is social housing subsidised?

terryw

Wee_Willy_Harris wrote: »

Housing Associations are probably more transparent from a financial point of view and, almost without exception, run at a surplus. That surplus is then used to fund new build projects. They can also borrow against rental income in the same way that a business can.

Only sometimes true. In many cases, the HAs have bought the dwellings for a nominal sum of say £1 from the council, so the true capital cost does not appear in the calculations.

squinty

CLAPTON wrote: »

clearly we have a very different idea of what a 'subsidy' is.

COUNCIL HOUSING : nowhere do you actually mention REAL costs or REAL income nor do you mention the MARKET rate for the properties.

ALMOs : again no real mentiopn of REAL money.

HA: basically tha same above

With your definition of subsidy anything that is below the market price is subsidised. And therefore by definition all social housing is subsidised.

However, using a dictionary definition of subsidy "money granted by the state or other public body to keep down the price" most social housing is not subsidised.

terryw

Svenena wrote: »

I don't know about excessive, but landlords are making large profits, surely? Well, maybe profits isn't the right word, but if there was no mortgage involved, they would me making quite a lot of money (after costs are taken into account), right? And if they are not making much (or any) money after paying mortgages, they are at least getting that mortgage paid, therefore in effect having a house bought for them?

Landlords usually go into it to make money, yes? Therefore it must be fairly profitable, or would not be done.

Of course I could be totally wrong. This is all a little over my head.

Historically, landlords make a poor return in terms of rent on on the capital invested in let property.
The main hope is to make capital gains as the property increases in value. But this can go hopelessly wrong!

Wee_Willy_Harris

A_Nice_Englishman wrote: »

Rents for social housing seem to be significantly lower than those for privately rented properties.

Looking at it simplistically, either social housing is subsidised or private landlords are making excessive profits - something I'm sure they would dispute!

In many areas the differential between private rents and social rents is much narrower than in some parts of the South East. Quite often the difference is under £30 a week.

Svenena

If they owned the house outright (no mortgage), wouldn't they be making a profit?

princeofpounds

Christ... finance is not your strong point is it?

Go and have a read up on the concept of an opportunity cost:

http://www.google.co.uk/#hl=en&source=hp&q=+opportunity+cost&aq=f&aqi=&aql=&oq=&gs_rfai=&fp=b880e0c34638eae

The opportunity cost is the implicit penalty you pay for using your capital in one manner rather than another. It is basic finance 101.

When you talk about subsidy, the opportunity cost is just as real as the cash costs, as despite the fact that it is not a cash cost itself, it represents the implicit missed opportunity to earn higher cash returns elsewhere.

So although much social housing may be run on the basis where it needs relatively small cash subsidy from the government (and I don't dispute this), much more money could be raised for the state and the taxpayer by letting the property out on a commercial basis.

This sacrifice is the most serious subsidy, and it is vast.

Silly use of capital by the state is to be deplored as much as pouring cash down the drain, for it amounts to the same thing once you understand basic financial economics.

Now here is the disclaimer - I am not saying social housing is bad. It may even be the best use of capital when considering the costs involved in having to house people in other manners. But what I am absolutely clear on is that it IS subsidised.

Subsidy is not a dirty word. We subsidise all sorts of things - healthcare, education, housing, transport, benefits for single asylum seeker mothers with families of ten and so on. But ALWAYS we must consider taxpayer's money as our own money and spend it in an optimal way, even if that means not spending it at all.

terryw

Svenena wrote: »

If they owned the house outright (no mortgage), wouldn't they be making a profit?

Of course. But this money could be invested elsewhere for a greater return. For example, over any longish period a lump sum invested in shares will produce a greater return than if invested in let property . And this is with a lot less hassle!

Wee_Willy_Harris

terryw wrote: »

Only sometimes true. In many cases, the HAs have bought the dwellings for a nominal sum of say £1 from the council, so the true capital cost does not appear in the calculations.

Councils sold their stock for a realistic, fully audited price which took into account the number of long term voids, major repairs and, most importantly, the expected cost of having to bring the stock up to the decent home standard. A company with a million pounds worth of assets and a million pounds worth of debt is, effectively, worthless. Pearle and Deane, Notts County FC, the Independant, New Statesman, Ascension, Moneyextra, Halifax estate agents... All sold for £1 (each).

Svenena

princeofpounds wrote: »

Christ... finance is not your strong point is it?

If this is directed at me, then I will put my hand up to that, lol.

I'm also not disputing that social housing is subsidised; I assumed it must be. But if a HA is not affiliated with a council (ie it's independent), presumably it's not being subsidised by tax-payers?

Wee_Willy_Harris

terryw wrote: »

Historically, landlords make a poor return in terms of rent on on the capital invested in let property.
The main hope is to make capital gains as the property increases in value. But this can go hopelessly wrong!

Because landlords are looking at far quicker returns than social housing providers. Rent a house out for 3 years and you may struggle to make a realistic return. Rent a house out for 20 years, and a return is guaranteed.