Housing Benefit Is Inflating Average Rents By £400/month

[goldbug9999]

when a Rent Officer calculates LHA rates they are required by law to exclude rents for tenancies which are assisted or influenced by HB. Thus LHA rates are set only by reference to rents paid by non-HB tenants.

The rule is based on a fallacy - that rents paid without and HB assistance are not "affected" by HB.

Sorry but if 40% of all rents are HB assisted then there is no such thing as a rent which is unaffected by HB. If you have n properties available for rent and you inject x amount of free money into the market (by housing benefit) then simple dynamics of a largely supply-constrained market mean that rents will increase on average by x/n.

So currently average rents are inflated by housing benefit to the tune of 20bil/5mil or .....

£400 / month

:angry:

[crash2006]

The rule is based on a fallacy - that rents paid without and HB assistance are not "affected" by HB.

Sorry but if 40% of all rents are HB assisted then there is no such thing as a rent which is unaffected by HB. If you have n properties available for rent and you inject x amount of free money into the market (by housing benefit) then simple dynamics of a largely supply-constrained market mean that rents will increase on average by x/n.

So currently average rents are inflated by housing benefit to the tune of 20bil/5mil or .....

£400 / month

:angry:

RUBBISH

They are not being inflated by housing benefits, but by the decreasing demand of social housing market share, less social homes more people that used to live in social homes being pushed into the private rental market meaning rent rises because the demand is there. please explain how to europeans that come to this country to find work get housing benefits, they all rent in the private sector pushing up demand.

Edited November 15, 2010 by crash2006

[Damik]

RUBBISH

They are not being inflated by housing benefits, but by the decreasing demand of social housing market share, less social homes more people that used to live in social homes being pushed into the private rental market meaning rent rises because the demand is there. please explain how to europeans that come to this country to find work get housing benefits, they all rent in the private sector pushing up demand.

why do we need more housing in UK?

I do not see any homeless people around ...

if we build more houses they will be empty ... and there is apparently 70k empty houses ... I can see a lot of houses in RightMove waiting empty for sale ...

the private rent is high because HB pays for any size of the private rent ... it is an ultimate market floor .. nobody will rent for less as the state always pay the market rate ...

[MongerOfDoom]

if we build more houses they will be empty ... and there is apparently 70k empty houses ... I can see a lot of houses in RightMove waiting empty for sale ...

Just go and see the overcrowded trains arriving into London in the morning. Do you think the people on them largely like a long expensive commute and would turn down a chance to live closer? I suppose they might like to live in the newly freed ex-social housing, but then not many of them will be able to afford to pay £400 a week ...

[Tiger Woods?]

The rule is based on a fallacy - that rents paid without and HB assistance are not "affected" by HB.

Sorry but if 40% of all rents are HB assisted then there is no such thing as a rent which is unaffected by HB. If you have n properties available for rent and you inject x amount of free money into the market (by housing benefit) then simple dynamics of a largely supply-constrained market mean that rents will increase on average by x/n.

So currently average rents are inflated by housing benefit to the tune of 20bil/5mil or .....

£400 / month

:angry:

It's worse than that, as these things aren't linear. If you dropped HB to zero, there would be an immediate oversupply of rentals by 40%. I'd suspect a very severe correction as landlords scrambled to sign up the 60% who could pay at least something, in conjunction with a lot of ex-rentals going onto the market inducing the mother of all crashes in both rents and land prices(*). No one would ever go into BTL ever again... Housing benefit being paid to a large portion of the population has a huge effect as housing is priced on the margin.

It would be an interesting economic and social experiment to run.

(*) I haven't figured into my calculations the proportion of the housing stock destroyed in the riots that would ensue.

[Fairies Wear Boots]

why do we need more housing in UK?

I do not see any homeless people around ...

if we build more houses they will be empty ... and there is apparently 70k empty houses ... I can see a lot of houses in RightMove waiting empty for sale ...

the private rent is high because HB pays for any size of the private rent ... it is an ultimate market floor .. nobody will rent for less as the state always pay the market rate ...

Our housing stock is a disgrace. Aparently we have 900K of empty properties in this country. But it hardly matters if they can't be put back into usefullness.

We've built a lot of rabbit hutch sized properties, which is probably why decent sized family homes in the South East have managed to stay so overvalued for so long.

[Hyperduck Quack Quack]

Housing benefit must have some sort upward effect on rents. If the total level of housing benefit is reduced, that would tend to lower rents at the bottom end, and so on up the market. If rents go down, more landlords will get into difficulties and try to sell their portfolios.

We've built a lot of rabbit hutch sized properties, which is probably why decent sized family homes in the South East have managed to stay so overvalued for so long.

If the market does drop enough to create much more affordability at the bottom end of the market, some of the smallest rabbit hutches will probably drop in value a lot more than the general market because first-timers will go straight for the second rung of the ladder. Edited November 15, 2010 by Hyperduck Quack Quack

[Tired of Waiting]

RUBBISH

They are not being inflated by housing benefits, but by the decreasing demand of social housing market share, less social homes more people that used to live in social homes being pushed into the private rental market meaning rent rises because the demand is there. (...)

Do you mean the Right to Buy council homes?

(...) please explain how to europeans that come to this country to find work get housing benefits, they all rent in the private sector pushing up demand.

Think NET, remember?

UK nationals also emigrate reducing housing needs here. Migration is a red herring in this debate.

[@contradevian]

Do you mean the Right to Buy council homes?

Think NET, remember?

UK nationals also emigrate reducing housing needs here. Migration is a red herring in this debate.

I don't think it is, if you examine the typical inner London social housing estate. And not so inner either, take a trip out to Thamesmead, to see how many Somali's have moved in. I would think immigration + housing benefit has inflated a nice little rental boom right along the Thames corridor.

[getknk]

been to the US.. the houses are much larger and cheaper to rent out..

[Tired of Waiting]

I don't think it is, if you examine the typical inner London social housing estate. And not so inner either, take a trip out to Thamesmead, to see how many Somali's have moved in. I would think immigration + housing benefit has inflated a nice little rental boom right along the Thames corridor.

There are some 6 to 7 million foreign born people living in Britain. But there are some 5.5 to 6 million UK citizens living abroad. The NET result here is probably just over 1 million. In a population of 60 million, this is not much relevant, less than 2%, and in some 5 decades. Migration is a red hering. Please see this http://www.housepricecrash.co.uk/forum/index.php?showtopic=153649&st=0&p=2765859entry2765859

The main cause of the increase in UK housing need has been smaller households - about 10% smaller in the past decade alone, if I recall correctly. If so, this increased housing needs by some by 10% in just 1 decade. (Just the number of dwellings though, not the total size).

Planing blockage has been the main problem, for a couple of decades, at least.

[Tired of Waiting]

true

The goverment know this and that is why they trying to cap HB

Cap housing benifit will cap all rents.

Cap rents will cap house prices.

+ 1

+ 1

+ 1

[tim123]

There are some 6 to 7 million foreign born people living in Britain. But there are some 5.5 to 6 million UK citizens living abroad. The NET result here is probably just over 1 million. In a population of 60 million, this is not much relevant, less than 2%, and in some 5 decades. Migration is a red hering.

I think that this ignores the fact that the vast majority of the foreigeners in the UK will be of working age and a very large percentage of the Brits overseas will be of retirement age

tim

[Tired of Waiting]

I think that this ignores the fact that the vast majority of the foreigeners in the UK will be of working age and a very large percentage of the Brits overseas will be of retirement age

tim

I am not sure that that is the case. We have had immigration here for many decades already. And we have many UK nationals working abroad. Do you have any data about that?

Besides, what difference would that make? What do you mean? Which one is "better" for a host country (on a NET basis)? More workers or more pensioners?

[RufflesTheGuineaPig]

If you just tax land values the problem will resolve itself. All the unemployed and retired will have to move out of the houses in central london and out into the cheaper houses out in the sticks.

[Tired of Waiting]

This country has a large excess of workforce for the Jobs available, this results in one thing, Mass unemployment which has to be paid for, WHATS SO GOOD ABOUT THAT,

" Lump of labour fallacy

One of the best-known fallacies in ECONOMICS is the notion that there is a fixed amount of work to be done – a lump of LABOUR – which can be shared out in different ways to create fewer or more jobs. For instance, suppose that everybody worked 10% fewer hours. FIRMS would need to hire more workers. Hey presto, UNEMPLOYMENT would shrink.

In 1891, an economist, D.F. Schloss, described such thinking as the lump of labour fallacy because, in reality, the amount of work to be done is not fixed. GOVERNMENT-imposed restrictions on the amount of work people may do can actually reduce the EFFICIENCY of the labour market, thereby increasing UNEMPLOYMENT. Shorter hours will create more jobs only if weekly pay is also cut (which workers are likely to resist) otherwise costs per unit of output will rise. Not all labour costs vary with the number of hours worked. FIXED COSTS, such as recruitment and training, can be substantial, so it will cost a firm more to hire two part-time workers than one full-timer. Thus a cut in the working week may raise AVERAGE costs per unit of OUTPUT and cause firms to buy fewer total hours of labour. A better way to reduce unemployment may be to stimulate DEMAND and so increase output; another is to make the labour market more flexible, not less. "

http://www.economist.com/research/economics/alphabetic.cfm?letter=l#lumpoflabourfallacy