to think high house prices are the problem?

[benefitcapclaptrap]

Just watched a news item about the benefit cap being introduced today in some areas. Not sure I totally agree with it but I understand that the reason for it is that the welfare bill is too high. What I don't understand is how reducing housing benefit payments will solve the problem in the long term.

As I see it, the reason housing benefit spending is high is because the rents charged are also high. Too high in fact for the (mostly working,but low paid) tenants to be able to afford to pay without assistance. The usual reason given for high rents is lack of available properties, but I can't see the evidence for this locally (south east) or in other towns I have visited.

Instead, I would suggest that, the reason for high rents and demand exceeding supply is actually due to the cost of buying a house being far too high. A large proportion of people who would like to buy a house (and in the past would have been able to afford to) have been priced out of the housing market. Therefore they have no choice but to rent those same houses from a landlord that could afford to buy it. This means the rent is at a rate that not only covers the mortgage the tenant couldn't afford plus extra for maintenance and I presume some amount of profit. So it would follow that the tenant quite likely will not be able to pay the whole rent their self and must apply for housing benefit.

Am I being unreasonable in thinking that if house prices were lower and affordable to most people on an average wage there would be a lower demand for rental properties. In turn this would mean lower rents for those who can't or don't want to buy and mean lower bills for housing benefit. Also if people didn't have to spend such a high proportion of their income on the basic necessity of a home to live in, there would be less need for top-up benefits (e.g. tax credits) and people would be able to spend more which would get the economy moving again.

So AIBU?

"negotiate with me all you like there us only so much I can give."

Well tbh I think you set your rent at market levels. If you cannot achieve a rent at a level that will cover your mortgage, then that's something you have to deal with - either by selling your property, or by making a loss.

It's not really true that rents are set by mortgage costs, since one person might have a very expensive mortgage, and they can't expect people to pay over the going rate just because.

At the moment rents/mortgage rates are obviously in a fine enough balance that you can break-even, but this isn't really your choice.

My landlord rents me at below market rate, but above his mortgage, which is 10+ years old (on a lower capital value).

YANBU

One of the things that I think should be done is regulation of the rental market. There is a degree, but not nearly enough. For e.g., in the area I live in in London the rents have gone up around 25% over the last few years. Yes, there is a lot of demand BUT, a lot of the time rents are set by rental agencies/landlords, and I doubt that their costs have risen by 25% in the last few years. The rise is driven by greed, pure and simple. And not just in our area - a friend lives in a less fancy area of London - her LL has demanded a 5% increase in rent every year since they've moved in. The mortgage is unlikely to have become more expensive, there hasn't been any development of the flat that would necessitate a rise in prices (e.g. redoing the kitchen). So why charge more?

When we moved into our flat, the landlord has outsourced some of their role to a rental agency, including deciding how much the rent should be - the LL bought the flat in the early noughties, and the flat has more than doubled in value, though I doubt their mortgage has. It is in the interest of rental agencies to raise rents, as they then get more income. The people who lose out are renters.

Couldn't agree more with Absy's post.

Rent rises reflect excess demand, excess immigration and insufficient house building.

Yes housing costs are a major issue. We brought first home in 1996 for £38k, earning around £15k, our mortgage was low around £300 a month (think it was signiificantly less), byt the time we sold our tiny 2 bed house just 4 years later it sold for £145k.
This allowed us to go on and buy a bigger house and have a bigger family. Our income hadn't increased that much, it was around £25k by then but we had £100k equity.

Now 13 years later, a divorce that left me with no equity (he managed to keep it, still to this day not sure how that happened), I earn a good wage but can not get back onto the property owning ladder as even with my wage the mortgage wouldnt be big enough for a house the size we need in the area where we live and work. If i was to move to cheaper area where i could afford the mortgage I wouldnt have a job earning as much as i do now, so maybe not able to afford my mortgage on a lower income?

So currently i rent, i rent a 3 bed semi detatched house for £1000 per month, this is at least half of my basic salary (i do get comission as well) without any bills paid. I know of a fair few other families that work and rent privatley but becasue housing costs are so high and the wages would only just about cover the rent, receive help in the form of housing benefit. That to me is what is wrong a family with two working parents, at least one is working full time, perhaps even both and yet they still dont earn enough to pay the rent!

Can I just point out that it was the last government who introduced Local Housing Allowance which caused some massively inflated rents due to the way houses were banded. Yes, a Labour government lining the pockets of private landlords. Who would have thought it?

This government then cut these market rates in 2011 to avoid landlords upping rents and taking advantage of the system.

How did it allow you to buy a bigger house. Surely the bigger house would have gone up in value by even more?

If you bought a house for £38k and sold it for £145k, and then bought a new house for £200k then it would have cost £52.5k previously, if it rose at the same rate, so previously you were paying £15k to move up, and after the rise it was £55k, which means that the house price increases actually made you poorer.

"Yes, a Labour government lining the pockets of private landlords. Who would have thought it?"

Er, how many houses does the Blair clan own?

I was being sarcastic...

YANBU. But there is no real solution as people who have struggled in recent years to get on the property ladder would be left in negative equity if the prices went down. I do think the landlords (who bought property 10+ years ago) have it made.

Some of the most expensive properties in London are unoccupied .

I do keep on waiting for the price bubble in London to pop, but I doubt it's happening any time soon, but it will. You can't have a capital city where normal people can't afford to live.
I think part of the reason that prices have been able to go up so much is because people just resign themselves to paying a larger proportion of their salary as rent than is normal outside of London, by saving less (or not at all) and/or doing without other things.

Though, in our area the house prices themselves are even more ridiculous. A flat went for sale in our building, and DH and I worked out that we could move up two floors, to a flat that is the same size but officially a two bed (we're still trying to figure out how), and pay twice what we pay in rent for a mortgage. We decided against it ...

Absy in the bad old days those huge multimillion pound London properties were rented out to several families and lived in. Before that they were lived in by the wealthy with their servants living upstairs or in the basement. Now they are simply investments.

Central London has lost its heart and the only thing that will change that is a massive tax on space (m2). Any space above a certain average quota should be taxed to Kingdom Come.

If BTL Landlords have over-stretched themselves on their mortgage and bought over-priced property that's their problem. The taxpayer shouldn't have to fix that by subsidising them.

Well the deregging or whatever it technically was called of the banks did it. So then people needed more money to pay the mortgage, so then families who h traditionally had a SAHP had to both get jobs if they weren't both working before.

When my parents bought their first house near Cardiff, they paid £9,000 for a three bedroomed, detatched house on a corner plot and a big garden. My dad was on a solid wage but nothing spectacular, and my mum was a SAHP. This was in 1975.

Things have changed so unimaginably much. Accomodation now costs the earth. DP and run our own business and take home about £45,000 which is more than enough for monthly payments, but again it's the deposit. It's so wrong.

LAs really should have been encouraged to invest in social housing rather than been encouraged to invest abroad it would have been lower risk.

I agree withabsy I do think letting agents have increased the cost of rent and speaking from personal experience I don't understand what they do to justify their letting fees.

If BTL Landlords have over-stretched themselves on their mortgage and bought over-priced property that's their problem. The taxpayer shouldn't have to fix that by subsidising them.

This.

Just like any investment/business venture - BTL landlording is a risk and it's unreasonable for any business landlord to expect the taxpayer to stump up the money to reduce that risk.

There are loads of great landlords out there...but there are many unscrupulous ones too: a friend of mine found herself homeless and jobless, but there wasn't any social housing to help her. Her local council had to put her into a really awful flat at £156 p/w (in an area where such a flat would go for around £100 p/w) The landlord had at least 10 other properties that were poorly maintained with an average of 3 flats in each property and because it was emergency housing the local council paid 100% of whatever he demanded. Since the council had a duty to house these families they had no choice but to accept his over-inflated prices. His excuse? As far as he was concerned these families were a risk because they had fallen on hard times.

Hester Well the deregging or whatever it technically was called of the banks did it. So then people needed more money to pay the mortgage, so then families who h traditionally had a SAHP had to both get jobs if they weren't both working before.

I would go so far as to say it was the introduction of several million women into the workplace enabled people to get larger mortgages and so prices went up accordingly in the family home market. The deregging came later, along with low interest rates, interest only, self-assessment mortgages. They added the extra sparkle to the goldrush.

And now the privileged can build a new home (usually by Polish builders on a minimum wage) in their back garden to further bolster their empires.

Chicken or egg?

binky, why on earth would any landlord willingly rent at a loss.

are you sayimg this should be the case, I ( landlords etc) are in business to make money, we arent charities. your an idiot for even thinking this.

if you invest in stocks ths can go down but you dont do this by choice.

how is it that people dont get how an investment works?

Rent controls worked but Landlords failed to maintain properties because there was nothing in it for them. They did the job of the council really and could probably have done with some support. The properties became derelict and did not have much capital value. Those are the houses that people bought in the 1960s for £5000 that are worth £5M now.

In those days the wealthy lived outside London and the poor lived in the centre.

It's tragic that the London property pull has reached the mediterranean countries and they are now forced to move.

your an idiot for even thinking this well that's a nice thing to say of a Tuesday lunchtime! Is that how you treat your tenants?

There are loads of great landlords out there...but there are many unscrupulous ones too: a friend of mine found herself homeless and jobless, but there wasn't any social housing to help her. Her local council had to put her into a really awful flat at £156 p/w (in an area where such a flat would go for around £100 p/w) The landlord had at least 10 other properties that were poorly maintained with an average of 3 flats in each property and because it was emergency housing the local council paid 100% of whatever he demanded. Since the council had a duty to house these families they had no choice but to accept his over-inflated prices. His excuse? As far as he was concerned these families were a risk because they had fallen on hard times.

that is disgusting. there is no word bad enough for that ^^ robbing cunt landlord

i am actualy forever grateful to my last landlord for being a greedy little chancer. i was a single mum on HB and he decided to put the rent up by 120 a month. Council refused to pay the extra HB, i refused to pay the extra. so he gave me my notice. Council rehoused me in a nice housing association house and the rent was much less what my ex landlord wanted every month. i also left it in a state and owed rent, bad moody and now i have managed to exchange my HA house to a lovely council house in a better area which i am hoping to either buy one day or be able to save a deposit to buy a place thanks to the cheap (ish) rent.

i for one really hope prices crash. sorry if this offends anyone but i couldn't give a shite about your "investment" - a house should be a home, not a way to make money at the expense of people less fortunate. and i want my kids to be able to buy even if i can't.

House prices could easily be reduced if banks were restricted in the proportion of annual income they could lend to borrowers, or if they went back to basing the amount they lend on one, rather than two people's income in a marriage.

They won't do that, though, because then we wouldn't all owe them so much money and be paying them lots of lovely interest.

Moody, I completely agree. Good luck to you :)