Wednesday, June 23, 2010
Yahoooooo!!!
Thousands could be evicted because of 80 per cent cut to housing benefit
Thousands of people could be thrown out of their homes after housing benefit was slashed by up to four-fifths in the emergency Budget. Senior aides to David Cameron are bracing themselves for a major damage limitation exercise next year when families who can no longer afford to pay their rent start to be evicted. The cuts which take effect from next April will cut the maximum housing benefit which can be claimed from £103,000 to £20,800 a year, or £400 a week. Experts said it was likely thousands of people renting from private landlords would have to find alternative accommodation. Department for Work and Pensions figures show that 5,170 people currently receive more than £400 a week in housing benefit to help pay rent to private landlords.
Posted by mark @ 02:33 PM (5478 views)
30 thoughts on “Yahoooooo!!!”
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mark wadsworth says:
No they won’t. Rents in “private” sector are hugely inflated by HB subsidy, therefore if they are reduced, “market” rents will fall to whatever the new HB maximum is. This will be good for non-claimants who are looking to rent as well of course. That’s the Golden Rule with subsidies – they don’t cheaper, they make them more expensive.
cyril says:
The big claimants are likely to be jobless with lots of kids. They will have to move somewhere cheaper presumably, but I think there are plenty of large houses in cheap areas so that shouldn’t be a problem.
d'oh says:
But what about the poor landlords with mortgages to pay?
What a screwed up country the UK is where £400 per week is not enough to rent housing suitable for a family.
What sort of screwed up country pays out of work people 100k per year in housing benefit. It beggars belief.
cynicalsoothsayer says:
Here’s the on-line limits by local authority:
https://lha-direct.voa.gov.uk/Secure/LHARateSearch.aspx?SearchType=LA
Looks like claimants will need to move out some properties in central London.
drewster says:
Here are some back-of-the-envelope calculations.
Assuming no more than a dozen people (of the 5170 identified) are claiming more than £100,000, the total amount spent on these people is just shy of £200million. If cut to the exact limit, the new figure would be £107million. So that’s £93m saved. Well done Ozzy!
Open Minded says:
Utterly gobsmacked and outraged that anyone will get £400 a week nevermind £100K a year. Where’s the justification when I earn a modest wage and get virtually nothing in return from the gov’mnt?
hpwatcher says:
The point is that the reduction may tip the balance for a lot of landlords and make BTL no longer viable.
monty032 says:
Paying even £1,733 per month (400×52/12) for a four-bedroomed house seems to me an astonishingly poor use of taxpayers’ money. My four-bedroomed detached in East Yorkshire costs £925 per month, so such rents can only be in the centre of big cities or south-east England. Why should taxpayers pay for a benefit claimant to live in a house which most taxpayers themselves could never afford?
Flatnose says:
Monty…yup I was surprised as well. I rent a large semi detached three double bedroomed dormer bungalow in a village nest to the seaside in the North-West for £520 a month. I would have placed a cap on HB at £1000/month.
drewster says:
You can get a 4-bedroom house in the Stoke-on-Trent area (+20miles on Rightmove) for under £700 a month. Some even under £600. If people have short-term illnesses then fair enough let them stay in expensive areas until they are fit for work again; but if people have long-term illnesses then we might as well send them to live in cheaper parts of the country.
Coriander says:
I wonder how much a council house costs to run. Not 100K. Not even 20K a year I should think
Selling those houses off was the worst economic decision ever IMO
The Baldman says:
Wont the landlords who have been scamming the system have to just reduce rents. The market has been fixed to over remunerrate them now is payback time.
51ck-6-51x says:
There wont be mass evictions (as pointed out by MW) – at least in NET (some may get evicted and rehoused, which will be reported as such and will cause upheaval to those being shuffled around.
Rather this is the margins of the housing market.
£400 a week for accommodating a family in some areas of London is **currently** not enough (and one must consider, if we are to have a welfare state, which is the worse scenario – hpi or ghettos? — Drewster?)
The effect would be a fall in rents and ultimately house prices, and, no doubt, price support would come in another (even more expensive? [for the taxpayer]) form!
(I am not defending the current subsidy limits, I am merely pointing out the welfare dilemma… the solution to my mind is to allow a more natural social saftey net to evolve, itself driven by market forces – as many here already know.)
Nnails says:
400 * 4 = 1600. Wish i got that in my wages each week.
Seem to make sense to me. WHY should people who do not work get more than the people who do work.
And if you cant afford to stay where you are, get somewhere cheaper or get job.
Either way, means housing cost will reduce and Imaybe able to afford my own home that I worked for.
little professor says:
666 – agreed £400 per week isn’t enough to accommodate a family in certain areas of London, but here’s an unusual idea – how about they get housed in another area of London? Why should families on the dole be housed in Kensington or Belgravia when they can be put up in Tower Hamlets or the Isle of Dogs? They might not like it, but in that case they can try working for a living.
gone-to-colombia says:
The government should have no obligation to house people in specific areas.
Could there be another successful Wetern country that does this?
Move, would be my answer, move to where your budget allows.
jonb says:
I would struggle to pay £400 per week in rent, and I earn an above average salary. That means I can’t afford to live in Central London and have to commute from a cheaper area.
Is it any wonder there is a problem with welfare dependency when unemployed people can live in a more expensive house than I can?
Sogy says:
Ah, making the spongers and their children (future hard workers, I’m sure) move out of the most expensive parts of London is so cruel! They need access to culture and entertainment, although apparently not to jobs.
The present limit of over £100K looks ridiculous to me – as we have never paid more than a few per cent of this, and we pay out of the money we honestly earn.
drewster says:
666,
Private housing tenants in receipt of housing benefit make up only a small proportion of total households. Most HB recipients live in council housing (or ex-council housing which has been sold and rented back to the local authority). Shifting these additional 5,000 people isn’t going to make much difference.
We already have ghettos of rich and poor in this country. Even if everybody worked full-time and there was 0% unemployment, there would still be rich and poor areas. Awarding lavish amounts of housing benefit to a lucky few is probably the worst way to try to improve this situation.
mark says:
don’t forget this housing benefit is on top of other benefits they will receive, all tax free, hassle free…
sit at home watching TV all day knowing you have a house, food, heating, electric, probably a car, all for free, what a life…
does anyone know what this and all the other benefits might be the equivalent of a salary???
bluebeach says:
Yahoooooo!!!………….. what on earth drives ya man…….sick or what
greenmind says:
Demand-side intervention such as HB as opposed to supply-side intervention (ie building affordable housing) has long been prescribed by the neo-liberal economic text book. But of course it just drives prices up and lines the pockets of landlords. HB should be phased out altogether and the subsidy should be switched to the supply-side.
stillthinking says:
Demand side intervention would have worked if it hadn’t come right up against government ordained planning restrictions i.e. we will put more money in but you can’t build more. Housing is based on available land, you can hardly expect land factories to spring up.
The whole housing nonsense is and always has been planning restrictions. Building a house is cheap, even more so for flats.
Bigbadbob says:
“agreed £400 per week isn’t enough to accommodate a family in certain areas of London, but here’s an unusual idea – how about they get housed in another area of London? Why should families on the dole be housed in Kensington or Belgravia when they can be put up in Tower Hamlets or the Isle of Dogs? They might not like it, but in that case they can try working for a living.”
Maybe because that is where they are from and where their family and all their social networks are from? What about those that try working for a living but can’t because of the recession or are you going to deny that this recession hasn’t created unemployment?
I truly hope you and your family never have to experience the trauma of redundancy or of having to be forecably moved to an area with no family, friends or other social networks.
Bigbadbob says:
“sit at home watching TV all day knowing you have a house, food, heating, electric, probably a car, all for free, what a life…”
Do you think that’s a life? I’m guessing you’ve never been on the dole, am I right?
Bigbadbob says:
“We already have ghettos of rich and poor in this country. Even if everybody worked full-time and there was 0% unemployment, there would still be rich and poor areas. Awarding lavish amounts of housing benefit to a lucky few is probably the worst way to try to improve this situation.”
Withdrawing the means to live in these areas will force social landlords to do up their houses and aim for higher up the private rental market to cover their mortgages. How you think this equates to “the worst way to try and improve this situation” beats me.
techieman says:
Bluebeach while i do not agree with the sentiment of revealing in peoples misfortune – as Mark says that wont happen. What will happen is that Landlords will have to adjust downwards their housing charges. Some may find it hits their margins and some may find that it tips them over the edge so that its not worthwhile anymore. In essence social housing is supported by HB when becomes a self perpetuating cartel for the Landlords (because its based on average prices… which are set by… you guessed it!!).
So getting rid of is exactly – actually – the correct thing to do. Now you may argue thats unfair on the Landlord who has based his business model on a certain amount of HB, but the level of HB was never fair – as has been illustrated above. So basically tough Sh1t. If people have been sucked in at the top, then that is what a bubble does – creates greater fools. The pendulum basically swung too far in the favour of LLs, since the basis for HB is utterly stupid.
If this causes some LLs to throw in the towel – either because the ROE is not worth the hassle (and i grant you there is hassle) or because the returns are negative – then so be it. Some bright speark is bound to do a complete analysis on this so lets see how much the LLs are going to squeal.
mark wadsworth says:
What greenmind says, comment 18.
51ck-6-51x says:
LP / Drewster… I am not arguing for the status quo.
LP said, “Why should families on the dole be housed in Kensington or Belgravia when they can be put up in Tower Hamlets or the Isle of Dogs?”
I think, in principle, we agree (especially in light of the later observation by Drewster): I didn’t say they should (and I also didn’t say they should not!) I just said that the £400 would not allow it and that a dilemma exists in setting such a nominal allowance, and that the solution was not to do so.
I doubt a market solution would end up housing very many in these relatively expensive areas! However, importantly, it would also not simply rule it out – maybe, for example, there is one house in Belgravia that is undesirable, yet habitable – why should it sit unused? (yeah, OK, maybe it should be an office, but again – let the markets decide!).
Drewster said, “Shifting these additional 5,000 people isn’t going to make much difference.”; “Even if everybody worked full-time and there was 0% unemployment, there would still be rich and poor areas. ”
Again I agree. There are always going to be relatively rich areas and relatively poor areas, but I think we should not encourage the phenomenon through policy (look to Paris for example), but rather let it be a natural one. The aforementioned dilemma still exists and the number affected may be small now, but it won’t necessarily be the case a few years after policy is changed, once the cost savings have been noticed by some number cruncher deep in the bowels of government administration and further policy changes are made.
51ck-6-51x says:
Bigbadbob,
Yes, moving some people is certainly a massive upheaval for them and may also incur a net loss to the economy (maybe they will find employment where they currently reside the very next day / alternatively maybe this is the case for their new location!) and society as a whole (the network effect you mention / alternatively they may expand their social network and end up benefiting others they would never have encountered otherwise). It’s neigh on impossible to tell!
On the flip-side we may be housing others who are indeed gaming the system… again there is no easy way to tell how many lie on each side (the media will happily point at individual examples with their usual spin either way – but they are just trying to sell papers!) or to measure the net effect of the decision whether or not to move an individual.
Once again the problems I see are having a state attempting to provide a public good – it’s a hard problem (due to both the difficulty involved in the analysis and in the effects of policy) and should, in my opinion, be solved by market application – there will never be a perfect solution (unless we had a government of clairvoyant saints!) but I do believe we can optimise our solutions to such problems by using the power of markets.