From The Metro:
Millions of housing association tenants are being asked to forego an expected rent reduction to help avoid a shortfall of new properties.
The National Housing Federation (NHF) has warned that even a small drop in rental income could see thousands fewer new homes being built as services get squeezed. Rent rises for tenants are linked to inflation measured by September's retail price index (RPI). It is expected to fall to minus 1.7% for July and remain around that level for some time to come.
Ruth Davison, NHF campaign director, said the impact of a 2% reduction would cut the number of homes that could be built next year by 4,000 at a time when nearly five million people were waiting for council homes. "This is bad economics and bad politics," she told The Times...
Tuesday, 18 August 2009
Yeah, like that's going to happen ...
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6 comments:
Never mind rent reductions - repairs would be nice. One particular HA is now discovering what the words 'awkward', 'difficult' and 'bastard' really means!
Ruth Davison is witless. Deflation means price reductions theoughout an economy. The price of houses and their construction will fall as well as the rents so that the ratios remain broad;y neutral.
She needs spanking.
Steady on Lola!
Deflation or not, if these rents are well below market rents and there are millions on the waiting list, why not increase rents?
Also note that deflation does not apply everywhere, e.g. the basic state pension goes up by MAX(RPI,2.5%). I don't hear many calls for that to strictly follow RPI.
I have a vague theory that benefits set rents and hence rents paid by housing assoc tenants set rents in the wider economy. By observation, and no research, it looks as if LA and HA pay/charge high rents but since most tenants are on benefits there is no market as such. And no 'cost'. This then drives rents in the private sector. If rents are a function of capital values and domestic property landlords cannot enforce long leases then logically rents will fall with house prices and / or supply - taxation distortions ignored.
There is an oversupply of flats to let in my town but it is very difficult to negotiate rents down even though vacancy rates are high. Private, non benefit dependent tenants are competing with benefits receiving tenants where the LA/HA just pay out a bureaucratically calculated 'fair' rent. They appear to make no attempt to bargain down the rents.
WFW, best of luck with that.
Ed, either increase rents or scrap housing benefit for private tenants and build another million council houses (my comment 2 here.)
Lola, first comment, excellent point. Re your second comment, that is exactly what Rantin' Rab pointed out using real-life examples, it's not just vague economic theory.
D, the index linking is illusory; if they put up rents then the council or HA gets more money but it costs the DWP more in Housing Benefit!
MW. Re Rantin Rab. Well. Well. Don't need economics books to teach you something that is plain for all to see, if you apply a little thought.
My 'vague (personal) theory' will now be upgraded to fact.
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