"Who really gets government subsidised housing?"

A chap from the Chartered Institute of Housing has had a fine article published in The Guardian. Here's one of the key bits:

Those with no or only small mortgages also benefit from not being taxed on the value of their home (as used to happen through the old schedule A tax). This tax relief is now valued at over £11bn (1). Pooling these benefits and adding back in the stamp duty and inheritance tax of approximately £5bn that owners do pay, the net subsidy received is still a surprising £12bn per year.

Of course it's true that no government is likely to restore schedule A tax, but even disregarding it the outcome is that owners pay no net tax at all (council tax doesn't count as tenants pay it too). As Professor Steve Wilcox points out, the existence of these tax advantages means that house prices are far higher than they might otherwise be, benefitting existing owners at the expense of those struggling to enter the market.(2)

1) Wildly understated, it's more like £40 billion a year, assuming non-cash income from owner-occupation were taxed at the same rates as earned income. The biggest figure which the Home-Owner-Ists can pluck out of the air for the value of the subsidy to social housing is about £7 billion, being the difference between headline rents and 'below market rents', which may or may not be true, but that's the total value of rent savings accruing to four or five million households in social housing (a third of whom are pensioners, you can't possibly get more money out of them).

That £7 billion notional cost benefitting four or five million households pales into insignificance against the £7 billion actual cash cost of Housing Benefit paid to to a few hundred thousand private landlords who rent out (approx) one million dwellings to tenants on benefits. if we didn't pay this subsidy, then clearly rents in the private sector would fall accordingly and assuming social rents stayed the same, the £7 billion notional cost would also drop quite significantly.

Win-win!

2) This is what enables the Homeys to maintain the illusion that housing is not subsidised, it's because they/the government has organised things so that money automatically flows straight from private pockets into other private pockets, rather than the government openly taking that money in taxation and then paying it to the ultimate recipient.

Consider: if the government collects tax and gives it to owners of wind farms, that is clearly a subsidy. If the government tells the electricity companies that they have to pay money to owners of wind farms and the electricity companies add that cost to our electricity bills, I think we'd agree that is also a subsidy.

But what if the government just tells the electricity companies that they have to source at least ten per cent of their electricity from wind farms, no matter what they charge or what it costs? The extra income that the wind farm owners get by being able to charge pretty much what they like is a subsidy exactly like the first two cases; the fact that money goes from private pockets directly into other private pockets is irrelevant.

H/t Drewster at HPC.