendation 2 Policy should buil
Page 13 and 14: Recommendation 10 Increased resourc
Page 15 and 16: The shaded boxes along the<
Page 17 and 18: RSLs have no direct electo<
Page 19 and 20: 4. Of the
Page 21 and 22: Similarly in urban regeneration sch
Page 23 and 24: 3. Increases in the</strong
Page 25 and 26: There may be some inconsistency in
Page 27 and 28: (a) producing units of a quality su
Page 29 and 30: 28 Zacchaeus 2000 Trust - M
Page 31 and 32: Fund they stress t
Page 33 and 34: homeless by local authorities (itse
Page 37 and 38: compared to 46% in
Page 39 and 40: approximately threefold rise in rea
Page 43 and 44: End of 1998 28,700 End of 2000 120,
Page 45 and 46: ‘...stock transf
Page 49 and 50: shown in Figure 3. (£ billions) 25
Page 51 and 52: Housing Association 3 Private Landl
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Page 59 and 60: The evaluative comparison focused l
Page 61 and 62: costs (which would have included no
Page 65 and 66: more prone to asth
Page 67 and 68: to a Parliamentary
Page 71 and 72: A sclerotic market Young people fac
Page 73 and 74: enters with no housing assets seems
Page 75 and 76: Europe, and that the</stron
Page 77 and 78: 76 reason for not joining a strike.
Page 81 and 82: is regarded as an essential step al
Page 85 and 86: provisions based upon partnership l
Page 87 and 88: Members could decide to</st
Page 89 and 90: The size of land value gains The ga
Page 91 and 92: For this reason, economists from Ad
Page 93 and 94: In the United Stat
Page 95 and 96: decline in Federal support for hous
Page 97 and 98: from stamp duty and council tax (Ll
Page 99 and 100: upward wage pressure and fewer recr
Page 101 and 102: So is there a way
Page 103 and 104: 7. A show flat already exists <stro
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healthy living. Poverty happens und
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‘When was it that we saw you hung
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StanislasYassukovich, quoted earlie
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Bowley, M. (1945) Housing and <stro
Page 113 and 114:
Phibbs, P. and Young, P. (2005) Hou
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Memorandum-to-the-Prime-Minister-on-Unaffordable-Housing

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