a Little Time Bomb Under Uk Buy-To-Let Housing

[Bear Goggles]

Some interesting analysis here:

https://medium.com/bull-market/the-overall-benefit-cap-a-little-time-bomb-under-uk-buy-to-let-housing-9575030792d3

Apparently, the new overall maximum benefit cap is going to impact wholly on housing benefit payments - it's unclear if this is an unintended consequence or not.

However I think this conclusions are right, and this is unlikely to be allowed to play out...

The best possible outcome would be for the change in the benefits cap to put downward pressure on rents.

But that best case is unlikely. One thing we do know about the British economy is that rents are sticky. I would guess that the frictions in the housing market would be significant enough to mean that we saw plenty of evictions (which destroy the cost-effectiveness of the scheme, as the evicted families have to be housed in expensive temporary accommodation), plenty of arrears, downward pressure on house prices and real danger of a meltdown in the social housing sector.

My guess is that this policy will be attacked by the left, become toxic and then be withdrawn, or even worse, some kind of extra benefit will be introduced to help people pay their rent after their housing benefit has been capped.

Help to housing benefit™

[Agentimmo]

Rents are sticky ?

Only if you move often and probably is the SE or London ?

Friend in Balham is now on 4th year of 1 bed rental without so much as a penny increase. Similar flats in the same block are advertising at £150pcm more, today. But have had no taker for months, so the void probably negated the price increase already. Good business head , that landlord.

[Bear Goggles]

Rents are sticky ?

Only if you move often and probably is the SE or London ?

Friend in Balham is now on 4th year of 1 bed rental without so much as a penny increase. Similar flats in the same block are advertising at £150pcm more, today. But have had no taker for months, so the void probably negated the price increase already. Good business head , that landlord.

Yeah, but there's an imbalance in the transitionary period, tenant can't pay rent, gets evicted at the end of the month, landlord can't get new tenant, builds up 6 months of mortgage arrears before there's a serious threat of repossession.

In da meantime Labour be like: Won't someone think of the children? and the Tories be like: vibrant private rental sector, long term economic plan etc.

Result. Policy cancelled.

And BG stops trying to talk like da kidz. So everyone is happy.

[wonderpup]

Ironically, in the limiting case in which rents fell by the full amount of the cap change, this would mean that the benefits cap had no effect on claimants at all — it would be experienced by the economy as a reduction in the subsidy provided to buy-to-let landlords and to housing associations.

It would be funny if this was indeed the outcome- given that many buy to let landlords probably voted Tory.

What this all nicely demonstrates is the fallacy of talking about 'welfare' as if it could be addressed entirely separately- another example is the apparent plan to cut costs by reducing home care to the elderly-result= more old people remain in expensive hospital beds instead being discharged to their homes- so any money saved by cutting those home visits is more than offset by the additional costs of keeping those people longer in hospital.

[long time lurking]

Team blue talked of £12bn in savings ,the elephant in the room that no one even mentioned let alone suggested it would be protected was HB and it`s one of the biggest bills when it comes to welfare

[interestrateripoff]

Housing benefit needs curbing it's helped support inflated rents. Whether the Tories will cut it is another matter. I don't think the Tories wanted or expected to win. Now they have they have to find £12bn in cuts, I suspect they'll claim cuts whilst fudging the numbers.

[Exiled Canadian]

This wold at least mean that HB won't go up for a couple of years or more. THat's got to make it harder for landlords to drive up rents if interest rates do eventually rise. As someone has already said, rents are sticky, and possibly about to get stickier.....

[Bear Goggles]

Housing benefit needs curbing it's helped support inflated rents. Whether the Tories will cut it is another matter. I don't think the Tories wanted or expected to win. Now they have they have to find £12bn in cuts, I suspect they'll claim cuts whilst fudging the numbers.

That's my problem with the political parties, none of them have the courage of their convictions. The Labour won't commit to improving tenants' rights or social housing, and the Conservatives won't follow through on their free market rhetoric and face the consequences.

If the Tories really do cut housing benefit and trigger a mass LL sell-off, I'll have to take back everything I've said about them. I may even have to eat my hat.

[Exiled Canadian]

That's my problem with the political parties, none of them have the courage of their convictions. The Labour won't commit to improving tenants' rights or social housing, and the Conservatives won't follow through on their free market rhetoric and face the consequences.

If the Tories really do cut housing benefit and trigger a mass LL sell-off, I'll have to take back everything I've said about them. I may even have to eat my hat.

Here's a quick way to increase the social housing stock:

1. Cut HB by 25%

2. Introduce the "Landlord Support Fund" that will buy LL's out of their problem properties at a price based on a 10% yield derived from the new HB rate.

3. Explain to (ex) LL's that "were all in it together"

[Gigantic Purple Slug]

Tories will shovel money towards their core vote. What's probably more surprising is that housing benefit is not going up.

[interestrateripoff]

That's my problem with the political parties, none of them have the courage of their convictions. The Labour won't commit to improving tenants' rights or social housing, and the Conservatives won't follow through on their free market rhetoric and face the consequences.

If the Tories really do cut housing benefit and trigger a mass LL sell-off, I'll have to take back everything I've said about them. I may even have to eat my hat.

I think your hat will be safe from becoming lunch.

I would expect the bit fudge would be London rents, a cap will be applied to the rest of the country whilst the centre of the known universe escapes it.

[Limpet]

That's my problem with the political parties, none of them have the courage of their convictions.

I`m afraid they do when it comes to imposing a police state.

[MrPin]

This country should not rely on the private sector to provide all rented accomodation. It's not working, and selling off the council houses was a bad idea. There, I have said it, and I don't even have a bust of Karl Marx on my desk!

Edited May 16, 2015 by MrPin

[winkie]

[Si1]

This country should not rely on the private sector to provide all rented accomodation. It's not working, and selling off the council houses was a bad idea. There, I have said it, and I don't even have a bust of Karl Marx on my desk!

I'm similarly minded

I don't mind them selling them off personally. But I'm not happy they stopped building them.

[19 year mortgage 8itch]

Here's a quick way to increase the social housing stock:

1. Cut HB by 25%

2. Introduce the "Landlord Support Fund" that will buy LL's out of their problem properties at a price based on a 10% yield derived from the new HB rate.

3. Explain to (ex) LL's that "were all in it together"

That would be awesome

[Bear Goggles]

That would be awesome

Something not far off that happened in the 1970s. My parents recently told me that the reason we ended up living in a council flat was because their landlord was encouraged to sell to the council because he couldn't maintain the house under the then fair rents policy. The house was bought by the council, we were rehoused in the same street (I was only about 6 months old at the time) while the flat was refurbished.

My parents were then given the choice to move back in, or stay in our new council flat. We stayed as they were pretty much the same - Victorian maisonettes in North London. A quick web search shows that the most recent sale of a similar maisonette in that street fetched £750k.

Ah, the helicon days of adequate housing. All but a distant memory now.

[council dweller]

Here`s something to remind you, my avatar with cat.

No really, it`s a genuine council house! (1953)

[Si1]

They built some sh#t too, those horrendous damp high rises that dotted the country. Just for some devils advocating

[long time lurking]

They built some sh#t too, those horrendous damp high rises that dotted the country. Just for some devils advocating

There still being built now ,they just cost 200k + and theyer not damp yet but most will be sooner or later

[Assume The Opposite]

My family has been fortunate to have had adequate and good standard social housing. I've been living in the private sector since leaving home for uni and now working etc. Social housing is just a dream for me. I can understand the theme of the social housing sell off, aspiration, own your home etc.

As others have said not building more is the problem and has seriously ******ed up any chances I have.

I could probably afford the mortgage payments monthly, just the deposit is trickier.

[The Young and the Nestless]

As others have said not building more is the problem and has seriously ******ed up any chances I have.

I could probably afford the mortgage payments monthly, just the deposit is trickier.

What don't you understand about this graphic?

It's not that there is "no building" going on (red column) though there should be much more -- rather that the landlords ('private rented' blue column) have "consumed" that property instead of owner occupiers/first time buyers. (As well also consuming some of the existing property stock that was owner occupied - yellow column).

[MrXxx]

Come on 'The young and nestless' give 'Assume the opposite' a break...even our politicians don't understand that graph!.....or maybe they do and then it begs the question why the electorate are letting themselves be shafted with 'their eyes open' !

[Bland Unsight]

What don't you understand about this graphic?

...

Come on 'The young and nestless' give 'Assume the opposite' a break...even our politicians don't understand that graph!

Also TYatN, good graphic and germane, so thanks for posting, but maybe dial down the tone a little? It's a lovely Sunday morning. This is not a bar fight.

Edited May 17, 2015 by bland unsight

[Pindar]

It's a case of, if each successive government allows housing policy to be dictated by the interests of the banking industry, this is what you'll get. I can remember in the 1980s the number of times the government would be criticised for attempting to bail out various industries with tax payer money yet here we are in 2015 with two almost state-owned banking groups, massive subsidies to private landlords via housing benefit and the refusal of ANY government to address the needs of ordinary working people.

Continuing to pander to the already wealthy and the comfortably off boomer types will end up recreating Norman feudal Britain.

This is just part of the problem that de-industrialisation has caused in the post-industrial western economies. When the only means of wealth generation is to get somebody else to pay your BTL mortgage and when the only decent incomes to be had are by physical houses which in some cases are more than a hundred years old, you know the economy is completely and utterly f***ed.