Big number, small number, big number.

From The Daily Mail:

Nearly 40 per cent of council flats sold off at a discount in the last 35 years are now being rented out privately to tenants, a Freedom of Information request has revealed.

Responses by 91 councils show they have sold a combined 127,762 council flats and maisonettes since Right to Buy was introduced in 1980, the request by magazine Inside Housing has unearthed. However, of these, nearly 48,000 leaseholders are registered as living away from the ex-council property, which suggests they rent it out privately. This is 38 per cent of all those sold...

Pat Callaghan, cabinet member for housing in Labour-led Camden, told the magazine: 'Over the years, I have seen many of our estates become virtual honey pots for estate agents and landlords.'

Big number

Forty per cent is roughly what we already knew, and for a depressingly large amount of those, the local council is now paying 'market rate' Housing Benefit and the banks in turn will be collecting a large chunk of that in mortgage interest, so the whole thing is a massive waste of taxpayer's money and is a piss-poor way of increasing owner-occupation levels, which was the ostensible reason for doing this. It's not just a honeypot for estate agents and landlords, it is a massive freebie for the banks who couldn't earn anything from council housing but can now merrily lend ever larger amounts to enable ex-council homes to be bought and sold.

Small number

But hang about, 127,762 is a surprisingly small number, as one commenter points out, that's an average of less than 1 flat per local council per week for the last 35 years.

Big number

Yes, that's because only 91 councils responded out of about 300, and this survey only relates to ex-council flats and does not include ex-council houses. The total number of council homes sold under Right To Buy is of course more like 1.5 million.

So, just how inefficient is local authority housing administration?

I can't find national statistics, so I will use the figures provided by my local council, which I guess is a reasonably good guide to the average.

The accounts include two different profit and loss accounts for their council housing, on pages vi and 38; total income is around £34 million and real cash expenses are around £18 million, including employee costs of £3.7 million. So unless more than half their income is from Housing Benefit, that's a nice little profit for the taxpayer.

It doesn't say how many people work in their housing department, but let's guess each employee costs £30,000 a year, so that's 125 employees. Neither does it say how many units of housing they look after, but let's call it 7,000 (£34 million divided by £100 a week rent).

So that means it one council employee looks after fifty-six homes. That includes managing the waiting list and allocating vacant ones; sorting out the repairs; collecting the rent and council tax; and administering housing-related benefits etc.

Ho hum.
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How does that compare with the 'private' sector?

According to the ONS there are 422,000 estate and letting agents (construction is a quite separate category) and [as Mombers points out in the comments] around 1.5 million private landlords.

There are 1,285,000 people working in finance and insurance, let's assume that half of those working in finance and insurance are involved with mortgages and home insurance, this means that there are 3 million people making a living from/looking after 22 million or so privately owned homes.

That means on average, in the private sector, one worker looks after about seven homes.

Going by that simple measure, local authorities are eight times as efficient as the private sector.

Random conversation about Council Housing

A while ago (a year or two?) I was having a fag at the smoking shelter near where I work (in London) and struck up a conversation with a middle-aged bloke wearing a delivery driver/removal company-type uniform doing the same.

I asked him, out of the blue, whether his children (I gambled on them being in their teens or twenties) were struggling or would probably struggle to pay the rent/mortgage and he confirmed wholeheartedly that that they were/would.

I followed up by asking him whether he thought it might be a good idea to start building a load of council housing again, so that his children can simply get a council flat/house for £100 a week with no further hassle, the rest of their money would be theirs to keep, no big worries about being evicted if they lost their jobs etc.

Again, he confirmed that he thought the idea had a lot of merit and we chatted on in this vein for a couple of minutes.

As he was stubbing out his fag, he pointed out one possible drawback from his children's point of view: they'd never be able to make a windfall gain by selling a house for vastly more than they paid for it. Which sort of made a mockery of everything we'd agreed on in the previous few minutes.

The best taxes

are, as we know, the ones paid by other people.

Similarly with other state charges. So, while I was rebutting Merryn Somerset Webb, after she disappointingly came out with the old canard about council houses being subsidised, I wondered why all the envious who are so keen to means-test previously universal benefits have said nothing about charging for one of the biggest of them all, state education. Could it possibly be that they send their children to state schools?

Rainfall causes droughts - shock

Tim Worstall didn't fully understand that report explaining the possible causal link between increasing rates of owner-occupation and later increases in unemployment.

He highlights one possible explanation - that if a private tenant loses his job in one area and can only find work elsewhere, he is more willing to move to find a job. The report itself pours some cold water on this by pointing out that the unemployment rate is lower for owner-occupiers than for tenants (which in turn can be explained by the fact that if you have a mortgage and lose your job, you don't stay an owner-occupier for very long...)

Nonetheless, there is a lot of truth in his following assertions:

What's required is a large and fluid rental sector. Maybe the Labour left has the answer: carpet-bombing the country with “affordable” housing. Sadly, this really means creating local council and housing association housing. And that's an even more illiquid market than the owned-housing one.

I did once press a housing charity lady very hard on the question of how long it took to move from one subsidised house in one local council area to another in another. I had to press hard because I don't think she really wanted to reveal the answer: somewhere between two and five years seemed to be that time span.

Which he then uses to draw a completely incorrect conclusion:

So if home ownership increases the unemployment rate by reducing labour mobility, then council housing must do so even more.

1. We are agreed that labour mobility is good for employment and that renting rather than owning is good for labour mobility, so a "large and fluid rental sector" must be A Good Thing.

2. And we are agreed - on the facts - that the waiting list for council housing is very long. The fact that disproportionately many social housing tenants are unemployed is possibly misleading, as this is self-selection. If you are unemployable/unemployed, you are more likely to end up in a council house than as an owner-occupier.

3. And why is it so long? It is not because local housing officers are so woefully inefficient, it is because there is not enough of it, and once you've got a council house, you play safe and stay where you are rather than go through the Hell of trying to get another one somewhere else.

4. So if we built enough* council housing, the waiting list would be days or weeks rather than years. The sector would be "larger and more fluid"

5. Hey presto - problem sorted. Lower unemployment, lower rents (even in the private rental sector) and one in the eye for the Homeys!

So his closing argument is like saying that "rainfall causes droughts". It doesn't. It's lack of rainfall which causes droughts, I think you'll find.

* Social rents usually do not include an extra charge for location value which private landlords rather unethically demand, they are set just high enough to cover actual costs. But council housing is anathema to the Home-Owner-Ist élite because they can't earn any more from it. So supply is severely constrained for political reasons and is outstripped by demand.

So in this context, "enough" means that the quantity is increased to match demand and/or that rents for the more desirable council housing is increased to dislodge a few unemployable people in potentially high employment areas.

As long the rents actually received more than cover the running costs (which they very much do, even if you knock off the large number of tenants living for free), how is this a bad deal for anybody? If you turn up your nose at the thought of living on a council estate, so what, nobody's forcing you to apply for one.

"Biggest council rent increase in three years as four in 10 town halls refuse to freeze bills"

Spotted by Bob E in The Telegraph:

Council tenants are having to pay their biggest increase in rent for three years after four in 10 town halls turned their backs on Government cash to freeze bills.

Local Government secretary Eric Pickles has said town halls had a moral duty to freeze council rents for people struggling with rising household budgets. He set aside £450m over two years as part of the autumn statement package to help support the freeze.

But figures published today show that only 61 per cent of local authorities – 257 out of 421 – have are accepting cash from Whitehall to fund a rent freeze. The remainder have decided not to use the grant money, and instead of increased the rents for millions of low income tenants from the beginning of next month.

Surprisingly astute comment in The Daily Mail..

... under an article about selling off council housing at undervalue:

... & this is the reason why housing benefit has rocketed over the last decade, people who haven't being able to find cheap social housing end up in the private housing sector & pay MORE expensive rents, for smaller properties.

WHEN the person is earning a salary this problem means LESS growth in the economy, because extra money is being spent on accommodation & not in the shops etc*, but when we have a downturn not only have you got that issue, but government have to take on the burden of the increased housing costs, THAT THEY HELP TO CREATE!

Selling even more social housing off at a discount shows a complete disconnect to the problem. If all the people who live in private accommodation were living in affordable social housing, workers would have more money in their pockets to spend & If people became unemployed, housing benefit wouldn't rise out of control as it has.

John Smith, West Midlands, 1/3/2013, 11:34

* The Home-Owner-Ist counter-argument is that that person's landlord then spends the money in the shops. This merrily overlooks the fact that the landlord is not producing or providing anything - one way in which Home-Owner-Ism damages the economy is the fact that so many people are producing nothing but consuming more than everybody else, and so a load of other people are wasting their time trying to tap into that stream of rental income (we can't all be landlords).

The amount of wealth transferred from producers to non-producers each year by Home-Owner-Ism is approx. the same as the amount transferred by the welfare/pensions system. It's just than only a few hundred thousand people benefit from the former but over ten million people benefit from the latter.

One only has to say "Dame Shirley Porter" to see the mind numbing hypocrisy...

... says Bob E, who spotted this in The Telegraph:

Conservative councils [in central London] are planning to build hundreds of "middle-class" affordable homes for nurses and teachers in Britain's most expensive neighbourhoods...

Today they will submit their plan for a pilot scheme of 300 homes on a new "middle-class" estate to the Communities Secretary, Eric Pickles. The councils say many working families on average incomes struggle to afford homes in central London, where a typical family home costs £1 million.

Officials from Mr Pickles’s department are believed to have worked with the councils on their plans. The councils’ business case states: "Home-ownership is increasingly unaffordable except to households on very high incomes, and families on middle and lower incomes are being driven away from the area."

Being fair to Dame P, in the end, she did actually stump up £12 million personally "in settlement of the surcharge for her role in the homes for votes scandal", which was basically Conservative councils in central London (like the one she led) flogging off existing council housing at huge discounts to potential Conservative voters.

"Coalition breathes new life into rotting corpse"

From The Sun:

FORMER Conservative Prime Minister Margaret Thatcher’s right-to-buy policy changed the face of Britain – and gave millions of families the chance to pay much higher rents or claim Housing Benefit to rent ex-council homes from RTB landlords.

Now, three decades later, the coalition Government want to breathe new life into the rotting corpse of the Thatcher housing revolution.

Here, the Morbidly Obese One spells out how his plans will help "rent seekers" - David Cameron’s term for those who "want to be able to rest on their laurels and have the housing market make money for them".

He also vows to stop Labour councils taking credit for this lunacy.

MANY people’s greatest ambition is to own their own home, which is a excellent proof of how we have knocked any real ambition out of people. Young, hard-working families, people who accept they have no choice but to play by our rules. The triers and the strivers and those who put something in deserve to get something out will get nothing; the lucky few in social housing will be given a massive subsidy to get them hooked on the drug of rising land values. In reality, they'll just end up with bigger debts, but the banks will be happy at least.

Mrs Thatcher knew all about aspiration. And crushed it. Her right-to-buy revolution transformed us from a nation of owner-occupiers to a nation of Home-Owners-Ists.

By the end of the 1980s, more than a million extra people had a place on a council house waiting list to call their own. Yet in recent times, the dream of the next generation has been dashed. During 13 years of Labour rule the lowest rungs of the property ladder were simply sawn off as this once great country was sucked into a whirlpool of house-price driven debt.

They own land! Contracts shouldn't be binding on them!

From The Daily Mail:

As Bob Diamond climbs elegantly into his mink-lined coffin, I wonder if he might spare a thought for Edna Robson, who took out a £15,000 loan with Barclays Bank 14 years ago, and now discovers she owes a staggering and disgraceful £97,000.

She and her husband John had lived in their former council house for 40 years. They wanted a little money to take holidays together, and so went to Barclays for a loan — called a Shared Appreciation Mortgage (SAM). It was an insidious financial product that was on sale at the bank between 1996 and 1998, and was designed to allow home-owners to free up money from the equity in their properties.

The loan is paid back when the property is sold, and at that point you pay back not only the loan but also a proportion of the amount your home has risen in value. So if your house price rose sharply, the bank would demand a much larger sum in return than you borrowed.

At the time Edna took out the loan — when her house was valued at £65,000 — it was predicted prices would rise by five per cent a year. In fact it was far more — leaving Edna, and others like her, facing a massive bill when the time came to sell their houses.

The reason Barclays are claiming the money back now is that Edna, 88, is suffering from Alzheimer’s and needs to go into a home to be looked after. One of her children, Barry Taylor, of Chedgrave, Norfolk, contacted me to say he has been forced by Essex County Council to sell his mother’s three-bedroom semi — for £183,000 — to pay for her care. The council insists on the sale because Edna has more than £23,000 in assets, and thus those assests — as the law demands — must go towards her care.

As Barry told me: ‘No wonder Bob Diamond and Co earn such huge bonuses if they can exploit people like my mother with such schemes.’ Once Edna’s care bills were taken into account, the rest of the sale value of her home would have been the basis of her legacy to Barry and his two siblings. Yet around half that money went straight to the bank.

Hang about here.

Edna bought her council house at a massive discount, and probably paid less in mortgage repayments than the council rent would have been, so effectively it's cost her nothing. So that entire £183,000 is pure unearned windfall gain, or free gift from the taxpayer or the next generation (some poor bugger now has to pay off a £183,000 mortgage instead of getting an affordable council house).

Yes, the bigger sharks Barclays have collected more than half that windfall gain, but that was the deal; twenty years ago, how many people knew that house prices would treble, so at the time she signed up, it was probably a fair bargain.

And if her house were still valued at £65,000, so that Barclays are only repaid £15,000, would that somehow make it fairer? That's how spiteful the Homeys are, if they can't have it, then nobody else can have it either.

Spotter's badge: Robin Smith.

Fun Online Polls: Welfare reform and EU referenda

The turn out in last week's Fun Online Poll was 162. Multiple votes were allowed, so any measure that beat the 81-votes cut-off point deserves closer inspection:

Which of David Cameron's ill-informed and spiteful welfare reform proposals do you support?

1) Cap on Housing Benefit at £20,000 - 101 votes
2) Curbs on welfare payments for large families - 99 votes
3) Chuck higher earners out of council houses - 87 votes
4) Force claimants to do 'voluntary' work after two years - 80 votes
Benefit claimants to be forced to learn to read - 78 votes
Regional benefit levels - 73 votes
End Housing Benefit for under-25s - 63 votes
Incapacity Benefit claimants to 'take steps to improve their health' - 58 votes
5) None of the above - 34 votes

The problem is, that even where Cameron is right he is only half-right as he always misses the other half of the equation, for example:

1) Housing Benefit for private landlords is an awful waste of taxpayers' money, building social housing costs more or less nothing because the rents cover the running costs, so agreed on that - let's phase out Housing Benefit and spend the money on council housing instead. Cameron however wants to sell off the remaining council housing, knowing full well it will end up in the hands of private landlords who will then demand Housing Benefit as a risk free return on their 'investment'.

2) Agreed, it is silly that there is not a maximum number of children for which benefits can be claimed, but again, that is not how he meant it. The actual cost saving of capping it at (say) three children is minimal, what Cameron was doing was dog whistling for those died in the wool Tory voters who blame everything on 'single mothers'.

3) I violently disagree on chucking higher earners out of council housing, this is a symptom of just how engrained Home-Owner-Ism is in this country. Compare and contrast the following (please note the facts are exactly the same in each case, only one variable is changed. Any comments based on changing other variables will be ruled invalid):

a. Mr A, who snapped up his council house for a song a decade or two ago and has done well for himself since and earns a lot, maybe he sub-lets it, maybe he still lives there.

b. Mr B next done, for whatever reason didn't take advantage of right-to-buy, has continued paying the full rent demanded throughout, despite he has also done well for himself and earns a lot.

As between the two, is it not blindingly obvious that Mr A has received the far larger subsidy from the government and ultimately the taxpayer? The amount of money which Mr B will reimburse the taxpayer over his life is far, far greater than Mr A's modest contribution a decade or two ago. But the Homeys will solemnly declare that Mr A has invested wisely and taken a stake in society and deserves his unearned gains etc.

And how can Mr B be abusing the income tax payer? Mr B is the taxpayer! The extra income tax and NIC and other taxes he pays are (by definition) far more than what the average taxpayer pays, far in excess of the value of any notional subsidy he receives, and certainly far less than what any owner-occupier has received in subsidies over the past decade or two.

For sure, Mr B has received a subsidy compared to Mr C on the same income who rents privately - but this is because Mr C's landlord Mr D is receiving the highest subsidies of all.

4) The rest of the ideas are f-ing idiotic. You can't make people work who don't want to (it's cheaper to leave them in peace) and you certainly can't make people learn who don't want to (ditto), there are plenty of people who would really appreciate and benefit from English and maths lessons, why not offer it to them first?

Regional benefit levels is the most f-witted of all. Not only would the admin costs be enormous and would there be huge scope for fraud, but the real flaw is that this would have the equal and opposite effect of capping Housing Benefit! The war on under-25s is playing right into the YPP's hands, so we shouldn't really grumble about that.

5) Well done, you lot.
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So much to that tomfoolery.

This week's Fun Online Poll: do you take the Tory party's recent burblings about holding an In-Out Referendum on the EU in the slightest bit seriously?

Vote here or use the widget in the sidebar.

Home-Owner-Ists scale new heights of vindictiveness and hypocrisy.

From The Metro:

‘Privileged’ residents on salaries of between £60,000 and £100,000 will be targeted as housing minister Grant Shapps reforms the ‘lazy’ attitude on social housing.

He said: "For far too long, millions of people on waiting lists have watched helplessly as high-earning social tenants continue to occupy homes designed to help the most vulnerable. These high-income tenants are not only blocking homes that could benefit those in greater housing need, they’re also relying on poorer taxpayers to subsidise their lifestyle."

The average subsidy for such tenants is worth £3,600 a year, the Department of Communities and Local Government says. Mr Shapps added: "If they want to continue using this precious national resource, they will pay for the privilege."

They want to own land! Give them money!

From The Daily Mail:

Millions of council tenants will be helped to take up the right to buy their homes from today as David Cameron revives one of Margaret Thatcher’s most popular policies. Discounts of up to £75,000 will be offered – four times the current deal on offer in London and treble the discount for residents in the rest of the country.

Home ownership for tenants of council and housing association properties has fallen in the past two decades as the discounts on offer fell and house prices surged. Labour failed to embrace the policy during its 13 years in power and started to reduce the value of the deals. But from this month, two million tenants will benefit from a bigger discount.

Mr Cameron will today say he wants to help families who "play by the rules.... I want many more people to achieve the dream of home ownership. In the 1980s, Right to Buy helped millions of people living in council housing achieve their aspiration of owning their own home. This vital rung on the property ladder was all but removed. This Government is now putting it back by dramatically increasing the discount rates."

Banks will be rejoicing, because instead of that nice steady stream of rental income going to the council, it'll be going into their coffers as mortgage interest, of course, that's a bonus. Once the required period for occupation is up, local letting agents will be happy to have more homes to let out (few people buy them to live in); the lucky purchasers will be rejoicing because, because once they've 'moved up the ladder' they can get tenants in who will be getting their rents paid by the council (Housing Benefit) etc.

What's not to like?

Except for the fact we have magically turned a steady stream of income for the council into a steady stream of expenditure for the council? The whole idea is crazy, whether you're a proper left-winger (who sees council housing as a vital part of the safety net) or a proper right-winger (who believes in the government getting value for money), it only makes sense if you squint at it through the warped prism of Home-Owner-Ism.

Fun Online Polls: Superfoods and Superfoulups

I'm glad to see that nearly everybody else is as much in the dark on these as I am. The results to last week's Fun Online Poll are as follows:

Which is your favourite superfood?

Acai berries - 1%
Chia - 1%
Goji berries - 2%
Kombucha - 1%
Wheatgrass - 1%
Other, please specify - 18%
I've never of any heard of those, much less eaten one. - 75%

The most nominated superfood in the 'other' category was bacon (including Parma ham, same sort of principle). I have to agree with that.
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I normally start a new poll on a Monday, I'm a bit late this week because I wanted to see if there'd be any more Lib-Con superfoulups to add to this week's list, choose your favourite(s) Here or use the widget in the sidebar.

Grant Shapps doesn't do logic

From the BBC:

Plans to make it a criminal offence for council tenants to sub-let their homes are to be unveiled by the government. A consultation will also detail plans to force thousands of tenants earning £100,000 or more to pay market rates. An estimated 160,000 tenants sub-let their homes, which is not currently an offence...

Housing Minister Grant Shapps said: "For too long this country has turned a blind eye on the multi-billion pound problem of housing tenancy fraud and abuse. This year the coalition is determined to end that scandal. Why should someone on a six-figure income enjoy a fantastically subsidised council rent, whilst those in real need languish on the waiting list? And why is it so easy to get away with sub-letting your council house at market rent and simply pocketing up to £1,000 a week at taxpayers' expense?"

From Dash 24, two weeks earlier:

The housing minister Grant Shapps plans to increase the cap on discounts for council tenants to buy their homes to £50,000, while pledging to replace every sold home with a new affordable one. Mr Shapps said the restrictions on discounts over the past few years have made Right to Buy (RTB) meaningless in many parts of the country, with fewer than 3,700 sales last year compared to a peak of 84,000 less than 10 years ago...

This will mean, for example, that someone in the West Midlands who had been a tenant for eight years on an household income of £20,000 could buy their £90,000 flat with a discount of £50,000 compared to £26,000 previously - effectively doubling their discount. In London, a tenant for five years buying a flat worth £160,000 would also receive a discount of £50,000 - more than three times the previous cap of £16,000.

So, to recap...

- 160,000 tenants sub-letting their council houses and making a handsome profit (because council house rents are lower than market rents) is A National Scandal, but

- allowing (say) 84,000 tenants a year to lock in an extra £50,000 profit by allowing them to buy their council houses at undervalue, as well as 'up to £1,000 a week' rental income by subsequently renting them out is... what, exactly?

Or to turn that into a question, if subletting council houses at a profit of 'up to £1,000 a week' is being done 'at taxpayers' expense', is selling off council houses for a discount of 'up to £50,000' not also something being done 'at taxpayers' expense'?

Half wrong half right

From the BBC. This is the clearly wrong part:

David Cameron is to pledge to boost the "right to buy" scheme established by Margaret Thatcher in the 1980s. He will announce proposals to increase discounts offered to tenants in England who want to buy their council house...

This part seems right but isn't:

The government's aim is to build one new home - to be let at up to 80% of the market rent - for each property sold.

Selling off council housing for cheap is the easy part, but what are the chances that they won't get round to building any new stuff? Fairly high. In any event, it would make far more sense just to allow more new stuff to be built, and if people want to move out of council housing and buy themselves a new house, well great, that's a better result for all concerned.

Gordon Brown's gold-owning democracy

I've been emailed a link to this article, which reminds us that Brown decided to sell the bulk of the Bank of England's gold a while back, netting about £2.3 billion, and that had it been sold at today's prices, this would have netted about five times as much, so in theory, the taxpayer has made a 'loss' of £10 billion, or at least not made that amount of profit (which would by and large be just on paper if we just left it in the vaults).

Fair enough, Brown handled the sale badly by announcing it in advance, thus depressing the market price slightly, but I do wonder how many of those people who are whining now made the decision at the time to buy gold? And what is £10 billion in today's money? It's about five days' worth of public spending/waste, big deal.

Let's contrast that with the loss suffered by the taxpayer as a result of the council house sell-offs, which were deliberately and calculatingly far below market value. In round terms, let's call it two million units and a loss of £70,000 on each, that's a loss of £140 billion, so which you can add about £60 billion extra Housing Benefit paid to the owners of those units where the original purchaser had moved out, so the loss to the taxpayer is around £200 billion (big margin of error) i.e. twenty times as much as the notional loss on the gold sales, that's nearly three months' worth of public spending

Hmmm.

What this boils down to is that Brown made a huge mistake by presenting this as an economic decision, by which he sold the stuff at or close to market prices to private investors, rather than a political decision to create a "gold-owning democracy". Had he done a Thatcher and sold it at undervalue to a defined class of deserving UK investors, would people still be complaining like this? I know that I would - the fact I could kick myself for not having bought gold ten years ago (to match HM Treasury's sale thereof) is an entirely separate issue, but that was my decision.

Another day, another reckless throw of the dice (44)

From the BBC:

"A London council is to help families get on the housing ladder by offering tenants and first-time buyers £50,000 deposits. Wandsworth councillors will discuss plans to set up a special "deposit fund" to help low-income families...

The council is to lobby Government for the financial freedom to create a "deposit pool" funded from the sale of council housing and future development. Initially, interest-free deposits of up to £50,000 would be repaid back into the fund once the property was eventually sold."

I refuse to believe that a council could, collectively, be so stupid as to imagine that this will help those whom it is supposed to help and assume that this is downright corruption, i.e. maybe a lot of the councillors own buy-to-let flats in the area and they want to be able to sell them at a high a price as possible.

What this council cheerfully overlooks is that it is a f-ing council!

If the council gives somebody an interest-free loan, repayable when the home is sold, then it is effectively part-owner of that home but is not charging rent for it and is bearing a lot of the risk of the value falling. That's about the worst position you could be in.

Alternatively, for £50,000 they can build a whole flat or maybe a small house and own it outright. Sure, land is expensive round there, but it's actually only land with planning permission which is expensive. Land without planning permission is pretty cheap wherever it is. And the council is in charge of granting planning permission, so it can give itself planning permission for free. Problem solved.

Westminster Council adopts an idea from UKIP's Welfare Manifesto

From our Welfare Manifesto (2010 version, pdf)

6.5 UKIP therefore recommends that social rents be set at a single inclusive figure (rent plus Council Tax, net of notional Council Tax and Housing Benefit) calculated at around 20 per cent of each household’s gross income: This would ease the poverty trap for the most needy; social tenants on very low incomes would keep 49p for every £1 earned (assuming a flat tax rate of 31%) rather than 4.5p as at present.

It would also encourage households on higher incomes to move into the private rented sector or owner-occupation, as above a certain level of income, the social rent they are paying would be higher than a comparable rent in the private sector or the cost of a repayment mortgage. This may seem unfair, but it is exactly these households who will benefit most from UKIP’s proposal to double the tax-free personal allowance, so taking the two measures together, very few households will lose out.

The preceding paragraphs 6.1 to 6.4 are worth a read if you want to see the workings. I explained how the extra 'about 20%' could be collected with the minimum of administrative hassle by using K-codes for PAYE on my 'blog here (scroll down a bit to the section beginning "Here's my crash course in the existing PAYE system").

Lo and behold, from yesterday's Daily Mail*:

Conservative-led Westminster Council has asked Government for new powers to introduce a sliding scale which would link social housing rents to incomes. The move comes after the council found it had 2,200 social housing tenants earning more than £50,000-a-year, and more than 200 on over £100,000...

Many of those on £100,000 or more were paying rents of £97-a-week for a one bedroom flat, or £110-a-week for a two bedroom place, said Mrs Roe. She said a new formula should be applied which would see tenants paying 35 to 40 per cent of their net income on accomodation, the national average.

They say 35 to 40 per cent of their net income, we said 20 per cent of their gross income, which comes to the same thing in £-s-d, only 20 per cent of gross income is far easier to calculate.

From the point of view of the council, there must be a revenue maximising point; i.e. if they set the rate too low then they won't get much rental income and much longer waiting lists; if they set it set it too high then they'll discourage out of work and low earning tenants from earning more and you'll lose all your better earning tenants.

Sure, there may be some middle to higher earners who would end up paying above market rents on the place they're in in the short term, but - even if they don't move out - the advantages to them are:

a) The council will be more inclined to upgrade them if a nicer council house or flat becomes available, and

b) It's like unemployment protection insurance with a mortgage; you overpay while you are still working, but if you lose your job, take a pay cut or retire and draw your pension, then you get your money back.

c) It's got to be better than being turfed out entirely, as the Tory government has vaguely suggested, a strategy with pretty obvious unintended consequences...

d) The local council will then give preference to people on the waiting lists who have jobs, so you'll probably end up with nicer neighbours.

* Spotter's Badge, MBK.

This evening I shall be mostly watching...

... The Great Estate: The Rise & Fall of the Council House starting in 15 minutes on BBC 4. I might learn something new.

UPDATE: I did. Quite a lot to take in.