Wednesday, Nov 11, 2009

Some dubious 'research'

Guardian: Debt levels leave low paid at risk of homelessness

Research shows low-income households – with an average of £15,800 at their disposal – are walking an increasingly precarious financial tightrope. Some 24% of low-wage households spend more than a quarter of their monthly income on debt [that appears to include mortgage debt] – twice the number from three years ago. Nearly 33% of low-income households have high loan-to-value mortgages and are in negative equity [no they aren't - see my comments below], making them vulnerable to homelessness if they lose their job.

Posted by drewster @ 08:37 PM (954 views)
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1. drewster said...

Here's the original report (PDF) from Resolution Foundation. They describe themselves as "An independent research & policy organisation seeking to improve outcomes for low earners."

"Low Earners" are defined as being between the 20% and 50% mark if you arranged all households in order of earnings. That works out to those earning £261-443 per week (per household; includes pensioners but not children.)

Under this definition, the report says there are 7.2m low-earning households. Only 72% are homeowners; and only 16% bought a house in the last decade. At the end of 2008, 14% of low earner mortgagors reported a loan-to-value ratio of 75-100% and 4% said they were already in negative equity. Given that house prices are now back to where they were a year ago (apparently), I have no idea where the Guardian gets their figure of 33% in negative equity.

The report goes on to complain that "Those low earners who are not homeowners are also finding it harder to buy than before". Their suggested fixes include:
* Extend the Support for Mortgage Interest scheme
* Expand the Homeowners Mortgage Support scheme
* Make sure lenders are doing enough to pass on the significant reductions in interest rates
* Support the development of new intermediate market models (e.g. rent-to-buy schemes)

None of their fixes involve building more houses, social or otherwise.

There are some good points in the report, including reforms to the private rented sector. There's even one line about the favourable tax treatment of homeownership compared to renting. My favourite point is "... a focus on the redistribution of wealth, as well as income". However there's no mention of how that redistribution might be achieved. Can anybody think of a good way to rebalance the tax treatment of homeownership, redistribute wealth, and make housing more affordable for all?

Wednesday, November 11, 2009 09:10PM Report Comment
 

2. Eeyore said...

HEW.?

Wednesday, November 11, 2009 11:23PM Report Comment
 

3. Cheekie Charlie said...

Let them eat cake!

Wednesday, November 11, 2009 11:56PM Report Comment
 

4. letthemfall said...

"Can anybody think of a good way to rebalance the tax treatment of homeownership, redistribute wealth, and make housing more affordable for all?"

Progressive income tax, land value tax, capital gains tax on homes - plenty of ways, should politicians want to use them.

Thursday, November 12, 2009 11:45AM Report Comment
 

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