Friday 13 January 2017

If this is a good idea, then employers will do it anyway.

From a recent Evening Standard:

Employers were today urged to offer loans to staff to cover their rental deposit as part of a campaign to help workers with soaring housing costs.

Mayor Sadiq Khan announced that all parts of the City Hall group would offer employees help with renting a flat and urged businesses across the capital to follow suit.

Many firms have reported that they are struggling to retain and attract the best talent as workers are increasingly priced out of the capital.

The campaign, Fifty Thousand Homes, calls on employers to pay all staff the London Living Wage and to offer housing advice and flexible working within six months of signing up.

They are also encouraged to offer help to buy through mortgage guarantees or loans, preferential lending terms for mortgages and to consider providing quality rental accommodation.


For an individual employer, it might be a good idea to thus steal a march on other employers and/or get away with paying lower wages in exchange for a larger bung up-front.

For example
- if you don't have enough cash to move to London and are offered a £40,000 job in London, you can't accept it.
- if another employer offers you £5,000 signing on loan to pay your rent deposit/two months rent in advance and a £30,000 salary, you can take it, but are then stuck with the £30,000 salary until you repay the £5,000 signing on loan (which will take you years). You can't move either because you have nowhere near enough money for another deposit/two months rent up front and don't dare losing your first deposit (which some honest landlords sometimes pay back a couple of months after you leave).

If all employers do this, then it will merely push up rents and house prices (and suck money out of the rest of the economy). Khan is firmly in the pocket of the developers and is as Home-Owner-Ist as they come, of course, which is why he loves this idea.

The added downside is that if employees owe their employers money, they are one step closer to being bonded slaves. I'm always very wary of employment-related accommodation, it's a bit of a trap.

14 comments:

Bayard said...

"The added downside is that if employees owe their employers money, they are one step closer to being bonded slaves."

I would have thought that this is probably the driving force behind the idea, along with the raising of rents/prices. All the rest is, of course, window dressing.

Mark Wadsworth said...

B, that's the advantage for an individual employer, but there is a significant first mover advantage - if all employers do it, the advantage for them cancels out and the landlords bank the rest.

Rich Tee said...

I had a recruiter from Amazon contact me recently asking if I was interested in working on Amazon TV. But I would have to move to London.

I didn't pursue it because I didn't want to move to London, even though they offered relocation expenses.

Pretty gutted really as I would have really liked to do it. If it had been anywhere else in the country I would have seriously considered it.

DBC Reed said...

In the past employers had to build suburbs and model villages to house their workers e.g. Swindon's GWR railway village, which also had health facilities later copied by the NHS : Northampton's Phippsville, a suburb for brewery workers.There was obviously an advantage in having workers to hand ,not living in the barbarous conditions that laissez faire conditions too often produced.
In providing council housing hospitals and health centres local authorities lifted a huge capital burden off firms which could then concentrate on making money.
Accommodation tied to employment may be a trap, but the glorious days of laissez faire when Herman Melville found a woman with a child living in a hole in the ground in Liverpool are not the alternative.

Mark Wadsworth said...

RT, why do Amazon want to be in London? (That's a rhetorical question)

DBC, yes, the paternalist Victorian employers built lovely model villages, all great stuff. But the workers could rent housing for a low price. That is quite different to getting into debt with your employer in order to pay a high rent. Quite different indeed.

Bayard said...

"but there is a significant first mover advantage"

I very much doubt Sadiq Khan thought up this one by himself. I suspect that there are employers who are already doing this and someone told him about them.

RT, why do Amazon want to be in London? (That's a rhetorical question)

Rhetorical question or not, why does an internet company who could be anywhere want to be in the most expensive location in the UK? Does it have anything to do with their policy of not paying corporation tax or dividends by the expedient of never making a profit?

DBC Reed said...

@MW As it says in the original these firms are helping new employees with the rent in order get staff who are being priced out otherwise. Would have thought it as well to encourage this tendency as they will soon tire of paying out so much rent money and will start some right wing moaning about property costs.
@B Why do so many firms cluster into London , calling in commuters every day when with wonders of e-mail there could be some "strategic dispersal" (Civil Defence term ) over the entire country? Like you I suspect some fiddle reinforced by self destructive snobbery.

Mark Wadsworth said...

DBC, B, partly snobbery and also because in the grander scheme of things, you have the largest catchment area for potential employees. It's called agglomeration.

For sure, London rents mean that most people in the country wouldn't move to London to accept a job (as RT explains), but it's easier to get people from the south east to work in London than it is to get the same number, quality of people to work anywhere else in the UK. Not because people in the south east are cleverer, there are just a heck of a lot more of them in a commutable area.

DBC, some more enlightened London employers have complained about the cost of renting. Far better to do that than to throw fuel on the fire by subbing rent deposits.

Rich Tee said...

I think there is prestige in being in London, which I think is what is meant here by snobbery ie. "We have to have a presence in London".

I would like to say that people knock Rupert Murdoch, but when Sky needed new software developers they opened a new office in Leeds where I live.

I have since seen adverts for software developers for Google and Amazon in Edinburgh/Glasgow so they do seem to have technical operations outside of London, I don't know if this is a new thing or not.

Bayard said...

"it's easier to get people from the south east to work in London than it is to get the same number, quality of people to work anywhere else in the UK."

There must come a point where this is no longer true: when the additional cost of being in London, in higher wages, higher rents, higher business rates is more than the additional money you have to pay to lure all those good people away from the south-east into the sticks.

DBC Reed said...

I would question the great supply of high grade workers in London. Purely from personal experience some clueless acquaintances of mine, born and bred in London, have had the pick of jobs there purely from being on the spot. Upper middle class gals and their male equivalents in the shires still move in with Uncle Bender in Bayswater until some posh job turns up.(When I was training to be a teacher in London I kept running into a stereotypical chinless wonder who was looking to get an entrée into advertising and, after being supported for a full year in some comfort, by the standards of trainee teachers, he did so).

L fairfax said...

Why not stop giving pro single mums housing in London, so there's enough for people who work here? I agree about bonded labour

Mark Wadsworth said...

RT, good to hear about Sky and Leeds. There's hope for us yet.

DBC "I would question the great supply of high grade workers in London. Purely from personal experience some clueless acquaintances of mine, born and bred in London, have had the pick of jobs there purely from being on the spot."

People born in London are not magically cleverer, but firstly there are simply far more people within commutable distance and secondly London is a migrant city. Half of people who finish uni anywhere in the UK move to London (or some such startling figure), so it is self-selection. Only people with above average earnings potential can above here, those with below average get pushed away.

LF, I'm not going to pick on the easy target of pro single mums, but I am a land value taxer, which would have the effect of pushing out people who aren't working, whether that's easy targets like pro single mums or hard targets like pensioners.

Bayard said...

"which would have the effect of pushing out people who aren't working, whether that's easy targets like pro single mums or hard targets like pensioners."

Not that that would do anything to the cost of renting: supply will always exceed demand in London because of geography and agglomeration effects. It might free up a bit of social housing though, unless, of course it's sold off instead.