to ask why so many people think social housing is subsidised?

[butwhythen22]

Not a TAAT but inspired by a recent mention on here - one of very, very many.

I live in a council flat, FWIW.

So, so often I hear people say that it’s subsidised (the implication that someone else is paying part of the cost on my behalf).

This is not correct. The building is owned outright by a housing corporation. It’s a non-profit organisation that charges enough in rent and service costs to cover all its overheads, which are presumably many. This rent is, however, substantially lower than what the flat would fetch on the open market.

However, nobody is paying that “shortfall” on my behalf. It’s simply that the housing corporation’s mission is to provide affordable housing, so they are not charging more than they need to in order to keep everything running well.

(I don’t even receive UC or rent subsidies or anything like that, not that there would be anything wrong with it if I did. I support myself from paid employment.)

Why don’t people get this?

You have to meet eligibility criteria to be able to apply for social housing. So it is not accessible to all. I think some people see that as unfair (not saying I do ... just I think that's maybe an issue!)

This is key. It is a hidden cost/saving. Also many HA do get govt help.

Economically speaking, they are subsidised. The difference between market rate and the HA rate is called the opportunity cost - i.e. it’s the money the council/HA is giving up by not renting it out for the most they can get. Any economist will tell you that an opportunity cost is equivalent to a cash subsidy, even if no money changes hands.

And any SW, philosopher or psychologist will tell you housing is a human right and not a commodity. I could charge people for breathing or to not punch them in the face. But the fact that I don't, doesn't mean I'm subsidising their breathing and punch-free-face.

Economists are not the people to talk to about housing. Housing used to be a means to the end of people being housed, being healthy, being productive, being safe. Now, because of the mass, international move to commodify housing, it's become a means of production of profit. BAD idea.

I'm in social housing and we say that private market and social housing seem to do the same thing. But we actually do something completely different. Our aim is to house people and we use money and houses to do it. Their aim is to make money and they use people and houses to do it. Completely different industry.

Presumably because it’s typically a fair bit cheaper than private rentals? At least that’s the case anywhere around here.

My df worked in council housing and he said the rent paid by tenants was paying off the mortgage taken out by the council to build the housing. This is why he thought the right to buy scheme was fair. Unfortunately councils didn't go on to build new homes so tenants buying just meant less social housing available.

Much rather my tax go to that than lining private landlords pockets with housing benefit....

But it is subsidised - as you say the council/HA make no profit - we live in a capitalist society that's based on assets being profitable - social housing is operating against that model. If the council operated like everyone else, social housing rents would double and the tax payer would profit. That lost profit is the subsidy. The wider public have assets they can neither use nor profit from.

Social housing rent is the realistic rent for the majority of lower earners and probably where all housing should be. The private rents are massively inflated and follow the mortgage housing market ups and downs.

The higher the private rent the more society ends up paying out in housing benefit because low earns can't afford the higher rents without help. That money lines the pockets of landlords not the tenants.

I have a council property. I'm a fairly low paid full time worker and I can afford my rent without the need for housing benefits. Even so, it still takes up a third of my wage. Most local private rents for three bed houses are more than my take home pay.

I think there’s a massive ideological divide, roughly along the lines of the haves/have-nots and basically a socialist/capitalist divide.

For some, housing is a human right which should be freed from market forces. Partly, it’s objectively true; partly is a mentality that first took root post-war and dug really deep roots in the 70s. Actual rent control was abolished by Thatcher in the 80s. For this group, the viewpoint is that anything market-related in housing is an abomination: hence words like “greedy landlords making profits”, “taxpayers are subsidising landlords to the tune of £10bnpa with housing benefits” etc. This is how it is to this group, people making money from the basic human right to shelter. From here, it’s a short hop, skip and ideological jump to “the government owes us affordable housing, we’re not rich people with property”.

On the other hand, you have people who through good fortune or perseverance or work or a combination of some/all, are able to house themselves without government assistance. Coming onto 75 years of the above housing policies and people in this group feel that if they’ve had to suffer through sundry recessions, repossessions, economic downturns etc to keep a roof over their heads, those who haven’t are having it easy. Some of these people, through compounded good luck/work/perseverence/combination have more than one property now for whom a property isn’t a home but a house. It’s an investment asset in a nation that centuries ago invented the notion of freehold and leasehold properties to ensure land stayed in the hands on the gentry. It’s there to exploit the have-nots, and these people are the haves doing the “exploiting”.

Many if not most people fall in the middle of the spectrum somewhere.

If that's true, you must have private schooling for everyone, medical care that you pay for at the point of delivery. You pay the Fire Brigade and Police if they show up. Pay as you enter museums and libraries.

Or do you assume that some services are a public good and are paid for through taxation without making a profit?

It's like people want to queue up to be ripped off. One of the most capitalist and money-oriented countries in the world also has one of the highest rates of government housing. Singapore. Brilliant model.

I agree.

I think people in private rent look over the fence and see that a HA property is cheaper. But they can't access this type of housing or buy their own at a cheaper monthly mortgage rate.

@butwhythen22 Why don’t people get this?

Probably because they are no where near eligible despite their relatively low income, and have to put up with the absolutely insane market rates - unlike some council tenants who have been occupying their tenancy for 10-30 years.
Why would they know how the system work when they have no chance to benefit from it?

Looking at your own comment and some of the tone death responses you are getting on this thread, it looks like some have no clue how the private market works either. So I guess everyone could educate themselves on the topic a little bit...

Yes but that doesn't mean it's subsidised.

Eg there are two three bedroom houses, House A and House B. House A owned by council, House B owned by landlord. Rent on House A £400 a month, rent on House B £1300 a month. Both sets of tenants are working parents. Household A pays £400 a month rent. Household B claims £600 towards rent via Universal Credit and pays another £700 rent from wages.

Who is being subsidised? Household A, Household B, the council or Household B's landlord?

Fast forward 30 years. Household A has paid £144,000 in rent. This covers the cost of building and maintaining the property and then some which the council invests in long term bonds to go towards further acquisitions. Household B has paid £252,000 in rent and the taxpayer has paid £216,000 in rent. The landlord has got the lot.

Who is being subsidised? Household A, Household B, the council or Household B's landlord?

I guess it's subsidised in the sense that the council can afford to offer it non commercially as it has other 'commercial' income streams. But I think when people say that it's because they can't get their head round how property isn't being used as a profit making asset.
I think social housing is brilliant. I'm lucky enough not to need it as my dad bought a property which me and mum live in, and I will inherit. I strongly disagree with people profiteering off of property. I'd actually choose to give my property to the council, in exchange for a life long tenancy in social housing in the same area. I know that's hardly the point, lol but I don't need such a big place and council could convert it or sell it to build more social, like reverse right to buy. But some people are jealous aren't they.

Of course they're subsidised. The houses weren't originally financed at a market rate of interest. Their construction was funded by the taxpayer. The current government body is called Homes England (similar bodies exist in the other home nations) - before that it was called The Housing Corporation - which funds new affordable housing. 'Affordable' is code for subsidised - it means the houses are partly or wholly funded by the taxpayer which represents a subsidy because the capital cost is lower than would be paid by a commercial company engaged in a similar enterprise.

I accept that not all housing associations charge below-market rents, but... any enterprise can undercut the competition when it doesn't have to account for the financing costs of its main capital assets.

This.
The whole thing is a racket which serves to preserve existing structures of power and wealth.

In that case private rentals are subsidised too because the correct market value is inflated by HB, a government handout. And any post-Council houses are subsidised in perpetuity, every time they are sold, because they started subsidised.

Added to which they could surely have properties under all sorts of operating agreements. Some might have been initially bought with preferential rates but some with mortgages. Meaning some HA tenants are 'subsidised' according to you and some aren't.

Go back far enough and most of the land was acquired for 'free' by murdering everyone.

I came on to say this!

It’s because you have to be ‘eligible’ for it and not everyone has that option therefore because of the situation you are in, you are in a category that is able to get very reduce rents compared to the market value, it’s almost like a charity

But what is the "market rate" in the example I gave above? What is the "true" rent for a three bedroom house? £400? £1300? £600? There is no magic figure.

Because, unlike private landlords, social landlords are not in it for the profit. It's cheaper because they are not profiting from their tenants.

For this group, the viewpoint is that anything market-related in housing is an abomination: hence words like “greedy landlords making profits”, “taxpayers are subsidising landlords to the tune of £10bnpa with housing benefits” etc

Maybe some people do think like this. For me, the standout question is whether it's a good use of the £70 billion it's going to cost us over the next five years.

I agree. People know it’s lower rent but just choose the wrong word to describe it, not sure why it’s an issue.

I think some people don't understand what "subsidised" means, and think it just means "cheaper". So even they vaguely understand the situation with HAs, they use the word subsidised incorrectly. Which then gets used by others who don't understand how it works, and believe it to be actually subsidised.

My HA rent is £750 and I pay it all. The same house on my my road privately would be £1800 minimum. I would have to claim housing benefit to afford it.