New Housing Benefit cuts: what effect will they have?

HAMISH_MCTAVISH

chewmylegoff wrote: »

if landlords refuse to drop their rents, who will they rent their properties to?

At the moment, allowance is set to the 50th percentile. There will be a distribution around that level. Some will pay less, some will top up and pay more, but it'll be a fairly standard bell curve and they'll theoretically have access to a bit more than 50% of houses on the market.

By setting rents to the 30th percentile, then benefits claimants will now only have access to a bit more than 30% of houses on the market. This will concentrate benefits claimants at the bottom end, and squeeze out existing non-benefits tenants from those areas.

Now those who have been squeezed out will have to move up the ladder and pay more. There will be no houses left at the cheaper price.

A good number of those people will be the FTB's saving for a deposit. They will have no choice but to pay more rent, and will therefore no longer be able to save as much.

The other thing that will happen is that prices in that bottom end will rise as supply fails to meet demand. After all, you're concentrating a population that previously had access to 50% or so of properties, into just 30% or so of properties. This will narrow the gap between cheapest and most expensive rents in an area, and will skew the median price upwards. And benefits will then rise again to match.

I predict ghettos full of benefits claimants at the bottom end, and a lot of relieved homeowners happy to see their property value increase as the benefits crowd are evicted at the top end. In the middle will be some pockets of winners, and some pockets of losers. But overall this is not going to crash the market, or make it boom. Just segment it by class and wealth. Much like the old days.

THRIFTY_GIRL

Shakethedisease wrote: »

Dream on, on public transport costs !!

TBH that's a pretty sweeping statement from you. If you're already on a low-income, and get moved miles out from where you work due to rental restrictions... 'Just commute like the rest of us'..I can't believe you said that without looking into it further.

Who is 'the rest of us' ? People on what a year who 'commute' ? What does it cost you ?

Just had a look and a London Zone card Zones 1-6 costs £1904 a year ! Jesus, 2k before you even earn anything... what would be the point of that on minumum wage travelling to and fro.

http://www.londontoolkit.com/briefing/travelcard_oyster.htm

( *wishes people would back up stuff like this with figures instead of wishful/pompus type thinking *).

Those sort of travelling costs are unsupportable on crappy inner city jobs the lowest paid there do. Wave them goodbye in October 2011. They won't be able to live there, OR 'commute' there either.

When the staff is not available, market forces should intervene so employers offer higher wages or transport allowances to those workers.

I agree that these people need financial support to commute, but realistically they should be expect to commute within reasonable limits. Maybe allowing employers to provide a tax free allowance for public transport users would ease the situation.

There are plenty of folk outside the capital who are forced to own a car and commute to work, and thats not cheap either.

chewmylegoff

IveSeenTheLight wrote: »

there is a lot of assumption that rents have to lower.

I've just increased one of my rents, because there is sufficient demand (desire and ability) for the local market to increase.

the other property I could raise, however I am leaving my good tenants with the same rent they have paid for the last 3 1/2 years.
If and when they move on, then that property rent will be re-evaluated, with an increase given the current market rates.

i presume there will be some sort of effect on rents, as the demand for properties at higher rents will fall. i don't think it will lead to rents halving or anything ludicrous like that, but it will be difficult for landlords of average properties to demand more for them year on year when a significant group of potential tenants is removed from the market. to take a very simplistic example, if there are 100 properties available at £1000pcm and 100 tenants who want to rent them, but suddently only 70 of the tenants can afford to pay the £1,000pcm because HB has been cut to £800pcm, then either there will be 30 empty houses or the rent for the poorer quality properties will have to decrease.

as usual, good properties in good locations will be a different kettle of fish.

chewmylegoff

HAMISH_MCTAVISH wrote: »

By setting rents to the 30th percentile, then benefits claimants will now only have access to a bit more than 30% of houses on the market. This will concentrate benefits claimants at the bottom end, and squeeze out existing non-benefits tenants from those areas.

why will non-benefits tenants be squeezed out? are you suggesting that landlords would rather rent to people claiming HB? not my experience.

Now those who have been squeezed out will have to move up the ladder and pay more. There will be no houses left at the cheaper price.

more likely in my view that HB claimants will find they cannot rent anywhere because the LLs prefer tenants who are not claiming benefits.

another thing that will happen is that prices in that bottom end will rise as supply fails to meet demand. After all, you're concentrating a population that previously had access to 50% or so of properties, into just 30% or so of properties. This will narrow the gap between cheapest and most expensive rents in an area, and will skew the median price upwards. And benefits will then rise again to match.

this may happen, but it will also be matched by properties previously at the 50% level reducing in rent somewhat to ensure they are occupied, thus the apex of the bell curve moves to the left a little.

I predict ghettos full of benefits claimants at the bottom end, and a lot of relieved homeowners happy to see their property value increase as the benefits crowd are evicted at the top end. In the middle will be some pockets of winners, and some pockets of losers. But overall this is not going to crash the market, or make it boom. Just segment it by class and wealth. Much like the old days.

i agree it isn't going to crash the market, but it may lead to static or somewhat reducing rents, especially in areas where there are a lot of HB claimants.

chewmylegoff

THRIFTY_GIRL wrote: »

When the staff is not available, market forces should intervene so employers offer higher wages or transport allowances to those workers.

I agree that these people need financial support to commute, but realistically they should be expect to commute within reasonable limits. Maybe allowing employers to provide a tax free allowance for public transport users would ease the situation.

There are plenty of folk outside the capital who are forced to own a car and commute to work, and thats not cheap either.

plus there's (a) already shed loads of people living in local authority housing in central london who are unemployed and could do the menial low paid jobs; and (b) loads of immigrants not claiming benefits and living in high density households who are prepared to do the menial low paid jobs.

there is no economic need to bus more people into central london from the outskirts when there are already many more unskilled people than unskilled jobs there already.

chucky

chewmylegoff wrote: »

more likely in my view that HB claimants will find they cannot rent anywhere because the LLs prefer tenants who are not claiming benefits.

very true - i've always refused them.

from experience when you do have HB claimants putting rental offers in - they usually don't get the maximum allowance amount but only a precentage of the total rent for the property. so for example if the property was £400 per week they would have £250 available to them to rent that property.

not all of them get the maximum amount available to them through HB.

IveSeenTheLight

chewmylegoff wrote: »

as usual, good properties in good locations will be a different kettle of fish.

thanked for the part above.

It's already been said that there will be a difference between LHa lets and private let properties.

all this ultimately will mean is that there will be essentially pushing people on LHA into certain post codes, where rent is cheaper

Areas where private rental is strong is unlikely to be affected

silvercar

I think HB tenants will find it much harder to rent. Taking a decent HB tenant (with guarantor) wanting a long term let can sometimes work. If the landlord knows that they will struggle to pay the top up when the new rules come in and that their top up will increase when they lose 10% of their LHA and 10% of their JSA in a years time, taking them on is too much of a risk.

silvercar

Just a thought. Don't councils count people evicted for rent arrears as having made themselves deliberately homeless? and absolve themselves of the responsibility to re-house them?

treliac

silvercar wrote: »

Just a thought. Don't councils count people evicted for rent arrears as having made themselves deliberately homeless? and absolve themselves of the responsibility to re-house them?

They still have a responsibility where there are children involved.