Changing Social Housing: Economic System Issues

By Gibb, Kenneth; Maclennan, Duncan | Public Finance and Management, January 1, 2006 | Go to article overview
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Changing Social Housing: Economic System Issues

Gibb, Kenneth, Maclennan, Duncan, Public Finance and Management


Over the last quarter century there has been a series of major shifts in policies for the organisation and ownership of social rented housing in Britain. The non-market housing sector is moving towards a more plural, decentralised and potentially contestable set of arrangements. Many of the reforms have echoes in recent changes to the housing systems of transition economies. This paper aims to set the reforms in context, explain their key economic and financial aspects and assess the likely implications of the alternative organisational models proposed. Much of the policy has been developed without recourse to systematic evidence about different systems costs and benefits. Economic analysis of non-market housing systems has focussed on questions of the legitimacy of sector existence, cost contrasts with other tenures and subsidy distribution rather than the optimal economic organisation issues that arise given the actual existence of a social housing system. The paper applies ideas drawn from the economics of industrial organisation and neo-institutional economics to the emerging models of social housing, not least to develop a series of evaluative criteria with which to analyse new policies.

Keywords: social housing; economic systems, organisational economics; policy; UK

1. Social housing, systems and economics: neglected questions

A century ago in Western Europe there were significant debates about the desirability of the promotion of non-market housing and how such sectors should be developed. Different countries found their own models of ownership and organisation. In the UK the existence of strong municipalities with significant tax and organisational powers led to a post-1919 commitment to public, municipal housing as the dominant form of provision. Although some non-municipal public housing was developed, after 1935, and a small not-for-profit sector existed, municipal provision came to characterise UK non-market provision. Non-market housing, locally, was in consequence, municipal and monopolistically organised.

That broad organisational pattern remained largely unaltered, indeed the extent of municipal monopoly grew, until the mid-1970s. Since then, however, the overall share of the social sector in UK housing provision has fallen from 33 to 21 percent and this has also involved an absolute reduction in scale from 8 to 5 million homes (Wilcox, 2003). At the same time there has been a significant ownership shift within the sector. In 1971 the not-for-profit sector provided only one 'non-market' home in 20 but three decades later owned more than one third of that sector.

The broad thrust of government programmes that promoted these changes are discussed in more detail below. Current programmes have some common elements across the whole of the UK (for instance, in relation to matters which pertain to the Treasury such as debt writeoff) but also display important differences across England, Scotland, Wales and Northern Ireland as housing expenditure and legislation are devolved responsibilities. A number of these initiatives had their roots in the Conservative administrations of the 1980s and 90s. There had been expectations, not least in the municipal housing sector, that the election of Labour in 1997 would have restored the relative significance of municipalities as providers. However, present policy, although it contains some important ambiguities, has reinforced rather than reversed pre-1997 trends in sector size and structure. Strong financial incentives, limited alternative options for action, strong performance regulation, and a declared time period within which landlords must meet a new challenging statutory housing standard are now unleashing radical organisational change in the public sector.

The discussion, and indeed formation, of policy has tended to focus on the question of stock transfer, that is the shift in ownership from municipal to non-municipal, non-market landlords.

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