Discrepancy between social housing rents verses private sector rents - how is this legal/fair?

[floffy]

I cannot understand how the discrepancy between the cost of social rents versus private rents is not breaching some kind of equality/discrimination/human rights laws .

My neighbours live in an identical sized property to ours, they have the same number of kids with no disabilities and roughly the same income as our household, yet they pay 1/3rd (or less) of what we pay and have a secure tenancy, whereas we have to always wonder whether our landlord will extend past 6 months. How can this possibly be legal or fair?

All HB is doing is keeping rents artificially high.

Imagine if HB was abolished, people wouldn't be able to pay inflated rents, landlords would have to reduce the rent that they charge just so that they could keep their properties inhabited.

The only people who could afford to charge over market rates would be landlords with zero debt on their property, while they exist they possible are in the minority.

The problem is the interim and the possibility that people would be evicted.

"Nobody should have to sell their home to pay care fees."

Why not?

If you're moving into a care home you don't need the home you're moving out of.

Do you really think public money should be used to subsidise large inheritances for the children of homeowners?

Beezaaaaarre

I agree with not kicking an elderly woman out of her home to put a family in it.

@tether well you have insinuated that people have not suggested a broad range of views, and that those that have been expressed are not valid.

What do you mean?

If net migration is running at £250 00 per year (as it has been doing so for at least the past decade), then it is disingenuous to claim that the increase in population is not having some effect on the housing shortage. That is at least an extra 2.5 million people who have to live somewhere.

And as for rent control: "Economists don?t spend much time debating the issues they agree on, and to them, rent control is about as dead an issue as the earth revolving around the sun. In 1992, 93% of American and Canadian economists surveyed agreed with the statement ?A ceiling on rents reduces the quantity and quality of housing available.? Opposition to rent control among economists spans the political spectrum from Milton Friedman and Walter Block to leftist Nobel Laureates Gunnar Myrdal and Paul Krugman. In fact, it was the socialist Swedish economist Assar Lindbeck who famously said, ?In many cases rent control appears to be the most efficient technique presently known to destroy a city?except for bombing it.""

marketurbanism.com/2009/03/19/undead-ideas-rent-control/

A real example:

Our rent is £650 pcm. The house we are in is cheap for the area. The typical rent for a house of our size is £850 pcm. We have been assessed by the Council OT and our house is unsuitable for DD1 (it has no downstairs toilet and she struggles with stairs due to her brain condition).

DH has a low paying job. Or rather, his two jobs are above NMW but the combined hours are only 27 per week, which leads to a poor salary. He has to have this sort of job, because he can compress his hours in the school holidays so that he can assist with DD1's care. If he worked full-time he wouldn't be able to do that and it puts the other children at risk.

As a result of his low wage and our family circumstances, the LA makes up the shortfall in our rent. We pay approximately 1/3, they pay the remaining 2/3.

When we move, our house will be bigger (although still 3 bedrooms - it's not sleeping space that we are short on, it's living space and toilet location) but the rent will be about 2/3 of the rent we pay now, probably half of 'average rent' for the size of the property.

When we move, we will then pay 1/2 of our rent and the LA will pay the other 1/2 (although they'll be paying themselves).

Overall, by having us in social housing, the council will save £200 per month.

Lougle: I see what you are saying, but I think you are over-simplifying the costs aspect.

Fair enough, your rent will fall and so the sum paid out in HB will fall, too. But there is a cost in providing social housing in the first place that you haven't factored in - the cost of the land, of building a house and of maintenance. And if the council is letting out social housing at below the market rent then that is also an indirect subsidy. In other words, if the open market rent for your new home would be, say, £800 and you are charged only £500 then the local authority is, in effect (if not in fact), sacrificing £300 per month of rental income.

Exactly brad.

If the house is worth £800 a month and you are personally paying £300 a month, then right now the government as a whole are subsidising you by £500/month.

If you later earn much more money and so receive less or no housing benefit, but the "rent" on the council house is fixed at £500 a month, then they will still be subsidising you by £300 a month. You would find it very hard to move out because you would be used to paying this lower amount.

If, instead, council houses were charged at market rent, but housing benefit was enough to cover market rent, then right now you would still pay £300 and they would still be subsidising you by £500.

As your income goes up your housing benefit would go down, so you would gradually (if your income continued to increase) get to the point where you were not being subsidised at all and you would be paying the full £800. You would then find it very easy to move house if you wanted, and there would be no worry of "what if our income goes down again?" as there is now.

Trills, it's a little different if you are in an adapted house - no matter how much you fiddle with the rent it won't make it easier to move at the end of the day as you still need the adaptations and LL that would allow this are few and far between, there is also no point in spending £1000's on adapting a property without an assured tenancy, it makes little sense to move someone out only to have to find a property that can be adapted every couple of years.

Absolutely, Trickle. We were very fortunate with our current house, because my Uncle is a landlord, so although a relative, we could demonstrate that he has a portfolio of properties, so therefore qualified for HB despite him being a (declared) relative.

However, even though he is very flexible and we were allowed to do anything with the property, there comes a point when you have adapted as much as the property can be adapted and it still doesn't meet the needs of your child.

The market rent isn't what private landlords rent houses for. That is an overinflated rate. The council housing is a realistic rental value.

WRT the over-simplification, I disagree.

Currently - rent £650, LHA £450, we pay £200.

New house - rent £450, LHA £250 we pay £200.

The LHA is council money, and the rent is going to the council. Therefore, the LHA is reduced by £200 but also goes back to the council and we pay the council £200 rather than my uncle.

The council goes from paying out £450 to receiving £200 (the LHA becomes cost-neutral..they are paying themselves so no gain and no loss).

Yes, they have costs associated with the house, but they would have that with whoever was living there.

"The market rent isn't what private landlords rent houses for. That is an overinflated rate. The council housing is a realistic rental value."

The market rate is whatever people would be prepared to pay if the house were on the open market. You may think the house is only "worth" £500/month, but if similar houses are going for £850, then that is the market rate. (Incidently, that rate seems very cheap compared to what it would be in many parts of the country e.g. the South East).

What you don't seem to grasp is the indirect costs associated with your subsidised rent. Let's say that, hypothetically, the council could let out a house like yours for £800 on the open market (assuming that is the going rate for 3-beds in yor area). By charging only £500 then you have an invisible subsidy of £300/month.

"The council goes from paying out £450 to receiving £200 (the LHA becomes cost-neutral..they are paying themselves so no gain and no loss)."
Do you seriously think there is no cost involved in building and maintaining houses? Let alone the opportunity cost of the lost rental icome by renting out art below market rate.

They require subsidy to build but eventually the debt to government will be paid off. Then the below market rents become not for profit rather than subsidised and the money can be channelled into maintenance and even building more homes. In the long term it is the cheaper option.

redbrickblog.wordpress.com/2011/05/27/is-social-housing-welfare-2/

This is a good article on this issue.

Why don't people in social housing pay proportionately for their homes, so if your income is £1000 a month you pay £100, if it happens to increase to £3000 then you pay £300 etc

What difference would it make to private renters if council tenants paid more rent?

Yes, I'll admit that adapted houses for specific disability-related requirements are different, but that's not what the majority of council houses are.

The difference it would make is not to private renters in general but to people who need help paying for their accommodation.

Currently there is a massive gap between people who are in a council house vs people who receive housing benefit but have to find a privately-rented place to live.

There is also the issue of people who needed council housing at one point in the past but are now earning perfectly decent wages. It is very hard for them to move to privately rented accommodation because they are used to paying much less. The council is not collecting as much income from these people as it could be because the "rent" on the house is £500 rather than the £800 it should be.

If council house rents were charged at market rate, and if housing benefit was actually enough to pay for renting a house, then this would balance out with the increased housing benefit required, and the difference between "renting from a private landlord" and "renting from the council" would be much diminished.

If we go back to the OP who is paying three times more than her neighbour for a comparable property.... it is doubly unfair on her because she is not only paying more rent, but she is also indirectly subsidising her neighbour's reduced rent through increased taxes and so on.

Council housing (or now more likely HA provision), is cheaper because it is heavily subsidised by the working and taxpaying people. Yes - including by those same private renters and their landlords. They pay the taxes - income, VAt, stamp duty, CGT, inheritance, etc- which are given to HAs to build their homes cheaply.) Basically, they are given a huge upfront building subsidy which accounts for about half the building costs. In addition, they benefit from taxpayer-backed HMG guaranteed borrowing ability which lowers their interest payable. Which allows them to charge rents at about half the market rate - and also about half that of next-door privately rented house.

I am fortunate enough to have a 2 bed HA house which I pay £377 pm for. Around here 2 bed houses are upwards of £650 a month! I only got this because my son is autistic and realistically my chances of earning enough to pay £650 a month now or in the future are slim.

I suspect this house is now paid off in terms of build cost so my rent goes into maintainence etc. the kitchen is dated but not due for upgrading until 2020. Even then. (if I am still living here) it won't be mine but will remain the property of the HA and continuing to make money for them hopefully.

bradbourne you DO realise that some of us council/HA tenants work and pay taxes too don't you. Even as a carer to a disabled child I manage that much.

Opiniatedmum - I read the article you linked to. "Economically illiterate" is how I would describe it.

Iamweasel - they DO. If you are unemployed, you will get all of your rent paid. If you are a Lone Parent, working for NMW, they look at your wages first, then count the fact that you are paying for childcare (has to be proven), and take the cost of that into account, and pay all of your rent. If you are a couple with ONE person in NMW work, and therefore have no childcare costs, they will pay a % of your rent, based on your income. If you are a couple with BOTH people in NMW, they will take your childcare into account, and STILL pay a % of your rent.

It is done on a sliding scale (at least in MY council area).

It still works out that the LA pay MORE HB to a private LL than they do to themselves.

It is NOT that social rents are too LOW - it is that private rents are too HIGH. There NEEDS to be some process whereby Private Rents are not PAYING the LL's mortgage. If the LL cannot manage to pay the mortgage on their BTL property from THEIR OWN EARNINGS FROM WORK, then they should have their mortgage refused. They are PROFITTING FROM SOMEONE ELSE'S WORK. Which is immoral IMO.

BTL LL's should NOT be allowed to charge ANYTHING MORE than the SOCIAL RENTS (on the old assured tenancies) IN THEIR AREA for their property. If this means that they cannot afford it - then they shouldn't BE BTL LL's. It would VERY quickly return the Housing market to where it SHOULD be, due to repossessions, from LL's that CAN'T afford to be LL's, rather than house prices being artificially over-inflated in this way.

There would then be available housing for everyone. Rather than some people having 2/3 or more, while others don't have one at all. And it needs to be collectively remembered that a house is a HOME, and everyone NEEDS a HOME. A house ISN'T a pension, or a way to provide for your loved ones. It is a HOME. It's not 'emotive language' for the sake of it - it is the TRUTH.

I'll illustrate with 4 families.

Remember we are talking about a house that at market rate would cost £800/month to rent, but currently the council rents out for £500/month.

Family 1
They have no income, the council has to completely provide for their accommodation costs.
Now: council puts them in a house and charges nothing: cost to council £800 (£500 housing benefit, £300 in lost earnings)
My scheme: they pay nothing, council gives them £800 housing benefit (enough to choose to rent a council house or a privately owned house)
Difference: nothing

Family 2
They have a small income, and have been lucky enough to get a council house
Now: they pay £200 rent, so the cost to the council is £600 (£300 housing benefit, £300 in lost earnings)
My scheme: they pay £200 rent, cost to the council is £600 (£600 housing benefit, they can choose to rent a council house or a privately-owned house)
Difference: nothing

Family 3
They have a small income, and have not been lucky enough to get a council house
Now: I have no idea what happens here - do they only get the same amount of housing benefit as Family 2? If so does that mean they only have £500 (their £200 plus £300 housing benefit) to try to find a house with? This seems just BAD
My scheme: they pay £200 rent, council gives them £600 housing benefit, they can afford to rent a council house or a privately-owned house just like Family 2
Difference: possibly costs £300 more under my scheme, depending on what actually happens now

Family 4
They got a council house a while ago and have a decent income so don't receive any housing benefit, but they have stayed in the house because it is cheap
Now: no housing benefit, they pay £500, cost to council is £300 in lost earnings. They is a strong disincentive to move because all the privately-owned houses cost a lot more. This family's accommodation costs are less than Family 3 even though they earn more
My scheme: no housing benefit - they pay £800 (this will have gone up gradually as their earnings increased so there was no shock) - cost to council - nothing. They can afford to rent from the council or privately
Difference: my scheme is £300 cheaper, which should pay for the possible extra housing benefit that Family 3 need

The logic:
1 - Anyone receiving housing benefit who does not have a council house should still be able (based on their assessed income) to rent a house that is as good as the council house that they would be awarded if there was one available.
2 - The subsidised-ness of your house (housing benefit, cheaper rent, whatever) should gradually decline so that once you are earning a decent wage there is no dramatic leap to be made, you have just gradually moved into paying the market rate

Bradbourne STILL has not said if he/she realises social tenants may well be working and paying taxes too.

Yes, yes, I know that most (if not all, if we take VAT into the equation) HA tenants are taxpayers. That's hardly a revelation.

So WHY bring in the fact that private tenants are paying taxes to subsidise social rents then? The fact is that there are not enough houses available but there would be if some people did not own 2/3/4 or more properties (many ex council places) and profiting nicely from them.

Nope! Wrong, and selling off social housing was Maggie's worst decision ever.

And in my street most of the tax which the tenants pay comes from WORK and NOT just VAT!

Bradbourne - Social Housing Tenants WORK TOO. Or are you under the misguided impression that all people who have council or HA homes are on Jobseekers allowance?

You DO realise that living in Social Housing is no barrier to work? If anything, it HELPS those who will only ever get NMW work to be able to AFFORD a roof over their head, or a HOME.

Someone on NMW is much more likely to be able to afford to pay 50% of £500 than they are 50% of £1,000. If you have a monthly income of £1,000, then paying 50% of that out on rent is going to make it impossible to cover your other BASIC living expenses.

Hence Social Housing. When NMW rises to the level that is able to pay Private Rents without recourse to Housing Benefit (or public funds) in order to be able to cover the cost of your HOME as well as your OTHER basic living expenses, then Social Housing Rents will no longer need to be any different to Private Rents.

The reason Social Housing was originally started? To ensure that EVERYONE had a HOME that they could afford the rent for AND their other basic living expenses. And I think that this is even more pertinent today, when wages compared to Housing costs are MORE disparate than they were when Social Housing was started.

The ONLY thing that raising Social Housing results in is MORE PUBLIC FUNDS BEING SPENT ON HOUSING BENEFIT. Which seems counter-intuitive to me when you look at the Government's stated aim for raising rents, as an austerity measure.

Which can only mean it is ideological, as it is going to RAISE EXPENDITURE, NOT CUT IT.