Housing in the Twentieth Century

Ray Forrest & Peter Williams. Handbook of Urban Studies. Editor: Ronan Paddison. SAGE Publications. 2001.

The production, consumption and exchange of housing is at the core of urban studies. Where we live, what we live in, with whom we live and how much it costs us to do so are among the central concerns of everyday life. With few exceptions, rental and loan payments are likely to represent a major proportion of earned incomes. Fluctuations in these costs impact in significant ways on other areas of social life and, for governments, housing costs and housing availability retained a political salience and sensitivity throughout the twentieth century. The issues may have changed and the forms of political mobilization around housing may have, in some contexts, become less overt and confrontational, but housing problems continue to have the capacity to provoke widespread social disquiet and tensions.

This chapter focuses mainly on the housing situation in the industrial or post-industrial ‘North’ but it is important to begin with a reminder of the global context of urbanization in order to avoid ethno- or Euro-centric views of housing problems and solutions. We cannot deal adequately in one chapter with the significant variations in social and economic conditions which shape housing problems in different parts of the world. Moreover, even within the confines of Europe, variations in culture, institutional forms, histories of urbanization and industrialization, housing stocks and policy histories have been and remain substantial and generalizations are highly problematic. With that as a cautionary note, however, it is possible to map out some of the key trends and developments which have shaped housing in the period since the Second World War.

A Retrospective: Progress in the Twentieth Century?

The past hundred years has seen enormous changes in housing standards and conditions in the developed North but the reality for millions of households in developing countries remains one of absolute housing deprivation, subsistence living and marginality. At the beginning of the new millennium we are, it seems, finally entering the urban age, when the majority of people will be living in cities of varying scale. In the developing and newly industrializing countries, many of these cities will be on a mega scale, with mega problems of environmental pollution, transport congestion, poverty and shantyism. The accelerated pace of urbanization and the commercialization of land markets in the cities of the South are creating new pressures of eviction and displacement.

Peter Williams has co-authored this chapter in a personal capacity. The views expressed do not necessarily reflect those of any organization with which he is associated.

From a European perspective, it would appear that housing policy over much of this century has been concerned with the legacy of the rapid urban growth of the nineteenth and early twentieth century. Issues of housing conditions and their impact upon health and the economy, subsequent slum clearance and, in some countries, the associated rise of social housing, the decline of private landlordism, the growth of individual home ownership and the development of contemporary financial mechanisms and institutions are all rooted in that period. Two centuries later, the nations which were at the core of the Industrial Revolution confront very different urban conditions and housing systems. But rural-urban migration and the related housing pressures remain dominant forces in the world. As Sudjic (1996) has neatly observed,

Between 1810 and 1850, Manchester’s population increased by 40 per cent every 10 years. It became a gigantic mechanism for the creation of wealth, and the transformation of rural migrants into city dwellers. Manchester invented the factory, the railway station, the civic university, and the back-to-back house. Asia’s vast new cities are doing the equivalent for the next century. (1996: 37)

Despite all of this, it is a sobering fact that, on whatever estimates, the scale of homelessness remains significant in Europe and North America. It has been suggested, for example, that in the early 1990s there were around 18 million citizens of the European Union in some state of homelessness (FEANTSA, 1995). However, if we then include even more heroic estimates of those in living in various states of housing precarious-ness in other parts of the world, the scale of the global housing problem appears truly unmanageable.

Worldwide, the number of homeless people can be estimated at anywhere from 100 million to 1 billion or more, depending on how homelessness is defined. The estimate of 100 million would apply to those who have no shelter at all, including those who sleep outside (on pavements, in shop doorways, in parks or under bridges) or in public buildings (in railway, bus or metro stations) or in night shelters set up to provide homeless people with a bed. The estimate of 1 billion homeless people would also include those in accommodation that is very insecure or temporary, often of poor quality—for instance squatters who have found accommodation by illegally occupying someone else’s home or land and are under constant threat of eviction, those living in refugee camps whose home has been destroyed and those living in temporary shelters (like the 250,000 pavement dwellers in Bombay). (United Nations Centre for Human Settlements, 1996: 229)

On any measure and whatever the context, we are evidently a long way from solving the housing problem. That is not to say that government interventions, rising real incomes and the development of new financial mechanisms have not produced substantially better housing conditions for the majority of households in the industrial (or post-industrial) world. If we take Britain as an example, in a relatively short period it has been transformed from a nation in which the majority of households lived as tenants of private landlords and in accommodation that lacked basic amenities such as inside toilets and fixed baths to a situation where only a minority lack such provision and home ownership is the dominant tenure form. As recently as 1950, most households were private tenants and the majority lacked exclusive access to bath, shower or inside toilet. In Greater London in 1964, more than a quarter of households did not have exclusive access to hot water (Murie, 1974), By 1991, only 200,000 dwellings lacked basic amenities in England, representing around 1 per cent of the stock (Department of the Environment, 1993).

On such basic indicators of housing condition, similar progress can be found across Europe and North America. And even more dramatic examples of upgrading of housing standards and conditions can be found in the rapidly developing nations of South East Asia, where the pace of urban renewal and suburbanization is breathtaking by European standards. In the older capitalist core of Europe, however, as amenity provision has improved, the general physical fabric of dwellings has deteriorated and problems of disrepair and general unfitness have become more pressing policy issues. In countries such as Britain, Ireland, Belgium, France and Portugal more than a quarter of the housing stock was built before 1919. But perhaps of greater concern has been the emergence of a minority of households experiencing relatively greater housing deprivation. Robson’s (1979) observations about Britain remain more generally relevant:

while the inequalities have grown less and the average provisions raised, the awareness of inequalities has grown. With a larger proportion of the population being better housed, the remaining, and still large numbers of ill-housed and homeless feel the inadequacy of their accommodation even more. (1979: 70)

While standards and expectations have risen, a minority of poor households—lone parents, poor elderly, the sick and disabled and many from ethnic minorities—find themselves in housing circumstances increasingly divergent from the majority. These minorities have, in the USA, Britain and much of Europe, become increasingly associated with low quality public housing. These poor neighbourhoods, typically in the inner city or on the urban periphery, are among the most visible signs of social polarization and social exclusion in contemporary urban society.

Housing poverty remains therefore a major issue even in the wealthiest societies. And perhaps perversely, housing-related wealth has become an increasingly important component of personal sector wealth (see Forrest and Murie, 1995). As individual ownership of dwellings has expanded in combination with periods of real house price inflation, the ownership of housing assets has come to represent a new if at times volatile division between the haves and have-nots. The home is perhaps more than ever a pivotal element in social life. The design, tenure and location of dwellings is a key dimension of social status and social stratification. And homelessness is the most overt expression of exclusion from the social and consumption norms of contemporary society. The residential dwelling is the focus of family life and the residential neighbourhood remains one of the major arenas where the mundane but important and routinized rituals of everyday life, which contribute so much to our social identity, are played out. The dwelling is the site for the storage, use and enjoyment of consumer goods. Hence in a consuming world the dwelling takes on ever-increasing significance. And the home is also, of course, the workplace for the unwaged work of women and carers, for minorities of high and low status homeworkers, where children do much of their learning and playing and where ever-increasing numbers of elderly people in increasingly ageing societies spend much of their time.

From Rational Planning to Deregulated Markets

A broad sweep of housing policy and provision in the period following the Second World War would situate changes in the context of a more general shift from the post-war period of rational planning and direct state intervention aimed at eradicating housing problems to a later phase of economic restructuring and social engineering where market processes were unambiguously reasserted. Whatever the particular phase of restructuring, and whether we are referring to shifting boundaries between the state, the market and the individual in the European capitalist core countries, (former) state socialist societies, the city states of Singapore or Hong Kong or whatever, housing has been at the forefront of broader social and economic tranformations. In the postwar period of suburbanization, mass social housing, New Towns and the development of various forms of individual home ownership have had a major impact on the everyday lives of people, on the links between housing and the wider economy, on patterns of mobility and on the relationships between home and work. With the USA as the obvious major exception, housing provision was at the heart of dominant, if contested, beliefs that states could address social needs and solve housing problems in a planned, rational manner. The British New Towns programme is perhaps one of the best expressions of state-centred, strategic rationality in addressing interrelated issues of environmental congestion, the geographic distribution of employment, higher housing standards and changing patterns of family life. Embedded in the planning of New Towns were utopian visions of healthy, cohesive communities living in landscaped residential areas designed to maximize neighbourly interactions. And while, in the USA, the direct provision of state housing was no more than a minor part of the policy programme, government policies were heavily geared to the promotion of home ownership as an important element of post-war social engineering and economic restructuring. Harvey (1978) linked the promotion of home ownership to a more general process of debt-financed infrastructural development and spatial reorganization in response to problems of overaccumulation and underconsumption in post-war capitalism.

Though suburbanization had a long history, it marked post-war urbanization to an extraordinary degree. It meant the mobilization of effective demand through the total restructuring of space so as to make the consumption of the products of the auto, oil, rubber and construction industries a necessity rather than a luxury … It is now hard to imagine that postwar capitalism could have survived, or to imagine what it would have been like, without suburbanization and proliferating urban development. (1978: 39)

But there are other perspectives on the promotion of home ownership in post-war USA which emphasize aspects of individual behaviour, social pathology and cohesion and which resonate more widely with other national housing policies and underlying assumptions about the links between housing tenure and social action (see Winter, 1994 for an interesting exploration of these issues). For example, the influential work of Rossi (1955) on residential mobility was funded partly from a concern with the pathology of hyper-mobility—the apparent rootlessness and nomadic nature of post-war USA which was seen by some as both symptom and cause of a wider social malaise in which community ties were disintegrating and the quality of urban life was deteriorating. The mobile, affluent society was viewed as unstable. A policy solution to reduce this assumed pathological desire to move to achieve upward social mobility was the promotion of home ownership which was seen as a way of encouraging individuals and families to put down roots.

Policy and academic debates around housing have continued to reflect this cocktail of macroeconomics and social engineering. As absolute housing shortages have diminished and as fiscal pressures increased throughout the 1970s and 1980s, beliefs and ideological constructions about the supposed political and social effects of housing tenure have become intertwined with a resurgence of liberal economics and austerity policies. Whilst it would be wrong to overstate the degree of policy convergence, terms such as privatization and deregulation entered policy and popular vocabulary and progressively shaped housing policy and provision in many countries. Housing was once again in the vanguard of Housing in the Twentieth Century attempts to restructure social and economic life.

The modernist mass housing estates of the 1950s, 1960s and 1970s had become increasingly discredited and associated with concentrations of poor people in high rise flats in inner or peripheral urban locations. The solutions to the housing problems of one period had rapidly become the social and physical housing problems of the next. High-rise housing and poverty, difficult-to-let estates, social isolation, ghettoization and residential segregation, became conflated with direct state intervention in housing. Policy emphasis shifted from object (the property) to subject (the person) subsidies and increasingly towards the promotion of individual home ownership. Home ownership and social housing became progressively intertwined as privatization policies boosted the former through the disposal of the latter.

These developments took very different forms in different countries. Political cultures, institutional and subsidy structures, housing stocks and the history of housing policies vary substantially between countries. Apparently similar policies are pursued within highly varied social and economic contexts with different pressures and motivations and with very different consequences. Moreover, the pattern of policy and provision in one era conditions the possible options of the next. For the UK, the privatization of state housing represented a fortuitous coincidence of economic and social imperatives.

The creation and then sale of a substantial stock of family houses owned and managed by municipal landlords enabled a massive boost to home ownership whilst simultaneously generating a large and continuous flow of funds to government. Whilst the role of the state in housing was ‘rolled back’ in a number of ways, home ownership and its attendant social and political consequences were rolled forward. But governments cannot sell what they do not own. In the USA, the scope for housing privatization policies, as opposed to deregulatory measures, was limited by the already small scale and residual nature of social housing. Concentrations of poor people in heavily stigmatized housing developments offered limited scope for disposal of such properties to the tenants. And in West Germany, private landlords and other institutions received loans and subsidies to provide social housing that met specified standards and was directed at target groups but, after a stated period, the contract allowed them to withdraw this housing to use as they chose. At that point, dwellings which had served a particular social role reverted to the private market.

The 1970s and 1980s therefore saw individual households competing in an increasingly deregulated market—albeit one that in many cases was fuelled by generous tax breaks and subsidies. Governments were withdrawing from direct state provision and channelling support to individual home ownership. This trend was perhaps most evident in Thatcher’s Britain but was nevertheless a perceptible policy shift in much of Western Europe. The dismantling of the Berlin Wall, the break-up of the former Soviet Union and greater marketizing pressures in China represented a new phase of social and economic transformation in which changes in housing provision, management and ownership were seen as essential elements of a new social order. The ownership of a home was emblematic of a new contract between the state and the individual, a new force for social stability and individual responsibility and, not insignificantly, the means to capture individual savings and release the state from expensive commitments for building, repair and maintenance.

At the beginning of the twenty-first century therefore, housing provision sits within a rather different ideological and economic context when compared with the decades following the end of the Second World War. The market remains ascendant and the state is to a large degree decentred. Big finance dominates and the environment of choice and deregulation presents a more complicated set of circumstances for consumers to negotiate. The polarized alternatives of the friendly bank manager or the state bureaucrat have given way to a much more fragmented system. That fragmentation of rules of access, of forms of social housing, of financial products is varied in its extent. Nevertheless, the negotiation of access to housing in a more complex and more uncertain social and economic environment is a significant element in the way in which individuals are socialized into and learn to cope with what Beck (1992) refers to as an increasingly individualized world.

Policy Preoccupations

The housing policy preoccupations, institutional structures and state and market responses of one period inevitably shape the problems and policy options of the next. In Europe, the Second World War was a major influence on housing priorities and policies. In the interwar years, any commitments to substantial direct state intervention in housing were generally limited and shortlived. Liberal economics dominated, housing programmes aimed at poor households were small-scale and alternative models of provision were of the self-help and cooperative variety (see Harloe, 1995 for a detailed discussion of these issues). After the Second World War, however, governments were confronted with massive housing shortages. Almost a fifth of the housing stock in Europe had been destroyed, residential building had been halted and demobilization produced a sudden leap in demand. These chronic housing shortages required state intervention in housing provision in a variety of areas, particularly in the supply of low cost public rental housing and rent control in the private rental sector. Large-scale housing production programmes were introduced in most countries in northern Europe under a variety of subsidy systems.

Unlike the period after the First World War, this response was not just a short term reaction to acute social unrest before a rapid return to business as usual in housing, as in the economy … [Moreover] now a powerful additional reason existed for state-subsidized social rental housing construction: its contribution to economic modernization and urbanization … Social housing investment also became one of the main tools of Keynesian-style demand management, being frequently used to help and maintain the new commitment to full employment and non-inflationary economic growth. (Harloe, 1995: 44)

In this context, Britain was rather exceptional in its almost exclusive concentration on municipal council housing as social housing. Donnison and Ungerson (1982) observed that

in France, Austria, Germany, Scandinavia and the Netherlands, industrial, political and religious movements developed various patterns of voluntary and cooperative association which were later adopted by governments as their principal instruments for the provision of housing. (1982: 63)

Housing policy in the USA is, of course, rooted in a very different set of circumstances, which is part of the explanation for its residual approach to social housing as welfare housing and the overwhelming predominance of free market principles. Doling (1997) argues that the roots of US housing policy can be found in the profound shock of the 1930s Depression in contrast to the impact of world wars on Europe. But, he suggests that in the USA

the concern was not primarily about the acceptance of a state responsibility for ensuring that citizens’ needs were adequately met, but with finding a way out of economic difficulties through planning at the macro level. Providing an impetus to the construction industry and maintaining confidence in the mortgage market were seen as significant steps in seeking to reinvigorate a depressed economy. (1997: 18)

Attaining numerical building targets to meet substantial absolute housing shortages remained a key preoccupation of most European governments well into the 1970s. Indeed, the fiscal and material constraints of the early post-war period limited the rate of new building and most energies were directed at the repair and reconstruction of damaged stock. Continued rural-urban migration and rising birth rates meant that the housing shortage grew more acute. The pressure grew to meet rising targets by producing smaller, cheaper dwellings, and as economies recovered more reliance was placed on the private sector. Urbanization produced higher land values, further adding to problems of cost. Social housing was pushed to higher densities and often peripheral locations. New systems building techniques were adopted in the late 1950s and 1960s which lowered immediate unit costs and accelerated production but which proved in many instances to have high maintenance costs and low standards of heating and insulation.

Typically, it is these mass high-rise solutions to housing needs which are prominent among the discredited legacies of the modernist era and are also inextricably, if debatably, associated with the failures of direct state intervention. One commentator has gone as far as to link the end of modernism with the destruction of a block of social housing in the USA—the precise time and date when a version of one of Corbusier’s designs was demolished because it had proved to be uninhabitable (Harvey, 1989: 40, referring to Jencks).

By the early to mid-1970s, many countries were experiencing relative economic prosperity and an apparent crude surplus of dwellings over households was emerging. Attention shifted towards more qualitative concerns and particularly towards tenure choice and tenure conversion. Major housing shortages remained in parts of southern Europe and, of course, in the rapidly developing Tiger economies of South East Asia. In general, however, political and fiscal support for mass housing provision diminished as need and provision moved closer into balance. As the urgency of the situation changed so the emphasis shifted towards more targeted assistance for localized needs, private sector solutions and questions of consumer demand. Home ownership became the dominant tenure preference, fuelled by a reorientation of subsidies. The conflation of what Kemeny (1980) has referred to as political tenure strategies with expressed popular desires was embodied in a variety of national and supranational policy documents. As the Economic Commission for Europe stated, ‘the fact is that for most people owning their own home is a basic and natural desire’ (1983: 79) and variations on that statement can be found in a variety of locations and stretching back over most of the twentieth century. Whether it is the British version of the property-owning democracy, the American or Australian Dream or Hong Kong’s latest medium-term housing strategy, that familiar refrain is evident.

Fuelled by the growth and deregulation of the financial sectors in some countries, rising real incomes, changing social norms and expectations and housing policies increasingly subservient to productivist, competitive social and economic policy the momentum towards higher levels of home ownership gathered pace throughout the 1980s. At the same time, growing unemployment, poverty and increasingly concentrated spatial patterns of disadvantage emerged, often with strong ethnic, gender and class divisions. It is these concentrated spatial expressions of disadvantage which represent some of the most pressing and intractable contemporary policy preoccupations in the developed world. Moreover, mortgage-financed home ownership, now the majority tenure in many countries, sits within the more volatile and uncertain prevailing economic environment.

Home Ownership in Ascendance?

If the industrialized world at the beginning of the twentieth century was a world in which the private landlord dominated housing provision, as a new century opens, it is individual home ownership in various shapes and forms which is ascendant. One of the more recent expressions of this pervasive ideological and policy trend came in March 1998, when China’s new prime minister, Zhu Rongji, pledged to turn China into a nation of home owners by abolishing state subsidized housing. Such an announcement by the leader of a country of 1.2 billion people and where home ownership currently accommodates around 20 per cent of the urban population is further evidence of the retreat from direct housing provision by central and local government which has been taking place throughout the world over the past 20 or so years.

International comparisons of tenure structures and rates of growth of home ownership are shown in Tables 6.1 and 6.2. These are inevitably crude comparisons and aggregate highly varied dwelling types, household circumstances and subsidy regimes under single labels. Moreover, in relation to home ownership levels, they may combine contemporary forms of loan financed urban residential property purchase with more historical rural forms and, in some cases, illegal self-build on urban peripheries. These problems are compounded when cross-national comparisons are made. Home ownership does mean different things in different countries. Home ownership might give access to land for a small holding and be the means by which a household acquires a living. Elsewhere, it is primarily a symbol of status and/or a means of accumulation. Nevertheless, such generalized aggregations serve as indications of broad trends in patterns of housing provision. With few exceptions and to varying degrees, the unambiguous trend has been towards higher levels of home ownership.

This trend has been accelerated in a number of countries in recent years by the transfer of properties from the public rental sector. The context for these transfers has varied enormously (see next section). In some cases, as with China or Russia, it was part of a fundamental reshaping of housing production, management and access; in others, it involved the addition of a new layer of owners to a highly developed private housing market. The UK’s notably high growth rate through the 1980s and 1990s (from 56 per cent in 1980 to 68 per cent in 1995), for example, was fuelled to a significant degree by tenure transfers from the public sector (and to a much lesser extent by the creation of supposedly transitional ‘shared’ ownership; a real indication of the drive to promote home ownership to a wide spectrum of the population). A small number of countries show modest falls in home ownership levels in recent years (e.g. Denmark, United States and Germany). Different factors have been at work, including political transformations (Germany), problems of affordability and access for some younger people and more volatile house price cycles (see below).

Table 6.1 Proportion of all households by tenure, OECD countries (%)

Country Home ownership Social renting Private renting Others Total Date of source
USA 64.2 2.0 33.8 0.0 100.0 1991
UK 67.6 22.6 9.8 0.0 100.0 1994/95
Sweden 55.0 22.0 23.0 0.0 100.0 1991
Spain 78.4 1.1 13.8 6.6 99.9 1989
Netherlands 47.3 40.2 11.2 1.3 100.0 1993/94
Japan 59.8 7.0 26.4 5.1 98.3 1993
Ireland 76.8 13.9 7.7 1.6 100.0 1987
Germany 38.0 15.0 43.0 4.0 100.0 1987
France 54.4 14.5 25.1 6.0 100.0 1990
Finland 78.4 10.7 9.5 1.4 100.0 1992
Canada 62.7 5.6 31.7 0.0 100.0 1991
Australia 70.0 6.0 19.0 5.0 100.0 1994
Average 62.7 13.6 20.9 2.6 99.9

Source: Freeman et al., 1996

Table 6.2 Proportion of all households in owner-occupation, OECD countries, 1945/50 to 1995 (%)

Country 1945/50 1960 1970 1980 1990 1995
USA 57 64 65 64 64 na
UK 29 42 49 56 65 68
Sweden 38 36 35 41 42 40
Spain na na 64 73 76 na
Netherlands 28 29 35 42 44 47
Japan na 71 59 62 61 60
Ireland na na 71 76 81 na
Germany na na 36 40 38 na
France na 41 45 51 54 na
Finland 56 57 59 65 67 78
Canada 66 66 66 62 63 na
Australia 53 63 67 71 70 70

Source: Freeman et al., 1996

The growth and functioning of home ownership is strongly conditioned by the ways mortgage finance is raised and delivered in each country. Most home ownership is debt financed and there are significant differences in the types of funding instruments, the structure of interest rates, repayment mechanisms and lending practices. There are also very great differences in family structures and the capacity to save and purchase (as well as economic cycles and tax systems). Household behaviour differs greatly between countries in terms of expectations, attitudes to debt and ownership and this impacts upon the age of entry to home ownership.

There are three main types of mortgage finance systems: the mortgage bank system, the deposit taking system and the contractual system. In the first, household funds are channelled via insurance companies and pension funds which in turn purchase mortgage bonds issued by the mortgage banks as backing to the housing loans they have granted (e.g., Sweden and Denmark). In the second, household deposits are recycled into long-term housing loans (e.g. Britain and Australia) while, in the third, potential borrowers contract to save for a specified period in order to qualify for a loan (e.g. Germany and Austria). In some countries such as Greece or Turkey there is no significant formal housing debt finance sector and informal family-based mechanisms remain important means of access to funds.

There is, in fact, little evidence that the different systems are converging. Clearly there may be significant developments in Europe following monetary union but at present systems remain doggedly national (or regional). The shape of the finance system will influence access to home ownership, its sustainability over the economic cycle and the extent to which housing market pressures impinge upon the economy as a whole. To the extent that home ownership is achievable and sustainable it can also affect public expenditure on other forms of housing provision and assistance. The structuring of mortgage finance influences who becomes owners and impacts upon the dynamics of the housing market. Higher down payments slow entry into home ownership but also allow for more rapid repayment of the mortgage debt. Fixed rate mortgages are common in some systems, allowing home buyers greater certainty regarding payments.

It is important to acknowledge the scale of state support for home ownership as a significant factor in its growth. Just as with the provision of state or public housing for rent, home ownership in many countries receives a variety of direct or indirect subsidies (Table 6.3). Mortgage interest tax relief is the most common mechanism (ranging from 100 per cent to 10 per cent relief). The UK and Ireland are notable in that both countries have substantially eroded this very significant benefit and one which was highly regressive. In a considerable number of countries there are grants to encourage ownership or subsidized interest rates on loans for house purchase and in eight out of the twelve countries no capital gains tax is levied, giving some indication of the way home ownership has been a favoured tenure.

Table 6.3 Tax and subsidy framework: owner-occupiers

Mortgage tax relief N N Y Y N Y Y Y Y Y Y Y
Imputed rental income tax N N N N N N N Y Y N N N
Capital gains tax N N N N N N Y N Y Y N Y
Subsidy for house purchasers N N Y N N N N Y Y N N Y
Subsidized interest rate on house purchase loan N N Y Y Y N Y N Y Y N Y
Eligibility for income-related housing allowance N N Y Y N N N N N Y N N
Minimum income safety net to meet housing costs Y N N N N Y N N N N Y N
ASL, Australia; C, Canada; FIN, Finland; F, France; G, Germany; IRL, Ireland; J, Japan; NL, Netherlands; E, Spain; SW, Sweden.

Source: Country researchers’ questionnaires in Freeman et al., 1996

Home Ownership at Risk?

In recent years some housing markets have experienced greater price volatility and a growing number of casualties. In Britain, the rapid house price inflation of the mid- to late 1980s was followed by a severe slump and fall in nominal house prices. A variety of factors were at work in the boom, including financial deregulation which improved households’ ability to borrow funds for house purchase, changing macroeconomic conditions, government policy and demographic change (Boleat, 1994; Forrest and Murie, 1994). By 1992, house-building activity in the private sector had declined to 139,000 from a peak of 199,000 in 1988 and mortgage activity was reduced from £40,111 million to £17,751 million. Home ownership became associated with mortgage arrears, repossession and negative equity.

There is, however, nothing novel about slumps in the housing market. Real house prices fell by 31 per cent between 1973 and 1977 compared to 24 per cent between 1988 to 1992 (Kennedy and Andersen, 1994). However, during the 1970s high inflation rates masked these falls and protected nominal house prices, indicating what Bootle (1996: 68) refers to as ‘the power of inflation to create illusions about real values’.

This period of housing market instability was not, however, confined to Britain. The growth and support of home ownership by governments has been prevalent throughout most of the developed and developing world and this has been accompanied by financial market deregulation, the internationalization of capital markets and the integration of mortgage finance into global capital markets (Fallis, 1995). The stability of national housing finance systems evident in the 1970s has been undermined as housing finance has been exposed to global financial forces. According to Fallis, ‘The deregulation and shifts in world inflation rates led to the near collapse of the housing finance system in several countries’ (Fallis, 1995: 15).

Bootle (1996) documents the volatility of house prices in the world’s leading industrial countries. He argues that in every one of the G7 countries ‘house prices rose remorselessly during the heyday of inflation’ (Bootle, 1996: 67). Between 1970 and 1992 the average annual rate of increase of house prices in Britain was 12.5 per cent, the same for Italy during 1970 to 1989. In the USA the annual rate was 7.75 per cent and in Germany 5.5 per cent. In real terms, house prices rose by an average rise of 2.5 per cent a year in Britain and Japan, 2 per cent in Canada and 1.5 per cent in Germany and the US (Bootle, 1996: 68). Kennedy and Andersen describe developments in house prices in 15 industrialized countries between 1970 to 1992, asserting that in the majority of cases volatility appears to have increased in the 1980s. In real terms, Finland, Japan and the United Kingdom show the greatest volatility both for the period as a whole and for the 1980s (1994: 13), with the Netherlands following closely behind. They also show the 10 largest house price increases, and decreases, in any single year over the period 1970–92. In the 1980s, in terms of price increases Australia is ranked third, with a peak of 38.1 per cent in 1988, Finland is second, with 3.63 per cent in the same year, and the United Kingdom is ranked seventh, with 33.0 per cent, also in the same year. The sharpest decline was experienced by Finland in 1992, when prices fell by almost 17 per cent following a decline of almost 15 per cent in the previous year. Finland is followed by the Netherlands, then Norway, Sweden, Japan and Denmark. Looking at what Kennedy and Andersen refer to as ‘peak to trough movements’, Finland heads the table with a 33 per cent fall in nominal house prices (40.3 per cent fall in real house prices) between 1989 to 1992. The United Kingdom is seventh, with a 10.7 per cent fall in nominal house prices (23.0 per cent fall in real house prices) between 1989 to 1992.

Inevitably, such figures mask significant local variations within countries. Fallis (1995), for example, has examined the pattern of house price increases in the United States, Britain, Australia and Canada during the latter part of the 1980s and emphasizes the regional nature of these initial increases and their subsequent volatility. He pointed particularly to London in Britain, Boston in the United States, Sydney in Australia and Toronto in Canada. These areas experienced a dramatic escalation in house prices, linked to increased demand because of employment growth, immigration and income growth within the region, and an equally dramatic decline in prices in the early 1990s.

Kennedy and Andersen (1994) also show that the ratio of mortgage debt to the value of the owner-occupied stock of dwellings was higher at the end of 1992 than in previous years and was particularly marked in Denmark, Finland, the United Kingdom, Canada and the United States. In Denmark, where 53 per cent of the housing stock was owner-occupied in 1994, estimates for 1988 indicated that 25 per cent of home owners, particularly those under 40 years old, were ‘technically insolvent’ with net liabilities equivalent to 100–125 per cent of property value. Kosonen (1995) and Timonen (1992) acknowledge the occurrence of negative equity in most Nordic countries but are particularly concerned about the rising incidence of housing debt problems amongst households in Finland.

Given differences in price trends and the size and characteristics of the home ownership market in different countries, the variations in the structure of mortgages and mortgage finance and the different legal arrangements, it is not surprising that the experience of mortgage arrears and possessions has also been very different. In some countries the substantial deposits put down and the relatively exclusive nature of home ownership has meant that, despite difficulties in the economy, few households have lost their homes via possession or foreclosure (in some countries, possession is not easily obtained by the lender). In contrast, in other countries, such as the UK, home ownership accommodates a wide range of households and access can be achieved with a low level of deposit. As a consequence, households are more easily exposed to a range of risks (for example, increases in interest rates, falls in income, falls in house prices).

While housing provision becomes an ever-more private responsibility, so governments are under ever-greater pressure to secure appropriate conditions in the broader environment, for example, with respect to jobs and employment, inflation and interest rates and with respect to the efficiency, effectiveness and fairness of the private housing and mortgage markets. In this regard it is no coincidence that a range of governments are now looking closer at ways of protecting home owners and home ownership from the vicissitudes of economic change.

Britain is one of the small number of countries that provides a modest state-funded safety net for home owners. As the housing market recovered in Britain in the mid-1990s the government moved to redefine the role of the state in relation to home owners in difficulty. Insurance against such risks was seen as primarily a private responsibility. Home buyers should cover their risks through private insurance schemes. Interestingly, in other countries—Germany, France and the Netherlands—the same problem has been recognized (that is, the increasing vulnerability of home owners) but the solutions sought are based on state assistance. Similarly in Australia, Canada and the United States, it is the government which underpins the bottom end of the housing market through a system of state supported insurance-based guarantees against lender losses when making loans to low income households.

The different roles played by the state, the shape of the mortgage market and the legal structures surrounding home ownership all influence the shape and character of the sector in each country. Perhaps of even greater significance is the question of the sustainability of home ownership. Built as it is on the shifting sands of social, economic and political priorities there can be no assumption that what we have today will be a given forever. Already it is evident in some countries that private renting is undergoing a resurgence amongst younger households. This is partly a product of tighter access to home ownership, but it is also part of household risk management strategies in the context of a more flexible labour market. As yet home ownership does not have the flexibility of renting because of the substantial transaction costs and the process of property purchase and sale. Securing greater efficiencies in the home ownership market is an emerging priority for governments.

Whither Social Housing?

The construction, management, financing and role of social housing varies in important ways over space and time. Decommodification to achieve social housing goals can come in different forms. State loans and subsidies may be channelled to private agencies to serve specific social or income groups. Dwellings may be financed, owned and managed by public sector agencies and focused on the poorest sections of society on a means-tested basis or available to a wider section of the population through other means of bureaucratic allocation. Non-profit housing may be provided through a wide range of voluntary agencies and cooperatives. And the provision of housing for lower income households may be via measures to ease access into home ownership. Singapore, for example, represents a somewhat exceptional example of state built housing, being essentially built for sale into owner occupation. Typically, however, the housing is for rental (at least initially), allocated on some criteria of need and profit is not the determining factor in setting the price.

It is impossible and inappropriate within the confines of this chapter to embark on a definitional excursion (see, Doling, 1997; Oxley and Smith, 1996). The important point is to acknowledge that the degree to which the market has been the principal means of access to housing has waxed and waned within nation states and that non-market measures have varied in form and scope. Moreover, while there is an association between fiscal and social pressures and the scale of state intervention in the housing market, that relationship is contingent on a range of factors. One of Harloe’s (1995) conclusions from his major study of social rented housing in Europe and the USA is that

There is no necessary connection between crisis and restructuring on the one hand, and mass provision on the other. He points to two conditions, however, which appear to be important in determining provision, particularly mass provision. First, a situation in which the private housing market was unable, for various reasons, to provide adequate housing solutions for sections of the population. Second, when unmet housing needs among those sections of the population had a wider significance for the societies and economies in which they existed, whether in terms of heightening social tension and crisis (after the First World War and in the USA in the 1930s), or in terms of economic modernization (after 1945). (1995: 524)

Harloe also identifies two main models of social rented housing—mass and residualized. The residual form which links to periods of slum clearance and/or is targeted on the (new) urban poor is, for Harloe, the normal and most universally institutionalized form within capitalist countries. It is institutionalized to the extent that there is some acceptance by government and the wider public that the market is unable to provide affordable housing of reasonable quality for the poorest sections of society. It is residual in the sense that it is minority provision for the poor and is likely to be identifiably second-class housing and stigmatized. US social rented housing is quintessentially residual.

The mass housing forms which, in the context of capitalist Europe (as opposed to transitional economies) are most closely associated with Sweden, the Netherlands and Britain are, for Harloe, abnormal. Unlike the residual forms which have been and probably will be around for longer, these large-scale programmes of social renting, catering for a wide cross-section of the population (and to a great extent excluding the poorest) have only grown up under very specific historical conditions. In Western Europe, that period was most notably in the three decades after the Second World War. It is this form of state-provided housing which has been transformed to the greatest extent in the past two decades.

Diminishing support for substantial public housing programmes has been evident in most countries with market or mixed economies in the period since 1980. That diminished support has taken two main forms: privatization and reduced new investment. Policies of privatization have been evident in a wide range of countries—perhaps most notably in the UK, but encompassing the USA, Ireland, Denmark, Hong Kong, Singapore, China and developing countries such as Nigeria and Egypt. State-owned dwellings have been offered for sale on the open market, on usually discounted terms, to sitting tenants. Whatever the context, there is a familiar pattern. The best dwellings are sold to the more affluent tenants. Supply to the poorest sections becomes more restricted, quantitatively and geographically. The result is a direction of change towards more residual, stigmatized sectors. It should be emphasized, however, that this occurs in its most acute form when mass privatization is combined with dramatic cuts in replacement building.

The most far reaching transformations in the state rental sectors have, however, occurred in Eastern Europe, and more recently, in China, where the transfer of ownership of properties to individuals or non-state sector organizations has been seen as pivotal to more fundamental processes of social and economic change (see Turner et al. (1992) for a detailed account of early housing reforms in Eastern Europe). One of the basic problems confronting the transitional economies of Eastern Europe in this context has been the lack of developed mechanisms (most notably loan and exchange institutions) to enable a housing market to take root. There has been extensive privatization but uneven and limited commodification.

The increased emphasis on private ownership and marketization has had very different histories in these countries. The housing system in Hungary, for example, has been shifting progressively to a more market-oriented form since the early 1980s. In Russia, however, the shift has been more recent and more dramatic. In the so-called transitional economies of Eastern Europe, various difficulties have typically complicated privatization processes: a history of low rents, poor standards of maintenance, and low incomes. These interrelated factors also have to be placed in the context of state housing stocks, which are almost invariably dominated by medium- and high-rise, system-built flats. Tenants with limited resources are therefore often being persuaded through generous discounts to buy undermain-tained, obsolescent properties in a situation in which there may be no re-sale market. Governments may succeed in off-loading a major financial liability but the advantages to the new owners are at least uncertain. The carrot-and-stick approach has been further enhanced through rent increases and the introduction of various forms of rent allowances to mitigate the difficulties for those on the lowest incomes.

The inequalities, however, built into previous state-organized housing systems find new expressions in their nascent privatized forms. Most notably, the housing privileges conferred on the nomenclatura and other elite groups in the state systems which involved access to the most desirable dwellings mean that the opportunities to buy have also benefited disproportionately those same groups. For example, an assessment of housing privatization policies in Novosibirsk in Russia observed that in 1993 ‘the better the quality of housing the family had and the larger the floor-space of the dwelling, the more active was the family’s privatization behaviour. The share of privatized dwellings in the top group of housing stratification amounted to 44 per cent, while in the bottom group it was only 2 per cent’ (Bessonova et al., 1996: 125; and see Danielli and Struyk, 1996). Again this uneven pattern of take-up and of potential inequality of benefit resonates with similar policies in developed capitalist systems. Those who gained most from state rental sectors, for example the skilled labour aristocracy of post-war Britain, also gained most from a new set of subsidies to encourage private ownership. And those who follow in the aftermath often gain very little and may end up as casualties.

In the UK, where policies of mass privatization have a relatively long history, those who bought well built, state owned family houses at generous discounts in the early 1980s can be contrasted with those who purchased lower value, lower quality apartments in the late 1980s and early 1990s. The first group generally bought appreciating, saleable dwellings and experienced periods of real house price inflation. The latter bought much less desirable dwellings in a more volatile and less certain housing market. In a similar vein, Bodnar (1996) contrasts two tales of private purchase in Budapest. One owner had bought a desirable apartment, immediately rented it to a multinational corporation and had subsequently been able to buy a small villa with the rental proceeds. By way of contrast, another tenant paid roughly the same price for a system-built apartment. Maintenance costs rose, proved prohibitive and she ended up requesting a return to tenancy status.

Selling desirable, marketable apartments or family dwellings to tenants with secure and reasonable incomes in a healthy housing market is relatively unproblematic. Selling apartments to lower income tenants in a depressed or underdeveloped market may create new problems requiring later policy intervention. State disengagement may prove partial and short-lived. Again the British experience of selling high- and medium-rise state-owned flats, which gathered momentum in the late 1980s, may be salutary. Many former tenants achieved neither social nor spatial mobility and the mix of tenures which developed within single blocks created serious difficulties for housing managers (see Forrest and Murie, 1995).

The consequences of significant shifts in housing provision and policy may take considerable time to emerge—and they may emerge in very contrasting conditions compared to those in which they were introduced. Major shifts in employment levels, in the nature of employment, in demographics and in house price inflation are obvious key factors. A particularly dramatic example of changing housing pressures and social conditions came with the rapid collapse of the Soviet bloc and the reunification of Germany which produced a new wave of immigration. By the mid-1990s, some 1 million new German citizens became eligible for social housing. This coincided with a period of substantial deregulation in which a significant number of dwellings were removed from the social sector with the termination of state loans. The government was suddenly faced with major housing needs when a few years previously there was relative housing abundance (Haussermann, 1994). These events highlight a basic problem of housing. Housing stocks often have to accommodate unpredictable social changes. But the necessary adjustments in quality or quantity are inevitably slow and will lag behind, whether state-promoted or market-driven.

Concluding Remarks

There are various versions of the story of the last one hundred years of housing provision. In one version, the period of what Harloe refers to as ‘abnormal’ intervention, the period of mass as opposed to residual state provision, might be seen as a ‘passing’ moment in the history of housing provision. Market forces have been re-asserted and the opening of a new century sees a variety of forms of home ownership emerging as the type of provision best suited to contemporary industrial and post-industrial economies. The period of mass provision in the 30 or so years after the end of the Second World War, which characterized much of European housing policy, reflected merely a period of transition from private landlordism to individualized home ownership. States had to manage acute shortages and quality deficiencies alongside rising expectations. They also had a pre-eminent model of intervention. That moment has now passed, but the consequences live on.

Rising real incomes, the development of mortgage credit, greater job security and Keyensian welfarism have all contributed to what has taken place subsequently. Home ownership has achieved a dominant position, the poor are increasingly accommodated in stigmatized housing forms in enclaves of concentrated disadvantage and subsidies for home owners are progressively targeted on lower income households and, in some cases, provided a safety net for casualties of the tenure. State withdrawal proceeds not just in relation to social housing but via the privatization of risk for home owners and the reduction of general subsidies.

However, just as the economic and political context around the provision of mass social housing has been transformed so too has the context around home ownership. This is a tenure perhaps best suited to stability and predictability. The private renting which dominated at the turn of the twentieth century was embedded in a context of relative volatility in household incomes and employment. Rapid adjustments in housing costs were often necessary and possible through relatively easy residential movement. The labour market of the new twenty-first century contains some of the same features of uncertainty and unpredictability for some households as did the labour market of the early twentieth century. As one period of transition in housing begins to wane, new processes of transformation are under way which will certainly produce new and hybridized forms of home ownership and may well see a significant revival of private landlordism, albeit configured rather differently from its early twentieth-century variety.

The relationship between housing and the macro economy now appear more exposed but also more complicated. Financial deregulation, changes in the pattern of ownership of dwellings and transformations in the nature of employment and new patterns of work within households have produced a more volatile mix of circumstances. The debate is no longer so focused on how many dwellings to build, the proportion of GDP devoted to residential construction or to the employment-generating effects of building activity. Debates about what to build and where are more likely to be focused on the environmental impacts of residential development than on how close governments have come to meeting stated targets. But the growth of individual home ownership has produced a new set of associations between financial institutions, individual household budgets, employment, housing market activity and general consumer behaviour. In circumstances where the mass of households own their own homes, the vicissitudes of the economy impact more directly on individuals and their families. And the centrality of housing costs, housing debt and house values for households means that shifts in mortgage costs can impact heavily on the consumption of other goods and services and on the general health of the economy.

Many national housing policies have been constructed on assumptions of relative predictability and security in household circumstances—conditions essential to forms of housing provision requiring high levels of personal debt. But the world seems to be becoming less predictable. Jobs seem less secure, relationship breakdown more likely and the family life cycle more complicated. Climatic change too brings new threats. Thus the possibility of floods in East and Central England could threaten entire residential areas and result in rapidly rising insurance premiums. The property value rollercoaster in South East Asia has undermined household savings and entire economies. The fall-out from the collapse of the Communist bloc continues to create unpredictable housing policy problems in relation to privatization strategies, new patterns of migration or the bureaucratic complexities of property restitution.

It would, of course, be wrong to overstate the case and suggest a world in turmoil when the reality of everyday life for many is closer to unremarkable continuity rather than dramatic and unpredictable discontinuity. It would be equally wrong to exaggerate the degree of convergence of housing policy in the past few decades. At a broad level there have been parallels in housing policy discourse and direction and in patterns of social and economic transformation in a wide range of countries, as we have sought to show. However, these are always embedded in significantly different cultural contexts, specific histories of urbanization and state intervention and widely varying institutional structures. And to return to the introductory themes of this chapter, it is important to re-emphasize the inevitably rather Eurocentric view of housing change and housing problems which has been outlined. It is important to acknowledge that, if we are indeed entering the Pacific century, we are also entering the urban century. A world population that has grown enormously over the past hundred years is now predominantly an urban population. At a global level, in terms of the sheer numbers of people living in cities and the scale and severity of housing problems, it is at least arguable that urban housing problems are both qualitatively and quantitatively much greater than they were in 1900.

What is also very clear is that we are moving away from a concern with housing per se, towards a wider concept of where problems and solutions lie. In the immediate post-war period, relatively full employment was being generated as part of the reconstruction process but a decent home which met rising aspirations provided a basis for family and community building and was a trigger for, and receptacle of, domestic consumption. The challenge then was to build the appropriate residential infrastructure. To a degree this has been achieved over the subsequent 40 years, at least in terms of the majority of the population, although significant minorities remain inadequately housed in all developed countries.

The dominant housing problem has now shifted from one of numerical provision to its renewal, repair and improvement, and not just within one tenure but all tenures. This in turn is manifested spatially because areas, regardless of the distribution of tenures within them, tended to be developed at the same time. They also tend to be rooted in the same economic base and, in the 1990s, we have seen the culmination of processes that have conjoined rapid economic change, physical deterioration and social decline. The focus on area regeneration (or whatever it is called) poses a considerable policy dilemma. There is no longer a single solution; rather, it relates to the provision of better housing and infrastructure, the creation of jobs and economic prosperity and the restoration of communities.

Post-war housing solutions have become part of the problem in the sense that mass housing estates created to house wage earners and to meet rising aspirations had, in some cases, become, with the passage of years, holding camps for the unemployed and underemployed and a mechanism for destroying hope and personal esteem. Decline is, however, not simply associated with mass social housing. Residualized populations and areas cross tenures and encompass owners and tenants. Unlike previous epochs, when renewal was the order of the day and the solution was clearance and mass provision, there is no longer the political will or pressure to do this, nor is it seen as a credible way forward. In a number of developed countries, we move into the twenty-first century with an increasingly physically inadequate housing stock alongside a growing marginalized population. The complexity of the solutions is considerable and the scale of the resources required is substantial. Moreover, past models of policy intervention, whether of the laissez-faire or direct provision variety, now appear to lack legitimacy and have different but inherent problems. With the collapse of state socialism, the ideological baggage associated with different forms of housing provision may have diminished, but there is a danger that we end up merely wringing our hands in frustration in the face of apparently intractable housing problems. In such a context notions of empowerment and self-help as alternative models of housing provision can become little more than justifications for leaving people to fend for themselves.

For countries such as Britain, with a heritage of the Industrial Revolution and post-war reconstruction, housing is but one element of the way forward. Renewal must now encompass housing, the public infrastructure, the economic infrastructure and the communities themselves. Britain began the twentieth century with the need to bring its social infrastructure in line with its economic capacity. It begins a new century with housing as a continuing constraint, but now as part of a bigger and more complicated set of issues. But in an era of privatized individualism and home ownership, with much more fragmented forms of public provision, and with an economic base no longer driven by large enterprises offering ‘permanent’ mass employment, this process of renewal is more difficult. Changing economic fortunes will affect patterns of investment and disinvestment in national housing stocks. Some residential areas will be rapidly devalorized and revalorized and be unrecognizable a hundred years from now. Equally, much of the housing being built today is likely remain as a visible imprint of the past, having to accommodate new generations with very different lifestyles and expectations.