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Far from being solved, the problem of rent has become even greater

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https://www.thetimes.co.uk/article/far-from-being-solved-the-problem-of-rent-has-become-even-greater-jmssl822d

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Twenty years ago, fewer than one person in ten lived in private rented accommodation. One in five does so today. Among those aged between 25 and 34, the proportion renting in the private sector has tripled to over 30 per cent.

That is an extraordinary social change occurring over a short period and overturning decades of change in the other direction. Private renting had been in decline since the early years of the 20th century. Most rental properties ended up in the social sector, while home ownership rose generation by generation. That has gone into sharp reverse. Fewer than half of 25 to 34-year-olds are now owner-occupiers, down from two thirds only 20 years ago.

The change has been especially dramatic for those on middling incomes. High-earners are still very likely to own their own home. For the poorest, the shift has been out of social renting and into private renting. But for the middle-income group, those on modest levels of earnings, the shift has been away from owner-occupation and into private renting.

This is having, and will continue to have, profound economic, social and political consequences. As more people lack capital in the form of housing, perhaps they will become less enamoured of capitalism. If middle-earners now feel more in common with their fellow renters among the poor, and less in common with high-earning owner-occupiers, perhaps their political allegiances will change. The march towards the “property-owning democracy” of which generations of politicians have dreamt has gone into sharp reverse.

One particular and immediate consequence comes through our social security system. If you are in rented accommodation and your income is low enough, then you can receive housing benefit to help to cover your rent. Growing numbers of private tenants, as well as increasing rents in the social sector, have pushed up the costs of this part of the benefit system to quite eye-watering levels.

Government will spend something like £24 billion on housing benefit this year. To put that figure in perspective, it’s three times what we spend on roads, it’s about £8 billion more than the entire police budget and it’s pretty close to what we spend every year on educating more than four million pupils in 20,000 or so primary schools. A government department whose only job was to disburse housing benefit payments would be among the biggest spenders in Whitehall.

It remains the case that more of this money is spent on the generally poorer population of social tenants than is spent on private renters, but that balance is changing. Spending on housing benefit for private tenants has doubled in real terms over the past decade. More than a quarter of all private renters — that’s one and half million households — receive some housing benefit.

You wouldn’t expect these facts to have escaped the eagle eye of the Treasury and, indeed, they haven’t. The inexorable rise in spending has, in fact, been halted by £3 billion-worth of cuts implemented since 2011, with more in the pipeline. One of the most important changes has been to reduce the maximum amount of rent that housing benefit will cover. The result is that many fewer people on very low incomes get the whole of their rent paid than would have been the case without the reforms. This is clearly a significant contributor to the financial difficulties faced by many poor families.

Yet that fact has to be set against the sheer cost of the system. It remains the case that, in high-rent areas, a family with one child can still receive as much as £15,000 a year to cover the rent on a two-bedroom property.

What we have is a system that satisfies nobody. It costs the taxpayer a fortune. It leaves many very low-income people in financial difficulties, while still paying out large sums of money and supporting some to live in areas where many not on housing benefit cannot afford to live. It can also have a damaging effect on work incentives since these large benefit payments are withdrawn as earnings rise.

Recent reforms have introduced a bizarre feature into the system, which means that the maximum amount of rent that is covered depends on rents in their area in 2012. This is baked into the system and will mean an increasing divergence between actual housing costs in different areas and benefit entitlements. Those living in areas where rents rise quickly will find life increasingly difficult. There may be a case for breaking the link between actual rents and benefit payments. It lessens the risk that the benefit system will itself drive up rents. But this is a very odd way of breaking that link.

The future also looks worrying. We don’t know what will happen to the present young generation of renters. Many no doubt will become owner-occupiers later in life. But if they don’t, they will end up eventually in retirement facing costs of rent, costs that the taxpayer may well end up paying through the benefit system. That’s expensive for the taxpayer and drives a coach and horses through a pension policy aimed at keeping people off means-tested benefits in retirement and providing them with clear incentives to save.

In the end, of course, the benefit system is simply trying to deal with the mess left by other failings in the economy and in the housing market. The burden it is bearing has grown as the private rented sector has grown, and it has grown far beyond anything it was designed to bear. William Beveridge called it the problem of rent. It is a problem that has become much more pressing over the past decade.

 

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21 minutes ago, fru-gal said:

Why can't they be like people who buy and live somewhere cheaper?

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Yet that fact has to be set against the sheer cost of the system. It remains the case that, in high-rent areas, a family with one child can still receive as much as £15,000 a year to cover the rent on a two-bedroom property.

 

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Typical Times article. The start is promising as they identify sudden shifts in the property market of middle earners renting, and then get worried that the worst consequences are:

  • Fewer people feeling great about capitalism
  • Increased government expenditure on benefits

Never mind the young who live on 6 month long tenancies in jobs that can disappear in a puff of magic smoke! :lol: Not a SINGLE MENTION OF HOUSE PRICES BEING TOO HIGH!

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3 hours ago, fru-gal said:

As more people lack capital in the form of housing, perhaps they will become less enamoured of capitalism.

As if capitalism was ever to blame for the current predicament...

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23 hours ago, sPinwheel said:

What is. 

To be sure: "Capitalism is an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market."

Zugzwang above gives you arguably the single most important violation of free market by the state:  control of money supply. Indeed, those that are first in line to the spigot benefit most. This together with a rainbow of all sorts of other economic interventions aimed at distorting incentives and centralised re-allocation of economic resources has indeed led to much bigger inequality and even poverty than you would have witnessed in a laissez faire system. The world we live in is best described as fascism rather than capitalism, and fascism itself is little more than socialism with a capitalist veneer. 

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*Wrong thread grr.

Edited by Venger

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On 17/10/2017 at 7:46 PM, Meerkat said:

To be sure: "Capitalism is an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market."

Zugzwang above gives you arguably the single most important violation of free market by the state:  control of money supply. Indeed, those that are first in line to the spigot benefit most. This together with a rainbow of all sorts of other economic interventions aimed at distorting incentives and centralised re-allocation of economic resources has indeed led to much bigger inequality and even poverty than you would have witnessed in a laissez faire system. The world we live in is best described as fascism rather than capitalism, and fascism itself is little more than socialism with a capitalist veneer. 

Can we have a free market money supply, provided by private institutions? Sounds like the Wild West.

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1 hour ago, sPinwheel said:

Can we have a free market money supply, provided by private institutions? Sounds like the Wild West.

i'm a complete novice on the subject but doesn't blockchain technology propose to do exactly that?

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1 hour ago, thewig said:

i'm a complete novice on the subject but doesn't blockchain technology propose to do exactly that?

We currently have a money supply which is mostly created by private banks (small amount by the central banks).
The money is in effect endlessly printed.

Bitcoin is a fixed asset with only 21 million ever to exist. It's more secure than gold due to the fact the money supply is fixed and visable to everyone, and no one can 'fake' the amount they have to move markets in the direction they want (as with gold).

Fractional reserve banking works.... providing it is fractional and is backed up by something.  Currently currency is backed up by 'asset prices' which are determined by the amount of money created (circular) 

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On 17/10/2017 at 7:46 PM, Meerkat said:

To be sure: "Capitalism is an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market."

Zugzwang above gives you arguably the single most important violation of free market by the state:  control of money supply. Indeed, those that are first in line to the spigot benefit most. This together with a rainbow of all sorts of other economic interventions aimed at distorting incentives and centralised re-allocation of economic resources has indeed led to much bigger inequality and even poverty than you would have witnessed in a laissez faire system. The world we live in is best described as fascism rather than capitalism, and fascism itself is little more than socialism with a capitalist veneer. 

This is 100% correct.

although i was wondering if other forms of society can now work given new technology, for example block-chain technology could help make communism work.  perhaps the block-chain will fix our current system to be closer to capitalism.

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This line in the article stood out to me "What we have is a system that satisfies nobody"

 I can think of a lot of people being satisfied by the current system.  Including Spreadsheet-BTL-Phil.

It's like they ALMOST get to the heart of the issue and then suddenly forget to mention what's caused it.

It's great that this stuff is even in the MSM, but could they just go the extra mile on the analysis?  Or is that the truth that dare not speak its name?

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11 hours ago, sPinwheel said:

Can we have a free market money supply, provided by private institutions? Sounds like the Wild West.

It's not that difficult - if you study the history of humankind, they have used all sorts of things as means of exchange and store of value, but almost always and anywhere they end up using precious metals - gold most often. Or money backed by gold. It's not a coincidence that, for example, in the United States average family's income has gone down ever since the last "shackles" of the gold standard were left behind (end of the Bretton Woods system in early 1970s). And inequality has increased in parallel and brought all sorts of other problems. A nice primer is this brief and powerful piece by Greenspan from 1966:

Gold and Economic Freedom

"The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which — through a complex series of steps — the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion."

I'd rather have that than gangsters manipulating fiat... not that different from being Wild West what we have right now.

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9 hours ago, thewig said:

i'm a complete novice on the subject but doesn't blockchain technology propose to do exactly that?

It does. To flee the influence of governments. But there are multiple issues. For starters the volatility of it as it's gone mental and no doubt will finish in tears for most of the latecomers who are planning to get filthy rich on it within a year or two. But more fundamentally it's not covered by anything.. a digital code. Government can still boast its taxing power. The bitcoin's value that I can see is that it offers seamless way around increasing regulation and controls by governments on banks and money. And the supply is fixed, of course.. 

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  • 294 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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