To not understand how social housing is subsidised?

[Lighthouseturquoise]

I live in a housing association rented house.

My rent is £420 pcm, the house is valued at around £120,000. The house was built 15 years ago and was worth nowhere near £120,000 at that time and I doubt it cost near that to build.

I've lived here for 10 years so I've paid around £50,000 in rent. If I lived here for 25 years I'd have more than paid for the value of the house. Over 50 years the rent will have doubled the cost of the house.

In what way are these properties subsidised?

As others have said, it depends where you live. Social rent is determined by a formula and therefore has stayed the same (the formula not the value) for many, many years. Market rents go up and down around it.

The property itself was probably built using subsidy which I think might be what people actually mean when they say subsidised housing

Sparechange- I agree with you that it generally costs councils more to run the property than they receive in rent- the shortfall used to be made up by the housing revenue account (central government) therefore I agree with you in this sense it is subsidised.

Weirdly though, HA have to break even on their social housing business (as they are a private company and therefore don't have anywhere to get subsidy from) so it's hard to understand how they can (usually ) do it yet councils can't.

The reason SH is subsidised is because the difference between the rent charged and the market rent of a similar property in the private sector is forgone.

There is an "opportunity cost" to the council/HA of the amount they could get, were they to rent it out privately.

That extra money could have been put towards other services like building more homes, social care, doing up older properties etc. By charging lower rent they lose the chance to do this.

That is why it's "subsidised".

Just like if a mum and dad own a flat and let their child live in it, and only ask them to pay £500 a month instead of the £1000 they were getting when they rented it previously to Joe Bloggs. The mum and dad are now subsidising their DC by £500 a month because their asset is no longer bringing them in the market rate that it otherwise would. The DC pays £500 less than if they had to rent the flat next door privately.

It's very basic economics.

If you genuinely don't understand why SH rent is subsidised then Google "Opportunity Cost".

Link: en.m.wikipedia.org/wiki/Opportunity_cost

Aye you're missing that in many parts of the country SOcial rent is similar to private rent

I'm not missing that. It's not commonly the case though, in fact it's pretty rare. And those aren't the examples people are talking about and you know it.

Even if it was exactly the same rent, for the same property, SH is still a preferable option for the renter because of the security of the tenancy and the lack of rip-off fees that you need to pay to landlords and letting agents.

Which makes demand higher, which makes its price in the market higher, so...

Opportunity cost.

Subsidised.

Even in those rare cases.

"I'm not missing that. It's not commonly the case though, in fact it's pretty rare. And those aren't the examples people are talking about and you know it."

That's exactly what the OP is talking about- her rent would be similar privately.

It's certainly not rare at all. I can give you whole regions where it's the case (many parts of the East Midlands; many coastal and Medway areas of Kent; the Isle of Wight are just some)

Read my post again Three. I've explained that.

Even if there are vast swathes of the country where there is a parity on SH and private rent, SH tenancies are still more favourable. There are still benefits to them. Otherwise people wouldn't live in them, they'd rent privately. Those benefits that come with SH have a value.

Even if the benefit is something like not being able to afford the deposit on a private rent so you can't move, then that is an additional benefit that the SH property offers you.

Housing repairs is a carefully managed system - or at least it should be!!

My dad spent many years of his life lecturing, writing and helping councils operate and efficient & effective service; & I believe even after his retirement/death his work is still being used my many organisations.

Of course it goes wrong sometimes, everything does

But the tenancy is the 'subsidy' really the security offered has in the past been immense - however now different tenancies are being offered

You've not explained anything. You've banged on about opportunity cost (something which anyone who has done gcse business studies understands) and shown no knowledge at all of housing.

The fact that people prefer to live in social housing because of the additional legal protection that comes with it has nothing to do with subsidy.

some of the comments on here are just however I will out it down to not knowing about compliance.

HA/Council have to have annual gas service, electrical testing has to be done once every 5 years, property stock is done every 10 years, however if the kitchen/bathroom etc... is fit for purpose, they wont renew because fashion/decor has changed over the years! as it always does.

There also isn't the money to do this, HA rent is lower, because the repairs of the property gets done, I also agree that HA should not supply carpets etc... as a tax payer, I would rather see this money be put to other use, not to decorate a house.

sorry electrical testing has to be done once every 25 years that should say.

What do you mean as a tax payer? It's not your money!

The only way it could be is if the government are paying the rent via housing benefit

Electrical testing is once every 10 years. There is no rule about when you have to replace a kitchen bathroom or roof but this is led by how long the it's expected to last (usually 15 years kitchen/ bathroom)

As someone who used to rent privately I find the idea that privately rented houses would be in a better state of repair/decor quite funny. My last landlord was OK, and the house in a good state, the two places I was in before that were much the opposite and the LLs didn't care about anything but getting the rent.

Ho hum.

This thread seems to be going the same way as every other thread about this. People say "I don't understand why people say it's subsidised", people explain the concept, people get offended and come up with bizarre reasons why they don't think it is and ignore the economics.

There are none so blind as those who do not wish to see.

It is what it is, deny it if it makes you feel better.

Three who do you think own the property and the land it is on?

Yes electric testing is recommended it is done every 10 years, however it HAS to be done every 25 years. Most HA and Councils are way behind the 10 year mark, in fact the last meeting I was at, only 20% of the stock where up to date!

They just don't have the staffing, as it takes 5 hours per house to do electrical testing. think if your a large HA/Council and the government has cut funding, because that's exactly what happened this year , resulting in many redundancies and cut backs!

I understand opportunity cost from when I studied accounting as the cost from not being able to use finance because it's tied up in stock for example and you have lost the opportunity to use that money to invest elsewhere. What place does this concept have for the citizens of this country who need to be housed? Applying economic theory to basic human need sits very uneasily with me. This is why large companies should pay taxes to support the workers that work for them so they can you know, have a roof over their heads and eat. There is no doubt that cheap borrowing and no investment in social housing has compounded the issue resulting in the opinion that social housing is subsidised when in reality employers are paying less tax which does not support the workforce that are enabling them to generate wealth.

They're not subsidised Private Rent is just inflated. I rented a 3 bed house for £500pcm which in 2011 was average for my area, by the time I left the landlord wanted £650 - The house was still the same we'd had no improvements or repairs, we'd actually decorated it to a lovely standard.

Currently renting a 3 bed HA which is smaller than my old house and this is £405pcm

Ha ha ha. Well. I am finance director for a HA. There is nothing you can explain to me Aye, but maybe if you read and tried to understand you could learn that you are wrong.

Jamie- the HA own the land the property sits on

That's a bit of a backwards way of looking at it Knickers. I'd prefer companies paid their staff a wage that enabled them to be self-sufficient, rather than pay more in tax for the government to give it back to people once inefficiency and administration costs eat a huge chunk of it.

I don't think the state should have to house all citizens, I think people should be paid a fair wage that enables all citizens to house themselves, with the state helping those who can't. Two different perspectives, a bit chicken and egg perhaps.

Re opportunity cost, that's the accountancy way of looking at it but in economic terms it is more than purely a financial concept. Although even if you take it the way you do in financial terms, the HA/LA loses the opportunity of investing (the shortfall in rent) elsewhere. Because although it's "tied up in stock", that stock also generates a return. And that return is, in the majority of cases, less than it would be on the open market. So asking for a lower amount of rent means they have to forgo the income they could otherwise spend on building new homes/repairs/other services etc.

Threebedsemii- sorry you are wrong on your repairs schedule, since the decent homes standard there is a basic level all housing providers need to adhere too. I can guarantee you no HA would risk there gas compliance by being haphazard with annual gas services. Yes electrical testing may not be up to date but there also isn't a legal obligation to do so and for a point of reference my privately rented home costing £1475 per month hasn't had any sort of safety check in years!! Likewise a HA wouldn't let a property with a kitchen that's completely falling to bits as they will all go.through a voids standard, and no, I am not talking about the kitchen being old and dated in talking about it really not being fit for purpose and beyond repair.

People don't seem to understand HA are a business, some may have a charitable status but they run to make money to put back into the stock.

I'm not wrong at all. As above, I understand it better than you.

Decent homes is now outdated and most organisations met decent homes standard many years ago. It has no ongoing obligation. Most HAs exceed it anyway.

Gas safety absolutely must be done annually by law for any rented property and no HA would not adhere to this, absolutely.

Where i live the difference is huge our 3 bedroom maisonette is £650 a month compaired to £900 for a bedsit.

There is nothing you can explain to me Aye, but maybe if you read and tried to understand you could learn that you are wrong.

I'm not getting into a pissing contest with you Three. I'm not wrong. It's economics; which I'm pretty well versed in, as it happens.

If you charge less than the market price for a good or service, there is an opportunity cost to that.

I'm surprised that someone who claims to be an FD cannot get their head round that concept, but there you go.