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Dorkins

When did private renting become expensive?

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A point came up on another thread about inflation in private rents which got me wondering about when it happened. Go back 50 or 100 years and even poor families were only spending 10-15% of their income on rents (they couldn't have afforded any more with food and energy costs much higher relative to wages than today) and yet private rents of >30% of household income are pretty common today. When did this happen?

By chance this twitter thread suggested the answer:

Do5GBAyXsAA2Aqm.jpg

http://www.ukonward.com/wp-content/uploads/2018/06/220618-Green-Pleasant.-Affordable-Web-ready.pdf

It looks like the Great Rent Hike started in around 1980, so before the Housing Act 1988 which introduced the AST. Since the late 90s rents look to have been pretty constant relative to wages. No idea what mechanism is at work here.

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5 minutes ago, Dorkins said:

A point came up on another thread about inflation in private rents which got me wondering about when it happened. Go back 50 or 100 years and even poor families were only spending 10-15% of their income on rents (they couldn't have afforded any more with food and energy costs much higher relative to wages than today) and yet private rents of >30% of household income are pretty common today. When did this happen?

By chance this twitter thread suggested the answer:

Do5GBAyXsAA2Aqm.jpg

http://www.ukonward.com/wp-content/uploads/2018/06/220618-Green-Pleasant.-Affordable-Web-ready.pdf

It looks like the Great Rent Hike started in around 1980, so before the Housing Act 1988 which introduced the AST. Since the late 90s rents look to have been pretty constant relative to wages. No idea what mechanism is at work here.

Housing benefits.

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1 minute ago, spyguy said:

Housing benefits.

Could be. According to Wikipedia responsibility for Housing Benefit was transferred from the DSS to local authorities in 1982. It wouldn't surprise me too much if LAs just handed over asking rents rather than imposing any sort of cost control.

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Also that's around the start of Right to Buy where council houses were being sold off and not replaced which reduced the supply of rental homes so the private landlords were able to just bang the rents up, innit.

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When BTL mortgages were introduced (privatisation of council housing with tax and lending  perks)....protected rents and sitting tenants were bought out and replaced by AST.....the rest is history.;)

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I would say it has something to do with other things like food and material goods like clothes and electronics getting cheaper.   Thus freeing up more money for the landlord to take.

 

It is funny how there is the expectation that goods will always get better and / or cheaper, but there is no such expection for property.

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2 hours ago, winkie said:

When BTL mortgages were introduced (privatisation of council housing with tax and lending  perks)....protected rents and sitting tenants were bought out and replaced by AST.....the rest is history.;)

Yes, that extraordinary climb starts very shortly after Maggie got in, I daresay she was making all sorts of noises about flogging off council houses, scaling back tenants' rights and encouraging people to put property in their pensions even before the legislation came in. It's definitely a stat for someone like me who puts most of the current evils of the world down to 35 years of neo-liberalism.

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2 hours ago, reddog said:

I would say it has something to do with other things like food and material goods like clothes and electronics getting cheaper.   Thus freeing up more money for the landlord to take.

Maybe, but there were big increases in real wages 1950-1980 and landlords didn't capture an increasing share of those.

Housing is just one of many things consumers spend their money on, why should that one have the magic ability to reach into your wallet and take any spare cash while the others don't? Food and clothing are essential for life just like housing is.

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1 hour ago, Dorkins said:

Maybe, but there were big increases in real wages 1950-1980 and landlords didn't capture an increasing share of those.

Housing is just one of many things consumers spend their money on, why should that one have the magic ability to reach into your wallet and take any spare cash while the others don't? Food and clothing are essential for life just like housing is.

That’s easy. It’s because the general population could make money from buying and selling housing / land so rentierism became a de-facto vote winner and policy motive (not to suggest your question wasn’t rhetorical as I’m sure we all know the answer!)

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2 hours ago, Dorkins said:

Housing is just one of many things consumers spend their money on, why should that one have the magic ability to reach into your wallet and take any spare cash while the others don't? Food and clothing are essential for life just like housing is.

There's more competition in food and clothing. Most people can easily go somewhere else if the price of food and clothing goes up in their local shop. It's a lot more hassle moving house.However there is still some competition in rent (landlords still need new tenants from time to time) so it may not be the explanation.

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5 hours ago, North London Rent Girl said:

Yes, that extraordinary climb starts very shortly after Maggie got in, I daresay she was making all sorts of noises about flogging off council houses, scaling back tenants' rights and encouraging people to put property in their pensions even before the legislation came in. It's definitely a stat for someone like me who puts most of the current evils of the world down to 35 years of neo-liberalism.

Nothing to do with Maggie,all to do with Paul Volcker.1982 was roughly the start of a long dis-inflation that saw rates on a multi decade downward march.That meant anyone buying an asset that goes up with falling rates could hardly fail.We are at the end of that cycle now,soon rates will be on an upward march and assets that gain from low rates will suffer the rubber band snapping back.The young buying now will be the biggest victims.

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11 hours ago, durhamborn said:

Nothing to do with Maggie,all to do with Paul Volcker.1982 was roughly the start of a long dis-inflation that saw rates on a multi decade downward march.That meant anyone buying an asset that goes up with falling rates could hardly fail.We are at the end of that cycle now,soon rates will be on an upward march and assets that gain from low rates will suffer the rubber band snapping back.The young buying now will be the biggest victims.

Hmm, nothing to do with Maggie at all, really? That huge uptick - and it is extraordinary - starts just after she got into office and continues right through the 80s, when interest rates were sometimes in the teens, up to the mid/late 90s, which was when we really started to see rates here falling. It actually levels off - albeit after a g-forces inducing climb - once rates start to fall. So you might need to think again about the other factors in play.

UK interest rate 1971-2018

Edited by North London Rent Girl

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13 hours ago, Riedquat said:

There's more competition in food and clothing. Most people can easily go somewhere else if the price of food and clothing goes up in their local shop. It's a lot more hassle moving house.However there is still some competition in rent (landlords still need new tenants from time to time) so it may not be the explanation.

Also it is much harder to create new cheap houses to rent than it is to create a new supermarket.

 

20 hours ago, Dorkins said:

Could be. According to Wikipedia responsibility for Housing Benefit was transferred from the DSS to local authorities in 1982. It wouldn't surprise me too much if LAs just handed over asking rents rather than imposing any sort of cost control.

I thought on the whole Thatcher took power away from local authorities, it is a shame if the only thing she gave to them, they messed up.

Edited by iamnumerate

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11 minutes ago, North London Rent Girl said:

Hmm, nothing to do with Maggie at all, really? That huge uptick - and it is extraordinary - starts just after she got into office and continues right through the 80s, when interest rates were sometimes in the teens, up to the mid/late 90s, which was when we really started to see rates here falling. It actually levels off - albeit after a g-forces inducing climb - once rates start to fall. So you might need to think again about the other factors in play.

UK interest rate 1971-2018

I don't think the initial uptick in 79 is the real question - a better one is why wasn't the uptick halted and I suspect Dorkins is correct in that the transfer to local authorities resulted in all rises being accepted without pushback. Previously a policy document would have said max rent is £x tough - afterwards a council worker faced with someone sat opposite them at a desk would have said yes that's fine - after all the bill was passed to someone else to pay.

I suspect were you able to get housing benefit payments and rental rates data you would have a 100% correlation (albeit with a slight lag) between the 2.

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On 07/10/2018 at 16:06, North London Rent Girl said:

Yes, that extraordinary climb starts very shortly after Maggie got in, I daresay she was making all sorts of noises about flogging off council houses, scaling back tenants' rights and encouraging people to put property in their pensions even before the legislation came in. It's definitely a stat for someone like me who puts most of the current evils of the world down to 35 years of neo-liberalism.

Selling off council houses imo was not a problem....those homes stayed for many years and often more than one generation in the same family, the rent they paid over those years would have most probably paid for it over time....those homes were blocked, basically one you had it you had it for life if you wanted to stay there, however much your circumstances changed...why even MPs were known to live in them, so having an opportunity to buy was a good thing......what was wrong was they were not replaced in the numbers required, the council housing lists were very long and growing, the people's assets sold and not replaced, lots however was saved in the ongoing general repair and maintaining of them..... The other issue was many of them ended being rented back out to the council at greater sums of money.....one time the council was receiving the rents, next they were paying out on a long term contract out three times as much or more in rent paying rent to the new owners who had moved elsewhere, often borrowing against it, sometimes abroad, to house those on housing benefit.....short-term practices, long-term costs.  ;)

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On 07/10/2018 at 17:28, Dorkins said:

Maybe, but there were big increases in real wages 1950-1980 and landlords didn't capture an increasing share of those.

Housing is just one of many things consumers spend their money on, why should that one have the magic ability to reach into your wallet and take any spare cash while the others don't? Food and clothing are essential for life just like housing is.

For clothing everyone spends their own money on it and so are more careful.  Some people's rent is paid for by others and so there is less care.  Hopefully the benefit cap will make rents cheaper.

 

Edited by iamnumerate

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The real increase came with freedom of movement which saw 3 million EU migrants come to the UK very few of whom had the income to buy and most of whom lived in rooms.  

This made being an investor a good option for many people who would never ever have considered doing so otherwise and pushed up rent and purchase prices.  In some areas I work in such as Ilford for instance as EU migrants have left rents have fallen due to less demand.  

Still the snowflakes want to stay in the EU and support immigration and refugees.  Turkey - Christmas 

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3 minutes ago, happyguy said:

The real increase came with freedom of movement which saw 3 million EU migrants come to the UK very few of whom had the income to buy and most of whom lived in rooms.  

This made being an investor a good option for many people who would never ever have considered doing so otherwise and pushed up rent and purchase prices.  In some areas I work in such as Ilford for instance as EU migrants have left rents have fallen due to less demand.  

Still the snowflakes want to stay in the EU and support immigration and refugees.  Turkey - Christmas 

What a load of horsh1t.

Get yourself into the Brexit sub and enjoy gas-lighting your cronies and a good old game of soggy biscuit.

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Selling off council houses with no replacement meant the loss of a buffer stock of rental accommodation. That coupled with poor regulation on the rental sector afterwards led to the inevitable creaming off of value by parasitic rentiers.

Building new houses is a good thing but I'd be as keen to see a mechanism where lots of privately owned houses are brought back into the social rent sector. Get rid of housing benefit completely along with new legislation to stop eviction of tenants unless the house is sold or there are new tenants to replace the existing, plus punitive taxes on empty properties. Then allow local government (or whatever suitable co-op/non profit/no leech organisation) to buy them at the new, crashed, market rate.

Then also allow local government to boost local economies by employing people to properly retrofit to a high standard.

Rent these houses back to the local community at maintenance cost thus reducing pressure on household finances, increasing disposable income and aggregate demand (or reducing competition for jobs).

Bingo, cheap housing to live in rather than as investment.

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10 minutes ago, happyguy said:

The real increase came with freedom of movement which saw 3 million EU migrants come to the UK very few of whom had the income to buy and most of whom lived in rooms.  

This made being an investor a good option for many people who would never ever have considered doing so otherwise and pushed up rent and purchase prices.  In some areas I work in such as Ilford for instance as EU migrants have left rents have fallen due to less demand.  

Still the snowflakes want to stay in the EU and support immigration and refugees.  Turkey - Christmas 

I remember being told that immigration would be good for BTL (this was 13+years ago) because it would increase the demand for private rents.  Fergus Wilson has said that many of his tenants are Eastern Europeans.

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3 minutes ago, happyguy said:

Exactly my point - but one which so many snowflakes and students cannot grasp 

You're still full of crap there buddy.

I suppose "EU immigrints" caused all of the UK's woes, right?

Including your ability to interpret data?

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8 minutes ago, cashinmattress said:

You're still full of crap there buddy.

I suppose "EU immigrints" caused all of the UK's woes, right?

Including your ability to interpret data?

I don't think he was saying that at all.  If immigration causes rents to rise, the people to blame are the politicians who let them without thinking about how they are going to be housed (or in some cases think "More tenants for my BTL empire").

Believing immigration causes problems does not mean that people dislike or blame legal immigrants* themselves, in the same way as saying "My bus was really full", does not mean that I dislike the other passengers.  It just means that I think there are too many people on the bus.

 

*No one can blame someone for doing something legal and not immoral.

 

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5 minutes ago, iamnumerate said:

I don't think he was saying that at all.  If immigration causes rents to rise, the people to blame are the politicians who let them without thinking about how they are going to be housed (or in some cases think "More tenants for my BTL empire").

Believing immigration causes problems does not mean that people dislike or blame legal immigrants* themselves, in the same way as saying "My bus was really full", does not mean that I dislike the other passengers.  It just means that I think there are too many people on the bus.

 

*No one can blame someone for doing something legal and not immoral.

 

That's a big IF.

What happens if people are incentivised to rent property?

There are far too many if's where the buck does NOT stop at Bogdan's doorstop.

And let's not forgo the fact that categorically... EU immigration has been beneficial for the UK's coffers, the populace, and the UK's standing in the world. I don't give a crap what bigoted folk have to say. Haters gonna hate.

BTW you're speaking inductive reasoning I guess... I am not.

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  • 244 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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