The Universal Challenge of Housing Provision through the context of the Communist Capitalist Dichotomy & How to solve it!

By Oliver Green

In recent years the issue of housing provision in modern society has come increasingly to my attention and in Britain in particular has become a hot political issue, and I then had the pleasure to read a well-crafted and astute article written by a friend of mine from the History Avenue, describing the inevitable failings of the Soviet Union and broader Warsaw Pact to provide satisfactory levels of housing for the peoples of the Communist block throughout the Cold War, along with the politicisation of housing as a source of social control of the people. The article also did a great job coincidentally in my view of illustrating how the political systems of nations and societies are showcased to the world in their house building or developments and the seeming failure of any of them to deliver on quality levels of housing provision satisfactorily over the long-term. Because in my view neither pure Communist nor major Capitalist nations ever get housing right!

To illustrate my point, I'll compare the Soviet central planning model with modern day Britain and China. We already know that the Communist jurisdictions of the Soviet Union and Eastern Europe could never succeed in adequately providing for the living requirements of their peoples for two reasons; Firstly, Communist governments have neither the ability nor the short-term profit incentives to accurately identify where demand is and "pick winners". Secondly, without the long-term sustainable wealth creation of a Capitalist economy, the Soviet Union could never hope to grow an economy large enough to achieve its housing targets. Consequently, the Soviets never had the resources required to supply the levels and quality of housing required for their people, or the ability to successfully allocate the resources they did have.

Capitalist Britain on the other hand now has the exact opposite problem. In 1980, Margaret Thatcher's Conservative government introduced the right to buy scheme, allowing social housing tenants to buy their homes at roughly 30 to 50% discounts, whilst encouraging a broader culture change in them and everyone else striving for a full "property owning democracy" regardless of income, whilst doing nothing to replace the sold off the nation's social housing, which amounted to nearly a third of the total stock. Subsequently, governments over the coming decades, especially Tony Blair's Labour Government introduced more and more building regulations and red tape to control alleged "urban sprawl" whilst at the same time providing higher and higher levels of housing benefit for people on low incomes to afford their escalating rents, whilst leaving virtually all housing provision to be determined by market forces.

Then David Cameron's Conservative led Coalition Government in 2010 introduced the "help to buy" scheme to enable more young families to afford deposits for lifetime mortgages to pay the escalating house prices, a policy which is now being adopted again by the current Labour Prime Minister Andy Burnham who is effectively rebranding it as "your first home" scheme. Furthermore, Britain's population over the past 46 years has increased by roughly 14 million people. Therefore, as a result of all this housing supply in relative terms has drastically dwindled, whilst demand has continued to escalate with both rents and house prices totally out of control, being continually aided by government social provisioning, which is distorting the market by artificially propping up demand so that the market has no incentive or pressure to correct. The result is total rental and housing market failure, ballooning private debt and a cost-of-living crisis!

Modern China on the other hand is Communist, whilst trying to embrace Capitalism to overcome the resource limitation effect, with the drawbacks of both and the benefits of neither. It has a centrally planning Communist government on the one hand incompetently allocating the resources to building new cities and apartment blocks at an unprecedented rate, whilst on the other (since the "Opening Up" reforms of Deng Xiaoping in 1978) has embraced the Capitalist open market to borrow the vast sums of capital required to do it, whilst expecting its poor populations to pay back the allocated capital by coming to live and work in these new cities. Consequently, China has expended vast amounts of misallocated capital investment with little to no return to meet its high growth and employment targets for its vast population, with empty ghost towns which nobody can either afford to or want to live in, whilst taking on ever increasing amounts of debt!

Therefore, I've reached the conclusion that neither social provision nor capitalism alone can adequately provide for the housing needs of societies, but rather a more nuanced, mature and sensibly balanced mix of the two with a two-pronged approach to simultaneously supress demand whilst ensuring adequate supply. In Britain's case it will likely have to involve a re-acquisition and significant expansion of social housing stock to keep people on low incomes out of the private sector to reduce demand, whilst also massively deregulating and tax incentivising to encouraging an unprecedented new wave of private house building, whilst also hard wiring the necessary parliamentary legislation to require either cross party support, referendum and courts to overturn this so as to prevent future short term vote seeking governments of both left and right from ruining it again!