The Torygraph at its finest:
More than 90,000 people have "inherited" taxpayer-subsidised council houses from their parents or family members, official figures have disclosed.
More than £9 billion of council housing has been transferred to those who may not have qualified for state help on the basis of their own circumstances, figures suggest.
The annual rent subsidy from taxpayers to those who have inherited the cheap tenancy deals is estimated to be worth more than £300 million...
Official figures indicate that the average council house tenant pays £280 a month in rent, compared with £565 in the private sector.
Firstly, there is no taxpayer subsidy. If these tenants are the 'better off poor' and are paying £3,360 a year, that more than covers the running costs, maintenance, insurance and so on UPDATE: as Adam Collyer points out in the comments, it also covers the notional interest cost on bricks and mortar of about £625 a year.
Secondly, what about the two million council houses they sold off? Let's just rephrase all that:
Up to two million people are living in "inherited" taxpayer-subsidised council houses, which they acquired at 70% discounts from local councils, official figures have disclosed.
More than £200 billion's worth of council housing (at current values) was transferred to those who would not have qualified for state help on the basis of their own circumstances, figures suggest.
The annual rent subsidy to those who have are living in ex-council houses under the Right to Buy deals is estimated to be worth nearly £7 billion £14 billion per annum*, and the loss to the taxpayer from Right To Buy was in the order of £140 billion**.
Official figures indicate that the average council house tenant pays £280 a month in rent, compared with £565 in the private sector.
* Two million households not paying £565 a month = £13,560 million. Add to that the hundreds of thousands that are now subsidised by Housing Benefit at £565 a month...
** Two million homes now worth £100,000 each sold at 70% discount = £140 billion. UPDATE: as Adam Collyer points out in the comments, they were originally sold off for about £15,000 - £20,000 each, so the loss to the taxpayer is more like £160 - £170 billion.
What have we wrought in the UK?
1 hour ago
13 comments:
More than £200 billion's worth of council housing (at current values) Why at current values? The value at the time (on your figures) was a fifth of that was transferred to those who would not have qualified for state help on the basis of their own circumstances The people concerned were living in council houses, on subsidised rents. They swapped that ongoing subsidy for a one-off subsidy of a discount on the market price, figures suggest.
The annual rent subsidy to those who have are living in ex-council houses under the Right to Buy deals is estimated to be worth nearly £7 billion* The correct figure is NIL (the subsidy occurred at the time the houses were sold and there is no ongoing subsidy other than Housing Benefit paid) , and the loss to the taxpayer from Right To Buy was in the order of £140 billion** Correct figure is £28 billion (2,000,000 x £20,000 x 70%).
And as I've said before, council housing costs the government a lot more than "running costs, maintenance, insurance and so on". The main cost is the interest the government pays on the money it borrows to build the housing in the first place. If the government sold at say 70% discount, then by selling the house it removed 30% of that ongoing interest subsidy.
AC, all right, they were sold off for about £20,000 each and are now worth £100,000. So that's a £160 billion loss.
"The main cost is the interest the government pays on the money it borrows to build the housing in the first place."
OK, have it your way. It costs about £45,000 to build an average council home, which appreciates with inflation, so the correct interest rate is the rate on index linked bonds of about 1.25%, so the interest cost is £675 a year. There's still plenty of change out of that £3,360!!
MW to be fair IL Gilts should yield about 4 to 4.5% on average. That is 2% plus RPI/CPI. Mind you if we could stop gummint inflation then we wouldn't need IL Gilts and the flat yield should again be about 4%. The 4% is one I have from third paryy research on Gilt/Treasury yields over the last 50 plus years.
L, OK, perhaps the long run average rate is inflation plus 2%, in which case the notional interest cost is £900.
MW, plus the capital repayment component. So £1800 p.a. plus 45000 / 15 = £3,000. So the cash flow cost is £4,800 p.a. plus the state has a mortgage free council house at the end of it and the ongoing cashflow/rebate from citizens pension plus LVT?
MW - Sorry forgot to add - I,m not challenging you, I'm trying to understand.
L, my view is that with very durable things like council houses, you don't need to worry about repaying the principle, because the rental stream goes on for ever as well (or a century, or whatever).
In any event, repayment of principle is not a 'cost'. Even if you repay it over the UEL of the home, the annual payments are a couple of hundred pounds at most.
But if you are fiscal conservative and say councils 'should' repay loans to build council houses over 15 years, that is fine by me.
PS, as an LVT purist, I say of course the council should be charging full market rent (which includes the full value of the location rent), the same as anybody with exclusive possession of land should pay full rent for the location value.
It's just funny how the Home-Owner-Ists think that this only applies to council tenants - if they pay less than MV, all of a sudden it's a "subsidy" but if yer homeowner has to pay a few quid Council Tax then that's an infringement of his 'rights'.
"The main cost is the interest the government pays on the money it borrows to build the housing in the first place."
Why should the government be building council houses with borrowed money? Just because the last few governments have been unable to live within their means doesn't mean that the gov't has to borrow money, it could fund everything from taxation.
Also, how do you know that the council housing that was sold off was financed with borrowed money? It could have been built by a fiscally prudent council from the rates.
Most council housing was built between the thirties and early seventies. All bought and paid for. Peanuts compared to today's crazy prices.
The very well built council house I live in was built in 1937. The council has made it's money on this property many times over.
"Firstly, there is no taxpayer subsidy. If these tenants are the 'better off poor' and are paying £3,360 a year, that more than covers the running costs, maintenance, insurance and so on"
Mark can I borrow your car for a 3rd of hiring a car privately.
I know that you could rent it for more money. However you are not really subsidising me using a car are you?
@RantinRab
"The very well built council house I live in was built in 1937. The council has made it's money on this property many times over."
Good - but why like other goods should it not be rationed on price rather than by a needocracy?
Do you think that if for example grace and favour homes are not subsidised providing the tenant pays the running costs?
Anon: "Mark can I borrow your car for a 3rd of hiring a car privately?"
Of course, that all depends which days of the week you need it and for how long, can you sort out the insurance etc. The only reason I bought it was because it would have cost £500 to hire a car for a week and £2,000 to buy one outright.
"... like other goods should it not be rationed on price rather than by a needocracy?"
Correct. The natural source of revenue for 'The State' is Land Value Tax, which includes charging market rents for council housing. Things like 'income tax' are an abomination.
"Do you think that if for example grace and favour homes are not subsidised providing the tenant pays the running costs?"
But it's the taxpayer who pays the salaries of politicians, Royal Family etc so that question misses the point.
What Mark says!
;o)
Aren't the gummint now in profit territory on RBS? What's that worth to the public purse at current share prices?
Surely selling of RBS and building more council housing in order to end the subsidy for private rented accommodation should be a priority. Of course we're talking the "big 3" parties still being in charge here so that ain't happening.
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