There Will Not Be A Further Fall In Prices Until Housing Benefit Is Reformed: Discuss

[Selling up]

Interesting and depressing comments after a rubbish article in the Guardian: This benefit cut will hit the poorest

I work as a legal rep and specialise in Housing Benefit. I can tell you now that LHA is not only a joke - as it's being abused by landlords in colusion with their tenants in certain boroughs, it's also driving up rents in areas where the LHA cap rate is too high.

I can't afford to live in the borough I work in because the LHA cap rate has pushed all the rents in the area up to the cap level. For example, the one bed rate is £240 a week, so most landlords are now advertising all one bed and studio rents at £240 a week.

It's an absolute joke and a disaster waiting to happen, the biggest f*ck up in private sector rents since deregulation. And I can't wait to see how our glorious governments subsidy bill for HB going to be spun, as I imagine it's not even included in costs at the moment and going from what I've seen in my casework alone, HB spending has doubled in some instances.

So it seems to me that:

In every area the council sets a cap for LHA (housing allowance) for each type of property.

Every landlord markets his property at that price, no matter how poor the property, and is guaranteed a tenant.

Therefore the landlord has a guaranteed fixd income irrespective of what the market might dictate.

Therefore prices will stay at whatever level produces a respectable yield: property investment is more like buying gilts than selling a service.

Thoughts?

[Pindar]

So true. It seems that the government has been colluding since the mid 1980's to prop up house prices. Since the abolition of the fair rent act (which would have kept private rents down), and the sale of council houses, it was possible for prices - and hence housing benefit - to drift upwards and provide a cosy buffer for property. All the time the government is subsidising private property owners in this way, using taxpayers' money, then the game continues. It doesn't help matters that unemployment is on the increase, leading to a larger proportion of private housing stock being supported by the taxpayer.

Nothing short of a massive program of council house building would halt this monster.

Possible solutions:-

1. Forced equity sharing of the capital gains made by landlords to be distributed as a rebate to local council tax payers?

2. Rental profit for tax funded accommodation to be taxed at 90%

Edited March 4, 2010 by Pindar

[babesagainstmachines]

Thankfully, the housing benefit level will be falling this year.

[bomberbrown]

Thoughts?

I posted this a week ago on the immigrants thread:

This is how stupid Housing Benefit has become in this country, and in particular, London.

When I first moved to London in 1998, I had to top up my Housing Benefit by £5 a week to the Property Management Company becuase the housing benefit never covered it. I remember cycling every week from Lower Clapton Hackney to Leytonstone just to to pay this fiver as the housing benefit was paid direct.

Contrast that with the generous LHA handouts you get now after 12 years of Labour. Not only will it cover exorbatant rentals (like Westminster, Chelsea etc), but you get to keep up to £15 a week if you find somewhere to live thats cheaper than the LHA for your area.

The system is bonkers broken.

[jonb]

Interesting and depressing comments after a rubbish article in the Guardian: This benefit cut will hit the poorest

So it seems to me that:

In every area the council sets a cap for LHA (housing allowance) for each type of property.

Every landlord markets his property at that price, no matter how poor the property, and is guaranteed a tenant.

Therefore the landlord has a guaranteed fixd income irrespective of what the market might dictate.

Therefore prices will stay at whatever level produces a respectable yield: property investment is more like buying gilts than selling a service.

Thoughts?

It's not as simple as that. Where I live, you can easily get a property for less than the LHA rate. LHA is £650 per month. I pay £600.

Having a tenant on LHA does not mean guaranteed income, because LHA is paid to the tenant, and they have a temptation to spend it on other things, especially as it is substantially more than any other benefits they receive. Also, landlord's insurance tends to be a lot higher if you have housing benefit tenants than if you have private tenants, because they are more likely to wreck the place.

[Guest Noodle]

QE = source of fake money for government financing = paying housing benefit = paying landlords = paying BTL mortgages = supporting over priced housing priced in GBP.

QE = source of fake money for government financing = bailing out banks and those in mortgage arrears = supporting over priced housing priced in GBP.

QE = trashing GBP.

House prices are still going down, but not in GBP.

[worried1]

Interesting and depressing comments after a rubbish article in the Guardian: This benefit cut will hit the poorest

So it seems to me that:

In every area the council sets a cap for LHA (housing allowance) for each type of property.

Every landlord markets his property at that price, no matter how poor the property, and is guaranteed a tenant.

Therefore the landlord has a guaranteed fixd income irrespective of what the market might dictate.

Therefore prices will stay at whatever level produces a respectable yield: property investment is more like buying gilts than selling a service.

Thoughts?

Very interesting article. I must admit that I have never really looked into housing benefit or understood it, but it certainly explains a few things.

What is the basic qualification for this benefit ?(e.g. unemployed, employed but below a certain income?) I know quite a few people who outwardly appear to live as well as those with a household income of £80k+ p.a. even though they themselves seem to have little or no work. I know that this could be funded by credit card/bankruptcy cycles, but if am family is getting their rent paid in full each month, they could live pretty well on a very modest income.

[DementedTuna]

Thankfully, the housing benefit level will be falling this year.

Locally, housing benefit is still rising in my area. By 3% as of last week, in fact, council rents go up by that much every year like clockwork.

I estimate that rent prices in my area would be 20% less without the housing benefit prop.

I move into a nice new 2 bed flat for £500 pcm next month... there were several hundred of these on the market at exactly £500.

Average wage here is pretty low (£16k), so they should be closer to the £400 pcm mark (in fact, in the 2008 crash the market got flooded and quite a few did), but that damn benefit won't let them fall further.

I realise the above figures might seem trivial to the londoners on here with good jobs, but the local impact is definitely apparent, especially with all the people on minimum wage getting cut to part time hours, or turned into agency workers.

£12k full-time job = just about liveable, somewhat better life than the dole.

£6k part-time job = better off on the dole...

Edited March 4, 2010 by DementedTuna

[Seasider]

It's not as simple as that. Where I live, you can easily get a property for less than the LHA rate. LHA is £650 per month. I pay £600.

Having a tenant on LHA does not mean guaranteed income, because LHA is paid to the tenant, and they have a temptation to spend it on other things, especially as it is substantially more than any other benefits they receive. Also, landlord's insurance tends to be a lot higher if you have housing benefit tenants than if you have private tenants, because they are more likely to wreck the place.

also, as a small involuntary landlord, I have had around 10 or 12 housing benefit tenants over the last few years, so far 100% have ended up in significant arrears, it is very difficult to evict in a reasonable time frame and even after getting court judgements against the worst offenders, not a penny recieved yet (they usually make sure you cannot find their forwarding address). In contrast the private tenants I've had so far have never been more than a day or two late with their rent (usually paid by standing order).

LHA might be costing a fortune but it's not usually the landlord who gets it. After going to various landlord forums I hear this same story for almost every landlord.

[DementedTuna]

Hah, yeah.. the 22-year old ex-single parent that lives in the flat below my mum spends all her LHA on crack. Probably spent the child benefit on it too, until they took her 4 kids away.

Then there's the 5 seperate occasions that she's set the kitchen on fire too...

I'm glad that landlords have to put up with all sorts of problems in exchange for their taxpayer-funded gravy train, takes the edge off the extra monthly parasite payment a little.

Edited March 4, 2010 by DementedTuna

[leicestersq]

Good original post.

Once again it screams of the need for a citizens benefit or negative income tax to sort this sort of scam out. Honest taxpayers have not only lost billions a year to the banksters, but they are losing billions every year to the housing benefit merry-go round of fraud.

The only solution is to have the citizens benefit. Simple idea, every UK citizen over 18 gets a one off payment each week, say £80 - £100. You get it even if you are a millionaire.

Thats it, no more benefit, you have to do the best you can with it.

Please have a go at this simple idea and see how it works.

It removes the poverty trap, as any earned money on top is money in your pocket.

No benefits for having lots of kids, that ends.

No housing benefit, or Local Authority Housing.

No way to screw the system, as there is no system to screw.

Easy to administer, and almost impossible to defraud.

And a bit of money when times fall hard, until you get a job.

(The only additional benefit would be for people who are handicapped and disabled in some way. This would come out of a fund adminstered by doctors, and the fund would be capped, so if you increase the benefit for one person, the remaining group has to take a cut. Otherwise, like DLA, you will get more and more people joining the pool.)

[Selling up]

Raises an interesting question:

Would I prefer that my tax is being spent providing crack for a tenant or paying a landlord an inflated rent?

Since

crack smoking

implies

landlord missing rent

implies

lower yield on his investment

implies

potential house price fall

I guess self-interest should make me hope that the tenants are smoking my tax pounds!

[Cozza]

Interesting and depressing comments after a rubbish article in the Guardian: This benefit cut will hit the poorest

My sister's new bloke bought a BTL in Croydon last year, did it up and attempted to let it on the open market for £1,600 pcm. No takers in the private market but he was swamped by people on housing benefit who wanted it. The tenant is now a young single mum of four. Croydon Council is of course paying him the full whack.

How long can this continue I wonder...

[abharrisson]

Interesting and depressing comments after a rubbish article in the Guardian: This benefit cut will hit the poorest

So it seems to me that:

In every area the council sets a cap for LHA (housing allowance) for each type of property.

Every landlord markets his property at that price, no matter how poor the property, and is guaranteed a tenant.

Therefore the landlord has a guaranteed fixd income irrespective of what the market might dictate.

Therefore prices will stay at whatever level produces a respectable yield: property investment is more like buying gilts than selling a service.

Thoughts?

I hadn't realised the system was that inflexible... of course changing it should have an effect ( driving down rental rates) but whether thats enough to prompt another down leg is another matter ( apart from anything else it would take quite a few months to have a noticable effect)

[newbie]

This thread remined me of this Times article from January - http://www.timesonline.co.uk/tol/news/politics/article6973993.ece

Honestly, the system is broken. In fact, some people in government should be held criminally liable for the excesses.

[REP013]

FFS, the solution is simple, drop the amount of rent someone on benefits can claim - 20% would be a good start. I personally believe this will have to happen as part of the UK's austerity measures coming to a LHA near you soon.

[piece of paper]

Interesting and depressing comments after a rubbish article in the Guardian: This benefit cut will hit the poorest

So it seems to me that:

In every area the council sets a cap for LHA (housing allowance) for each type of property.

Every landlord markets his property at that price, no matter how poor the property, and is guaranteed a tenant.

Therefore the landlord has a guaranteed fixd income irrespective of what the market might dictate.

Therefore prices will stay at whatever level produces a respectable yield: property investment is more like buying gilts than selling a service.

Thoughts?

Unintended consequences. The only answer is to get the verger, or whatever he is called, at the Palace of Westminster to padlock the doors and refuse to let anybody in if they intend to introduce new legislation. Those undertaking to roll-back the law to how it was 40 years or more should be admitted.

p-o-p