Tuesday, October 26, 2010

Please read the whole article before commenting

Benefits cut, rents up: this is Britain's housing time bomb

At last the Tories have a final solution for the poor – send them to distant dumping grounds where there are no jobs. This will become a cut that brands this government. The removals will be an invisible migration, not a mass exodus in special coaches. However, these cuts are so extreme and random as to who will be evicted that the political noise will rise to ear-splitting decibels. Next year housing association and council rents will rise from their present heavily subsidised rents to 80% of the market rent for new tenants. Anyone out of work for more than a year will lose another 10% from their housing benefit. This is a departure into the realms of US welfarism, influenced by the architects of American time-limited welfare who have been visiting David Cameron. But that's not all.....

Posted by drewster @ 02:53 AM (3129 views)
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65 thoughts on “Please read the whole article before commenting

  • It’s over for the tories. The deflationary spiral and the reversal of the opium of the middle classes; house price inflation, will be enough to see them booted out of office for another decade. They might stand a chance if they put together a coherent argument about how housing benefit has propped up prices and disenfranchised middle-income workers from being able to compete for houses, had a good plan for building social housing, etc, but they don’t, so they will be accused of being tories. The middle class house price inflationistas in the key marginals will get upset. It’ll be like the early 80s, but this time it won’t be the tories that win the polarised battle and the reason is simple – one half of the (failed) laissez-faire experiment have been bailed out whilst the other half are being hung out to dry, when feelings start to run high as the recession, mass unemployment, mass homelesness begins, the majority of the Country will not have sympathy for the half that was bailed out.

    It’s strange that a website dedicated to a house price crash should be inhabited by so many right-wing knuckleheads – do you not realise that it was capitalism that priced you out and made you poor? It’s even more bizarre to see people here predicting inflation.

    Anyway, I’m looking forward to what the VIs are going to say about the changes to the london market – are we going to expect wealthy arabs to buy up these slums??!!

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  • Typical socialist rubbish. Why should the taxpayer subsidise uneconomic housing in overpriced areas, let the prices fall instead.

    “Who will do the cleaning, caring and catering in expensive places once low earners are cleared away?”
    Poor dears! The rich that live there – and tesco metro etc. will have to pay more for these people so cleaners carers and caterers can live there.

    Useful manufacturing businesses could move to the likes of Hastings where cheaper labour (and housing) would be.

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  • Typical Toynbee tosh. She even managed to use the phrase “final solution” at the end.

    If what she says is correct, then the best answer is for taxpayers to subsidise everyone to live in Mayfair!

    The truth is that housing in nice/convenient areas will always be expensive – and if you want to live in these places you will need to have a good job.

    I am totally fed up with hearing that we’ve got to subsidise unemployed people to live in posh areas. In the last two years I have moved from Sussex to Cambridgeshire to Yorkshire in pursuit of jobs. If I can move house so can they.

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  • “House prices doubled in the golden decade but that unearned windfall for the lucky generation went untaxed. Meanwhile housing benefit claims soared as lack of cheap council housing saw councils put people into expensive private housing instead.”

    I believe Mr Wadsworth might have something to say about that. Compared to the drop in popularity of this government due to benefit cuts, I wonder how the electorate would feel about having their future ‘windfall’ taken away as well? No mention of the possibilities for paying higher wages to lower level earners, which would go some way to alleviating the mess.

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  • tenyearstogetmymoneyback says:

    Is see why you said read the whole article.

    Easy solution – Build more council houses.

    I was amazed to see the state of RAF Biggin Hill (abandoned) on a recent Battle of Britain program. How many council houses
    could you build there ?

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  • Some of the slower ones here still haven’t figured out that this has nothing to do with council houses.

    The banks have their greedy eyes on something more private.

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  • The article points out, quite rightly, that the changes to HB will have a devastating impact on many many people. Just collateral damage in the move to a beautiful free market model? Should we move all the so called scroungers to barracks in the north of Scotland because thats where they can be housed the cheapest?

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  • i remember the 90`s says:

    Most on here are so full of anger that anyone is fair game for a volley even those that work poorly paid .Its sad!!!!!!

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  • cynicalsoothsayer says:

    The article conveniently ignores that people moving out of expensive-to-rent areas will empty properties in those areas. Landlords will have to accept lower rents if they want tenants. Net effect, less subsidisation of tenants and lower rents. Who loses out? A few tenants have to move during the transition, but it’s landlords that will be poorer. Boo-hoo.

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  • Replacing the sold off social housing would help, it would also raise revenue in the long term.
    It would also have the effect of lowering private rents due to lower demand. Politically this would look 1000% better than ‘we are going to slash your rent & make you homeless’

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  • sibley's b'stard child says:

    Greenmind, yes it will adversely affect on a number of people however it will, indirectly, benefit far more people. I can’t see what your opposition to this welfare reform is?

    Back to the article, yes, typical Toynbee champagne socialist rhetoric; the greatest irony that she fails to grasp that these welfare reforms will – eventually – benefit the poor. The only losers here will be the landlords.

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  • Oh, and starting a building programe would also create some well needed jobs right now.

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  • How about building a million council houses without electricity or gas. We could make the inhabitants use treadmills to generate their own electricity and heat. We could also release stink bombs into a built in vent system at 8.00 am, to encourage the inhabitants to get out of bed and find work. The needy would have free housing but any further sponging would be limited. Pragmatic socialism

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  • Anyone inclined to sympathise should remember that HB now costs an average of £800 p.a. per household in taxation..

    ..is that fair?

    ..I don’t think so.

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  • Remeber, a good percentage of these individuals are not employable and are not capable of contributing to a service based economy.

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  • Always good to read peter and vinrouge’s deep analysis. Where would this site be without thinkers like them.

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  • i say scrap all benefits apart from

    unemployment maximum 6 months payments

    sick and infirm after a proper check over and thereafter frequent checks to make sure they are not conning system.

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  • I say build several million quality new homes and give them away. I don’t care if they are allocated on a lottery system or if they only go to the poor or to the already rich. All property would consequently tumble in value and the property parasites would be cleared from the system in a stroke (we’d have to cap immigration to avoid creating another shortage). UK workers could earn less and still be better off (drastically lower housing costs) which would make UK PLC much more competitive. Who says that socialism and capitalism don’t mix?

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  • 15, mark do you know where we can find 1.47 million jobs for these people within 6 months?

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  • Extend there job search area to Poland and the rest of the EU?

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  • I can’t believe it 3 people liked my comment that I put up there already and it had only been up all of two minutes. Hey there may be hope for us all yet.

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  • Khards

    Obviously sense would say not to abolish system overnight, however rather than having romanian slave children working our fields the unemployed can start there, there are also plenty of jobs if you look they might not pay a fortune but they are out there.

    See the positive side of getting rid of welfare, lower taxes, more work, lower crime etc

    there is an old saying “devil makes work for idle hands” long term unemployed are probably more likely to turn to drugs or crime through boredom

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  • “I say build several million quality new homes and give them away”

    A few years ago, at a Tory policy discussion meeting, I suggested much the same thing – a free 25 year mortgage, with the freehold at the end, provided the beneficiary made no claims on the welfare state, (other than healthcare and schooling) or got into serious trouble.

    If the occupier broke his or her side of the deal, the property would immediately convert to a tenancy at market rate.

    Unfortunately, the idea was just a bit too radical for those around me at the time..

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  • mark wadsworth says:

    @ Vin Rouge, comment 1.

    Social housing is, by and large, not subsidised by the taxpayer. The notional subsidy of below market rents can be accounted for entirely by the fact that social tenants only pay rent for the bricks and mortar, and not for the location value. On a strict cash flow basis, social housing makes a modest profit. In any event, from the point of view of the taxpayer, it is far better to build more social housing than it is to pay Housing Benefit to ‘private’ landlords.

    Now, as a Georgist, I’m quite happy for social tenants to pay an additional amount to cover the location rent, but only if we also apply this logic to owner-occupiers, who do not pay a penny in location rent to the council (it is usually embedded in their mortgage payments, so they do pay it, it’s just that they pay it to the wrong people, i.e. the bank).

    This whole bleating about “poor people being forced to move to cheaper areas” is water off a duck’s back. I get exactly the same kind of shroud waving when I mention Land Value Tax. Big deal. In the long run, houses in nice areas will be bought by people with high incomes and vice versa, so worst case, all Land Value Tax does is speed up this process.

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  • mark, accepted there are low paid jobs out there, but they do not pay enough to keep a roof over your head and food on the table. That is why we need much (50%+) lower housing costs. A government housing program fits in here perfectly.

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  • mark wadsworth says:

    @ Uncle Tom, comment 12: “Anyone inclined to sympathise should remember that HB now costs an average of £800 p.a. per household in taxation..”

    I’m surprised that people still believe drivel like this.

    HB for private tenants is about a third of HB = £6 billion, which is a pure expense, funded by the taxpayer. This does indeed cost over £200 per household in extra tax and should be got rid of sharpish.

    The other two-thirds of HB is merely a transfer between two parts of government (DWP and local council), it is a number on a bit of paper. DWP counts it as expense and council counts it as income. The only relevant figure is what the council spends on cash on social housing and what it receives in actual rents and Council Tax, net of Housing Benefit and Council Tax. Having looked at the figures, the two amounts, income and expense appear to net off to nothing.

    It was SELLING off the council housing and introducing Housing Benefit for private tenants that was a MASSIVE FRAUD on the taxpayer. Instead of the council collecting the rent, it was banks collecting the mortgage interest and lucky right-to-buyers making handsome profits.

    So, the answer, in terms of saving the taxpayer money, is to build more council housing.

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  • ”apply this logic to owner-occupiers, who do not pay a penny in location rent to the council”
    I would have said that Council Tax is a sort of location rent. It certainly does not relate to the level of services you receive.

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  • khards

    it is a chicken and the egg, in theory is the benefits system was almost abolished house prices should drop, i feel house prices are high in part because of the benefits system, the same goes for immigration we have such an attractive benefits system immigrants feel safe coming here, also the immigrants will take on the crappy low paid work which british people are too lazy to do, the same happened many years ago in Australia.

    Anyone ever noticed how immigrants become fairly well off , they will take the crappy work live in crappy conditions and save every penny.

    Saying all this I do believe the benefits system is the root of a lot of social and housing issues

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  • I think HB tenants deserve a transitional arrangement, its what most groups get when policy hits them hard. Weaning off HB is necessary. Switching to a supply side subsidy should be done over a period of 5 years. Govt should call-in planning decisions and fasttrack 100,000 new social/intermediate rented homes per year. They should reduce HB across the board by 20% as soon as the first 100,000 are delivered (and not sooner), then the next 20% with delivery of the 2nd 100,000 etc. Job done by 2016.

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  • “do you know where we can find 1.47 million jobs for these people within 6 months”

    Building a house creates around five years of employment, once the money-go-round has worked its way through, so tell the MoD to identify 40,000 acres it isn’t using; auction it off as 300,000 self build plots (+ facilities) with the condition that every house must be finished and occupied with two years.

    30 day deadline for the MoD to identify the land, 45 days to parcel it up, 45 days to arrange and conduct the auction..

    ..then while the detail of the house designs is thrashed out, all the services can be installed

    Hey presto, 1.5 million jobs within six months

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  • UT

    i love your idea, it really is a great one, so long as

    1) the plots are of a reasonable size

    2) estates do not look uniformed and regimented

    3) I would like to see facilities for small community farms on these estates, eg growing eggs and other items shared amongst community

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  • MW,

    Just because a large part of HB goes through local authorities doesn’t mean it doesn’t count..

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  • Mark, eggs dont grow, chickens lay them. City folk, I dont know 😉

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  • yeh yeh realised after i pressed submit

    now I am off to pick some peanuts from the peanut tree

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  • Mark,

    After you’ve done that you can go on a haggis shoot..

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  • mark wadsworth says:

    UT, HB to councils is both income and expense from the taxpayers’ point of view. The absolute figure is irrelevant.

    As a thought experiment, let’s assume they hike council rents by £1,000 a year, so councils get another £2 billion a year in revenues (so central goverrnment funding to councils goes down by £2 billion). But then central government has to increase Housing Benefit by about £2 billion as well. That does not affect the taxpayer in the slightest, does it? The same logic applies if they trebled council rents.

    It is ONLY the net average figure paid by social tenants in cold hard cash, net of HB and CTB that matters.

    It’s the same as QE, which is a loan/borrowing arrangement in a closed loop between two departments of HM Treasury (DMO and BoE) and the commercial banks (who are either in the hands of the government, or who have the government in their pocket).

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  • did anyone buy oilex (OEX.L) shares, i see they have gone up again today

    yeh just ordered my spaghetti bush from ebay

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  • @p. doff “I would have said that Council Tax is a sort of location rent. It certainly does not relate to the level of services you receive.”

    Spot on.

    Scions of wealthy families such as Toynbee (and indeed Cameron, Osborne, Blair et al) don’t have to think about the cost of living and therefore don’t see the unfairness of paying council tax and getting poor services for your money.

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  • Back to my plan. The 500,000 affordable homes could be built alongside 500,000 open market homes (mixed communities and all that). About 50% plots and 50% bulk build. Good energy efficiency standards a must (sustainable homes code 4). 40 new build sites @ 25,000 homes each, with complete range of facilities for towns of this size. 1 million new homes in 5 years.

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  • Schapps could brand it “the housing new deal”

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  • MW,

    Every property owned by the govt or local authority has a market rental value, and every penny less than that is a loss (an expense) to the taxpayer.

    The figure that matters is the amount that would be saved were there no benefits or subsidies for housing, which is widely reported as being in excess of £20bn p.a.

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  • mark wadsworth says:

    UT,

    Try this: “Every property owned by the govt or local authority has a market value, and if it is sold for less than that under Right To Buy, every penny less than that is a loss (an expense) to the taxpayer.”

    PS, you are talking about NOTIONAL expense, not cash expense, which is fair enough. By the same taken, NOT collecting Land Value Tax is not just a notional expense to the income tax payer, it is an ACTUAL expense because every penny LVT not collected is an extra penny income tax paid.

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  • the number cruncher says:

    MW @ 22

    Spot on sir – a very apt analysis

    We need a system that puts a good roof over everyone’s head and saves the taxpayer money.

    A lot of the right wingers on this sight think the answer is to take away the roof and let the poor rot – shame on you, you selfish load of scoundrels

    But the left needs to recognise economic realities and work out the consequences of their actions. There is nothing wrong in spelling out the problems of Government policy as Poly T is detailing, the problem is she has no effective solution.

    And the solution is…. LVT

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  • In the long run we are all dead. people may speculate about what the long term effects are going to be on rents etc., but in the short to medium term the effects Toynbee describes on current benefit recipients will be real. Rental prices will not magically fall overnight to some socially benign equilibrium where everyone gets their just deserts! No one has answered the point about creating ghettoes of low aspiration either – surely you don’t hold children responsible for the failure of their parents to find a job?
    Maybe moving to Norway is a good option? Looking better by the day.
    N

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  • “Every property owned by the govt or local authority has a market value, and if it is sold for less than that under Right To Buy, every penny less than that is a loss (an expense) to the taxpayer”

    – Agree..

    “NOT collecting Land Value Tax is not just a notional expense to the income tax payer, it is an ACTUAL expense because every penny LVT not collected is an extra penny income tax paid”

    – Not quite… The substitution of one tax for another does not create an actual expense, except for those who would be worse off under a different tax regime.

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  • sibley's b'stard child says:

    TNC

    “A lot of the right wingers on this sight think the answer is to take away the roof and let the poor rot – shame on you, you selfish load of scoundrels”.

    Left wing, right wing; the definition has blurred so much over the last two decades that I can scarcely tell the difference between the two – Orwell was prescient in that regard.

    Suffice it to say, what we have here isn’t socialism, it’s parasitism.

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  • The banking sector is a far better candidate for the label of parasite, it seems to me.
    The parties may have moved closer together, but it seems to me there is still an ocean of clear blue water between social democracy and thatcherism.
    N

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  • Nick

    curious what is your political standing?

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  • Mark
    your question is ad hominem. who cares?
    N

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  • communism maybe

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  • nope. Do you know many more ‘isms’?

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  • Homeownerism

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  • Also like UT’s idea for the MOD land. Self-build would not be uniform – have a look what Ecomotive have done in Ashley Vale.
    http://news.bbc.co.uk/player/nol/newsid_7200000/newsid_7205700/7205743.stm?bw=bb&mp=wm&asb=1&news=1&ms3=22&ms_javascript=true&bbcws=2
    the construction work would be temporary though. Other work that could pay for itself would be retrofitting and insulating the existing creaking housing stock on a systematic basis…
    N

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  • sibley's b'stard child says:

    C’mon Mark, there’s no need for that – does you no favours.

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  • reveals a lot… that we already knew?
    N

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  • sibley's b'stard child says:

    Absolutely Nickb, both are parasitical; one directly and another by-proxy. It’s all a matter of degrees however one doesn’t negate the other.

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  • sib maybe not maybe there is, i feel nick is baiting me for some strange reason, maybe because he is losing his job and needs benefits and therefore does not like my point of view.

    as far as i am concerned someone who does not work long term (excluding people just made unemployed) does not contribute to the economy and why should these people receive any benefits from the economy, why should they receive cable before others, buy the biggest TVs before others, become regulars at the pub like Amanda, etc etc

    I pay for these people, they waste my money and my time.

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  • I disagree Sibs, except for perhaps a small percentage of HB claimants that are the price of a humane system. The parasitism of the banking sector is revealed in the fact that it doesn’t actually do anything apart from create and allocate credit (debt), for other people’s projects, for which ‘service’ it amasses interest. Thanks to this it is now larger than all the productive sectors put together in the UK economy (and in most developed nations, according to OECD figures). The corresponding evidence for the systematic parasitism of housing benefit claimants is what? Anecdotes in the red tops?
    N

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  • Mark,
    Not interested in baiting you, or in your opinions about my motives etc. Not my fault if you dig yourself into some holes. Sorry you feel this way towards people who disagree with your strident opinions.
    N

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  • nope no holes being dug by me, i would employ someone to do it..lol

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  • sibley's b'stard child says:

    Nick, you’re not taking into account the impact LHA has on the private rental market. This isn’t just about a few thousand HB claimants; which is why I alluded to HB as parasitism-by-proxy. I suspect that we’re both singing from differing hymn-sheets here. Suffice it to say, as a private renter I can but welcome such reform.

    However, I agree, more council housing is the answer. In the meantime, reduction of LHA will suffice.

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  • Sibs,
    I don’t doubt you are right that HB pushes up rents generally by increasing the amount that low income families are able to pay. But I doubt that rents will come down quickly (enough) if you simply cut it, and there is also the problem of ghettoisation. The real problem is that we don’t provide basic services at a decent enough level across all areas, and allocate schools etc only according to area. That’s why there is an unedifying scramble to live in the ‘decent areas.’
    N

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  • sibley's b'stard child says:

    Nick, so – given that said market distortions make everyone poorer – you disagree with cutting LHA?

    To be honest, I find that the ‘unedifiying scramble for decent areas’ is a predominantly middle-class preoccupation. All I require is a reasonably sized roof over my head. Due to said market props, all I can ‘afford’ to rent (despite a not-too-unreasonable wage) is a modest terraced house in the cheapest London borough. I’d like to live in Kensington but I can’t so I won’t lose any sleep over it.

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  • They don’t make those on HB worse off compared to the situation in which everyone just pays market rents. I disagree with the policy of simply cutting it, with no measures to curb the social problems this will cause in the short run. I’d agree with introducing LVT and using some of the revenues for social housing, plus this would lower rents generally by reducing speculative hoarding of properties and land. More fundamentally, a different banking system would reduce house prices, and therefore both mortgages and rents, by curbing asset price speculation.

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  • tenyearstogetmymoneyback says:

    After the last post I wondered.

    What is going to happen to the Olympic village in 2013. Will it be sold off to the usual bunch of wide boys, to be rented back to the councils at a stupid rate ?

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