From Public Finance
Scottish Tories have condemned plans by the Holyrood government to end the right of all new tenants to buy their council or housing association homes. Chief whip David McLetchie described the decision, the first major change to the policy introduced by the Conservatives 25 years ago, as an 'act of naked political vandalism'.
He said: 'Nearly half a million homes have been bought thanks to a policy which has done more to make housing affordable for working people in Scotland than any other before or since (1). At the same time receipts from sales, now approaching £7bn (2), have enabled other rented homes to be modernised and new council houses to be built (3) for those who continued to rent in the past 25 years.'
1) Are houses in Scotland particularly cheap or affordable? Nope.
2) £7 billion sounds like a lot, but divide that by half a million and the average selling price was £14,000 each. If they'd retained those, they could have collected twice as much in rent in the interim and still own the housing!
NB, average net rents in social housing (after Housing & Council Tax Benefit) are about £30 a week x 52 weeks x 20 years x 500,000 homes = £16 billion, plus a tenth of those will now be let to Housing Benefit claimants, call that another £2 billion cost to the taxpayer, total cost to the taxpayer £18 billion, give or take a large margin of error.
3) How many homes can you build for £14,000? A third or a quarter of a home, maybe? If my estimate of £18 billion loss is correct, they could have afforded to build another 400,000 units of social housing in addition to the 500,000 they shouldn't have sold off in the first place.
From the point of view of the taxpayer, who committed the bigger "act of naked political vandalism"?
Put On Your Big Boy Pants, Maybe?
2 hours ago
8 comments:
I suppose they might say there were positive externalities.
Still this puts the supposed mistake of Gordon Brown's gold sale into perspective - if they've raised £7bn on £14,000, how much would they have if they still had the houses? Presumably at least another £7bn, probably far more.
Don't forget that the £7 billion came in over 25 years. If the rate was steady over that period, that means the average amount held over that time was £3.5 billion. At 5% interest, that would have brought in £175 million a year, or a further £4 billion.
In addition, net rents have presumably not been static over the last 25 years. So rents would not have been £16 billion over that time, but perhaps half that. (That's just a guess.)
AC, if you are going to add interest to the sales proceeds* then you'd have to add interest to the rental income as well. The rent would still be twice as much.
Look, if you were appointed as trustee-manager of somebody's housing, what's the bigger breach of trust:
a) To rent it out at below-market value or
b) Flog it off at below-market value?
If you choose (b) then I am happy to be appointed trustee-manager of all your assets and to do exactly that.
* Notwithstanding that they spunked it straight up the wall anyway, there's no capital there to earn interest.
Apart from the financial points you make, the whole thing was purely politically motivated in the first place, i.e. they would have done it even if there had been no receipts in the first place.
'From the point of view of the taxpayer' why should we be building council houses in the first place? Why get involved at all? Why not just pay the rent for people renting houses from private landlords?
B, yes of course. It was crass and hugely expensive vote-buying. I just don't get this idea that letting out property at below market value is EVIL but selling it off below Market Value is A Good Thing.
L, why? Because it costs next to nothing to build social housing and the rents more or less cover the cost. Renting from private landlords is hugely expensive and pushes up rents and property values generally.
"I just don't get this idea that letting out property at below market value is EVIL but selling it off below Market Value is A Good Thing"
Surely only if you are a Tory. If you are Labour it's the other way round. It depends on whose vote you are trying to buy, doesn't it?
B, selling off council houses is not just a Tory thing, it's a Home-Owner-Ist thing, which includes 'New' Labour as well.
As to whose side, how about 'the taxpayers' side'? If social housing costs nothing and housing benefit for private landlords (many of whom merely let out their ex-council home) is massively expensive, then the homes-for-votes affair was a massive, massive waste of money from the taxpayers' point of view.
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