Economic Myths: Social housing in the UK is subsidised by the taxpayer

I always find it useful to look at the bigger picture and compare like with like.

Using data culled from various government sources, I have allocated government revenues from land, housing and wealth generally to households by tenure type. Some of the allocations are a bit arbitrary and you have to take into account that there are two layers of tax in the private rented non-claimant sector - taxes paid by tenants and taxes paid by landlords. Benefit spending is easier to allocate (having deducted about £2 billion Housing & Council Tax Benefit lost to fraud and error).

First, let's compare the cost to the taxpayer of claimants in the private rented sector with the overall cost of social housing. As we see, social housing is a break even; the rents paid by the one-third of tenants who are not claiming HB or CTB covers the full cost. The rent and Council Tax nominally demanded from claimant households is meaningless as it is equal and opposite to the HB and CTB nominally paid out. By and large, this is a purely paper exercise. It's like me giving my children £20 a week pocket money and also charging them £20 a week rent.

On the other hand, the cost to the taxpayer of paying for claimants in the private rented sector is enormous. The government spends more money on these 1.2 million households than it spends on 3.0 million claimants in social housing:


Secondly, we note that paying tenants in social housing pay about twice as much in tax (counting everything you pay to the government over and above the cost of services provided in return as tax) as owner-occupier households. They are not subsidised by the taxpayer; they are the ones effectively paying for the social housing for the other 3.0 million, and they don't get any tasty tax-free capital gains, interest rate subsidies and so on.


Thirdly, there is only one group here who is really losing out.

The 4.2 million households who are living rent free have nothing to complain about. Paying tenants in social housing have affordable rents and security of tenure, so they are doing OK. Owner-occupier households are only paying half as much tax as paying tenants in social housing, plus they are getting five times as much back in direct and indirect subsidies (interest rate subsidies, tax-free capital gains, no tax on rental values etc), so they are doing much better.

The ones who are being shafted are paying tenants in the private rented sector, on top of the £2,000 in housing and wealth taxes they pay each year, they pay on average £8,000 a year in rent, which exceeds the costs of providing that accommodation by £5,000 a year - so they are paying directly in cash for their landlords to scoop up £5,000 of national wealth each year for nothing in return.

Finally, the Homeys then wail about paying tenants in the social sector paying "below market rents". What the Homeys really mean is that these tenants shouldn't just pay for the bricks and mortar running costs (which they are clearly paying two or three times over), but they should also pay for the "location rent" on top of that. But when invited to do the same (i.e. to pay LVT on their own homes instead of paying taxes on their earned income), the Homeys politely decline.