Thursday, 24 June 2010

"Cap on housing benefit will export poverty to outer London"

I was busy seething with rage over the VAT hike in the Budget, so I haven't got round to looking at the welfare bits in detail* yet.

Capping Housing Benefit seems like A Good Thing to me, as it is merely a subsidy to private landlords (many of whom 'own' ex-council houses that the self-same Conservative Party started flogging off cheap when they were last in power) etc. As I've said before, it's far cheaper building more council houses than doing it their way (something else that is unlikely to happen). So for them to now start whining about the cost of Housing Benefit is a bit rich.

The £400 per week cap seemed a bit 'plucked out of the air'**, but a few minutes ago it struck me that my wife and I 'only' pay £390 a week for a slightly dilapidated four-bed house with a large (but idiosyncratic) garden on a nice street in a nice part of Outer London, so if you ask me, £400 is way too high, and £300 ought to cover it. Maybe £200 or even £100 in some parts of the country.

What's nice is that the main groups of rent-seekers i.e. the claimants themselves, the private landlords milking the system (and presumably, indirectly the banks who lend the money to said private landlords) and the bleeding heart liberals have come together to oppose the cap, which makes me think that it is A Very Good Thing Indeed. There's an undertone in that article that the NIMBYs in Outer London don't want a load of Housing Benefit claimants dumped on their doorstep, so that's another group of rent-seekers whose noses will be put out of joint***. Most excellent!

* It strikes me that freezing Child Benefit while hiking the savagely means test Child Tax Credits to 'protect the most vulnerable' is a huge step in the wrong direction; and if they are going to means-test CTC down to £nil at much lower income levels, that means-testing will be even more savage.

This makes a mockery of George Osborne's claim elsewhere in the Budget speech that they were going to try and reduce marginal withdrawal rates. The correct course of action would be to increase the flat-rate and universal Child Benefit and reduce Child Tax Credits accordingly (or scrap CTC entirely, AFAIAC. In fact, they might as well scrap Working Tax Credits as well and use the 'saving' to increase the personal allowance by a couple of thousand pounds).

** Maybe, seeing as MPs live in a rarified world where you can quite legitimately claim over £20,000 for your second home, let alone the main one where you family lives, maybe they think this is normal? Maybe they just knocked off Council Tax and divided by 52 weeks?

*** I suppose somewhere there must exist a Guardian journalist who lives in a leafy suburb in Outer London, is a NIMBY (obviously), and who owns a load of ex-council flats in central London for which some council or other is paying him or her a shedload in rent. He or she must be pretty miffed :-)


Macheath said...

Maybe £200 or even £100 in some parts of the country.

But not the unemployment-ridden South coast, I'd bet. Many years ago, I worked briefly in the Housing Benefit dept of a seaside council.

The claimaints were applying for truly eye-watering sums in rent - holiday rentals pushed the market upwards and landlords were charging the maximum summer rate even for long-term tenants in winter.

There's something deeply depressing about seeing vast cheques being despatched to the owners of run-down clifftop caravan parks, some of which never saw a tourist from one year-end to the next.

Anonymous said...

Inner London Councils already "export" some of their homeless they are obliged to house to outer London boroughs.
While I can't disagree with your and Macheath's view that the limit is a squeeze on landlords rather than, I do think there has been a failure of nerve to make the limit regional, i.e where £100 per week is sufficient make £100 the limit, and perhaps be more generous in inner London.
The benefit aside, the limit does nothing to address the costs of the inefficient way some Local Authorities administer the HB.

AntiCitizenOne said...

Or just scrap reproduction rewards.

Rational Anarchist said...

Not sure why we should have more generous allowances in some places than other. If adequate housing can be had for £150 a week in some areas why should we pay a lot more than that to house people in other areas. It's more efficient to move them to where we can house them for less.

If they want to live in the more expensive area, they can pay.

same anonymous said...

If they want to live in the more expensive area, they can pay.

So someone who loses their job in Islington, where they've lived all their lives, and where all their friends and family live should move to Carlisle?

This idea was tried out with asylum seekers, the great guinea pigs for welfare reform. They were packed off to Sunderland from London to save money. Many of them hitched back and slept rough.

Matthew said...

As far as I can work out, this cap was brought in because of headlines (or the actualite) about families with say 6 children having multi-bedroom housing in the London Borough of Westminister, and possibly Camden, Kensington & Chelsea. It won't have much impact anywhere else.

Having said that, the rents have to be relevant to the area, don't they?

Mark Wadsworth said...

McH, exactly. So why not just knock up more social housing for them, or worst case, have more static caravans?

AC1, would you only pay CD to adults? Why?

As to the 'London weighting' debate, in the long run, I agree with Rational Anarchist. If somebody 'loses their job in Islington' of course they wouldn't have to move to Carlisle, they can just move a bit further out of London. And people who live a bit further out can now afford to move a bit further in.

I commute into London three-quarters of an hour each way every day and I don't see that as a burden, I'm sure lots of people do a lot more than this. Why is it so terrible for an unemployed person to make a similar journey once or twice a week to visit their 'family and friends'?

Joseph Takagi said...

same anonymous,

So someone who loses their job in Islington, where they've lived all their lives, and where all their friends and family live should move to Carlisle?

Ummm... no. You can rent a 3 bed house in New Southgate for about £400/week. 7 miles from Islington, or 13 minute ride on a train, 20 minutes by car or you could walk it in a couple of hours. Hardly much of an inconvenience, is it?

Anonymous said...

Hmmm...£1600 a month. And that's the new 'capped' limit!

Not bad for people who don't even pay any tax is it?

Just when I think this coalition outfit couldn't sink any sinks a bit lower :))

Mark Wadsworth said...

JT, ta for back up.

Anon, this will turn out to be one of the few good things in the budget - the other 'cuts' are far too modest and they cutting the wrong things and not cutting the right things. And then they went and hiked the worst tax.

Lola said...

RE last paragraph. Isn't that Will Hutton?

Mark Wadsworth said...

L, yup.

Anonymous said...

As I've said before, it's far cheaper building more council houses than doing it their way (something else that is unlikely to happen)

I doubt this ~ I've never seen a comparison that includes all maintainance, pension costs, etc, etc. I would be amazed if the state could be less efficient in every single area than life apart from housing.

Capping Housing Benefit seems like A Good Thing to me, as it is merely a subsidy to private landlords (many of whom 'own' ex-council houses that the self-same Conservative Party started flogging off cheap when they were last in power) etc

The rip-off sell off aside, which I agree was wrong, they should have been sold at market rates, all benefits are a subsidy to one business or other (food shops, beer offs, dentists, doctors, whatever).

So, why not this.

Let the council charge whatever they like for their council houses. Localise housing benefit, but state that whatever the rate above was would be the maximum they are allowed to hand out for a like for like property. Prevent councils from building any houses themselves, or selling their existing ones (other than perhaps at open auctions), and insist that anyone can apply for a council house at the above rates on a first come first served basis.

Oh, nad as always, scrap planning laws.

Anonymous said...

Too right, Mark. How about this lovely house and it's a snip at just £1500 a month - well below the new ceiling!

Mark Wadsworth said...

HH, there are plenty of full-cost analyses, but commonsense tells us that the cash running costs, plus notional interest on the building minus notional capital appreciation are in the order of £2,500 to £5,000 a year per unit.

Of course councils should charge 'market rent' (i.e. 'as much as they can get') but similarly, they should keep increasing supply until the marginal extra rent they can collect for each additional unit is down to £2,500 to £5,000 per year (which pretty much everybody could afford, even without housing benefit).

Otherwise right-wing opponents of council housing think that market rules don't apply to council housing - of course they do!

There is demand for housing, including council housing, and in a free market, supply expands until the marginal extra income = marginal extra cost. There'd be no need for waiting lists or arbitrary rules on 'need'. And to bring in that commercial edge, why not employ proper letting agents who can keep five per cent of the rent as commission?

If 'private' developers are prepared to offer better quality/lower cost, then good luck to them - they have quite clearly failed miserably so far, haven't they? Because most property developers are not property developers at all, they are in fact land price speculators.

AC, that looks tasty. A bit of a commute for me though.

Anonymous said...

People can only be 'land price speculators' because of corporatist planning lasw. Scrap them, solve that. I would be greatful for a link to a full cost analysis that includes all costs, but if the market can solve this, the market can solve this. No need for council interferance at all. Scrap planning, and I'll happily bankrupt evil speculators by building decent houses for folks until the waiting lists are zero, as I suspect many smaller building firms would.

Having planning (allowing land speculators and land banking corporate developers to maximise profits by using the artificially low availability of land to increase cost for 'rich' folk) and then 'council houses' for poorer folk (more corpratism, where they give themselves planning permission for large estates, built by, you've guessed it, corporate big boys) is my idea of a frigging nightmare.

Which is unfortunately where we are today.

My idea above would encourage councils to loosen planning, as nobody would rent out at the artificially low council house rates and people would still need rented acomodation. But I recognise it isn't perfect.

Just scrap planning. Leave the rest to the market.

Mark Wadsworth said...

HH, true in part. See e.g. Houston.

But in the long run, liberalising planning laws would increase returns to land owners (think about it). And if you suggest this, the NIMBYs will wail about you wanting to concrete over the South East. And the Faux Libertarians will wail about 'their property rights' being infringed by garden grabbers etc.

The only way to place an economic disincentive on NIMBYism is Land Value Tax (which would of course place the financial burden of running the state on exactly those people who benefit most from its existence, and take the burden off the productive economy).

London Residential Properties said...

Capping housing benefit is fairer for low-income families and will reduce the massive burden on the taxpayer. Good information shared.
Nice sharing and keep posting more.