Wednesday, September 15, 2010

Fear & uncertainty stalk the land, like two giant stalking things

Landlords fear housing benefit cuts

Nine out of 10 landlords would be less likely to rent their properties to tenants receiving housing benefit if proposed cuts are introduced, a survey has found. The Government plans to cap the local housing allowance (LHA) at 30% of average local rents, with future increases linked to the Consumer Price Index, rather than the Retail Price Index which tends to be higher. But 90% of landlords questioned by the National Landlords Association (NLA) said they would be less likely to take on tenants receiving the benefit if the cap went ahead. Nearly half of those questioned also said they could not afford to reduce the rents they charged in line with the cuts in order to keep existing LHA tenants. A further two-thirds of landlords said they were unsure what impact the reforms would have.

Posted by drewster @ 08:45 PM (1832 views)
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18 thoughts on “Fear & uncertainty stalk the land, like two giant stalking things

  • 9 out of 10 private tenants would expect to pay much lower rent costs, if they were not haggling against with massively subsidised state tenants.

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  • crash bandicoot says:

    “A further two-thirds of landlords said they were unsure what impact the reforms to the LHA would have on their business.”

    Is that fear or capitulation?

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  • Even fascism has it’s limits when it comes to the last chair standing.

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  • Then they can compete for private tenants instead.
    So they may have to reduce their rents to compete.
    Which may reduce the average local rent.
    Which may put further pressure on those renting to benefit recipients.
    So they may compete for private tenants instead.
    Where might this be going?

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  • surely the market sets the rent regardless of what a landlord can afford…..what part of that don’t they get?

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  • It is burying their heads in the sand

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  • arrrr poor landlords looks like they will have to sell up for peanuts haha

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  • HB is nearly 10% of tax revenue as it is, which is borrowed, and the BTL landlords aren’t obliged to pay tax until their mortgage is gone. Nice work if you can get it.

    The UK worker will end up paying 20% HB and 20% debt servicing costs which makes a bit of a mockery of taxation generally, after pensions, PFI there will be precious little left to provide services aka the whole point.

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  • Meanwhile, in another universe: “The future looks bright for the buy-to-let sector as demand rises”

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  • mark wadsworth says:

    These people don’t understand the way markets work.

    Sure, capping HB will reduce the total income of the BTL sector by a tenth or something, and in areas that were previously subsidised by excessive, rents will go down a bit.

    So private renters above the income level where you no longer qualify for HB (£10,000 – £15,000) will now be able to afford to rent the places that were previously subsidised by HB; and in turn, people claiming HB will move into the places that these lower earners have vacated.

    So there’ll be a small win for lower earners, and a small loss for non- and very low earners – these net off to nothing.

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  • Mark, at least it is a move in the right direction.

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  • Still Thinking @3

    Is there any capital gains tax to pay if a landlord converts a BTL home into their own residence or sells it ?

    If they sell at a loss can they offset that against their other income ?

    Mark Wadsworth @5

    I hope you are right but cannot see the low earners vacating cheaper property .

    setting LHA at 30% of mean/median rents does seem very low . Bring back social housing . Council houses and hostel style accomadation .

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  • mark wadsworth says:

    RTL, of course.

    The welfare system rewards non earners and punishes low earners, so levelling that off is a win; and the HB system is just subsidies to land ownership, the worst kind of subsidies, so reducing those is another win.

    I still say we’d be better off scrapping HB for ‘private’ landlords and spending the vast amounts of money on building more social housing. The £6 billion a year they pay to ‘private’ landlords is money down the drain, and would be enough to build 120,000 social homes a year (assuming £50k bricks and mortar cost) cash paid and mortgage free. And building social housing is not really a cost at all, it is an ‘investment’ in the true sense of the word.

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  • sibley's b'stard child says:

    @ 13

    Hear, hear MW.

    Although – and I suspect I know the answer already – if it’d be such a no-brainer; why don’t the govt sanction it?

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  • @13 MW

    except that as you have stated in a previous comment – the number of people needing housing doesnt change (as a result of e.g. capping HB) and neither does the number of houses in existence. So suggesting scrapping HB to use the money to build more social housing would result in lots of existing property becoming permanently vacant. Not that I am against the absolute devestation this would wreak on landlords, but it does seem a bit wasteful. Would the better option not be to reduce HB by 90%, pulling the artificial rug from under teh (excessively high price) rental market, so that the market can find the correct level for rents (much lower) and subsequently the right price for house prices (much, much lower) and then use the money saved by cutting HB to buy up these cheaper houses from the social landlords?

    I think what I am trying to say is that the government, by understandably capping HB, can rig the market so that the private landlords lose, and the government gain. Seems like a vote winner to me.

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  • SBC:

    “if it’d be such a no-brainer; why don’t the govt sanction it?”

    trick question right?

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  • mark wadsworth says:

    Inbreda – stroke of genius!

    “then use the money saved by cutting HB to buy up these cheaper houses from the social [email protected]

    Yup – we can buy back cheap all the council housing that was sold off cheap!

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  • Simon @ 12: “setting LHA at 30% of mean/median rents does seem very low”.

    I think I am right in saying that the 30% refers to the 30th percentile open market rental price, which is determined for each locality (“Broad Housingmarket Area” as defined by the Valuation Office) and for each size of home (i.e. number of rooms). HB used to be based on the median (50th percentile) price. Given the price distribution curve, the 30th percentile price is between 7% and 10% below the median price. I assume that this means that the amount of HB will be reduced by this percentage.

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