Saturday 23 February 2013

"Ability to pay"

*rant*

It strikes me that this is one of the most abused phrase in the whole debate about taxation and housing.

The dawn of social housing a century ago was based on the simple observation that the working man (or woman) was paying £1 rent, but that it only cost the landlord a few shillings to provide, the rest was pure profit/land rent. So the governments of the day decided that it would be better for social cohesion and so on (i.e. they didn't want a revolution) if they built social housing which you could rent for five shillings, this still made a modest profit for the government and the uncollected land rent stayed in the pockets of the working man for him to spent as he pleased.

So the whole rationale for social housing was not so much "ability to pay" but "leave the working man's earnings in his own pocket, don't let the landlords snaffle it". It's hard to disagree with that.

Fast forward a century to Home-Owner-Ism, there is a complete schism:

1) On the one hand, social housing is seen as incontrovertibly bad, something to be sold off or given away as fast as possible to whoever happens to be in it. Renting out social housing at "below market rents" (even though overall rents cover the cost of providing it, and the cost to the taxpayer is precisely fuck all divided by six) is evil, but selling it off for "below market value" is seen as a the ultimate act of benevolent liberation by any government.

2) On the other hand, when it comes to taxes on housing, such as Council Tax, or Heaven forfend, Mansion Tax or even Land Value Tax, the Homeys are up in arms. "But it doesn't relate to ability to pay!" they screech.

Well, here's a hot tip, if you can't afford the Council Tax, Mansion Tax or Land Value Tax, then get yourself on the waiting list for a council house.

Oh... the waiting lists are too long, it'll be years before you're allocated a home. Well what a surprise, it's because you Homeys have made sure that no social housing has been built for forty years and all the nicest stuff has been given away.

Grave, dug, lie in it.

*/rant*

15 comments:

Woodsy42 said...

The rational may have been cheaper housing but nowadays everything the government buys, builds or maintains costs vastly more than the private equivalent. A result of poor controls, waste and maximising profits for commercial 'partners' perhaps.

JuliaM said...

And there's also the fact that demand for social housing has risen as we are swamped by waves of immigration..

Mark Wadsworth said...

W42, well that's all propaganda.

If you actually look at actual figures in actual real life, social housing is a break even for the tax payer (even if you include running costs, housing benefit, council tax benefit).

But every tenant claiming Housing Benefit in the "private rented sector" costs the taxpayer about £6,000 a year.

And if you (as a tenant) have a choice between paying £163 private sector rent or £83 council rent, why would you slavishly choose the former? I don't get it.

The private sector is clearly overcharging by £80 a week. And the local council is undercutting the private sector by £80 week and still breaking even.

All of this strikes me as actual real life evidence that privately provided housing is vastly overpriced and that councils are doing a much better job (and it's not as if councils are doing a very good job, they are doing a sort-of-OK job and the private sector is a bunch of crooks and thieves).

JM, immigration is no excuse for treating your own people like shit, is it? I've heard this a thousand times "Oh, we can't let any more housing be built because all the immigrants would take it".

The Home-Owner-Ists love immigration because it gives them somebody else to blame and an excuse to do nothing. Plus cheap labour to drive wages down.

Lola said...

As far as I can see this is all about first principles. 1. Why does my land have value? Answer, because of the efforts of everybody else. (law and order to protect my enjoyment etc etc). So the huge profit margin enjoyed by landlords is pure wealth transfer from tenants to landlords, that is wealth transfer in excess of 'reasonable' profits. The trick is is how does the 'community' recapture these profits? Well LVT, obviously.

Now, I trust the state in anything about as far as you could spit a rat, so I do not really want the state or the council doing the providing.

But I think the universal application of LVT/CD would drive down the cost of housing for everyone - on average - which would make all housing 'social'. The current 'anti-social' bit are the windfall profits enjoyed by landlords.

What saddens me is that the proles (I am one as well) don't seem to see that the cost of government under the current tax settlement is simply rent. So paying a direct rent only 'tax' would be much better and more transparent.

Mark Wadsworth said...

L, council housing has an undeservedly bad reputation.

It's all about price and quality, the waiting lists are very long in some places, so clearly the low price more than compensates people for any actual or perceived lower quality as compared to privately provided housing.

But as you say, LVT comes to the same thing.

Anonymous said...

Actually council housing is generally much better built than privately built "homes".

There doesn't have to be a polarised argument here. I believe in privately owned housing including its land simply because people care more about their community and especially their house when they own it. But let's also build some new council housing too. We need to build a lot more to make housing generally cheaper instead of turning it into a nice little (big) earner for the banks.

Mark Wadsworth said...

AC: "people care more about their community and especially their house when they own it."

yes, I'm familiar with this argument, which is fine right up to the point where the right-to-buy family moves out and sells their ex-council house at a massive profit to a landlord and the cycle starts again.

mombers said...

Germany has much lower homeownership rates than here. More or less social cohesion?

Mark Wadsworth said...

AC, actually I withdraw my earlier remark and you are quite wrong.

My grandparents got a council house in mid-1930s, which was pretty luxurious by the standards of the day, they treated it as their own and looked after it very nicely. Sure, some of the houses on the estate looked like shit, they were occupied by people who didn't care.

But if you go round a private estate, there will be some houses that look like shit because the people don't care, or they are tenanted, or derelict or vacant etc.

I'm not aware that the % of homes in a shit state on council estates is any higher than the % on private estates.

Clearly, you have control for the type of person living there - it is meaningless to compare the house of an unemployed or low income person or pensioner with the home of a reasonably well off young family where Mum is fussy and Dad is good at DIY.

M, more of it.

Lola said...

MW. Yes, the building standards applied by council were often better than private developments, but that may be as much a function of high land prices as anything else. LVT should level the playing field and make developers compete on quality.

I agree the perception of low quality of council house is undeserved.

Bayard said...

"The private sector is clearly overcharging by £80 a week. And the local council is undercutting the private sector by £80 week and still breaking even."

This is because the whole housing benefit system is corruptly rigged so that private landlords can get away with charging the extra £80 a week. If HB was capped at the same rent as council tenents paid, the rents in the lower end of the private sector would fall to the same level as the social housing. If the council can make a modest profit on housing the poor, a private landlord should be able to make a slightly less modest profit, by being more efficient.

Mark Wadsworth said...

L, probably, but I don't really know about building standards. What I really don't like is the Tory myth that AC puts about that all you need to do to turn a family of council house slobs into saints is to sell them their house.

B, yes, cutting HB spending to social rent levels would be a good start.

Even better would be to cut HB levels to one-third of headline social rent levels - because social housing still breaks even, even though only one-third of the tenants pay those rents.

So if the private sector is so super efficient, it will have no problem breaking even, will it?

Bayard said...

What I find hard to believe is that no-one who is responsible for the continuance of the HB system has ever heard of the concept of positive feedback.

Mark Wadsworth said...

B, of course they know!

It's all part of the cunning plan "They own land, give them money" and if they don't own land, just give them land (right to buy) and then give them money (housing benefit), that feeds through into higher rents and house prices, and in the end it all goes to the banks as higher mortgage interest payments.

Bayard said...

Much though it would be satisfying to believe that it was all part of a deep-laid plot, I suppose it is far more likely that the current setup happened as a result of unconnected changes, e.g. RTB being prompted by political considerations initially ("breaking the Labour fiefdoms"), but then the bankers and the pols realised it all suited them so damn well that they want to keep things going like this for ever. One day, the Great Credit Bubble of the turn of the C21st will be seen as just another in a long line of Extraordinary Popular Delusions. Meanwhile we must live in interesting times.