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 15:06:43

You can increase what someone's Labour is worth by paying them a decent wage.

The lowest paid jobs are usually the most important jobs imo.

froubylou Fri 16-Aug-13 15:12:31

I think landlords should make a profit from the property they 'own'.

But property is a limited resource in this country, certainly at the moment. So I don't think it is fair that resources are effectively being held to ransom over the rest of the country that can't afford to get on the property ladder.

And its all well and good getting a better education or better training, but how many graduates are unemployed at the moment? Or doing unskilled jobs just to make a wage?

DialsMavis Fri 16-Aug-13 15:13:51

I agree that you have everything skew whiff in your reasoning. its the cost of housing (especially private rent) that needs to come down. We struggle to pay the £1500 rent on our cold horrible house every month. Its ridiculous, we could move but this is the best area for us to try and build decent careers using our training, I hope it will be worth it in the end. We will never be able to buy in this area though, even when comfortably off. We would need £100k cash for deposit, fees and stamp duty to buy a 3 bed in need of modernisation, thats a lot to save when you are paying £1.5k in rent every month. Our only option for home ownership/ retirement is to try and scrabble together the deposit for a flat somewhere cheaper and then charge some other poor sod over inflated rent to cover the mortgage!

kissme that's an opinion you'll find quite a lot here on MN.
I was told that I should give up my council house and take up a private rental once DH had been promoted and I'd secured a part time job as I would be able to afford it.

ClaraOswald Fri 16-Aug-13 15:21:40

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.

So when we build more on land that might be usable for the raising of foodstuffs/ emotional wellbeing, when do we stop? When we are incapable of growing food to support ourselves? When there is no more land left and every foodstuff has to be imported or we starve? Fantastic- you have just lessened the population because people can now no longer afford to buy food and have a roof over their heads.

Or do you suggest that we begin killing off whole swathes of the population? Who do we start with? Oh, I know. The poorest in society, the weak, the sick?

TheFallenNinja Fri 16-Aug-13 15:24:34

I like the OP, clearly of enormous fiscal savvy.

I particularly enjoy the phrase "the markets set the price", let's poke at that a little bit

The "market" in this case is commission based estate agents telling landlords what rent to expect, this then becomes the de facto rent for that street or suburb.

So, the lofty idea that your rent is set by anything more intelligent than some spivvy little git from some tuppeny hapenny estate agent is wrong.

So when paying your crippling rent, thank the estate agency industry.

sparklingstars Fri 16-Aug-13 15:25:10

Dials but you don't need to pay £1.5k in rent every month, you can choose to live somewhere where rents are cheaper than that. For example, you could pay £1.5k for this or you could move and pay £625 for this - both are in big cities where you could find a job.
People who are buying a house buy where they can afford, why should it be any different for people renting? You've got more chance of being able to save when you are paying £600 in rent than £1.5k

I was quite shocked at how expensive some of the rents were in that programme last night!

I live in social housing in the south in somewhere that is known for being damned expensive to rent/buy, yet I pay only a fraction of the rent being shown on flats and bedsits for a 3 bed semi.

LondonMan Fri 16-Aug-13 15:25:54

Could you explain what you mean by this:
"I think it is wrong to price anything at other than a market rate, as it results in misallocation of resources."?

I think it is a general rule of economics, here are some examples of what I think it might mean in this context. (Actually it might be two perspectives on the same example.)

A social landlord who is letting a property at below-market rent to someone who no longer needs benefits is forgoing income that could be used to help someone in need.

Two people in identical circumstances, both not on benefits, but because one obtained social housing in the past they continue to get a subsidy, when any rational system should treat both the same.

Social housing is not a subsidy.

usualsuspect Fri 16-Aug-13 15:29:09

Social housing is not a benefit

usualsuspect Fri 16-Aug-13 15:30:56

SH is affordable housing, it's not SH tenants fault that private rents are too high.

Its all a bit foot stamping and its not fair,really.

It all basically boils down to whether you believe safe, affordable, appropriate housing is a human right. Some people earn less, some people earn more. Do they all have a right to live somewhere?

There are cleaners, call centre workers, people who collect bins, SWs and teachers FWIW who have to live in London. Where do you suggest they live if they work teaching your children and collecting your bins?

MammaTJ Fri 16-Aug-13 15:34:02

One of the disadvantages of social housing is that you live where you are put. Why should people pay the same for this as someone who get to choose where they live?

We are not on benefits and pay full rent but could not afford to live in private rented. I did not need benefits to pay my rent when I moved in ehre either. So I don't get your comment A social landlord who is letting a property at below-market rent to someone who no longer needs benefits is forgoing income that could be used to help someone in need. Really, not everyone in social housing is on benefits. hmm

I am guessing from your stand point, OP, that you do not live in social houing, or if you do, you get housing benefit.

LondonMan Fri 16-Aug-13 15:39:50

So the council should give people loads more housing benefit to pay for higher rents in social housing.

Housing benefit which they'd be giving back to themselves in rent.

That's efficient, OP.

Where the council is also the landlord and the housing benefit equals the rent, it's equally efficient to have the rent anywhere between £0.01 a week and £100,000 a week, the only thing that changes is a number on two forms, figuratively speaking.

Take your argument to its logical conclusion: why not make the rent nothing? Then there would be efficiency savings, as you wouldn't need a housing benefit system or a rent-collections system, that really would be more efficient.

ouryve Fri 16-Aug-13 15:41:21

Sparkling - when your parents and other family, who might be able to provide childcare, are in London, you are not going to make your situation any easier by upping sticks and moving over 100 miles away so that you now have to pay for childcare. And, of course, unless you command a particularly good salary, claim tax credits/relief for that childcare.

And if people who don't command a high wage aren't allowed to live in London, because they can't afford it, then who the hell will work in the shops, or do the cleaning, or serve the deserving latte drinkers in the cafes?

And what happens to the newly tripled rent paying social housing occupier if they get a job?
That's right, they won't, because they can't afford to pay the rent.
So no one earning less than a fortune could live in the south. Good luck getting your bins emptied, schools and hospitals cleaned, deliveries from online stores, finding a sales assistant to serve you in a shop.... Etc.

Take your argument to its logical conclusion: why not make the rent nothing? Then there would be efficiency savings, as you wouldn't need a housing benefit system or a rent-collections system, that really would be more efficient.

Now, intelligent MNers. Is this reductio ad absurdum or a straw man or both. Answers on a post card.

LondonMan Fri 16-Aug-13 15:51:56

Why would it ever be a good idea to increase the housing benefit bill? Don't you know we're in a financial crisis.

For people on subsidised rents whose rent is entirely funded by housing benefit, the combined housing benefit + rent subsidy bill won't be change by this. So the country is no worse off.

People whose rent is not covered by housing benefit may be worse off, if there is no benefit change to compensate them. So the country may be better off with respect to them.

I'm not necessarily advocating the second scenario though. The point of the change is not to make anyone better or worse off, the point is to create transparency. What we decide to do once we can clearly see who's getting what is a separate issue.

Even with no change to the benefits bill, the country could be better off afterwards in the sense that there's less misallocation of resources (the wrong people being subsidised.)

Take your argument to its logical conclusion: why not make the rent nothing? Then there would be efficiency savings, as you wouldn't need a housing benefit system or a rent-collections system, that really would be more efficient

And with that, I'm out.

LondonMan Fri 16-Aug-13 15:54:24

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?

I was originally thinking they might buy, then over-generalised what I wrote. You are right, private rentals are a terrible option. Something needs to be done to provide better options in private rentals generally.

But if Council houses aren't subsidised, and they have no mortgages on them, how is that the same? You are confusing an effective subsidy (in that the person has a lower rent) with an actual subsidy. Unless you want to plow the extra rent from the Council rents back into housing, which wouldn't be a bad thing. Except for the working poor, who would be fucked.

I was originally thinking they might buy. How are they saving a deposit? Since you think everyone in social housing is on HB, they are not allowed vast savings.

sparklingstars Fri 16-Aug-13 16:03:18

Ouryve I know; I had to do that myself when a change in circumstances meant that I could no longer afford to live in the place that I wanted to live. We're now over 100 miles away but we've made it work simply because we had to.

LondonMan Fri 16-Aug-13 16:05:21

Oh FFS get out of your Ivory Tower and see that 'market rates' just doesn't comply with NMW or even a liveable wage.

We need lots more affordable housing built and lower rents all round

I accept there will always be people whose reasonable outgoings, of which housing is a large part, cannot be covered by the income they can earn. There are three possible solutions.

1. Lie to ourselves about what their labour is worth: legislate higher salary.
2. Lie to ourselves about what their housing costs: legislate lower housing costs.
3. Bridge the gap with social security: benefits/tax credits.

I favour option 3. I believe that lying to yourself about what things cost always causes damage to the economy, often in subtle ways you can't see, predict or mitigate.

I think it was that kind of lying, taken to an extreme, that made the Soviet Union the economic powerhouse it is today. grin

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