Theresa May, safely out of power, pillories Home-Owner-Ism.

From PA Media:

Former prime minister Theresa May has warned that the housing system is “broken” and “letting down” the next generation.

The backbench Tory MP said the problem can be traced back to a lack of action from “governments of all colours”, with the crisis beginning “not because of a blip lasting a year or a parliament, but because not enough homes were built over many decades”.

Speaking at a conference on social housing hosted by the charity Shelter, Ms May said for “too long” the Tories have been seen by many as “the party only of home ownership... Indeed, dare I say it, our policies have too often made it seem that way,” she said. But she argued the Conservatives are in fact “the party of decent homes for all”...[That's obviously a lie but neither were Labour when it power, so gloss over it]

Ms May called for processes to be put in place “support the building of more social housing... We know our housing system is broken, but the housing crisis in this country began not because of a blip lasting a year or a parliament, but because not enough homes were built over many decades. Under governments of all colours we simply haven’t given enough attention to social and affordable housing. It is undeniable that the housing system is letting down the next generation. Fixing the housing crisis will let so many more people get on in life.”

"In line with our commitment to deliver 300,000 homes per year by the mid-2020s, we need to put in place processes to support the building of more social housing... It’s still too hard to build social homes and too easy to be an irresponsible landlord. We need to harness the momentum that I think we now have and use the levelling up agenda as an opportunity to spur further change.

“I think, and I say to the Government, next month’s Queen’s Speech does give an opportunity to bring forward the measures that require primary legislation, including those reforming regulation for private rental and social tenants, that will tip the scales in favour of fairness.”

Social housing tenants in the UK and Hong Kong

Parker Tron linked to this article in The Guardian, none of this is news but worth repeating:

Almost half of social homes are occupied by only one person, and only a quarter have two residents:
43% are one-person households
32% have more than two residents.
This is partly down to the high number of retired people living in social housing, especially in supported accommodation.

... in terms of economic activity, the difference in employment status between owner-occupiers with mortgages and social renters is stark.
92% of owner-occupiers with mortgages are in employment
41% of social renters are employed

But the reasons for the disparity aren’t immediately obvious:
Half of economically inactive social renters are retired
The remaining renters are full-time carers, or long-term sick or disabled

How old are they?
People in social housing are considerably older than the people in the private rented sector:
28% of social tenants are over 65, compared with 8% of private renters
Only 25% of social renters are under 45, in contrast to 70% of private tenants
Five times as many people over the age of 75 rent in the social, rather than private, sector

This is partly down to the high number of retired people living in social housing, especially in supported accommodation.

So to generalise, social tenants are disproportionately pensioners and one-parent families.

Coincidentally, Kj emailed me a link to an article about public housing in Hong Kong (link extremely dodgy, open at your peril):

Impoverished inhabitants have reappeared in the city. The public renter-housing sector today is a concentration of poor elderly retired households and low-income single parent households.

Between 1976 and 2011, the proportion of public housing renter households from the lowest income quartile increased from an estimated 24.5% in 1976 to 48.4% in 2011, and the proportion below the median household income rose from 53.3% to 80.0% (see Figure 1).

At the same time, among households with heads aged 20-65 the percentage living in public renter housing declined from 36.3% in 1976 to 27.4% in 2011, while among heads aged above 65 the percentage rose from 30.6% in 1976 to 48.6% in 2011.

Same old, same old.

The article was written by somebody working on behalf of banks, insurance companies and possibly the old-age care sector, who are salivating at the proposal of selling off public housing.

How about this for a Home-Owner-Ist tour de force, all done presumably without any intention at irony:

Given that demographic, it seems obvious that old age support should focus on selling our public housing estates to sitting tenants at an affordable price. In particular, this would allow the elderly to immediately and cheaply acquire an asset to provide old age support. It would go a long way to addressing the problems of elderly poverty in Hong Kong.

At present, elderly homeowners can mortgage their homes in exchange for an annuity to provide a constant stream of monthly income support for the rest of their lives. Upon passing away the property is inherited by their designated heirs, who can either take ownership and assume repayments on the outstanding mortgage loan, or receive the net value of the property after the loan is repaid in full.

Using land to finance old age retirement and to benefit the next generation has been a tradition in many civilizations long before the modern world made governments the preferred provider of those in need.

Privatizing the public renter housing estates would create a very large client pool of elderly homeowners willing to take advantage of mortgage backed annuity schemes. This would create better opportunities for diversifying risks associated with the uncertainty of life expectancy. A bigger market could also lead to better terms for all participants.

Reader's Letter Of The Day

Things have come to a sorry pass when a Green Party candidate shows a better understanding of basic economic concepts like "opportunity costs" or "cost to the taxpayer" than the Tories (and just about everybody else).

From The Evening Standard:

Describing council rents as "subsidised" brings to mind cash payments to keep them low. But they're only subsidised in the sense that they're paying lower than private rents. It's like saying your energy bill is "subsidised" because you fixed a cheap deal.

Council tenants pay enough to meet the cost of building and maintaining their homes. Any up-front subsidy to build the homes is paid off in the long run through rents and benefit savings. Private rents are so high because the tenants pay the equivalent costs many times over, as landlords profits from rip-off rents and house price rises.

The unfairness isn't well-off council tenants enjoying a low rent that meets landlords' costs, it's private tenants being ripped off. We need rent controls and more social housing, not George Osborne's politics of envy.

Toim Chance, prospective Green Party mayoral candidate.

I'm a land value taxer and see things the other way round. Clearly, social tenants aren't paying the government for the real value of what they 'enjoy', but at least they are paying something, unlike private landowners, be they owner-occupiers, private landlords or land speculators.

"David Cameron to pledge right-to-buy extension"

From the BBC:

David Cameron is to launch the Conservatives' general election manifesto, with a pledge to allow housing association tenants to buy any extension to their homes.

The PM will say up to 1.3 million tenants could buy loft conversions, front porches and conservatories as a result, insisting the Tories are the party of working people.

"We're keeping the original part of the house though," added the Prime Minister, "We're not stupid."

Natalie Bennett on top form

The LBC have put up a transcript of her car crash interview.

As to building more social housing, they both missed the point.

It doesn't really matter what they cost to build in £millions or £billions, the important consideration is whether the overall annualised cost (minus rental income) is less than paying Housing Benefit to private landlords.

Gov.uk says there are 1.7 million HB claimants renting from private landlords at a total cost of £9.32 billion a year = £105 a week average.

Councils can wangle land virtually for free, and the build cost for a small terraced house or a decent flat can't be more than the £60,000 figure she gave*. Let's say councils borrow at 3% over 25 years, that's loan repayments of £3,500 per unit per year plus £1,500 annual maintenance and running costs = £100 a week.

So even if councils allow people to occupy them rent free, it's still no more expensive than paying Housing Benefit.

If you factor in rental income of £80 a week (the average charged for social housing), it is a considerably better deal for councils, tenants and the taxpayer. And it's a considerably better deal for working private tenants who are not claiming HB because private sector rents will fall markedly and/or lots of landlords will sell up**.

That woman is her own worst enemy. And I happen to know that she has been presented with itemised and robust calculations for paying for their suggested Citizen's Income; I accept that you can't her to remember the finer details but surely you can expect her to remember that it's all been worked out and costed?

If you join the dots, they can also claw back a lot of the Citizen's Income in rent, in other words you can choose between £72 a week cash or a roof over your head, however modest.

FFS.
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* Steven L points out in the comments that if the government spends money on having housing built, it claws back a fair bit of that (a third?) in CIS deductions, PAYE, corporation tax (housing is zero-rated for VAT).

So if it funds construction by borrowing, it is cash positive in the first few years. The 3% interest cost is further reduced by income tax thereon.

I cheerfully admit that £60,000 might be a bit on the low side and I did not factor in a cost for land. But all of these little adjustments net off to nil at worst, leaving the overall saving to the taxpayer intact.
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** Bayard in the comments thinks that the latter effect will outweigh the former:

"If the Housing Benefit claimant market collapses, because either there are no claimants or the claimants are suddenly a lot "poorer", then the most likely outcome is that there will be a lot of houses on the market as the BTLers sell up."

Either way, it's all good, as most private tenants would rather be owner-occupiers.

Outrage

"Developer's advert boast sparks outrage" says the article in the Evening Standard.

So it should; private developers profiting from public expenditure on transport without contributing a penny. That's outrageous!

Oh, wait, that's not what the outrage is about, it's about the fact that they haven't provided any "social housing". Private profit at public expense doesn't even get a mention.

I suppose that's the norm these days...

Bob Crow RIP

From The Daily Mirror.

As a commuter, I didn't approve of his occasional strikes of course.

But what made him so valuable was the way he messed with the Home-Owner-Ists' minds by choosing to pay £10,000 a year rent for his Housing Association house (previously a council house) for the next twenty or thirty years rather than exercising his Right To Buy and snapping it up for about £50,000.

Let's leave the last word to the man himself:

"I was born in a council house, as far as I’m concerned I will die in one."

The Sun finally identifies the cause of Britain's "housing crisis"

It's bloody Bob Crow!

All because of him, his wife and daughter, there are 14,000 families on the waiting list in his area! The complete and utter heartless bastard!

If he'd only move out, that'd get it down to a manageable 13,999, which is a sort of tipping point and the rest of the problem would sort itself out. There'd be no need for the government to build another single unit. Ever.

The downside of him moving to somewhere more commensurate with his salary would be that he'd price 14,000 high earners out of the market in the same way as he has condemned 14,000 families to eternity on the waiting list.

The fact that he pays nearly £100,000 a year in taxes and rent to the government, sufficient to build one new home per year, and the fact that he didn't cash in on Right-to-buy and/or Buy-to-let (aka Right-to-let) and has not made a single penny in untaxed windfall land price gains over the past ten years is completely lost on the Homeys at The Sun and The Mail.

Reader's Letter Of The Day (2)

From last Friday's Guardian, actually:

Ed Miliband's plans for the political realignment of the middle class may well founder on the issue of home ownership, which you identify (Editorial, 15 January) as the key to middle-class self-identification.

With house (basically land) prices so high, Labour's only recourse would be to its old post-war model of the development corporation, compulsorily purchasing land at agricultural prices and retaining any planning uplift while developing houses for sale or rent, preferably on garden city (and village) principles.

Ideally a revived middle class could benefit from increased job mobility via a computerised letting service and move first into high-spec rented property then, after saving a deposit from the affordable rent, buy a house, as of old.

A land value tax would be necessary to cap any current land value inflation, so maintaining the house price stability achieved.

DBC Reed, Northampton.

"Mixed communities"

Let's take another glimpse into the swirling maelstrom of Homey platitudes and identify a few more which cancel each other out.

From some official DCLG research:

... the rationale for mixed communities is that substantial diversification of housing type and tenure, combined with improvements to facilities, services and opportunities will both improve life chances for disadvantaged residents and attract new wealthier residents.

This will lead to a new dynamic including increased land values and a better-functioning housing market, reducing overall concentrations of deprivation.

Lower income residents will benefit from increased resources and social interaction with better-off residents. Neighbourhoods will thus be less reliant on repeated 'regeneration'.

That's the theory (the research goes on to say that there is no actual real life evidence of such results being achieved), and this is one of the reasons/excuses given for flogging off the council housing at undervalue to those who could afford it:

The 'mixed tenure' policy with greatest impact on individuals and neighbourhoods to date has been the Right to Buy, with two million homes sold, against fewer than 100,000 for all the other low cost home ownership initiatives combined.

The Homeys continue to ignore real life evidence that the policy does not achieve its stated aim and they insist that the "mixed community" is a good concept with good outcomes and hence justification for flogging off council houses. Quite how we jumped from "mixed community" to "mixed tenure" is another topic.

Now, in two ever so slightly different contexts, Homeys oppose "mixed communities" with absolute venom:

1. When higher earners, particularly a middle class hate figure like Bob Crow, continue to rent a council house

They are, allegedly, stealing from the taxpayer, depriving low earners of affordable housing etc.

But surely they are is still making that council estate more "mixed" by living there, which is A Good Thing, isn't it? Serving as a positive role model and all that?

Why is it that on Planet Homey, if higher earners bought their council houses and are now living there rent-free, i.e. contributing less back to the taxpayer, then they are not stealing from the taxpayer, they are not depriving a low earner of affordable housing - and they are serving as positive role models as a bonus - but not if they are still renting?

2. When it comes to new construction

The "mixed community" model says that in an area, there should be affordable rented housing for low earners (i.e. council housing) and there should be more expensive privately owned housing for middle and high earners to buy.

But if the council says that x% of a new development has to be affordable housing, or, Heaven forfend, the council just gets on with it and builds some social housing near privately owned housing, then the NIMBYs (the radical wing of the Homey movement) scream blue murder. There is no room at our inn, they shriek, there's no need for it, and we don't want chavscum round our way dragging down the neighbourhood and our lovely house prices.

Conclusion

Thus we can safely say that Homeys do not believe in "mixed communities" except when it suits them (i.e. they don') and in any event, on the facts, the policy does not work.

Home-Owner-Ists merrily jumbling legal and economic concepts

They'll pick and choose whatever suits them:

People who rent out their council homes to make money could be locked up for two years under new laws which come into force today. For the first time, sub-letting a council property is now a criminal offence with fraudsters also facing hefty fines.

OK, council and Housing Association tenancy agreements say that you are not allowed to sub-let; but so do most private tenancy agreements.

A private tenant has little incentive to sub-let because there's no money in it. If you are paying market rent and sub-let for market rent, there's no profit in it and a lot of hassle for you. Clearly, if a private tenant sub-lets, that is a civil offence and the landlord can terminate the agreement and evict the original tenant.

The Homeys then decide that council tenancies are a special case, and say that sub-letting is a criminal offence, which is a purely legal concept as there is no real crime involved, but hey, their gaff, their rules. The reason social tenants like sub-letting is because they can pocket the difference between the low social rent (about £80 a week) and the private rent (about £160 a week on average across the UK, call it £250 a week in London).

But the naughty social tenant's £170 a week (£9,000 a year) pure profit is no actual or legal cost to the taxpayer, he is getting the £80 a week official rent whatever happens, it is purely an economic or notional cost, i.e. in economic terms, you can view the £170 as a notional loss to the taxpayer of the rent he could be collecting.

Ministers are clamping down on the practice after discovering it costs the taxpayer £1.8 billion a year and clogs up desperately needed social housing.

When they say "it costs the taxpayer £1.8 billion a year", this is purely a notional cost, i.e. let's say that five percent of social housing is sub-let = 200,000 units @ £9,000 = £1.8 billion.

That notional cost is the same whether sub-letting is legal or illegal, it makes no difference. Notional costs are an economic concept, not a legal one.

But seeing as we have merrily segued from legal to economic concepts, what is the cost to the taxpayer of all the social housing which Thatcher and Blair sold off for cheap over the last thirty years? Average private rents across the UK are £160 a week and the taxpayer is losing all of that = £8,000 a year.

That's 1.5 million units @ £8,000 = £12 billion a year.

Hmmm, what's the larger cost to the taxpayer - £3.6 billion or £12 billion?

"Ah, but..." squeal the Homeys, "If you bought your council house, albeit at a huge discount, then it's yours to do with as you please. If people rent out their old ex-council house, that's not a cost to the taxpayer."

It's not necessarily an actual cost, no - but neither is [illegal] sub-letting of council housing, we established that.

But of course it is still a notional cost, and one four or five times as large.
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For a rich seam of Homey DoubleThink, I refer you to Bill Quango's post.

He makes the perfectly sensible point that the majority of the council houses which were sold off are still occupied by the family had always lived there and then bought it. Seeing as they would have stayed in the house either way, that sale has no net effect on availability of social housing.

Fair enough.

But then he merrily throws in a classic bit of Home-Owner-Ism:

The idea was not to give tenants a house and then build another one for some else. It was to remove people from state dependency for their property and, as a bonus, turn socialists into capitalists through asset transfers.

We've heard this crap so many times that many people actually believe it, but it crumbles apart under closer scrutiny.

How on earth does making people pay some rent every week, even if it only £80 mean "state dependency"? Why does it make them less dependent if you effectively give them that house for free?

In my simple world view, if the state gives people stuff for free then that is truly "state dependency". If the state charges market rates, or at least some sort of contribution towards costs, like social rents, prescription charges, or charging for dentists, then those people are forced to be a little more self-reliant i.e. less dependent on the state than people who get things for free.

Our successful right-to-buyer is in the happy position of paying no rent, having paid off the laughably small mortgage years ago. So he has to be slightly less self-reliant than the tenant next door who is paying £80 a week which at least covers the costs and maintenance etc.

And this does not turn people into "capitalists" it turns them into rent-seekers. If the government can afford to forego £80 a week from a social tenant, the best thing it can do is cut their PAYE deductions by £80 a week but continue to collect the rent. That's the carrot and stick to make sure that people go out to work, to the benefit of the tenant, wider society and the taxpayer as a whole.

And even if Bill is right, that building a council house, renting it to a family for a few years for a low rent and then allowing them to buy it for a fraction of its full market value turns people "into capitalists", then why aren't we doing more of it? Why don't we do it for everybody? Why don't we just build half a million of them every year and give them to every young couple who get married as a wedding present?

Hurrah ! Up by "10%" year on year ! [but please don't look at the small print though, please don't]

The number of new starts of public housing construction is up by 9.8 per cent year on year, according to statistics from the Office of National Statistics published on Friday.

Wow!  Impressive or what ...

The figure for building starts in quarter two 2012 was 1,018 and for the same quarter in 2013 the number was 1,118.

Output in the Construction Industry, June and Q2 2013

Great minds think alike

I re-wrote an article from the Evening Standard a few weeks ago:

Thousands of London mortgage salesmen will get a chance to lend money to London's higher earning social tenants to buy their homes under a major extension of the Right-to-Lend in tomorrow’s Budget, the Evening Standard reveals today.

George Osborne will raise to £100,000 the maximum incentive to persuade tenants in London to swap a secure tenancy at a low rent for five years of debt slavery during the lock-in period, after which they will be able to sub-let the home for a huge guaranteed profit or to sell it to an aspiring homeowner or BTL landlord who will have to take out an even larger mortgage...

Bob E has now spotted these opening paragraphs in an article in The Guardian:

There were, of course, many myths propagated by the [the Home-Owner-Ists]. One of the most pernicious was that, by allowing council tenants to buy their own homes [they] somehow provided a gateway for working-class people to a land of milk and honey. Thus, huge quantities of solid council stock disappeared into the private sector and have never adequately been replaced.

Barely more than a generation later, Britain is paying a heavy price for [their] atavistic desire to wipe out any trace of working-class culture, or "society"... All over London, former council homes are changing hands for hundreds of thousands of pounds simply because they are in a neighbourhood now deemed chichi by London's cultural elite.

The failure to replace social housing stock, and the greed of mortgage lenders, has left millions looking for affordable social housing. For, as we now know, the only real beneficiaries of... council house revolution were financial institutions that have never since stopped thanking [the UK government] for handing them a multitude of new customers on whom to prey. One global credit crisis, two banking bailouts and one double-dip recession is [Home-Owner-Ism's] real and dismal economic legacy...

I've had to edit the second excerpt a bit because in typical Guardian fashion, they blamed it all on Thatcher and glossed over the role of Labour councils and the Blair-Brown government in all of this. The point about Right to Buy mainly benefitting bankers still stands though.

"It must have been a huge extension"

... says TL (via email), having read this:

"They're from my parents on behalf of the family. It's a thank you for right-to-buy. They bought their council house, a three-bed Victorian in East Dulwich, for £17,000. They've extended it and done a lot of work – we're a family of builders – and it's been valued now at about £1m. It's a policy which changed everything for us." – Samuel Tuck, 40, from East Dulwich, who brought a bouquet of flowers to St Paul's.
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The Daily Mail gets in a couple of observations about land/location values as well:

Joe Walker, 32, a Big Issue-seller from Canada, said he had moved from his usual Regent Street patch to The Strand to take advantage of the increased footfall from the funeral procession(1).

'It seems like people love her and hate her here, and I can see why,' he said. 'It's amazing that people can buy their own council houses in England, it's my dream to own my own house. But then I know some people who take advantage of it and sell them on for much higher prices, so no one can get a home.'(2)

1) Yup. The rental value of land depends (largely) on the number of people/population density. If there are more people on The Strand, then you will sell more newspapers there than on Regent Street for little extra effort. The extra profits you make where there are more people are "rent".

2) Yes, but they had to spend a fortune on improvements and massive extensions first, the real profits weren't that big.

No. None of us, actually.

From The Sun

TODAY Lady Thatcher will be laid to rest after a magnificent funeral of the sort few of us get to see in a lifetime.
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The Daily Express is on top form as well. Their front page is emblazoned with the headline

4,000 POLICE GUARD MAGGIE COFFIN

And next to it is a photo of MADDIE:

"Budget 2013: £100,000 off right-to-lend on London homes"

From The Evening Standard:

Thousands of London mortgage salesmen will get a chance to lend money to London's higher earning social tenants to buy their homes under a major extension of the Right-to-Lend in tomorrow’s Budget, the Evening Standard reveals today.

George Osborne will raise to £100,000 the maximum incentive to persuade tenants in London to swap a secure tenancy at a low rent for five years of debt slavery during the lock-in period, after which they will be able to sub-let the home for a huge guaranteed profit or to sell it to an aspiring homeowner or BTL landlord who will have to take out an even larger mortgage.

One Council of Mortgage Lenders spokesman said it could "unleash a new generation of land-price speculation and mortgage lending in the capital". The rise, from £75,000, reflects the higher land rents of London property compared with other regions...

Mr Osborne has hailed Right-to-Sublet, which was introduced by Margaret Thatcher in 1980, as "one of the greatest trickle-up policies of all time. As The Daily Mirror pointed out recently, forty per cent of homes bought by tenants are now in the hands of landlords; and with prices as high as they are, it's difficult for banks to lend even more money on the existing housing stock."

It gives long-standing tenants a discount of up to 50 per cent if they buy their taxpayer-owned home from the taxpayer. Sources say David Cameron personally backed the move and pushed it through against feeble resistance from the Liberal Democrats who just don't get it.

Andrew Johnson, the business development spokesman for the British Bankers Association said: "A £100,000 discount could make the difference to thousands of hard-working London bankers who could not otherwise dream of lending social tenants hundreds of thousands of pounds. It’s the time for the Chancellor to grab the Right-to-Rent bull by the horns and unleash a new generation of Home-Owner-Ism in the capital."

Six Right-to-Speculate sales have been completed in Hammersmith & Fulham since the discount nationwide was raised to £75,000 last year, with a further 37 awaiting completion. But a study last year found that discount was not enough for most financial service industry insiders and future BTL landlords.

Average house prices in London have reached £403,000 for the first time. It is 15 per cent above the £350,000 peak in January 2008 before the short-lived house price dip, which triggered a decade long financial recession.

"The Bedroom Tax" war of waffle

Polly Toynbee in The Guardian kicks off the festival of f-wittery with this:

Mass evictions (1) of the most vulnerable are no way to tackle the housing benefit bill,(2) and we must do all we can to stop them... One distraught woman who is paid a carer's allowance for looking after her severely mentally ill brother (along with her own three children), said she would have to leave him to social services: his room would now be counted as "spare" because a brother doesn't count as family."(3)

1) There won't be "mass evictions", the Tory policy, as ill-judged as it might be does superficially have the reasonable aim to optimise use of existing council housing. So in theory at least, some council tenants will trade up and some will trade down; they will swap places. So this might be part of the answer, but the Tories are - maliciously and deliberately - overlooking the fact that there is no natural limit to the amount of social housing; the fact that there is so little of it is a purely political decision, it's basic Home-Owner-Ism.

2) The total cost of Housing Benefit for social tenants is precisely £ zero. The council/Housing Association (collectively referred to as "RSL") demands a made-up figure for rent which some tenants can't afford and then it gives them an equal and opposite amount in Housing Benefit. It's about as daft as me charging my kids £100 a week rent each and then giving them £100 each pocket money to help them pay the rent. So what the policy boils down to is making those people who currently live for free paying a little bit back into the system.

3) Shroud waving. Ignore. She says later on that the extra charge per "spare" bedroom will be £14 a week; don't disabled people get given extra money, why can't the £14 come out of that? It doesn't seem like an unreasonable amount to me.

She veers a bit closer to the real issue here, but then deftly veers away again:

The cuts that make most noise are those deliberately devised as eyecatching political crowd-pleasers, yet often saving small sums. Exploiting one-off anecdotes about benefit "scroungers" in high-rent Kensington palaces may have worked as a clever cover,(4) but the truth about the imminent bedroom tax is starting to emerge.

Well over a third of social housing tenants have a "spare" room and must pay an average £14 a week more – £700 a year – or move out. That's 20% of unemployment pay.(5) The north is harder hit as its social housing, on cheaper land, has more bedrooms: in Hull 4,700 families are "over-occupiers", with only 73 one-bed flats to move to. In Brighton a thousand families are hit,(6) as the council expects to lose £1m in rent arrears.

4) Spot on. Any sane person is against the cash subsidies for private landlords of £8 billion a year, although the Homey ire is directed at the tenant not the landlord, they then direct that anger against social housing generally. The hatred which the Home-Owner-Ists have towards social housing is unfathomable to me:

Claim #1: "It't not fair that the undeserving poor get to live somewhere for very cheap or for free." Subtext: I have to work hard and pay a shed load in tax and then pay rent or mortgage out of my own income.

Fair enough, so I counter this with: "We've plenty of land to build more social housing on; as long as the RSL is getting more than £80 a week in rent, then it has covered its costs; anything more than that and it is into profit, which is great - it's like Land Value Tax. Then everybody who wants no truck with 'the property ladder' can have a council house with low rent and a secure tenancy."

Claim #2: "But I don't want to live on a council estate, they are full of low-lifes. Do you not remember the horrible tower blocks from the 1960s?"

Rational response: "Well nobody says you have to live in one. You can stay where you are now if you're happy with that, and if you are renting privately, then by and large, your rent will go down a bit, win-win! The fact that other people send their children to state school doesn't stop anybody sending their children to a private school, does it?

"Further, there is let's assume a fixed number of low-lifes, one per cent of the population. If there is only enough social housing for twenty per cent of the population, then one-in-twenty people on a council estate is a low-life, which is such a high concentration as to drag the whole estate down. If everybody - including the vast majority of people who are perfectly decent neighbours lived in a council house, then a) that does not increase the number of low-lifes, it spreads them more thinly and b) the sensible policy is to try and corral the one-per cent incorrigible low-lifes into sink estates at the edge of town (effectively open prisons) which means the everybody else can live on nicer estates among nice people."

5) I really don't think that being asked to pay a small minimum is unreasonable. Price rationing is the best form of rationing. If the residents concerned are really that poor, living off welfare, maybe £14 is too high. The whole idea of working out who has a "spare bedroom" is a nonsense on stilts anyway, it's a bureaucratic nightmare and, unlike LVT assessments, really would involve "inspectors entering people's homes".

It would be far cleverer to just charge a minimum rent of £x per week per room and to dock that straight from people's benefit payments, forget about Housing Benefit. Maybe a charge of £5 per room is enough to achieve the desired right-sizing and home-swapping (if that is all you wish to achieve, rather than a bash-the-poor crusade). So some people (larger households with some earned income in smaller homes) would end up a bit better off; and other people (smaller households with no earned income in larger homes) would end up a bit worse off; the two households just have to swap places.

6) This is a land value thing. Hull is a far less desirable area than Brighton, so private rents are much higher in Brighton, so there are only 9,700 people on the waiting list for social housing in Hull and 16,000 in Brighton, and it appears that even these indirect market force means that social housing in Brighton is more efficiently allocated.

Per capita population, that's one-in-twenty-six in Hull one-in-fifteen in Brighton and in London of course it's one in ten (plus an unknown number who never even bother putting their name down because they know it is hopeless).

So it is important to look at this on a national rather than local level, so the charge per room ought to be £3 per room in Hull, £5 in Brighton and £10 in London (or whatever). Again, a bit like Land Value Tax.

And then in the comments there's the usual mix of leftie drivel, shroud waving and Home-Owner-Ist crap which I can't be bothered rebutting again, i.e.
a) blame the immigrants, or blame Labour who allowed them in.
b) social housing should be for a narrowly defined category of people - the hard-working poor. If people earn nothing they don't deserve a home; and people who have done all right for themselves (Bob Crow, Frank Dobson) don't deserve it either.
c) A lot of people are labouring under the delusion that there is a fixed or limited amount of social housing, there isn't. That's like saying "there is a fixed number of ring-tones for mobile phones" or "there is a fixed number of television sets".
d) If you don't want to pay the Bedroom Tax, then buy your own house.

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.

"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*

Another important Home-Owner-Ist milestone!

From the DCLG's English Housing Survey 2011-12:

1.3 Owner occupation remained the largest tenure group with 14.4 million households, comprising around two-thirds (65%) of all households. There has been a downward trend in the proportion of owner occupiers since the peak of 71% in 2003 but the proportion in 2011/12 was very similar to that in 2010-11, Figure 1.

1.4 As Figure 1 shows, the difference between the number of social renters and private renters, which was over 3 million in 1980, has been narrowing steadily. The numbers and proportion of households living in the private rented sector have been rising in recent years, and in 2011-12 were at the same level as in the social sector, 3.8 million households or 17% of the total...

• Average weekly rents in the private rented sector continued to be well above those in the social rented sector (£164 per week compared with £83). While mean rents have increased in both sectors since 2008-09, private rented sector rents showed no significant change from 2010-11.

• Almost two-thirds (64%) of households in the social rented sector were in receipt of Housing Benefit, compared with around a quarter (26%) of those in the private rented sector.

I think that is a pretty significant achievement, to have more people renting privately than from the council or a Housing Association. The bonus is that the percentage of owner-occupiers is back to 1987 levels (the highest level was 71% in 2003). So Home-Owner-Ism is achieving its underlying and understated aim of concentrating land ownership in ever fewer hands, especially if you include banks' indirect land ownership via mortgages.
------------------------------------
Let's crunch some numbers:

We know that "Housing Benefit" is slightly over £21 billion a year; let's knock off 14% to get the England-only figure = over £18 billion, and let's assume for sake of argument that it is an all or nothing benefit.

Therefore: 2.4 million social sector tenants are "receiving" HB of £4,300 per year = £10 billion; and 1.0 million "private sector" tenants are "receiving" HB of £8,500 per year = £8.5 billion. £10 billion + £8.5 billion = £18.5 billion, looks about right.

Why all the "speech marks", you may ask?

I always find it useful to look at things from the point of view of the taxpayer, in cash terms.

a) The £10 billion which the DWP pays to local councils to subsidise rents goes into the tin for rent receipts, and rather bizarrely, that is all pooled nationally and paid back to Whitehall, whence it is dished out again to local councils... So it is all pure bookkeeping entries, it does not affect the cash amount of tax you pay; they could eliminate all these transfers to and fro by simply reducing social rents to what people are willing and able to pay (i.e. the market rent), which would average out at £1,500 a year or something (£4,300 x 36%). This could easily be collected 100% by docking it from people's welfare or pensions payments.

b) The £8.5 billion paid to private tenants actually ends up in the pockets of private landlords, that is a real cost to the taxpayer and also pushes up the rents which the 74% of non-claimants have to pay. For consistency, the average real market rent is 74% x £8,500 = £6,300 a year.

In other words, if the UK government had continued with its policy of building social housing from the late 1970s onwards instead of selling them off, the taxpayer would be saving £8.5 billion a year in Housing Benefit; and those people who are now private tenants would be paying lower average rents and the government would be receiving about £24 billion a year in rental income.

The taxpayer would be £32 billion a year better off (private tenants would benefit from lower taxes and from lower rents). And the economy would be better off, because what what isn't taken in taxes on earnings, rent or mortgage interest is spent on goods and services. And don't give me that crap about landlords spending their income on goods and services; the point is that they are consuming them without producing or providing any; so 'everybody else' has to make do with a smaller share of a smaller total amount.

What's not to like?