To think some social housing rents should be tripled?

(259 Posts)
LondonMan Fri 16-Aug-13 13:49:43

First of all, please read the post carefully, this is not meant to be a benefits-bashing thread. It's meant to be a thread in favour of "economic correctness."

I want all rents to be set at the market rate, which apparently might mean tripling them in parts of London. I was watching the "How to get a council house" series, and in the program in which Tower Hamlets was featured, the rents seemed to be about a third of the market rate. (I have also watch the Manchester program, so realise there is less of a discrepancy elsewhere.)

I think it is wrong to price anything at other than a market rate, as it results in misallocation of resources.

I presume realistic rents would make no difference to those most dependent on benefits, it would just increase the amount of housing benefit they received. Obviously some other people would be affected. For example some working people who pay social rents with no help from benefits might decide that if their council house no longer had a subsidy, they might prefer private housing, freeing up their council house for someone else.

I know from previous threads that lots of people on here have a confused idea about what subsidy means. It simply means getting something for less than it would cost in a free market. If the owner could rent out a property for £300 a week to the highest bidder, but do in fact rent it for £100 a week to a social tenant, then the social tenant is being subsidised by £200 a week the owner is forgoing.

Essentially the point of "social housing" should be to provide secure tenancies, since the market currently doesn't do this. (Though possibly there should also be changes so that the market does.) It should not be to provide "cheaper" housing, since there is no such thing. Housing is worth what it's worth: when people talk about "affordable rent" or "low-cost" housing the correct economic view of what they mean is almost always housing with a hidden subsidy. I'm not against explicit subsidy, via higher housing benefit for example, but I am against the hidden subsidy in below-market rents.

(Before I saw these programs I was under the impression that central government had already introduced a rule that social rents had to be raised to realistic levels, so I was surprised by the size of the discrepancy in Tower Hamlets. Are Tower Hamlets just being slow in complying, or am I wrong to think there is such a rule?)

usualsuspect Fri 16-Aug-13 14:18:00

Ah, good old council house envy.

cantdoalgebra Fri 16-Aug-13 14:20:16

For the sake of accuracy in the "build more houses" debate, the figure of 6% as the percentage of urban areas is misleading - it is actually 6.8% for the UK - 10.6% for England, as opposed to 1.9% for Scotland, 3.6% Northern Ireland and 4.1% for Wales. England clearly has the highest percentage of urban areas.

But surely the problem is that the market rate is far too high & crippling many working families??? Rather than hiking up social rents we should be capping private rents to make them more affordable. Yes, that would mean a loss in profit for landlords but surely would help the economy as a whole if tenants werent forking out half their salary on rent (as they would have more cash to spend). Private rents are far too high esp in SE & I am a landlord myself (though an accidental one!)

OddBoots Fri 16-Aug-13 14:22:35

I agree with those saying that the 'market rate' is too high and something urgent needs to be done to close the gap between earnings and housing costs.

Shelter says "If food prices had risen at the same rate as house prices over the last 40 years, a chicken would cost £51.18.

Four pints of milk would be £10.45, and a loaf of bread would set you back £4.36.

We wouldn’t accept this with food. So why accept it with housing?

Unless something changes, a generation will struggle to afford a home of their own."

timeforanothernewname Fri 16-Aug-13 14:29:28

OP, wtf is this "correct economic view" you know all about? That'll be why all professional and academic economists are in agreement, right? Oh, wait...

froubylou Fri 16-Aug-13 14:30:26

If there was more social housing then rents on private property would decrease and housing would be more affordable.

The buy to let industry was partly responsible for the last property boom which then led to the credit crunch. Private landlords effectively out priced first time buyers and you need first time buyers to keep chains moving.

Once the credit crunch hit and lenders stopped lending to buy to let investors there was no one to buy the smaller properties as they were way too expensive for the average first time buyer.

And my DP is a builder affected by the reduction in properties being built and at the time I worked for a financial adviser who specialises in buy to let and had an extensive portfolio himself.

You actually didn't need a huge deposit or a high salary to start buying up property. Not back then. And most landlords will have the properties they own mortgaged. So whilst interest rates are low they are making massive profits from the rental income they receive.

Social housing doesn't actually cost the housing associations anything. They should be run as a not for profit organisation. Which means once staff are paid and maintenance costs covered any surplus money should be reinvested into more social housing.

The only thing that increasing the rental value would do would be to increase the cost to the tax payers as housing benefit costs would increase.

And it would destroy communities as people wouldn't afford to be able to live there and drive the price of houses up even further.

No one other than the lending institutions benefit from this.

The cost of housing and the cost of energy causes more poverty than anything else. The rich get richer and the poor get poorer.

Nice.

Debs75 Fri 16-Aug-13 14:32:24

Broken do you want to see the workhouse back for those who have children at the wrong time?
Some people do things the right way for them which could be kids first then career later. Or they might not want a career. Some people are very content working as a cleaner or in McDonalds or in care. They still have the right to raise a family.

Old Boots that is shocking I spend about £70 a week on food but there is no way I could feed a family of 6 on one chicken a loaf of bread and a bottle of milk.

dirtyface Fri 16-Aug-13 14:34:13

is the OP real?

this has got to be one of the stupidest things i ever read on here or anywhere

yes lets treble the housing benefit bill for the unemployed. brilliant. plus even for tenants that are in work, who is going to provide the shortfall for all the ones that suddenly wouldnt be able to afford their homes by themselves?

and as most intelligent people will agree, it isn't that social housing rents are too low, (they are proportionate and fair and in line with the average income) its that private rents have become way too high and out of whack with the average income

wages have stagnated whereas housing costs have skyrocketed

really it doesnt take einstein does it

<bangs head against brick wall>

ffs angry

sparklingstars Fri 16-Aug-13 14:36:00

Why shouldn't landlords make money from renting houses? If they are running a business as a property owner then they are entitled to make money from it? Nobody would say that a taxi driver can't profit from the car that he owns just because somebody else can't afford a car and it's no different - they have an asset that somebody else needs.

Darkesteyes Fri 16-Aug-13 14:39:25

Employers should pay a bloody living wage and rents need to come down.

Broken why the fuck is it always suggested that ppl without children can afford to put up with all the crap and live on less.

Interesting survey in Red magazine this month about parents and non parents in the workplace and how resentment can build between the two groups You should read it. Because suggestions like yours cause this type of resentment.

expatinscotland Fri 16-Aug-13 14:40:23

Yeah, YABU.

BrokenSunglasses Fri 16-Aug-13 14:41:22

I think you could project your own issues a little more if you try a bit harder there Debs!

Since when did people who believe in being able to afford children and expensive areas of housing equal believing in workhouses? hmm

I'm a big supporter of the welfare state, I just don't think it should pay people to have children they can't afford or live in areas they can't afford.

No one has a right to live wherever they want to at someone else expense, that's just ridiculous.

If you want a low paid job and to have children at the same time, then fine, but don't do it in one of the most expensive areas of the country. Do it somewhere you can afford, and if you are in a cheap area, living frugally and working full time but you still can't afford to feed your children, then you can rightfully expect state help.

LondonMan Fri 16-Aug-13 14:41:30

I disagree that 'housing is what it's worth' because I disagree that a free market should be god.

Instead I take the opposite stance to you - there should be a massive social house building programme so that rents/ ownership costs come DOWN.

Actually I agree that building more houses is a legitimate way to bring prices down. Houses are "worth what they worth" at a point in time, but that figure can change over time, and obviously supply and demand affect it.

I live near the former Times print plant in Wapping, there's a planning application to build several 15 storey residential towers there, plus another 70-storey building and a school, I hope that all goes ahead. In fact much of the City end of Tower Hamlets could do with being demolished and replaced with residential high-rises, it's a pity the planning system doesn't do more to facilitate that. (I'm in favour of private compulsory purchase, a private developer should be able to compulsorily purchase poorly used land and convert it to a higher-value use.)

OddBoots Fri 16-Aug-13 14:43:39

"I'm in favour of private compulsory purchase, a private developer should be able to compulsorily purchase poorly used land and convert it to a higher-value use"

What do you regard as poorly used?

ShimmeringInTheSun Fri 16-Aug-13 14:43:44

I presume realistic rents would make no difference to those most dependent on benefits, it would just increase the amount of housing benefit they received .

As of this year housing benefits amongst others have been capped, so many. many people are already contributing to their rent as the benefit doesn't cover it all.

So move to a cheaper place is the answer is it?
Well, if you're claiming benefits then how the heck do you afford to move? ....and where to? ........

Icedink Fri 16-Aug-13 14:46:41

Sparklingstars I disagree, People have a choice not to use a taxi - they could walk or use public transport if they don't have their own car. We unfortunately don't have the choice not to use a home.

BushCricket Fri 16-Aug-13 14:49:37

"(I'm in favour of private compulsory purchase, a private developer should be able to compulsorily purchase poorly used land and convert it to a higher-value use.)"
Would that include huge mansions owned by the very rich but not lived in for 10 months of the year? Or just social housing? I wonder if you are just trying to be provocative with this thread?

Chattymummyhere Fri 16-Aug-13 14:50:36

Lack of housing pushes up prices as you basically have people fighting over 1 house.. Landlords know this and know they can price houses up more and more..

A street I know 3bed houses 90k-100k to buy outright, rent £550-£650 per month that's 6.6k-7.8k a year so the 90k house rented at £650 a month would be paid for in full within 11.5 years (if interest was not added of course), yet one family (a close friend) owns a house and live in it down said street their mortgage repayments are £350 a month..

I'm sorry but £300 a month profit as the house is not going to need work on it every month is huge.. It's technically cheaper to own than it is to rent, but with rents so high not many can afford to save, then you have banks saying but you cannot afford £550/£650 per month on repayments.. Yet you have been managing to pay your rent at that price with no help. A lot of private renters get stuck in the trap as rental prices have been allowed to get to high.. Oh and the £550 houses down said street are priced like that on purpose as to only be £1 over the housing benefit cap.

More needs to be done about the private sector and landlords need to be forced to keep their stock in a good condition, at the moment things have to be so dire for a enforcement to repair and at that point the landlord will still evict the tennant for being an issue... Maybe we need a law on just how many houses people can own with the full intention to rent out, it might bring some houses back onto the open market, cap rents, and make the houses have inspections but not for the landlord but to check up on the landlord and how he/she is maintaining the houses

LondonMan Fri 16-Aug-13 14:50:41

If social housing is paid at a lower rate then the housing benefit bill will be reduced.

But if the council is also the landlord, there will be no saving, as a decrease in rent/housing benefit will be matched by an increase in hidden subsidy.

Where someone else (e.g. housing association) is the landlord, then yes the council is worse off, but the housing association has more money with which to provide more houses.

georgettemagritte Fri 16-Aug-13 14:52:21

OP your argument only works if (and it is a big if, these are highly-disputed theories not fact) your theory of markets is in fact correct. And then only if markets do in fact work efficiently. However there is plenty of evidence that pure market theories do not work in reality and that so-called "free" markets are not only not "free" but highly rigged by rentier interests, skewed public policies and speculation. For various macroeconomic reasons housing is not, and has never been, a "free market", and it is currently vast skewed even from historic norms by speculation and economic imbalances resulting from more than three decades of poor public policy and malinvestment. So AIBU I'm afraid.

Social Housing has already paid for itself - rents cover repairs and admin, not mortgages. Councils aren't supposed to make profits as far as I was aware. I live in a very undesirable part of London and have absolutely no hope of paying market rates for my council flat - it would be an extra £1k a month! (I don't get HB btw, not all people who live in social housing do)

Move to a less expensive area? Well, that would be out of the South East I guess, so I'd have to leave my job, Dh would have to leave his and the DCs would have to change schools. Bit of upheaval I couldn't afford, plus how am I supposed to pay for the market rents wherever it is I'm now allowed to live (as I'm not allowed to live in the city I grew up in...) when we've had to give up our jobs. Oh fuck it, we'll just claim HB and income support and jobseekers and whatever else it is there is.

YABU. Yes.

Debs75 Fri 16-Aug-13 14:59:26

I'm not projecting any issues Broken.
I do live in a low rent area and I do live quite frugally. Even here though NMW was not enough to live on, as everyone else knows, without benefits.
When I start and finish Uni I hope I can afford to raise my children in line with whatever standards you use.

I do agree the welfare state is in a shambles but when you see all the corporate tax this government can't or won't take from big businesses it is unfair to then take from the poorest of the poor.

Anyway back to Social Housing a lot of people are in social housing who work and do not receive benefits. How could you justify tripling their rents it could see them go under. They would be earning too much to get help but effectively would lose their homes

LondonMan Fri 16-Aug-13 15:01:21

So why shouldn't we look at reducing the cost of renting a house rather then increasing it for people who probably can't afford it at all.

We shouldn't because we can't. People who say what rents (or wages) "should" be are framing the issues wrong. The market says what these things are worth, if what someone can sell their labour for doesn't cover their reasonable expenses then we should bridge the gap with welfare, we shouldn't pretend that the gap is other than what it is by legislating the costs. This artificiality, this lying to ourselves about the true cost of things, will cause adverse consequences elsewhere.

People who think like this are usually in favour of rent control, for example. However rent control increases demand and reduces supply of housing, i.e. it makes things worse.

There are legitimate ways to change costs. You can bring down housing costs by building more housing, or (in theory) reducing the population. You can increase what someone's labour is worth by education/training.

KissMeHardy Fri 16-Aug-13 15:03:30

For example some working people who pay social rents with no help from benefits might decide that if their council house no longer had a subsidy, they might prefer private housing, freeing up their council house for someone else.

Yeh, and pigs might fly!! What world are you living in - obviously not Social Housing World. Once you've spent years getting one you hang on to it for dear life.

Why on earth would anyone with a secure social housing tenancy want to move back into the world of private rented where you can be moved on every 6 months?

sparklingstars Fri 16-Aug-13 15:03:31

Icedink, that's a fair point as, like you say, you could walk. But I still think that it is OK to profit from owning a house; we all profit by going to work and offering our services and a landlord is doing no different if their line of work is managing houses for rent.

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