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?

Ah, a HPCer.

applauds mateinthree

particularly the last paragraph.

Actually Tunip, I've never posted on that site, I find the general attitude on there quite depressing (especially the muted glee at job losses). Regardless, the material facts of my post are accurate.

mateinthree

I don't doubt your figures, but I am assuming they are averages. The problem with quoting average figures is they are skewed by sales / prices at the top end of the market especially in places like London. In fact, I wonder if that isn't at least part of the reason why the average house price adjusted for inflation has gone up. A better comparison is median income versus median house price.

Toad, yes perhaps that be something to take into account, but certainly isn't the whole story. The house I live in (3 bed semi) in a small northern town was bought for £50k ish in the mid 90s, and cost me £150k a couple of years ago. My OHs parents bought a (2 bed terrace) house near central Manchester for £30k at the turn of the millenium, and sold it for £130k a few years back.

The south is definitely worse, but the North is a lot worse than it used to be.

YoniMaroney

I'm not sure what the rules are in Australia, but when one disposes of property it is normal to write the depreciation back in for tax purposes, except to the extent that the property is sold at a loss. So, while tax is not delayed, it is not permanently reduced.

mateinthree

Assuming there weren't renovations or other factors etc I will concede you have a point.

However, I doubt houses will ever go back to what they were in the 1960s without rent controls and stricter lending criteria. It would be interesting to know price-to-earnings ratios from the inter-war or pre-war periods but I suppose the statistics aren't out there. I do know that owner-occupancy was only about 20% I suspect, however, that the low prices of the 1960s were an anomaly.

Toadinthehole some countries have affordable housing.

There's an interesting report here:

www.demographia.com/dhi.pdf

It notes that the majority of major US markets (pop > 1m) enjoy p/e ratio of under 4x. That is 40 out of 51. The median is 3.2x earnings. In the UK no markets have sub 4.0 p/e ratios, and the median is 5.1x earnings.

Whereas basically the whole UK is rated 'severely unaffordable', the only areas in this category in the US are Boulder, Hawaii, the New York area, Boston, and California.

I don't think the two are comparable as UK has a much higher population density - 650/sq mile vs 84/sq mile, which means much cheaper land. Furthermore majority of houses are of wooden construction rather than brick making construction much cheaper (& less durable).

Bollocks. The vast majority of the BTL brigade simply MEWed their deposits from houses they already owned that had rocketed in value, using the advantage of having been born at the right time to snatch first time buyer properties and force those coming after them to rent those same properties and line the landlords pockets instead of buying them for themselves

A lot of that happened in my home town, a place that is one of the most financially deprived areas in the UK. Your normal hard working 40 hour per week person cannot afford to buy because between that, and people retiring there (buying a house to let out and another for themselves) has shoved house prices up so high that the only way to live is to rent of the multiple property owning landlords or to get a house on the council estate (hardly likely, 4 year waiting list). The people who keep the town ticking over and who keep Asda full and running are never going to be able to afford to ever buy their own house.

On top of that, the local council were bloody stupid enough to allow a lot of the properties to be converted into bedsits...and you can all I'm sure imagine what happened...

The majority of people who have to rent also rely at least partly on HB...who is getting the benefit of the HB? The landlords.

"I don't think the two are comparable as UK has a much higher population density - 650/sq mile vs 84/sq mile, which means much cheaper land. "

Well land in Alaska is not much use if you want to live in central Portland (which you can do, for a reasonable sum).

The difference is so huge that it doesn't make much of a difference but for your benefit lets compare actual land in Contiguous United States (less hawaii & alaska) vs England. 7.6 million sqm vs 0.13 million sqm that's almost 60 times the area vs nearly 6 times the population (300 million vs 53 million).

I have l;ived somewhere like that skipped, I don't think people realise what a negative effect second hjome owners have on local economies (and now I will get loads of replies saying it helps it, okkkk)

It doesn't help at all. Where I live, some villages are almost half second home ownership. People who come down with bootloads of food from their local Waitrose and contribute bugger all to local life. And yet they are so self righteous and defensive when questioned. If you want a holiday in a pretty area, rent a cottage for a week or two like everyone else.

Actually there's lots of empty land in the UK too, it's just that it's expensive or impossible to build on it, because of planning regulations.

Only 2% of England is built-up. www.bbc.co.uk/news/uk-18623096

Despite this we build smaller homes (800 sq ft average) than say Germany (average new dwelling size 1200 sq ft), which has a similar population density, or even Japan (1400 sq ft), which has a higher population density than ours.

Quality of life is a complex issue, but small houses and lots of unused land are not my idea of good sense.

Unfortunately we have suffered historically unprecedented levels of immigration, loose monetary controls, and no solution for this is in sight.

I think people will adapt and live in smaller houses and flats, share more, with friends, siblings, parents.

HesterShaw Thu 18-Apr-13 12:36:27
It doesn't help at all. Where I live, some villages are almost half second home ownership. People who come down with bootloads of food from their local Waitrose and contribute bugger all to local life. And yet they are so self righteous and defensive when questioned. If you want a holiday in a pretty area, rent a cottage for a week or two like everyone else.

exactly and that would help the local economy

Of course! No brainer!

But these people are too speshul to share.

:o

I once had to listen to one braying about why didn't council close off a one way street of a weekend as it made walking down the pavements too difficult for them, them being second homers. Not sure how he thought people would access their houses or how they coped in the week

And there was that incident in Cornwall where the fishermen wanted a permanent jetty installed to make landing their catches 100 times quicker and easier and the second homers formed an alliance and blocked it, using legal challenges they could afford, the crux if their protest being it would change their view. They were so utterly convinced of the fact that their wishes trumped the local people's. They seemed perplexed that anyone should think differently.

Indeed: www.bbc.co.uk/learningzone/clips/conflict-between-local-people-and-second-home-owners-in-cornwall/7239.html

Of course such objections are hardly limited to second home owners. Those who own home at all fight tooth and nail to prevent new construction that would allow people to buy their own home.

We received a letter from the a neighbouring road saying that a planning application had been put in for two houses on an empty plot, and that we must object otherwise the place would change in character completely, as if entire roads of 1930s detached houses would be changed in flats as a result. Bollocks, no objection here, build away.

I hope they don't build any more. Keep the supply down, keeps the prices and the rents up. This makes investing in property worthwhile.

Fuck the people though, eh?

Why not devalue all investments then, see how the people who remain in the UK get on then...

We're talking about homes for people here. Places to live. Security. Comfort.

What are you talking about?