Thursday 26 July 2012

Complete Home-Owner​-Ist disconnect

The Evening Standard (h/t SBC at HPC) kicks off with a fair summary of the position:

More than 3,600 former council flats in Westminster, bought under the Right to Buy scheme, are now in the hands of private landlords, transforming many council estates into buy-to-let goldmines, the latest figures show. Ironically, private landlords are now making huge profits by renting former council flats back to the council to house its homeless on housing benefits.

Westminster has been a champion of Right to Buy and has sold nearly half of its housing stock since the Eighties. Tenants who exercised their Right to Buy and then sold up often profited handsomely because of booming property prices in the borough, which includes some of the capital’s most expensive postcodes. Westminster has sold more than 9,000 houses and flats and expects to sell hundreds more during the next three years following the Government’s quadrupling of the maximum discount available to qualifying tenants to £75,000.

Properties are commonly rented out for more than £500 per week, over four times the average council flat rent. Owners, whether buy-to-let investors or former tenants, are free to rent out properties. But concern about profiteering landlords and housing benefit fraud has prompted a council and government crackdown. Hackney Council has decided to introduce a licensing system for private landlords (the first such regulation in London)...


Then come the fatuous comments from the Homey cheerleaders:

... while housing minister Grant Shapps wants to make sub-letting of council homes illegal. (1)

... Councillor Jonathan Glanz, housing spokesman, said: "Westminster supports the government’s Right to Buy scheme as it enables those who can afford it to secure a foot on the property ladder. (2) The revenue from each property is reinvested to provide another much needed affordable home in Westminster." (3)

1) I completely agree, let's make it illegal. But there is not the blindest bit of economic or moral difference between Mr A who acquired his council flat at a massive discount a few years ago, is paying £100 a week mortgage interest and renting it out for £500 a week and Mr B who is paying a £100 week rent to the council and is sub-letting for £500 a week. So why not make both these things illegal?

2) The whole RTB debacle has clearly reduced the number of people who can "secure a foot on the property ladder". At the very least, it has pushed up the rents which non-owners have to pay, thus leaving them less money to spend in the real economy or to save up towards a deposit. Glantz appears to be utterly clueless as to any of the facts and figures presented in the article?

3) That's just an outright lie. Even if it weren't, then it doesn't make sense. If you own a car and are happy with it, would you rather sell it at a discount and then buy a new one, or just keep your current car? And if "affordable housing" is a good thing (and it is), then why not just build more without selling off the existing stock? Or, if Westminster Council had retained its entire existing stock and bumped up the rents to (say) £300 a week, that would give them a budget of £300 million a year to spend on building new housing (i.e. six thousand flats a year).

7 comments:

TTC said...

Was quite agreeing and nodding at the wisdom until the bit about rents of £300 per week.

I worry about the people in call centres at £6 an hour (yes, lots of that in London) or serving coffee (£6 an hour) or dishing out Big Macs (£6 an hour).

These types of people aren't workshy scroungers, they are trying - but clearly, there is no way they could afford £300 a week.

With 40 hours at £6 an hour (£240 before tax and NI), I doubt very much that, with bills and food taken into account, they could even manage £150 a week easily.

This then sets up the situation where work is disincentivised.

We could, alternative, force employers to pay better wages.

Or we could let every call centre, coffee shop and burger chain in London close down.

Or we could ensure that there are affordable rents.

TTC

Mark Wadsworth said...

TTC, my £300 a week suggestion related to Westminster (and other central London boroughs) only, being a tiny patch of central London with ridiculously high rents.

Apart from that, of course council rents should be between £50 and £150 a week, depending on how big the home is and where it is in the country.

Like most people who work in Westminster, I live ten miles away and commute in, this is not a major issue.

My thinking is, collect that £300 million a year and build 6,000 new flats a year a few miles out where the land is cheap - those new flats can then be rented out for £100 a week to the lower paid workers (who'll have to commute in just like most other people, big deal) and still make a nice profit for the council.

Everybody wins!

TTC said...

Sure - I am hearing you.

However, I live in Westminster and, while Parliament and the rest are indeed in the city, there are pockets of extreme poverty in Westminster too.

Take a walk from Paddington station along Harrow Road, for example.

Appreciate there are some who will point out the demographics of the area, but my point is that it is a myth to suggest that every part of Westminster is a desirable, highly sought after address. It's a very poor borough in parts - hence the population keeps returning a useless Labour MP... :)

All that said, I'm pleased to see that your non-Westminster figure is something that we agree wholeheartedly on! :)

TTC :)

Mark Wadsworth said...

TTC, re "pockets of poverty" that's a slightly different topic. It's not so much that the area is poor, it's the people who live there.

If council rents were bumped up to £300 a week and said poor residents offered a nice new council home out in Zone 4 or 5 or 6 for £50 - £150 a week, then clearly that C London area would soon become gentrified and would no longer be a "pocket of poverty".

This gentrification would tend to push up rental values in C London, so they can then nudge up the rents to £400 or £500 and use that as a permanent source of hundreds of millions of pounds a year, which is enough money to build as many new homes every three or four years as they originally started off with.

Sarton Bander said...

Well it's one of the reasons I think council houses are a non-starter. Just allow more houses to be built, and capture the land-value element.

Subsidising locations will always lead to fraud, and political point-scoring.

Which is why the fewer council houses, the better.

Mark Wadsworth said...

SB, I knew you'd say that, but we are where we are.

Fact is, if WC wants to collect that land rental value element, the easiest way of doing this is to rent out their housing for market rates. That's much easier than selling them off subject to LVT (which doesn't exist yet).

Similarly "allowing more houses to be built" is, in the absence of LVT, a complete non-starter. You've got the NIMBYs on one side and the land bankers on the other. Between them, they'll ensure that f- all gets built.

Local councils on the other hand can just get on with awarding themselves planning and building council houses. Maybe council housing is not to everybody's taste, so what? It's still housing, and the knock on effect is to reduce rents and prices for EVERYBODY including in the private sector.

I will never ever qualify for a council house (unless I do something really stupid), but I'm still competing in the rental market with people who would, so if they get a council house then my rent will fall as well :-) win win!

Sarton Bander said...

Well I reckon that council houses would be used to subsidise immigration, so it would just add to population pressure, and not have the effect on rents we'd like.