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Tired of Waiting

I F S Mistake: 100% Of L H A Reductions Allocated To The Poor

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After the Budget 2010 the IFS published a report saying that the budget was regressive. But a major reason for their results was that they allocated 100% of the LHA reduction as income loss for the poor, and 0% for landlords. In effect they assumed that rents would not fall at all as consequence of the LHA reductions. This was an obvious, basic mistake. (Or spin?) Just absurd. Economic logic says that rent levels will obviously be affected, and the income loss will affect both landlords and tenants, by some ratio.

Even in their revised assessment (in quote below), they kept ignoring this. Perhaps because it is difficult to forecast the loss shares, or for political reasons, or for the limelight? But it is obviously wrong to allocate 100% to tenants.

Or perhaps it just didn't occur to them! Or to the media, as nobody corrected them back then.

They will publish another report today, and I bet they'll make the same mistake again. It would be very important if someone with contacts (any journous around here?), or time to write to them, could warn them, and/or the media about it.

25 August 2010

The distributional effect of tax and benefit reforms to be introduced between June 2010 and April 2014: a revised assessment

James Browne and Peter Levell

In this Briefing Note, we attempt to model the full impact of tax and benefit changes in the Budget, including additional benefit cuts, on different income and expenditure groups.

http://www.ifs.org.uk/bns/bn108.pdf

Edited by Tired of Waiting

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There's your problem.

Trying to square the Economic Logic and Housing market circle

I could (should?) have written that common sense tells us that.

Don't you think that with a reduction of HB across the whole country, that rent levels will be affected, by at least some degree? I think this is probably a consensus here, and anywhere.

Edited by Tired of Waiting

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Flanders did the same in her blog:

But here is what seems to me to be the ticking time bomb in the government's plans - which will have economic implications as well as political ones. That is the likely impact on the demand and supply for housing.

With the housing benefit cuts, the cuts in social investment, and the re-definition of "affordable" housing to include rent that is 80% of the going market rate, the government is surely ensuring a massive rise in the demand for social housing, and only a modest increase in supply. When you consider that local authorities have also been told that they do not have to stick with the targets for private house building which were imposed on them by the previous government, this is a big gamble with the bottom end of the UK housing market.

The chancellor says, rightly, that the old system of social housing was not working. He has some bold ideas for creating a better one. But they will take time to work - if they actually do. In the meantime, you have to wonder where a lot of lower-income households in the South East are going to live.

Or perhaps rents might fall to a level that can be afforded? You'd think an economist might have mentioned that.

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I could (should?) have written that common sense tells us that.

Don't you think that with a reduction of HB across the whole country, that rent levels will be affected, by at least some degree? I think this is probably a consensus here, and anywhere.

This is anecdotal, I was talking to a builder(contracts mgr) yesterday about the monstrous level of housing costs and he told me his single mum daughter who recieves HB has just had this dropped by a third, when she contacted the council about the shortfall they told her to tell the LL that was all he was getting ! (its a former Local Authourity house on an estate in Bristol) perhaps sanity will return !

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Flanders did the same in her blog:

Or perhaps rents might fall to a level that can be afforded? You'd think an economist might have mentioned that.

Yes, I heard Flanders yesterday, and she was repeating that all over the place! No sane economist would ignore that! Very weird indeed. I'll have to check her CV again. Perhaps she just did that "PPE" malarkey?

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This is anecdotal, I was talking to a builder(contracts mgr) yesterday about the monstrous level of housing costs and he told me his single mum daughter who recieves HB has just had this dropped by a third, when she contacted the council about the shortfall they told her to tell the LL that was all he was getting ! (its a former Local Authourity house on an estate in Bristol) perhaps sanity will return !

Exactly. Of course!

And private tenants will not "fill that gap".

It is just common sense.

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Exactly. Of course!

And private tenants will not "fill that gap".

It is just common sense.

Not quite as straightforward as common sense. You do have to have been thinking about it. The Local Housing Authorities will have been thinking about it, judged by the response in the previous post.

I think those who are private tenants already do not have a better option. Certainly people I have known who became private tenants were either moving to a new area, moving out of a parents house or had split up with someone. The only ones who really had a choice were the ones moving out of a parents place and I'm pretty sure none of them would have been encouraged to rent if the prices came down by only 80%.

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Could you clarify what you mean by:

The only ones who really had a choice were the ones moving out of a parents place and I'm pretty sure none of them would have been encouraged to rent if the prices came down by only 80%.

For the record, we rent privately and have to live in a smaller place (less rooms) than our family would be entitled to on HB. I've banged on about this before, but this is insane - my tax is essentially being used to price me out of a decent rental, since HB sets a floor under rents.

We need more social housing - the combo of HB and private tenants competing for the same stock of rentals is ridiculous.

Failing that, a reduction in HB at least means that, one way or another, rents will drop. Either because LLs need to drop to the new HB levels, or because increasing multiple occupancy for HB claimants frees up other rentals for the private tenants, and LLs will then need to compete for them.

High HB benefits LLs and no one else. Even LLs who don't take HB are being subsidised by it, due to the way it distorts the market.

BTW, why do we rent? Bad luck/good luck - we had a huge rental in Putney for years for basically a peppercorn rent from a friend of the family. We've had to move to get a decent secondary school for the kids, and by then HPI meant that we didn't want to buy.

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Could you clarify what you mean by:

For the record, we rent privately and have to live in a smaller place (less rooms) than our family would be entitled to on HB. I've banged on about this before, but this is insane - my tax is essentially being used to price me out of a decent rental, since HB sets a floor under rents.

We need more social housing - the combo of HB and private tenants competing for the same stock of rentals is ridiculous.

Failing that, a reduction in HB at least means that, one way or another, rents will drop. Either because LLs need to drop to the new HB levels, or because increasing multiple occupancy for HB claimants frees up other rentals for the private tenants, and LLs will then need to compete for them.

High HB benefits LLs and no one else. Even LLs who don't take HB are being subsidised by it, due to the way it distorts the market.

(...)

Exactly.

By the way, you may find this interesting:

BBC "Today in Parliament", 20/10/2010, from 20min 30sec to 25min 10sec: http://www.bbc.co.uk/programmes/b00vcq99

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Exactly.

By the way, you may find this interesting:

BBC "Today in Parliament", 20/10/2010, from 20min 30sec to 25min 10sec: http://www.bbc.co.uk/programmes/b00vcq99

Thanks for the link - labour flailing, tories trumping them.

Funnily enough, I was speaking to someone from the IPPR last night about my situation (an old friend of the family). They genuinely had never considered the issue of private tenants such as myself, and how HB impacted on us.

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Not quite as straightforward as common sense. You do have to have been thinking about it. (...)

OK, you may be write, but the IFS and these journalists have been thinking about it. And it is so logical that once someone hears it for the first time (that the fall in HB will affect both tenants and landlords, at some ratio), it is clearly a convincing argument.

(...)

I think those who are private tenants already do not have a better option. Certainly people I have known who became private tenants were either moving to a new area, moving out of a parents house or had split up with someone. The only ones who really had a choice were the ones moving out of a parents place and I'm pretty sure none of them would have been encouraged to rent if the prices came down by only 80%.

I am not sure I understood you there.

What we mean is that the "purchasing power" on the demand side has been boosted by HB. With lower HB, this boosting will be less strong, meaning the supply v demand relation will move, prices will fall.

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Thanks for the link - labour flailing, tories trumping them.

Funnily enough, I was speaking to someone from the IPPR last night about my situation (an old friend of the family). They genuinely had never considered the issue of private tenants such as myself, and how HB impacted on us.

:o

:o

still :o (literally, here)

Edit: I've just went to check their front page:

http://www.ippr.org.uk/

The b@stards! They went "tribal"! The IPPR used to be was supposed to be one of the best think tanks around! They were supposed to be sensible! That "Evidence-based policy"! (I know, weren't they all. Always? Well, not really. The IPPR was trying to change Labour previous practice of basing policy on ideology.)

The idiots! No, the b@stards! Went tribal Labour now. :angry: So it is "feck the evidence" now! And logic too! :angry:

Edited by Tired of Waiting

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Could you clarify what you mean by:

"The only ones who really had a choice were the ones moving out of a parents place and I'm pretty sure none of them would have been encouraged to rent if the prices came down by only 80%."

Sorry the "down by 80%" was meant to be "down to 80%".

What I mean by that is that I know of noone who didn't rent, that then suddenly started renting because of price.

Most rented because they wanted to live in a town that their parents didn't live in, or because they bought a house.

A drop of 20% in rental prices wouldn't have been enough to get them to rent.

[ However if the rental price dropped by 80% as I initially stated many of them would have done ]

These people I'm talking about are the potential private tenants who are meant to be replacing the housing benifitees, as a result of more supply to properties. Also my experiences are for people in their 20s in 1999-2005 when people in their 20s had good jobs.

Edited by SomethingHasToGive

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Sorry the "down by 80%" was meant to be "down to 80%".

Ah - thought so...

These people I'm talking about are the potential private tenants who are meant to be replacing the housing benifitees, as a result of more supply to properties. Also my experiences are for people in their 20s in 1999-2005 when people in their 20s had good jobs.

I suspect that there are a lot of people like me - reasonably happy renting, but would happily move to a bigger place if rents come down. In other words, I suspect that there is going to be a some rental shifts with private and HB tenants swapping places. In other words, its current private renters who will replace the HB renters...

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:o

:o

still :o (literally, here)

:lol: - actually, I've done the friend a dis-service. They're no longer at the IPPR, they've moved to a different think-tank... New Economics Org

From the NEO on housing:

Housing

“Halving the social housing budget will cause a major crisis in housing, and simply putting up rents and removing security of tenure won’t be enough to prevent it. If the Government cuts housing benefit without making changes to the rental market, we run the risk of ghettoizing our cities, driving out poorer renters from wealthy areas, especially in London and the South East.” said Charles Seaford, Head of the Centre for Well-being at nef.

“The Chancellor promised 150,000 new homes,” he continued, “but there are 1.8 million households on the waiting lists. The reality is that the Government could slash the housing budget and have one million new affordable homes built in the next five years if they stopped giving away the value created by the planning system to land speculators, and if they reformed social housing finance to make it more efficient: at the moment housing associations are paying high rates to banks and the losers are vulnerable people.”

“Even if the private sector takes up the burden, as the Government hopes, this will actually add to the housing benefit bill, and be financially inefficient.”

In a report to be published in November, nef will set out an economically and politically viable way of solving the housing problem – while cutting the deficit.

Personally, I've always been amused by the ghetto argument - 'cos it makes so much more sense to only have the very rich and the very poor able to afford to live in our city centres...

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:lol: - actually, I've done the friend a dis-service. They're no longer at the IPPR, they've moved to a different think-tank... New Economics Org

From the NEO on housing:

Personally, I've always been amused by the ghetto argument - 'cos it makes so much more sense to only have the very rich and the very poor able to afford to live in our city centres...

Jeeez! The "New" Economics Org is much worse! By "New" they really mean "NOT", or even "ANTI-"!

I kid you not!

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Jeeez! The "New" Economics Org is much worse! By "New" they really mean "NOT", or even "ANTI-"!

I kid you not!

I can't really comment. I do think the left in general is going to have to undergo a sea-change. New Labour was a sort-of recognition of this - they just got it hideously wrong.

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I can't really comment. I do think the left in general is going to have to undergo a sea-change. New Labour was a sort-of recognition of this - they just got it hideously wrong.

New Labour's main problem was that they had the support of only about 2/3 of Labour MPs (varying with the issue), and therefore they always needed the support of the Old Labour wing to have a majority in Parliament. New Labour, by itself, never had a Parliament majority.

BTW, Labour modernisers will most probably never have a Parliament majority by themselves. Hence, Labour will always be incapable of implementing reforms.

( Yes, Gordon Brown made things even worse by making deals and alliances with Old Labour, to constantly block and blackmail Blair. But these things will always happen. There will always be a b@stard Labour politicians exploiting this tension/opportunity. )

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New Labour's main problem was that they had the support of only about 2/3 of Labour MPs (varying with the issue), and therefore they always needed the support of the Old Labour wing to have a majority in Parliament. New Labour, by itself, never had a Parliament majority.

BTW, Labour modernisers will most probably never have a Parliament majority by themselves. Hence, Labour will always be incapable of implementing reforms.

( Yes, Gordon Brown made things even worse by making deals and alliances with Old Labour, to constantly block and blackmail Blair. But these things will always happen. There will always be a b@stard Labour politicians exploiting this tension/opportunity. )

Personally, I'd rather go back to 'old' labour, but with a healthy dose of realistic finances (i.e. no deficit budgeting) and a recognition that they are there to help the working poor, not to support or create an underclass of non-working poor. It should be 100% taken for granted that work should always be a better deal than benefits*.

I favour the minimum wage and a reasonable set of health and safety standards at work - and to make sure that this doesn't mean uk goods get priced out of the uk market, I'd put an embargo on imported goods from countries w/o comparable standards. FFS why should uk workers basically have to compete with slaves?

* and IMHO a citizen's wage replacing all benefits is the simplest, fairest way to ensure this.

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(...)

High HB benefits LLs and no one else.

(...)

I told you! Look at that:

" The Institute For Fiscal Studies (IFS) says that the entire package of tax and benefit changes coming into force by 2014-15 is clearly regressive "

Stephanie Flanders http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2010/10/ifs_analysis_of_tax_and_benefi.html

" Poor hit more by Spending Review cuts, says IFS "

channel 4 news http://www.channel4.com/news/poor-hit-more-by-spending-review-cuts-says-ifs

They have ignored that HB cuts will be partially a loss for landlords. They've allocated it all to tenants, as if rents will not fall at all! That is either spin, or a monumental incompetence.

Idiots or b@stards?, that is the question...

Edited by Tired of Waiting

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Yes, I heard Flanders yesterday, and she was repeating that all over the place! No sane economist would ignore that! Very weird indeed. I'll have to check her CV again. Perhaps she just did that "PPE" malarkey?

Stephanie Flanders opened her legs for two of labours up and cumming "stars".

http://www.dailymail.co.uk/news/article-1319222/How-BBCs-Stephanie-Flanders-fell-Ed-Miliband-Ed-Balls.html

What else do you really need to know? Don't even bother reading any more of her trojan drivel.

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Stephanie Flanders opened her legs for two of labours up and cumming "stars".

http://www.dailymail.co.uk/news/article-1319222/How-BBCs-Stephanie-Flanders-fell-Ed-Miliband-Ed-Balls.html

What else do you really need to know? Don't even bother reading any more of her trojan drivel.

Yes, I knew that, ed and balls...

But the IFS will be taken as truth by all media outlets. That is the problem.

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  • 245 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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