The Economist: " Private Landlords May Be Hurt As Much As Poor Tenants

[CrashConnoisseur]

From the article...

Between 2007-08, before the downturn, and 2010-11, the total number receiving housing benefit has risen by 18%.

On average those new claimants who've just lost their job are renting more expensive properties than long-term benefit claimants; hence the 3% rise in average rent paid by HB while overall rents have fallen.

Edited November 14, 2010 by CrashConnoisseur

[porca misèria]

The rental market isn't homogenous. The vast majority of Private Rental Sector properties are not available to HB claimants so their rents are not likely to be influenced by LHA rates. As the article above states rents generally have been falling.

I've personally experienced a case where I was viewing a house also sought by a HB claimant (twentysomething single mother-of-two). She made it quite clear she expected to outbid me on price, because it cost her nothing. So I declined to enter a bidding war, despite it being the nicest of the four places I viewed.

My present place is one of the vast majority that advertises no HB. Yet one of my two current neighbours (other flats in the building - same landlord and agent) is a claimant. I expect "No HB" is often empty words. If I were paranoid, I might suggest one purpose of it was to manipulate the market.

[mdman]

Any market receiving taxpayer subsidies 'enjoys' corresponding price rises. I know HB punters whose rent on their studio flat bumped up from £150 to £350 PW after the landlord confirmed with the council what the 'going rate' was.

[Tired of Waiting]

(...) In any case when a Rent Officer calculates LHA rates they are required by law to exclude rents for tenancies which are assisted or influenced by HB.

That is simply not possible. As Housing Benefits injects billions of pounds on the demand side of this market (that has a fixed short-term supply) it pushes rents up, unavoidably, all rents, the whole market.

CC, come on, this is quite straightforward.

'Rent Officer Handbook - Lettings Information - HB':

http://www.voa.gov.uk/instructions/chapters/roh/l-roh-lettings-information-HB.htm#P76_761

Thanks for the quote. It shows that the writers were also unaware of the above (scarily!). (OK, I know, I should be used to that by now but it still surprises me.)

.

Edited November 14, 2010 by Tired of Waiting

[Tired of Waiting]

the trouble is - that if the rental market is reasonably efficient then ALL rents are influenced by HB, by landlord-arbitrage, so what ToW says will happen can still come about quite easily

That is simply astonishing.

It shows exactly how Housing Benefit has driven up all rents.

And now the limit is to be reduced to the 30% level of rents from 50%, it should have an incredible domino effect on all rents.

+ 1

+ 1

[Georgia O'Keeffe]

Ministers point out that the government can use its market power to push rents down, because housing-benefit tenants make up 40% of the privately rented sector.

That is simply astonishing.

It shows exactly how Housing Benefit has driven up all rents.

And now the limit is to be reduced to the 30% level of rents from 50%, it should have an incredible domino effect on all rents.

yep, i find it shocking that its going to be reduced, it will only harm savvy entrepreneurs in the market and Britian needs more savvy entrepreneurs , not less, if the tories had any economic sense theyd whack it up to 70%

Edited November 14, 2010 by Tamara De Lempicka

[Tired of Waiting]

Nice That's my kind of government

This article by The Economist chimes with IDS interview to Andrew Marr - in both content and timing.

Looks like the government decided to come out of the closet, and admit that they want lower rents, despite the political costs of it for the Tory party - its base.

.

Edited November 14, 2010 by Tired of Waiting

[bomberbrown]

The most striking thing from this graph is that housing benefit payments increased during the early 90's recession (as you would expect), however, you then have another massive increase in housing benefit in the supposedly booming years of 2004 to 2009.

Go figure.

[Si1]

it makes me so angry that this game was played that made some BTL landlords very rich - involving paying MY taxes as above fair value income to asset-speculators

they said they were savvy - no, they were just looters

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Edited November 14, 2010 by Si1

[Optobear]

This article by The Economist chimes with IDS interview to Andrew Marr - in both content and timing.

Looks like the government decided to come out of the closet, and admit that they want lower rents, despite the political costs of it for the Tory party - its base.

.

The whole idea of housing benefit is entirely bizarre. The government takes £20bn from taxpayers and gives it to private landlords. Why do they need to be given £20bn? It makes no sense. Many of the private landlords are very wealthy, why take from ordinary taxpayers to further enrich the landlords?

[Tired of Waiting]

it makes me so angry that this game was played that made some BTL landlords very rich - involving paying MY taxes as above fair value income to asset-speculators

they said they were savvy - no, they were just looters

scum

scum

scum

Have you noticed this part of the article?

"between late 2008 and early 2010 private rents fell by 5% because of the recession, while those paid for with housing benefits rose by 3%"

BTW, IDS has just quoted exactly the same numbers to Andrew Marr.

[Tired of Waiting]

Humans play to the incentives given to them including weighing up the risks, costs and benefits of being caught.

It doesn't matter whether you are a rich man who finds out they can 'legally' avoid tax, to an unemployed single mother on benefits, a landlord or a banker.

People are just being people. And that is the sad thing.

Yes, unfortunately. The main key is always regulation.

[Georgia O'Keeffe]

Yes, unfortunately. The main key is always regulation.

yes regulation implemented by people, good one

[Tired of Waiting]

yes regulation implemented by people, good one

Not all people are the same. Governance can be god or bad. Some countries are better governed than others. Some parties are better than others. Some people too.

[erranta]

The most striking thing from this graph is that housing benefit payments increased during the early 90's recession (as you would expect), however, you then have another massive increase in housing benefit in the supposedly booming years of 2004 to 2009.

Go figure.

That's because Labour introduced a new law making Housing Associations/councils etc to start raising their rents to market levels!

It also shows the lack of council housing and the poor being forced into private sector renting which, when they are thrown out of a job costs & everyone ends up paying extra.

Edited November 14, 2010 by erranta

[Liquid Goldfish]

The most striking thing from this graph is that housing benefit payments increased during the early 90's recession (as you would expect), however, you then have another massive increase in housing benefit in the supposedly booming years of 2004 to 2009.

Go figure.

no it doesn't

it shows a smallish rise from 2005 to 2008, then a huge rise since the recession started, because, as stated in the article, the number of claimants rose 18% during the recession

[porca misèria]

This article by The Economist chimes with IDS interview to Andrew Marr - in both content and timing.

Looks like the government decided to come out of the closet, and admit that they want lower rents, despite the political costs of it for the Tory party - its base.

.

Tory party base?

Old wealth landowners yes. BTL spivs? Hardly!

Tories understand instinctively that you have to create wealth before you can do things with it - like spending or redistributing it.

It's not such a great leap from that to the realisation that a zero-sum game like property speculation doesn't create wealth, and that if too much of our money and effort goes in to that then everyone is poorer for it.

I suspect even Brown and Balls realised that, and would've behaved more responsibly if they'd expected to win the election. Not just the 2010 election, but also the 2005 one.

[Stars]

Tory party base?

Old wealth landowners yes. BTL spivs? Hardly!

Tories understand instinctively that you have to create wealth before you can do things with it - like spending or redistributing it.

Yes - but they fail to follow through with this logic and apply it to real estate (for some odd reason). They have been failing to do this for about a century now, so it's not a temporary 'senior moment'.

It's not such a great leap from that to the realisation that a zero-sum game like property speculation doesn't create wealth, and that if too much of our money and effort goes in to that then everyone is poorer for it.

I agree it is not a giant mental leap at all - in fact it's bleedingly, patently obvious if somebody points it out to you, but this isn't where the Tory party have been or are presently. Some of us are in danger of reading the tory party's position as being where we want to be (and where it SHOULD be), rather than where it actually is.

[SHERWICK]

The whole idea of housing benefit is entirely bizarre. The government takes £20bn from taxpayers and gives it to private landlords. Why do they need to be given £20bn? It makes no sense. Many of the private landlords are very wealthy, why take from ordinary taxpayers to further enrich the landlords?

+1

[Harry Monk]

Yes, at last, we have finally drilled it into SHERWICK's brain that this money is going to BTL landlords and not "benefit scroungers".

[miko]

Yes, at last, we have finally drilled it into SHERWICK's brain that this money is going to BTL landlords and not "benefit scroungers".

LOL

[Lepista]

Changing the spending power to the renters from the rentiers - makes no difference to the government, exxept in their need to spend - rentiers will save, renters will spend.

[Optobear]

Yes, at last, we have finally drilled it into SHERWICK's brain that this money is going to BTL landlords and not "benefit scroungers".

But how to get the public to also realise that this is £20bn to landlords?

[Tired of Waiting]

But how to get the public to also realise that this is £20bn to landlords?

I think it will depend mostly on what will actually happen in the next 2 or 3 years. I am pretty sure that the 30th percentile rule will bring rent levels down. If this happens, the coalition will be fine politically.

Only if landlords were prefer to leave millions of properties empty (impossible for them), we would have millions of people homeless, and a big political problem. But that is just not logical or even feasible for the landlords.

[Damik]

Most of us already know most of this. Still, it is interesting to see that our point of view is becoming mainstream (finally!).

http://www.economist.com/node/17465301

government should NEVER pay a private rent at all ...

they should provide only council owned cheap accommodation ... if they can not they should provide emergency tent cities or mobile houses ...

and if you check around the M25 there is a plenty space for cheap council accommodation ...

paying a private rent should be a criminal act -> total miss management of public founds ... so simple ...