Barriers to entry

Emailed in by MBK from The Sunday Times readers' letters:

As architects, we can only get work with many of the housing associations if we take the risk of working for nothing up to the point when planning approval is granted for a scheme. Otherwise, there is no chance of getting on board a new project.

This procedure can cost thousands of pounds — all at risk — and in some cases it can take many months, if not years, to secure an approval. If the scheme is rejected by the planners, you get nothing. Furthermore, the client can change the brief and mess you around for as long as it likes at no cost to itself, or take a flyer on a problematic site.

This appalling business practice is driving some architects to the wall. Surely everyone should be paid in a proper manner at all times, rather than taking suicidal financial risks to secure work, especially when housing associations claim to practise ethical behaviour at all times.

Adrian Mitchell chartered architect Yelverton, Devon.

Housing Associations are dressed up as private/charitable organisations, but they are nearly all government owned and controlled. So that's a nice trough to get your snout into.

So to ensure that only large firms of architects, who can afford to pre-subsidise the work, get a look in, there's a nice barrier to entry for you right there.

(The whole of architecture is a closed-shop business, so they are all guilty of anti-competitive trade practices, but as per usual, the big ones are disproportionately worse.)

Cutting in the middlemen

Emailed in by BobE, from Inside Housing:

Two of the sector's largest banks are offering cheaper loans to housing associations after benefiting from gov­ernment initiatives to boost lending.

Lloyds and Royal Bank of Scotland have both taken up the Treasury's funding for lending scheme and passed on cheaper borrowing costs to the sector to offer more competitively priced finance...

OK, stop right there.

i) The government is the government.

ii) Lloyds and RBS were given massive bail outs by the government, which now effectively underwrites and controls them.

iii) Housing Associations are set up, financed and controlled by the government, either directly or via legislation telling them what they can or can't do and what tax breaks they get. They are not charities or truly private organisations.

So instead of the government just building housing itself - or allowing local councils to do so, using borrowed money or otherwise - it is using taxpayers' money to lend to "banks" to lend back to "housing associations" to do the building for them.

We then need overpaid civil servants at HM Treasury to monitor the lending to banks, overpaid regulators to oversee the banks, overpaid civil servants to oversee the Housing Associations and overpaid quangocrats to run the Housing Associations, who then outsource the building work to large corporates with their high paid Chief Executive Officers, who in turn sub-contract it all back out to Joe The Local Builder.

Because, for some reason, this is seen as preferable to allowing councils to just get on with asking Joe The Local Builder directly.

A little bit of speculation, a little bit of public guarantee

An interesting little article from Inside Housing about Warrington Council, the essential facts from which are given below, prompting an equally (imho) interesting reaction and question from reader Keith Veness

Ludicrous - why doesn't the Council build and manage its own homes rather than risking money by giving it to unelected and unaccountable RSLs?

On Tuesday, Warrington Council agreed a £30 million commercial loan to Muir Group Housing Association. In July it will consider a proposal to lend £20 million to Plus Dane Group.

The local authority has provided loans to associations since 2010 to stimulate housing development in Cheshire, following the withdrawal of long-term finance by banks in the wake of the 2008 banking crisis. To date, using its cheap borrowing from the Public Works Loan Board, it has loaned £51.8 million to four providers.

Under the terms of the deal, the 25-year loan can be drawn down in up to 20 tranches over a six-year period. The rate of interest payable will be 1.25 per cent above the PWLB’s rate at the date of each drawdown.

The council will gain around £15,000 in interest annually for each £1 million borrowed and plans to use this to reinvest in services to help reduce the scale of future cuts. The deal will also increase its new homes bonus – a government grant to coun­cils for increasing the number of homes and their use – by between £1.1 million and £2.2 million over six years.

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.

Awesome rebranding exercises

Beyond satire:

From thedrum.co.uk:

Queens Cross Housing Association in Glasgow has undergone a brand identity developed in conjunction with Stand and a working group of staff and tenants. The new logo is the first rebrand for the 35 year old housing organisation, which manages nearly 4,500 properties along the Forth and Clyde Canal area of Glasgow.It was made up of a circle, wavy line and sideways C. The circle is said to represent community and togetherness, and the wavy line represents the land, joining together to make the Q. The sideways C inside the Q represents the horizon over the land.

From whathouse.co.uk:

Thames Valley Housing Association (TVHA), one of the largest affordable homes providers in the South East, has launched Fizzy Living, a new residential rental business which will provide apartments for young professionals.

TVHA's new initiative offers a long-term solution to providing private rental accommodation on a large scale. With a new subsidiary called Fizzy Living, TVHA intends to create a portfolio of more than 1,000 new homes aimed at young professionals in London and the South East.

TVHA appointed branding agency Heavenly, after a competitive tender, to help create the Fizzy brand, ensuring it appeals to a core audience of 25-34 year old self-styled "rentysomethings".

"Ministers to extend 'right-to-buy' policy"

Spotted by SW in The Daily Telegraph:

A new era of “Gerrymandering” will be heralded by ministers today as part of a fundamental shake-up of Government moves to create a new generation of Home-Owner-Ists at the taxpayers' expense.

The old “right-to-buy” rules will be extended, the Coalition will announce, so that social housing tenants – those who are in housing association homes as well as those in council houses - will be offered juicy taxpayer-funded discounts after five years of renting them.

In return local associations will be allowed to plough the money they receive back into providing new homes - unless prevented by the Localism Bill, of course - which will in turn be sold off at undervalue, thus ensuring an ever dwindling stock of social housing. The move is part of a package of measures designed to plough on merrily with Labour's Home-Owner-Ist policies. To try and drive a further wedge between the 'better off poor' and those at the bottom of the heap, new council house tenants will no longer be given a council house for life, as these will be required to sell off at undervalue.

Instead, they will get a flexible tenure contract for as little as two years and be given six months notice if an assessment reveals they no longer need the house. With global warming and so on, tenants who haven't found work will be happy to make do with a tent; and tenants who have found work will have a choice: buy the place you live in or be evicted.

Because of the new flexible tenures it is crucial to “right-to-buy” that people are allowed to accrue time even if people have moved home.

Currently some tenants in housing association homes do not get full “right-to-buy” rights for a variety of reasons, mainly because the taxpayer-funded Housing Associations quite enjoy the rush of power that being a large scale landlord gives them. Ministers will today say to housing associations, if you build a home using the new Flexible Rent – that is up to 80 per cent of the market rent - then you must also offer the right to buy.

Grant Shapps, the Housing Minister said last night:

“You will acquire the right to buy at a discount from housing associations. The present system is far too simple. Councils can only charge more rent if they use the extra cash to build more affordable homes to sell off at undervalue to Home-Owner-Ists.

Even in these tough times this Government is determined to find ways to exploit the hopes and dreams of hard working people who want to become Home-Owner-Ists for political gain. The UK banking system also needs to find fresh blood to tap into, and we're offering them the necks of the 'better off poor'. That's why we'll build in ways to help people move from renting to home ownership when the time is right. This will be a continuation of the failed housing policies of the last forty years.”

David Cameron is determined to push ahead with the plans despite concerns from some Liberal Democrat MPs about the affect they will have. But Tory ministers pointed out that Labour had also fundamentally failed those most in need and created a housing waiting list of five million people, so what they were doing was no worse.

Some local authorities will use their new powers to decide who goes on their council house waiting lists to give priority to those who are low-paid and struggling to get a home, rather than automatically allow the jobless and those on benefits to be housed first. The changes to the way councils allocate social housing are likely to be the most controversial. They will be able to decide who qualifies for social housing in their area - taking away the “unrealistic” requirement to accept applications from anyone.

Landlords will now be able to raise funds to build more social housing for those who need it – on top of the £4.5 billion the Government will invest in building up to 155,000 new affordable homes. But under the Localism Bill, it is highly unlikely that any of these schemes will go ahead.

The New Feudalism (2)

From the BBC:

A new not-for-profit lending scheme is being unveiled aimed at giving manageable loans to financially excluded people. A pilot scheme has been set up in the West Midlands called My Home Finance, in the hope of diverting people away from borrowing from loan sharks. However, the interest being charged is higher than the maximum by law that credit unions can charge. It will charge 29.9% APR in the pilot scheme, rising to 49.9% APR in April...

My Home Finance has been set up by the National Housing Federation (NHF), with 10 branches opening as part of the pilot project... The pilot scheme is being launched by Work and Pensions Secretary Iain Duncan Smith on Thursday. The "vast majority" of the set-up costs for the scheme have been met by the Department for Work and Pensions, according to the NHF. There has also been input from local housing associations and the Royal Bank of Scotland.

Please note that all of the parties involved are branches of government or are controlled by the government and financed by the taxpayer - the National Housing Federation is just the umbrella lobbying body for Housing Associations, who are in turn creatures of legislation and financed by the taxpayer (whether they do a better or worse job at providing 'affordable' housing than local councils is a separate issue), and this whole concept of 'living within your means' appears to have been lost in the mists of time.

The fundamental difference between homeownership versus Home-Owner-Ism

From The Daily Mail (of all places!):

A third of middle-class parents are hoping house prices fall to help their children buy their first home. The research finding highlights the widespread fear that the children of today are facing a lifetime of renting. That contrasts with today's householders, many of whom were able to buy their homes at relatively low prices.

The study, from the National Housing Federation*, also found that nearly 60 per cent of parents feel obliged to give their children money for a deposit. They expect to hand over at least £20,000 to each of their children to get them on to the property ladder - in what is known as raiding the 'Bank of Mum and Dad'.

The research is based on a poll of more than 500 middle-class parents with children between the ages of 20 and 30. They have been the winners of the house price boom over the past decade - but their children are the losers. And they expect that the only chance that their children have of buying their own home is for them to hand over a substantial amount of money.

In 1997, the average home cost £68,500. Today, the figure stands at nearly £168,000. The increase of £100,000 is well ahead of inflation and equivalent to four times the national average salary...

So a third of homeowners actually believe in homeownership - they want their children to be able to afford to buy a house under their own steam, and for their children to take on the risks and rewards of this (the way it should be, and the way it was for the over-forties), even at the expense of losing an illusory paper capital gain themselves. Sixty per cent are clearly Home-Owner-Ists - people who are stupid enough to want to keep the house price bubble going.

If it were up to me, I'd far rather lose £20,000 of the 'value' of my house (which costs me nothing) than have to reduce my savings/increase my own mortgage by £40,000 (assuming I have two children in the 20 - 30 age bracket), but hey, I'm Mr Sensible.

* The National Housing Federation is the umbrella lobbying body for taxpayer-financed Housing Associations, so they are firmly in the "We own land! Give us money!" camp, but let's assume that these findings are broadly correct.

Illegal Immigrant/Baby Smuggling/Housing Fraud/Employment Tribunal Fun

From The Soaraway Sun, May 2008:

A WOMAN who smuggled a baby bought for £150 into Britain to get a council flat was jailed yesterday. Peace Sandberg, 40, got off her flight from Nigeria at Heathrow airport with the tiny lad and headed straight to a housing office to demand a dwelling. But council workers twigged when they remembered she had NOT been pregnant when she visited the office less than two months earlier.

Jailing her for 26 months yesterday for child trafficking, Judge Sam Kathkuda told the Nigerian she was “a stranger to the truth”... The Home Office will make a decision about whether to deport Sandberg after she is released.

Twenty-four months later, from The Evening Standard:

A convicted baby trafficker banned from Britain for 10 years was arrested today after she sneaked back in to try to claim thousands of pounds at an employment tribunal.

Peace Sandberg, 42, was jailed for 26 months after she bought a three-month-old baby in Nigeria for £150 and tried to pass it off as her own to get a council house. After her sentence she was deported back to Sweden, where she holds Swedish/Nigerian citizenship.

But the former housing officer still pursued a race and sex discrimination claim against former employer the Peabody Trust — and turned up in London today at the start of tribunal proceedings.

Police were informed by the trust and arrested her...

Outbreak Of Commonsense at the DCLG

Further to point 4 of my recent Crash course in social housing etc, it looks as if they are about to revoke this earlier act of Whitehall-knows-best madness, with all its unintended consequences.

From 24 Dash:

Proposals have finally been tabled to scrap the complex system of cross-subsidies for council housing in England, and allow local authorities to maintain and build homes using their own funds from rents and sales...

Mr Healey said that the four million people who live in England's 1.8 million council properties will get better homes and better services under the new system, which now goes out for consultation with local authorities.

Under the Housing Revenue Account (HRA) system, introduced in 1935, money from rents and sales of land and homes is sent by councils to Whitehall, where the DCLG manages the national housing debt and redistributes funds to the 177 local authority areas according to a complex formula.

The new self-financing system would allow councils to keep their cash and decide for themselves how to spend it on maintenance, refurbishment and repairs of social housing. In return, councils will be asked to take on their share of a £3.65 billion debt* . Town halls will also be able to borrow more cash to fund refurbishment and house-building projects.

"This is a once and for all settlement between central and local government," said Mr Healey, "It will bring council house funding up to date, replacing a system which was introduced before the Second World War. Councils will get the freedom to fund and run their council homes, without central Government subsidy.

"Not a single penny from rents or sales will go to Whitehall and not a single penny will subsidise other councils as the current system dictates... This is a change which councils have been calling for, and which has cross-party support. This is an opportunity for radical change which will allow councils to do much more to provide better services and better meet the needs of local people."

Excellent. One more thing I can tick off from my manifesto. If nothing else, at least it puts local councils on par with Housing Associations.

Also of note is the statistic that "Every year as a country we are raising £6 billion a year from council house rents", i.e. an average weekly rent of £64. I strongly suspect, having calculated this before, that this is the gross figure before deducting Housing Benefit, which 'pays' half of that £6 billion and so isn't real income. If it were up to me, I'd scrap centrally-funded Housing Benefit as well and leave it to councils to sort out as best they can (by hiking rents on their nicer properties, chucking out non-payers or identifying sub-letters, for example).

* Which sounds like a lot, but it works out at about £2,000 per council home.

Crash course in social housing etc.

There has been some confusion over my proposal to replace existing cash benefits (and various other bits and pieces) with a single flat-rate universal non-means tested cash benefit (often referred to as a Citizen's Income). The detractors say that this wouldn't be enough to cover housing costs, and as I keep saying, housing costs are a separate issue, and can be dealt with completely separately to any reform or simplification of cash benefits.

Before you think up ways of sorting this out, it is useful to have some knowledge on how it actually works in practice, so here goes. This is all from memory and is simplified version of what really goes on, so don't quote me on exact figures:

1. There are two types of social housing.

Council housing and housing owned by Housing Associations (which are ultimately financed by and owned by the government).

There is no real fundamental difference between the two, except:
* They have slightly different criteria as to whom they accept as tenants.
* HAs tend to set ever so slightly higher rents.
* There was never a right-to-buy with HA housing.
* About two-thirds of social housing is council housing and one-third is HA housing.
* UPDATE: HAs have much more freedom in how they are financed and what they can do with capital receipts (to which see item 4. below and Nick Drew in the comments)

2. Tenants and rents

* 18% of UK households are in social housing, i.e. about five million households.
* Nearly a third of social tenants are pensioners.
* Turnover in social housing is very low, even lower than with owner-occupiers, about 3% of units change tenants every year.
* Average headline rents in social housing are about £70 a week, about half the equivalent open market rent.
* Social housing is subject to Council Tax, average maybe £18 a week.
* Unsurprisingly, there is a lot of sub-letting going on, you'd be daft to hand back the keys to the council when you move out, you just sub-let. Nobody knows how much social housing is sub-let in this way, but it must be between 5% and 10%.

3. Council house sell-off

* At its very peak in the 1950s or 1960s, about 30% of the UK population lived in social housing. Our population was smaller and households bigger then, over the years about two or three million units have been sold off.
* There are about 1.6 million households on the waiting list - there is massive 'pent-up demand' for more social housing.
* The proportion of social tenants who are not in work has gone up a lot over the last twenty years. In round figures, from one-half to three-quarters. This can be largely explained by the sell-offs and is down to basic maths. Let's say that there used to be six million households in social housing, three million of whom had jobs so half were 'workless' households. Two million units were sold off to people with jobs. This leaves us with four million households in social housing of whom only one million have jobs, so three quarters are 'workless' households.

4. Finance

This is where it gets really murky.
* When Whitehall is allocating grants to local councils, it deducts an amount equivalent to the rent it is collecting. In other words, rents are ring-fenced. There is little financial incentive to local councils to increase collection rates above and beyond a certain minimum.
* HAs appear to be able to keep their rental income and capital receipts in full.
* HAs are allowed to borrow money to build more housing, local councils aren't.
* The headline figure for total HB of £17 billion (to which we could add £2 billion in CTB claimed by social tenants) is highly misleading. Maybe a third of that goes to private landlords (update 12/1/2011: 40% of HB claimants are in 'private' rented accommodation from ONS, and these rents tend to be higher, so actually it's probably half of all HB) and is a real cost to the taxpayer. The rest is money shuffled between departments (see below) in ever decreasing circles.
* The cost to the taxpayer of people in social housing is NOT £12 billion (or whatever), the real cost is merely the difference between the cash costs of running it and the £30 or £40 average rents paid (i.e. the cost to the taxpayer is negligible and it might even be a small profit). Feel free to add notional interest to the costs side, but if you do that it is only fair to include notional capital gains on the income side!

5. Housing & Council Tax Benefit (HB and CTB)

You could hardly design a more stupid system if you tried. The council and HA ask the tenant for below market rent (which some of them can't afford) and then also ask them for Council Tax (which some of them can't afford either). So they invent HB and CTB. The way they are calculated and withdrawn again is fairly similar, but we end up with several departments involved and several streams of money going back and forth: one department ask for rent; another asks for Council Tax; another deals with HB claims; another deals with CTB claims; then the council department has to claim it back from the DWP and so on.

This leads to ridiculous situations - when I was clearing up one of my rental properties after a tenant had moved out, I found one cheque from the housing department to cover the rent he paid me; and a last reminder from the council tax department asking him to pay arrears of Council Tax.

* Two-thirds of social tenants claim Housing Benefit and Council Tax Benefit (HB and CTB) for all or part of their rent/Council Tax. Having ground the figures, it appears that the overall average rent paid by tenants is about £30 to £40 a week, in other words, taken as a whole, the actual net rents collected are roughly equal to the cost of running it.
* Conversely, about three-quarters of HB and CTB claimants are in social housing.
* HB and CTB are savagely means-tested. Remember that most families with low incomes will be claiming Tax Credits, which give them an overall withdrawal rate of about 70% (for every £1 earned, they lose 39p Tax Credits and lose 31p in PAYE). HB and CTB are then withdrawn at 65% and 20% of the balance, i.e. out of the 30p you're left with, you lose another 25.5p in HB and CTB withdrawal.
* I once calculated the percentage of income that people pay in rent and Council Tax, plotted against incomes. Clearly, if you earn £nil then you pay 0%; the percentage then increases sharply - if you earn £150 a week, the actual rent you pay (plus Council Tax, net of HB and CTB) is about about a third of your gross pay (so you are no better off by working longer hours, see above); and once you get to £350 a week or so, your HB and CTB are tapered to nil anyway, so the total rent plus Council Tax you pay is about one-fifth of your gross income (and the percentage goes down from there, of course) and the percentage declines from there on.

6. My suggestions...

This is primarily about simplification, and can be seen as a straight swap for HB and CTB for social tenants (if it's in conjunction with other measures like Citizen's Income or at least reducing the withdrawal rates, so much better, but that is by the by):

* instead of councils and HAs asking for rent and Council Tax separately, there would just be one, all-inclusive bill.
* Instead of there being separate HB and CTB, which are withdrawn at different rates depending on income, there would be one system of abating the rent-inclusive-of-Council Tax for no- and low-income households.
* Instead of asking for the full amount and then giving people HB and CTB which pay the full amount but then withdrawing these with rising income, why not just ask for an 'affordable' amount, in other words a certain percentage of people's income?
* Tracking down people's income is notoriously difficult, of course, so why not do this at source? The normal rate of PAYE (income tax plus Employee's NI) is 31% and there is such a thing as a K-code for PAYE where the tax rate is 50%. So if social tenants were not asked for rent, as such, but instead were given a K-code, then to the extent they are working, the rent gets collected automatically. They will overpay while they are working and underpay when they are not working.
* Under the already existing PAYE system, K-codes are set so that the worker pays the lower of (a) an extra 19% of his wages and (b) the actual liability (in this case rent).

PS, item 6 wasn't originally my idea. I explained items 1 to 5 to a UKIP MEP a few years ago, and genius that he is, he asked me why they don't just collect a certain percentage of income and have done with it? The more I thought about it the more I liked it. Collecting it via a K-code was my idea, of course.

7. Intended consequences

The knock-on effects would be that:
* If councils wished, they could nudge the better-off poor out of social housing by setting the headline rents at higher than market rents (i.e. the maximum amount that would be deducted under PAYE). Once your income reaches a certain level, you'd be better off renting privately. This may or may not be a good idea.
* The marginal withdrawal rate for low earners would be significantly reduced, so they are more likely to look for a job.
* Non-earners would not be affected in the slightest by the change (they still would pay net rents and Council Tax of £nil), except they'd suffer a lot less form-filling and hassle.
* Nobody knows what the Laffer Curve for welfare claimants looks like, but a rate of 95.5% must be on the downward slope. I guess that a 50% rate is near the top of the Laffer Curve, so if you care about reducing the net cost to the taxpayer of social housing (and welfare payments generally), then reducing the withdrawal rate has to be a good idea.
* If councils were paid over, and allowed to keep, the full amount of rent collected, then they would have a direct financial interest in maximising their rental income, i.e. maximising the amount that their tenants earn; i.e. attracting businesses to the area etc.
* Applying the reverse logic to the last point under 3. above, if councils built more housing, then instead of just housing the lowest two income deciles, they would be housing the lowest three income deciles, so the average income of social tenants would go up, and the marginal extra income collected from the third decile would certainly be more than the marginal cost of providing that extra housing. And with shorter waiting lists, it would be much easier for social tenants to move elsewhere if that's where they can find work. It's a win-win for tenants, the economy and taxpayers alike.

8. Fraud etc

And yes, of course there would still be fraud and sub-letting and jiggery-pokery, but:
* There would be a lot less than now.
* As the system would be greatly simplified, some of those people currently involved in pointless paper shuffling could be moved to tracking down fraud instead.
* Sub-letters would be easier to spot - if they have moved elsewhere in the country and are working, then a council in Yorkshire will wonder why it is being sent rents collected by a PAYE district in Kent.
* If a couple split up, then the one who has left social housing will be keen to point this out to the council to get his K-code scrapped and his tax rate reduced to 31%. So this helps the council identify which flat is now 'over-occupied' and perhaps shuffle the sitting tenant into a smaller unit, freeing up the larger one for somebody else.

Outbreak of commonsense ... at The Daily Hatemail

The Daily Hatemail ran one of its regular articles wailing about the £17 billion cost of housing benefit ...

Figures obtained by the Conservative Party last week revealed that one in six UK households is now reliant on housing benefit*. In Hackney, the local authority with the most subsidised housing, 41.9 per cent of households receive the benefit...

The article was posted on the HPC 'blog yesterday, and I went straight into my usual rant:

That £17 billion headline figure is all lies, of course.

Two-thirds of this is money being paid from one branch of state (DWP) to another branch of state (councils or Housing Associations). The real cash cost of social housing is in fact minimal, once you minus off the half of social tenants who pay some or all the rent. One-third of HB is paid to private landlords, and I agree that this should be scrapped - it is a subsidy to land ownership and thus inflates rents and prices without increasing supply. Far better to spend that money on building new social housing.

T'was DBC Reed who actually bothered to read the article, and what amazed him (and me) was that this was more or less exactly what The Hatemail were saying - the piece is actually about the ridiculous amounts of money paid in HB to private landlords (thousands of pounds a week in some parts of London) rather than being a rant against social housing in general, and it concludes with this:

But the system [of subsidising private landlords] remains over-generous. Not only that, it creates a benefits trap: people have a disincentive to get a job or to work more hours.

The best way to slash the £17 billion housing benefit bill would be to adopt a cheap housing policy: build more homes and raise taxes for property speculators, allowing house prices to fall so that more people would be able to afford to buy a home on the open market.

Instead, the Government is trying to reinflate the housing market. What we gain on our houses we will lose through the extra taxes needed to subsidise housing benefit claimants.

That's me told, I suppose.
------------------------------------------------
On the HPC thread, there followed the usual debate about the cash cost and notional cost of social housing. My view being that it is only the cash cost that is of relevance to the taxpayer (i.e. the interest on the bricks and mortar, repairs, insurance etc minus rents actually paid, net of HB, which is about £30 per week per household on average). The cash cost is therefore probably negligible.

If you want to look at the notional cost of social housing (i.e. to account for the shortfall to the taxpayer that arises because it is let at below market rents) then you would have to base it on the maximum income that you could milk out of allsocial housing on average, i.e. to assume that all social tenants were turfed out and all properties sold off to private landlords and these landlords tried to let them out for the highest amount that potential tenants can afford.

The bulk of people wanting to rent them would be former social tenants, who simply can't afford to pay very much, so the new 'market rents' probably be lower than the headline rents charged by the council/the Housing Association (but possible above the average weekly rent of £30 that is paid currently). The new market rent might be £2,500 per year on average, or £1,000 more than is currently paid.

On that basis, the total notional cost of social housing to the taxpayer might be £4 billion - or 0.3% of GDP. But if you are going to go this far, wouldn't you also have to factor in the notional social cost of people sleeping rough, a million or two pensioners being evicted, entire families being crammed into one bedroom like in Victorian times with all the misery that entails? So even on a notional cost basis, it's a break even.
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Finally, no doubt some Home-Owner-Ist will complain that it is unfair that people who "take responsibility" have to pay £10,000 a year for a mortgage but social tenants can rent a similar sized property for £3,000 a year.

Why is that unfair? If it's such a fantastic deal, why don't they get themselves on the waiting list for social housing?

Don't forget that the capital gains accrue to home-owners more than cancel out the mortgage cost. So a fair comparison would be to imagine that social tenants had to pay £10,000 a year rent but were refunded all the rent that they had paid at the end of the tenancy (or that their heirs were refunded this when they die). That seems a bit daft, so why not continue what we're doing, charge them a rent that more than covers the costs and leave it at that?

* You don't need to be the Conservative Party to obtain these figures, you just do a bit of searching on the DWP website, to find their annual statistics. To sum up, there are 3.2 milion households in local authority/housing association housing claiming HB @ £80 a week on average = £13.3 bn per annum (about eighty per cent of social tenants) and 1.2 million households in privately owned housing claiming HB @ £105 a week on average = £6.5 billion per annum. Which adds up to rather more than £17 billion - the DWP figures say the overall average weekly claim is £81.03 a week. Ho hum.

Quangoes Of The Week: Housing Associations

Somebody claiming to work for a Housing Association ('HA') made the most startling claims in the comments to an earlier post:

1. HA's are not a branch of government, they are independent organisations.

2. About half of the residents of the HA I work for claim HB. The 'true cost' to the taxpayer therefore is the level of HB that gets paid to the resident (or direct to us)as we don't pay any of that money to the government.*

*ahem*

I responded as follows:

1. HA's are creatures of legislation, whose management are appointed by and are under the control of The Housing Corporation (I thought that had been re-named recently?), which is in turn part of the DCLG. They get substantial grants and cheap loans from the taxpayer, they have statutory duties and all manner of tax breaks (primarily corp tax exemption/refunds and SDLT exemptions when they buy land and buildings).

2. Basic bookkeeping says whether the taxpayer pays money to HA's via the DWP (as Housing Benefit) or via The Housing Corporation (as grants and loans) makes bugger all difference. People have to be housed and costs have to be met.

PS, The HC's accounts show that they made total grants [to HA's] of £2 billion in 2007-08 and had made cumulative total loans to HA's (also known as RSL's) of £17 billion (less amounts written off, unknown).

* I could add, if they were truly private, independent organisations, they would pay quite a bit of money back to the government, it's called "corporation tax". There are bizarre rules that say while not all HA income/surplus is automatically exempt; most of them qualify as charities anyway, and even if they do end up paying corporation tax to HM Revenue & Customs, then The Housing Corporation will reimburse them. Enabling the government of the day to boast about all the tax they are collecting and all the 'investment in housing' they are making, I suppose.

*/ahem*

Disclaimer - let it be noted that I am in favour of scrapping Housing Benefit for private landlords and building more social housing, under the direct control of democratically elected local councils. When I am in charge, HA's will all be disbanded and their assets handed back to local councils.