to think people are being deliberately perverse about Council/HA..

[fideline]

....housing?

1. Social (council or HA) rents are not subsidized.

2)Social (council or HA) tenancies are not a form of welfare benefit.

It's not that hard to grasp is it?

There are other factors also.

A privately owned house with a sitting (regulated - cannot be evicted tenant) tenant, may typically worth just a third of a property of what a house with a modern assured shorthold tenancy would be worth.

This reflects the value of security of tenure. A council tenant acquires security of tenure. He has the right to leave at any time, but unlike a private tenant he cannot be evicted at the whim of a landlord.

Further, if you have a council tenancy then in the event of the council wishing to redevelop its land, you will be rehoused on a similarly secure basis. In the private sector if the landlord decides to knock your house down, then you may have just a month's notice, and it's tough shit.

The fact is that it is not reasonable to compare a council rent with the rent for the same house on the private rental market (and in many cases due to right to buy, you can get houses on the same estate on the private market), because in reality the fair market value of council rental is HIGHER than the equivalent, assured shorthold tenancy, turf-you-out-on-a-whim private tenancy. Secure tenancy is a massive deal.

The right to buy is another factor. This is a discount of up to 70% on the market value of your house. This is another subsidy accruing to council housing, and worth up to £100,000. As an example, if you stayed in a council flat for 5 years, you might pay £400 per month in rent, times 60 = £24,000. If you then exercised your right to buy, you would receive a £100,000 discount from the council, based on a council flat in London worth £200,000.

If the market rent for the same property is £600 per month, then a private rental sector tenant pays in the same time £36,000, as against negative £76,000 for the council tenant.

The difference between the two hypothetical tenants, one private and one public sector, is £112,000. One tenant is £36,000 worse off than when he started, the other £76,000 better off. For HA the discount, under Right to Acquire is 'only' up to £16,000.

Clearly it is utterly ridiculous to suggest that there is no subsidy to council/HA properties.

I'm assuming you know what the term no recourse to public funds applies to Calculators?...

rommell In reply to you and both the post I was originally replying to, still a moot point when 61% of HB (£14.7 billion) goes to social housing tenants, but 39% (£9.3 billion) goes to private landlords.

Some really interesting discussion on this thread.

fideline, I think it is reasonable to argue that an opportunity cost could be construed as a form of subsidy. Subsudies take various forms and I'm not sure it's fair to say it's unreasonable to characterise an opportunity cost as one of these forms.

For an example from the energy sector, see this quotation from the International Energy Agency website:

www.iea.org/publications/worldenergyoutlook/resources/energysubsidies/methodologyforcalculatingsubsidies/

"The subsidy, in this case, is the opportunity cost of pricing domestic energy below international market levels, i.e. the rent that could be recovered if consumers paid world prices, adjusting for differences in variables such as transportation costs."

Nursey - it's hardly a moot point if hb paid to social housing tenants goes back to the social housing provider but hb paid to private rental tenants lines the pockets of the landlord

Yes Aga secure tenure is an advantage/attraction of council housing. Nobody said it wasn't. That is very different from a rent subsidy however.

RTB discounts again are doubtless appreciated by those who qualify and are able to get a mortgage, but are not a rent subsidy.

The rents are not subsidized.

It is though because we aren't arguing about where the money goes, we're debating about subsidy, and who is being subsidised. In relation to what we were actually initially discussing the point is moot.

You stated the majority of working council house tenants will likely be covering the whole rent (even low income households) whilst private tenants on low incomes will be receiving housing benefit top ups as their rent will be significantly higher. So who is subsidised?

The stats say the majority of HB is going to social housing. So in your question to who is being subsidised.. well on the whole it's the council house tenants.

Nursey whether council rents charged are low/fair/reasonable because they are subsidized is a diff question from HB

Again I was replying to the post at 23:14:49.

Actually I stated working council house tenants specifically

Phatseu it is current 'market' rents are distorted, not social rents. It is more accurate theefore to think in terms of private tenants paying a premium due to a distortion of the market that has its root in the 1980s.

OK, If i re-posit it as Council rents are 'normal' and private tenants are paying a premium, is that less controversial?

I agree with that fideline - if I was to buy the house I'm in my mortgage payments would be similar to my current rent. If I was to rent privately my rent would be approx double what I currently pay as that is what the Lha is and that's what landlords here use to set their rent

I wonder how much profit the average landlord is actually making.

Depends when they bought Nursey

fideline, I think you could reasonably argue that, yes.

However, I don't think you could argue that it's categorically the only "correct" interpretation, based on evidence. I also think you could argue that an opportunity cost is a form if subsidy, with the same caveats.

I don't think it's black and white at all, and therefore after consideration of these points, if someone falls into the "considering social rents a form of subsidy" camp as opposed to "considering market rents unreasonably inflated" camp, it's not "perverse" - I can completely understand how someone could reasonably arrive at that view.

I suppose when I wrote the OP, I was thinking of some unpleasant indivs insisting that their taxes were subsidising other people homes.

That particular perversity (I am paying for you to have a cheap house) is just factually wrong.

(And an opportunity cost is different from a subsidy anyway)

No, the council rents are not 'normal', because they aren't consistent even for the same type of house between one HA or council and another.

It's very easy to find out what the rent for a 2-bedroom purpose-built flat in say Balham is, and indeed the government records this information for setting LHA rates. These private rates are far from arbitrary, reflecting the demand for housing, wages, prices in neighbouring areas, and, to an extent, interest rates and capital values

Council rents are subsidised, and this is well-established. Here is a discussion of this from Professor Hills, in 2001: eprints.lse.ac.uk/4231/1/Inclusion_or_exclusion(LSERO).pdf

If the government wants to know what, say, the mobile spectrum is worth, it puts it up for auction, and the price is discovered. If it wants to know what its social housing is worth, it can check the open market.

Clearly the rents which can require 10 year waits, or desperate circumstances, are not the normal rates, because they are not generally available.

If you get 25% off TVs if you work for Currys, then you might pay £600 for a TV sold on Amazon for £800. The normal price for that TV is £800. It is not £600. That price is not widely available, it is not the normal price, it is only available to a special group (in this case Currys enmployees).

Private rents are normal because they reflect actual demand. If there is no demand for a particular property, then the rental rates may be very low. For example, the normal rent for this £1.7 million manor house in Leicestershire is under £3,000 a month: www.rightmove.co.uk/property-for-sale/property-35063719.html www.rightmove.co.uk/property-to-rent/property-44502176.html, because there is no demand to rent that kind of home in Leicestershire, and that might struggle even at that low price (low relative to the cost), as it looks like they are advertising it months in advance to try and find a tenant.

Whereas in many parts of London, a modest house at £3,000 per month would go to let agreed in under a week.

Aga for these super-inflated market rents to occur, the market had to be extensively tampered with.

Besides, private rents are not 'market rents' as they are being subsidized by HB to the tune of billions a year. So the market is being propped up artificially.

fideline, there's no evidence for that.

Rents have risen in line with incomes (capital values are much more tampered with). That's what you would expect in a normal market.

Rental increases between January 2005 (start of the government's rental inflation figures) and May 2013 (latest data) in rental rates was only 8.6%, in total. The wider retail price inflation was 32%, so rental rates are actually cheaper in real terms now than 8 years ago.

Rental rates for places I personally rented 10 years ago are cheaper today.

There are increasing amounts of HB going to buy-to-let landlords, but my opinion is that they are overleveraged amateurs on the whole, and their presence amounts to a subsidy to rental rates, because they are willing to accept rents that do not cover their costs, on the speculative promise of capital price appreciation (which is another matter entirely, and certainly influences the demand for housing benefit, if people cannot afford to BUY homes, they will rent them).

We have negative real interest rates and excessive capital valuations on homes, as well as an oversized buy-to-let sector. Private rents are the most untampered with of these things.

I live in a council house. It is my home, not like some snobs think, a squat I should be evicted from when I get on the housing ladder. Not that I can now, too old to get a mortgage anyway.

I have brought up my kids well. Two have gone to uni and a third is going. My two younger kids are happy and well adjusted.

My husband works but on minimum wage. I would be homeless without this home as I couldn't afford a private rent. We struggle to pay this rent, as it is.

I've been on a thread on another site today where this issue came up and there really are people who think the bedroom tax is a good idea and making an more even playing field between private renters and those in HAs or council houses.

And saying all that I'll informed shit about it not being a home for life any more, yet they'd shit themselves if I turfed them out of their mortgaged ( I won't say owned as most home "owners" forget they own feck all til the day the last payment is paid) "homes".

My neighbour lost her much lived home of twenty years when bedroom tax came in. She couldn't keep up with the rent having been self employed for years and a single mum, but her son grew up and her work dried up. She lived that house.

My HA has nothing to do with the council. Neither does most of the social housing around here. Charities own them.

but council and RPs are not for profit private rent is for profit

so there is no subsidy.

there is huge demand for council RP homes - just not enough supply

Social Housing Rents are lower because LHAs are subject to certain rent controls which Private aren't. Not because they are 'considered to be subsidised'. The No recourse to public funds thing mentioned upfront is to do with non-eu migrants coming to live / stay here. It applies to many things not just HB unless you call things like Working Tax Credits subsidised too?

Too many people forget how they or their parents profited from RTB.

Now there IS a subsidy.

My parents bought their 4 bed council house at a massive discount because they had been council tenants for many years. When they sold it they made a pure profit based upon a subsidised sale originally.

We can talk around subsidies all day but fact is that many people are profiting from the lack of social housing.

If there was more social housing then the rents in the private sector would fall

Oh and anyone thinking that the so called bedroom tax is a great idea has obviously never had to struggle.