Sunday, Sep 03, 2017

We can afford banks bailouts, HS2, F-35 and Restoring the Houses of Parliment but not social housing

Independent: Rogue private landlords given £2.5bn a year of public money, new analysis reveals

Billions of pounds of taxpayers' money is being given to rogue landlords who are renting out homes that don't meet basic health and safety standards, new analysis of Government data has revealed. Over the next five years, they will receive more than £12bn in housing benefits – enough money to have helped build more than half a million new homes.

Posted by quiet guy @ 10:37 AM (2704 views) Add Comment

16 Comments

1. stillthinking said...

btw, as a simple rule of thumb there are about 30 million workers in the UK so any public expenditure of 30 billion means 1000 pounds each. housing benefit at 24 billion is about 800 per person. what is so appalling about housing benefit, is that the government are effectively setting the rent level. i have mentioned this before but go to shepherds bush uxbridge road and look at the shops and the people there. absolutely stoney broke. yet the government has set the housing benefit at 750/month for a single occupancy room in a shared house....
there is absolutely no way that this rent would reflect what that area could achieve. there was even an upward spiral in housing benefits because the councils were trying to outbid -themselves- which was thank god stopped. it is insane. we have 17.5% tax on tinned soup, a per diem allowance of 300 at the house of lords, some poor welsh woman imprisoned because she didn't have the money for her council tax, total crap nhs.. and seemingly without end support for property. and may makes the trite statement she is a fighter who will compete for the next election.
The Tories are a busted flush because they do not stand for and actually never mention their belief in the free market and supply and demand. Marginal wages never rise from a tight labour market, because the government enables a persistent oversupply, you can get a work permit from a non-eu country for something as trivial as working in a curry house. There is and has been a shortage of housing but supply can never rise because it is limited by planning restrictions. May is going to get wiped out I think.

Monday, September 4, 2017 02:56AM Report Comment
 

2. techieman said...

When government hands over social housing to the private sector, then there must be safeguards that those dwellings are fit for purpose.

In terms of price it's a joke that housing LL benefit is based on market value of privately rented dwellings (albeit that has been reduced in affect recently). We need to look at rental markets that work... e.g. the German and Swiss models where rent controls form part of the solution.

As for blaming the tories, it could be argued that Blair was worse than Maggie. The initial idea wasn't bad but implementation has been horrible. The tories ... well Georgy....has done something to lessen the wealth of the LL at the cost or society as a whole.

Monday, September 4, 2017 09:02AM Report Comment
 

3. nickb said...

@2 agree Blair was pretty awful. Don't want to be party political, but I seems to me that Maggie set the ball rolling with selling off council houses and liberalisation of finance. Current labour manifesto contain a land value tax proposal apparently. But I would believe it when I saw it, given their history of dropping more fundamental reforms when they get anywhere near power. As did Churchill on LVT apparently ...

Wednesday, September 6, 2017 10:50AM Report Comment
 

4. techieman said...

Hi Nick.... 2 separate things really. 1. Selling off council houses and 2. Making the private sector responsible for social housing.

The premise made sense, but the fact that housing benefit constitutes a large portion of the rent meant that social housing effectively remains in the domain of the government.

The worst of both worlds as the article points out. Private landlords are subsidised by HB directly and , by price equalisation, indirectly where renters foot the bill twice !!!

Wednesday, September 6, 2017 08:44PM Report Comment
 

5. mombers said...

I wonder how many of these housing benefit recipient landlords are also evading tax? You'd think a simple HMRC spreadsheet to ensure that every landlord receiving HB is at least declaring something via self assessment would be a doddle. Extra points for doing a rec on what's paid vs what's declared. To boot, recovery of evaded tax could be close to 100% as a lien can be placed on the home as opposed to trying to chase mobile capital and labour evaders...

Thursday, September 7, 2017 09:12AM Report Comment
 

6. nickb said...

I'm not sure that the premise made sense. I guess it comes down to what you think about private ownership of land on the liberal model (exclusive use rights conjoined with rights of exclusion, sale and profit from sale). Philosophically, I've always thought that does not make much sense, it's just a question of power relations. In a system where land ownership is privatived on this model, the best you can do, probably, depending on prices, is buy a bit yourself to escape serfdom. Buying yourself out of slavery. If you don't believe in private ownership of land, you will find some form of "socialisation" appropriate, be it LVT or council housing. The questions of housing and site values are separable however, I think it's the latter where private appropriation is problematic. Though housing (and any kind of development) always involves use rights over a site ...

Thursday, September 7, 2017 10:31AM Report Comment
 

7. nickb said...

Incidentally, while HB no doubt props up rental prices because of its link to "average" rents, I doubt this can be a rigid as some imply. (I admit to not knowing all the details, perhaps someone can enlighten me). For a start, if it is based on an average there must exist rents below that average for any given type of accommodation. And secondly, rents are coming down in London, so presumably HB will follow suit if this continues, and HB clearly doesn't preculde any movement of rents. I guess it adds inertia. Agree with techie that you probably need a system with rent controls (abolished by Maggie??) to start to sort this out. Or LVT with redistributed rents.

Thursday, September 7, 2017 10:45AM Report Comment
 

8. mombers said...

@7 the theory behind HB pushing up rents is that an extra £10bn of rent paid via HB to private landlords is chasing a very fixed supply of property. Take that £10bn away and landlords simply don't have the means to get tenants to pay more to recoup. As we've seen with the section 24 BTL tax changes, LL are dreaming if they think that cost increases can be passed on. Similarly, a reduction to demand (£10bn withdrawn) does not affect supply so price levels will simply drop.

Thursday, September 7, 2017 12:34PM Report Comment
 

9. nickb said...

@8 Yes I get that, but HB is not the entirely of the rental market. Similarly, when HB is lowered or withdrawn it takes time for rents to adjust, and in the meantime tenants are stuffed.

Thursday, September 7, 2017 02:06PM Report Comment
 

10. techieman said...

My understanding is effectively HB is based on Local Housing Allowance. Subject to means testing, LHA was provided to allow 50% of the properties in a defined area to be affordable via HB. In around 2012 that fell to 30%.... the so-called 30th percentile.

Of course if LLs acted in a perfect cartel then they would force up rents which in turn forces up HB, which means that private renters need to equal that cost. Thus my argument that (non HB) renters are paying twice. Once for the cost of HB via general taxation and once for the increased rent because of the competition from HB. So I would argue yes it does affect the whole market since it underpins it.


The counter argument is of you cut HB, tenants will be kicked out by their LLS as they will find a private tenant at an equal cost to that which HB no longer pays.

There is a BRIEFING PAPER
Number 07833, 16 June 2017... which explains the issue and is worth a read (although it's referencing HB regarding the social rented sector). BTW I'm happy to be challenged on my understanding.

Why I say the premise was good was that making the private sector responsible for rental accommodation, albeit with incentives, SHOULD have freed up funds and de-politicised housing. It didn't because prices were left to the market without standards or maximums. If rents were controlled, allowing LLS to earn a reasonable return then Sec 24 would likely not have been implemented.

It's because government spends so much on HB that they are trying to claw back the costs via s24 (for example). To my mind it would be better if they had implemented rent controls years ago, and standards of accommodation and policed them properly.

Thursday, September 7, 2017 10:28PM Report Comment
 

11. nickb said...

@10 Thanks, that's useful detail. Not entirely sure about freeing up revenue for local councils though - they ditch costs and gained a below market value sales price from selling of council houses, but also lost the indefinite revenue stream from the rents. Now they are in a position of buying back at inflated prices and putting people up in B&Bs at enormous per tenant expense. They used to be able to borrow money cheaply for relatively high quality construction (the houses had to take some hammer) and offset the costs against the rent, something they were politically not allowed to do subsequently it seems.

Friday, September 8, 2017 10:04AM Report Comment
 

12. mombers said...

@11 exactly - if you look at any council's books, they take in more in rent than it takes to build and maintain their council housing. Therefore there's no need for subsidy from central government EXCEPT if the tenant is deemed unable to pay due to low income. Selling off the council housing but still paying subsidy for low income people is simply not consistent as you're guaranteeing that you'll pay more for often worse quality accommodation. If Thatcher (and her ConLab successors) had been consistent that would have to say no more council housing AND no more low to middle income renters in anywhere with a decent location value.Forget about teachers, nurses, even doctors being able to live near jobs in large parts of the country.

Friday, September 8, 2017 03:47PM Report Comment
 

13. stillthinking said...

nickb, the reasoning behind the sell off of council housing was that the payments that tenants were making were -more- than the costs of just purchasing the house outright, and to keep them paying rent (and by doing so paying more than they would for a purchase) would be fleecing them. That plus the opinion that home owners would be more likely to vote conservative. There wasn't a shortage of housing at the time.
That aside.
Prices started heading through the roof in 97 and kept going so its very hard, imo, to keep pinning the blame on Thatcher.when she was out of power in 1990. At the time the population was expected to fall. I live in Japan, the population is falling, and house prices are collapsing. There is even the concept of depreciation from age of the building. Nobody here saves in housing which is probably why the Japanese are the worlds largest net creditor. Housing as a method to save, when the quantity of housing doesn't go upwards, how can that possibly be saving when you have at the end what you started off with.

The outrageous cash value of planning permission makes it obvious, there have been, and are, extensive restrictions on planning. IMO this is the whole explanation behind the shortage. Otherwise you could simply buy agricultural land for 10-20K and put a prefabricated house on for 80K. A fantastic home for 100k.

Thursday, September 14, 2017 05:29AM Report Comment
 

14. nickb said...

@13
> the reasoning behind the sell off of council housing was that the payments that tenants were making were -more- than the costs of just purchasing the house outright, and to keep them paying rent (and by doing so paying more than they would for a purchase) would be fleecing them.

If that were the true motive, they would have been sold off at market value, not artificially low, capped prices. Which they undoubtedly were.

Wednesday, September 20, 2017 10:06AM Report Comment
 

15. nickb said...

Also I don't think you can explain the movement in Japanese prices with reference to population, though that is falling. The population did not u-turn in the 1990s, whereas prices nose dived. Their population is rising until about 2010 (www.e-stat.go.jp).

Wednesday, September 20, 2017 10:09AM Report Comment
 

16. nickb said...

I think a few years down the line we will be saying "shortage, what shortage"? I know that is an unpopular view on here, but nobody has been able to quantify this "shortage" in the face of the fact that there have never been more dwellings per capita on the only available systematic statistics (DCLG). In the SE, maybe, there has been a "shortage", though I suspect price / speculation / credit bubble is the main factor. But nationally?

Wednesday, September 20, 2017 10:13AM Report Comment
 

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