Friday, Jun 26, 2009
Incentive removed
Inside Housing: Proposals to end excess housing allowance payments
I didn't notice but apparently in the budget the incentive for benefit claimants to rent at a price below the LHA (and get up to £15/week) has been removed. Darling suggests that this will save 145 million. Well, apart from ripping off the people who took worse housing than necessary by not actually paying up the difference, going forward, this makes shopping around for a cheap rent pointless, and fixes fairly firmly the bottom of rents to whatever the arbitary price the LHA lists.
Posted by stillthinking @ 11:42 AM (563 views) Add Comment
4 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. stillthinking said...
Darling cannot be serious about this measure saving 145 million when going forward he has increased the costs of LHA by exactly the same amount he purports to save. I think the real reason for this is to prevent a collapse in rents, which are falling fairly dramatically. I recommend using the propertybee firefox plugin for firefox and visit rightmove.co.uk if you want to see for yourself.
The tragedy of this is that our economy is now being crucified on the cross of maintaining house prices when they are completely unsupportable. Consider, if housing were to crash from now an additional 50% and do so tomorrow, and repossessions were allowed to run their course. All the cash buyers would pile in reducing considerably banks liabilities, and also their levels of debt. Further, healthy loans against good collateral (a not falling asset value) could be made. FTB consumption would resume. The only snag is that the people who speculated on property end up without the property and just with the debt, the amount in fact that they lost speculating.
Darlings measure is irrelevant at best against the outstanding debts of government so you have to question why on earth do it. The only reason that makes is that New Labour are continuing to intervene in the housing market, and reveals that they are in dangerous denial and attempting to return to 2007. This is an absolute horror story if you live in the UK because this makes an abrupt chronic collapse in 2010 much more likely.
I think it is becoming clear that the price we pay for the slow decline in house prices is unemployment. Unemployment will continue to rise and so it is hard to see that the current government will end up doing anything else other than leading us to a complete economic collapse. Perhaps this is an extrapolation to far for such a small budget measure but it is very revealing. The intention is clearly to stop market price discovery of rents.
2. jonb said...
Very few landlords will take on housing benefit tenants because they are too much hassle, and in many cases, it costs more in insurance if you take them on.
If you look at the likes of Singing Pig, most landlords don't like LHA because the money is paid to the tenant who often doesn't pass it on to the landlord. They prefer the previous housing benefit system where it was paid directly to them.
3. mark wadsworth said...
Housing Benefit is a thorny topic. OT1H I don't want people to be homeless (obvious answer -> build more houses), but OTOH Housing Benefit is a straight subsidy to property owners (whereas I support higher taxation of property). Subsidies are in fact far more damaging and distortionary than taxes.
4. stillthinking said...
As Mark says.
I am sure that landlords do -not- want DSS tenants, but the fact is that LHA does set a minimum rent level, and as such is taxpayer cash going direct to property owners, which is the main point, because surely that is not the correct market level. The government has the ability to act in a similar way to the supermarkets dealing with dairy farmers, if they were trying to be cost effective then they could drive the price down, imo dramatically.
Of course it is possible but unlikely that the government have dictated exactly the correct price. But the thing is that if the price is too high then they are price fixing upwards, and price fixing upwards results in over-supply. Maybe the oversupply is absorbed by migration. I suppose we will find out.