To think some social housing rents should be tripled?

[LondonMan]

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?)

I have only skimmed the thread, so jumping in.

I agree with the op, SH rents should rise to market levels, HB should top up the difference when needed. There should also be a condition that any 'profit' must be reinvested building new SH.

As for all those people saying 'rents are too high in the private sector' how do you propose to change that? Rents in the private sector are not too high, they are the market value for a scarce resource, building more housing is the only thing that I can see that will change that. Also tenants should have more rights making BTL less appealing so that people might be able to buy the homes they can only afford to rent at the moment.

IMO the argument that HB pushes up private rents is nonsense considering most private LL won't even accept tenants claiming HB.

IMO the argument that HB pushes up private rents is nonsense considering most private LL won't even accept tenants claiming HB.

because the banks thell them they are not allowed. which imo should be legally challenged. sounds very fishy to me.

But what if the "fantasy pricing" is the marker rate? Current private rents are massively overinflated. The so-called "subsidised" rates are actually far nearer historical value. What you suggest doesn't work in a bubble economy where the market is actually overinflated rather than at fair value.

Kendodd your idea of market value is far too simplistic. Housing in this country is not a scarce resource, but it is an already mispriced resource. When markets are already malinvested market value is not fair value. Your mistake is to assume market value is always equal to fair value. This is a very simplistic (GSCE) (mis)understanding of market economics.

so then georgette tell us how housing is mispriced and what change would be required to achieve fair prices?

But sparkly those private developments are built by speculative builders for private buyers who can afford the mortgages. How are you going to replace them with low cost social housing? Out bid the builders? Compulsory purchase at a lower price than the builders will pay?

The only thing that putting SH rents to 'market' rents will do is make those who rent privately feel they are not getting a worse deal. It won't help people who are contributing to society but not earning a liveable wage, they will just have to claim HB which would prob not be enough for a part timer who would then again be better off claiming dole.

Like a poster said upthread we should look up and say not fair not down.

Our council is currently in the process of demolishing some 300 houses, (to add to the 600 they demolished in the area over 10 years ago) and they will be building some 150 houses over the next 2 years. Out of the 600 they demolished they have built only 100.

It is a start replacing old stock which is harder to repair and maintain but they are not building enough to replace the lost houses so where will the tenants go.

There is a lot to be done to rectify housing in this country and if someone has a good and decent idea lets hear it

I would say that the fact that £20 billion a year (and rising) of public money going to subsidise rents is a fair indication that rents are mispriced.

Also that the average home now costs 7x the average wage.

wallison I would say that the fact that £20 billion a year (and rising) of public money going to subsidise rents is a fair indication that rents are mispriced.

but with limited land and a rising population, prices to buy or rent a house are going to rise. and there is nothing any government can do to change that.

Also that the average home now costs 7x the average wage. so maybe the change is someone on an average salary does not buy a house but is a life long renter.

Fasterstronger by all objective economic metrics UK housing is overvalued both on prices and rents. Even the OECD suggests an overvaluation of over 30% (very conservative estimate).

We don't actually need to do anything. The population bulge in the current 50-70 age bracket will start selling their houses into the market in 10-15 years' time, and there are not enough people in the following generations to buy them all at current values given current wage levels, and prices will drop sharply. The secret about UK housing is not that there isn't enough housing. It is that it has been overconsumed by certain age groups and demographics. When those demographic trends go into reverse, the market will revert very sharply to historic values. Public policy should be smoothing this (as it should have prevented the bubble in the first place), but we have incompetent economic governance, so that isn't happening. Doesn't mean it won't correct though. That's also the reason why we won't end up with a nation of renters in 20 years' time. To put it bluntly: the rentiers are about to die off.

www.ons.gov.uk/ons/rel/npp/national-population-projections/2010-based-projections/sum-2010-based-national-population-projections.html

so the ONS say the population will increase up until at least 2035 - their figures are another 10 million by 2035.

but you say 'prices will drop sharply' by 2025-2030. how so?

the renters are about to die off. so what age is the average renter v. home owner?

where is your data?

also the ons figures show the rate of population growth increasing up until at least 2035.

not growth slowing.

Fasterstronger - migration is a red herring. Look instead at the population distribution and the amount and type of housing consumer at each level, compared to the wage distribution. Think of all those people in the 50-70 age bracket living in large family homes (an unprecedented situation historically as in previous generations retirees would consume less housing not more). Then look at the income and wealth levels of the upcoming generations and try to work out how prices will be sustained. Migration and the birth rate are red herrings, since the added population by both tend not to be at high income levels and are generally not able to sustain high prices (and there are various measures being put in place to constrain younger generations' income, eg paying large amounts for university; a large pensions and healthcare burden for the same age group who have overconsumed housing).

Put simply, we don't, and won't for some time if ever, be generating enough wealth in our economy to sustain older generations' expectations of pension, public care and housing wealth. Ain't gonna happen. Pretending we can import some more low-wage workers who will fund it all is a fantasy. What matters is the productive, income-generating part of the population, and that part is just about to have to start bearing a huge increase in pension and healthcare obligations on small wages. How are they going to support current housing prices? They're not.

My Mil's mortgage is £400 per month. She rents her house out at £1500 per month.
Pure greed,
Social housing rents need to stay low.

(To which, the message is: if you are a baby boomer relying on your house to fund your retirement, sell and downsize now rather than waiting until ten years' time).

georgette - can I ask if you are a home owner?

you seem very housepricecrash.

cooee thats disgusting

pure profiteering

my mum and dad have a rental property, its a 3 storey 3 bed terrace, really nice. i think the mortgage is paid off now, as they bought the house for about 14k in 2001.

and they only charge 420 a month. which is slightly lower than market rents in our area, it would be about 600 i reckon normally.

It doesn't surprise me cooee - I imagine they're not short of people who will pay it either. It amazes me how much people are willing to pay to rent.

We have a three-bed semi, large garden, garage which we rent out for £375 per month.

thats about the same as my council house ladybryan

good on you for charging a fair rent

you deserve brill tenants and i hope you always get them x

Lady it's not even a spot on house. It's a bog standard home.
She also buys cheap homes in Wales, gives them a lick of paint then rents them out as holiday lets.

Her friends do the same thing, it's wrong and she knows it but she doesn't care that she's pricing locals out of the market.

where I live, a two bed flat costs about £1600 a month. That is in a a pretty tatty area of East London. If I earned £35K, that would give me about £2K a month. leaving me £400 for council tax, water, utilities, food and all sundries. please tell me where that would make me a) too poor to be allowed to live there, and b) someone who needs to move to another area where rents are lower and lose my entire community, my son's school, my family.

OP you are talking such utter shit it is disgusting. bubble pricing is neither sustainable, economically, nor "fair" .

my prediction for the housing market is that it wont go up at the rates seen in the last few decades but that in the SE and London it will be a better investment in the long run than putting your money in the bank. I do think we will return to more of a north/south divide in housing with greater house price variation over the country. this will happen as we move to a sustainable benefits and pensions system.

I think more people will live in flats allowing rents and purchases prices to be relatively higher than they were in the past on a per square metre basis.

borrowing money will obviously be more expensive than in the past (when the risk was underpriced) so more people will become life long renters - or rent until they inherit. others will continue to be renters and LL as they can afford to buy a house in the wrong location or not of the correct size for their needs.

Ladybryan. Where are you? Around here you would be looking at £800 to £900!

Instead of dreaming up more hair-brained schemes to keep property prices so high (ie the packages guaranteeing buyers' deposits), wouldn't govt money be better spent building more council houses, allowing a crash and then paying off the excess for people consequently caught by negative equity?