Friday, April 20, 2007

Words fail

Private sector landlords are being advised to refuse tenancies to housing benefit claimants

RLA chairman Lee Dribben: "The trouble is ... the money is often spent on other priorities instead of paying the rent and there are no winners from a situation that just encourages more rent arrears. Landlords can't afford to take that sort of financial loss on a routine basis while they chase defaulting tenants who have already spent their rent allowance on other things. Vulnerable low-income tenants, who already have difficulty managing their money, are being driven further into debt. And the resulting withdrawal of affordable private sector rented housing from the claimant market would shift crippling pressure onto the public sector.

Posted by converted lurker @ 10:19 AM (691 views)
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5 thoughts on “Words fail

  • Retired Banker says:

    converted lurker-

    This seems like very sensible advice to me.

    In the past tenants were notorious for spending their social security rent allowance on other things, such as booze and fags.
    This is why the Government stipulated that rent should be paid direct to the landlord. If this has now been reversed, then the
    supply of rental property will dryup. Another example of this Goverment’s legislation producing unintended consequences.

    I bet that you would soon change your tune if your rental income was at risk.

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  • “And the resulting withdrawal of affordable private sector rented housing from the claimant market would shift crippling pressure onto the public sector.”

    And result in huge void periods for many BTL LL.

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  • “And the resulting withdrawal of affordable private sector rented housing from the claimant market would shift crippling pressure onto the public sector.”

    And result in huge void periods for many BTL LL.

    Reply
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  • Good, we need more pressure on the ‘public sector’.

    Why? Because it’s long past time that it was realised that invesment in public sector housing is a good thing. This of course comes with a proviso that it is good quality public sector housing.

    ‘Public sector’ housing (which we used to call Council housing.) created a pool of affordable homes for the less well off, reducing the demand for privately owned housing, with the effect that the cost of a privately owned home was also lowered. This is an actual positive benifit, as expensive housing is well…expensive.

    The current house prices are artificailly inflated by the simple fallacy that a house is an investment, and lack of real housing options. The crunch comes when you try and ‘realise’ your ‘investment’. It’s ok for those who were able to purchase homes beyond their actual needs, who can then ‘downsise’, but most people are not in that situation, and those who can ‘downsise’ just increase the demand for smaller properties to move into. Most people are in fact not likely to beneifit from the investment in any great measure at all!

    The people it benefits the most are those who are in a position to own more than one property, an in many cases several. (Mr Blair for example!)

    To be in a situation where the ‘value’ of a property is increasing faster than the ‘value’ say of a high-rate investment account is quite simply ridiculous. First, the simple economics tells you that money ‘invested’ in brick and mortar, is not being put to good use as it would be funding business start-up’s or other enterprise. It just sit’s there. To add to this it actively discourages saving, which further reduces the supply of funds for other investment. Second, it reduces the amount that the buyer has available to spend on other things. So reducing the flow of money in the econnomy in general. Third, it makes government projects more expensive, as many of these inevitably require building work, and have to pay market price, and of course goverment employees need to be paid higher wages if they are to be able to afford housing of their own.

    This of course makes it more expensive to begin a puplic housing building program, and so we are locked into a ‘vicous circle’ which if allowed to progress too far will be very expensive to break, not only in terms of higher taxation, but also in terms of ‘negative equity.

    If allowed to run it’s course, this circle will eventually break of it’s own accord. But the longer this takes, the greater the expense, and if it happens later rather than sooner, the results will be catastrophic.

    I for one would prefer that this vicious circle is broken gradually and carefully so as to minimise the effects. This may have to be done over a period of several years, or even many, but the results of allowing the catastrophic failure will be worse in extent, affect all of the population, (Not just those with relatively recent mortgages, or ‘surplus’ property.) and longer lasting. A gradual change would for instance allow investment businesses time to shift the focus of investement away from the property sector, avoiding a sudden collapse of the value of their invesments. Those with ‘surplus property’ would similarly be able to minimise thier losses by shedding propery without too much of a loss, to those who would benefit from the use of the property even despite it’s falling value.

    This leaves the question how do we acheive that?

    Well, the answer is simple. Allow councils, to build homes of their own accord which thay can let at a market rate, solving the immediate problems of affordable housing, and at the same time reducing homelessness and poverty, while at the same time recovering the intitial building costs. After a while of course theincome generated from rents will reperesent a positive asset, helping to fund other local services, but only provided the property is of sufficient quality!

    By the way, my father lives in a ex-council property. It was built just after WW2, abd has a big marble plaque over the door boasting of this fact. It’s as tough as they come and very cheap to maintain. So I know it can be done!

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  • How many BTL newbies don’t even think about bad debt when they do their sums? More than a few tenants know they can stop paying the rent a few months before their rental period is up, because the courts take so long to process possession orders.

    I know one BTLer who found it took six months to get rid of a tenant for non-payment. When the tenant finally ran out of time, he deliberately trashed the place as he left…

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