is social housing subsidised?

A_Nice_Englishman

Wee_Willy_Harris wrote: »

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.

Here in south Wales, the rent on the 2 bed council flat I shared with my ex was about £260 a month. That on the smaller 2 bed private flat less than half a mile away I rented after I moved out was £525 pm - and my landlady told me that barely covered her mortgage.

Would be interested to hear from those in other parts of the country able to make similar comparisons.

Svenena

terryw wrote: »

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!

Ahh, right. I will bear this in mind if I ever have a large money to invest. I think lots of other people must be under the same delusion as me, because there's always people on this forum asking whether they should be investing in buy-to-lets. So the only worthwhile return is if the capital increases in value? Interesting. I'm learning from this thread.

Wee_Willy_Harris

princeofpounds wrote: »

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.

And always we should consider the social impact that spending may have. We are people, not numbers.

Wee_Willy_Harris

terryw wrote: »

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!

So, are you suggeating that, over time, bricks and morter is a poor investment?

Svenena

A_Nice_Englishman wrote: »

Would be interested to hear from those in other parts of the country able to make similar comparisons.

I'm about to move from a privately rented studio flat which costs me £550 a month, to an almost identical HA flat, in the building next door, which will cost me £330 a month. I make that a 40% difference. I'm in East Anglia.

terryw

Wee_Willy_Harris wrote: »

So, are you suggeating that, over time, bricks and morter is a poor investment?

Absolutely not! For those who buy to nest, home ownership is far better than renting for most people. But for those buying to invest, share will show a better return over any longish period.

terryw

Svenena wrote: »

Ahh, right. I will bear this in mind if I ever have a large money to invest. I think lots of other people must be under the same delusion as me, because there's always people on this forum asking whether they should be investing in buy-to-lets. So the only worthwhile return is if the capital increases in value? Interesting. I'm learning from this thread.

"Buy to Let" is a very dangerous game. The attraction something called "gearing" - you borrow say 90 per cent of the price so you have only invested 10 per cent. But with luck the rent will pay the mortgage and then IF property prices rise you will make all the profit not just your 10 per cent share.

But so dangerous, if things do not go to plan.

princeofpounds

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?

No, it wasn't directed at you. It was at the OP's rather disingenuous original post which chose to ignore the real area of subsidy.

Again, housing associations are not subsidised much in terms of cash for normal operations. But when the property was transferred to them (relatively few are really independent, although they may ape an arms-length management style) the councils forfeited any opportunity to rent or sell those properties at commercial rates.

And always we should consider the social impact that spending may have. We are people, not numbers.

Whilst I do agree, I think generally people are far too comfortable spending tax money. And tax money is not just numbers - it comes directly out of the pockets of everyone in this country who earns over roughly £5k, anyone who buys stuff in shops. Out of the pockets of people.

One of the posters here has a great quote in their signature I think (and I paraphrase it): 'The problem with socialism is, eventually you run out of other people's money'. Whilst I do think we need a social safety net, there's a grain of truth to it.

Wee_Willy_Harris

A_Nice_Englishman wrote: »

Here in south Wales, the rent on the 2 bed council flat I shared with my ex was about £260 a month. That on the smaller 2 bed private flat less than half a mile away I rented after I moved out was £525 pm - and my landlady told me that barely covered her mortgage.

Would be interested to hear from those in other parts of the country able to make similar comparisons.

Bolton. Typical 2 bed social housing £71.22 a week
http://www.salfordhomesearch.co.uk/property.aspx?void=8307

2 bed LHA rate for Bolton (ie the median level of rent charges) £103.56
http://www.bolton.gov.uk/website/pages/LocalHousingAllowancecurrentrates.aspx?bid=1748

Cheapest 2 bed property on rightmove £300 pm (choice of 2)
http://www.rightmove.co.uk/property-to-rent/property-26963287.html
http://www.rightmove.co.uk/property-to-rent/property-26847607.html

£300 a month is less than £70 a week. ie CHEAPER than social housing.

There were another 6 for less than £325 a month.

squinty

Wee_Willy_Harris wrote: »

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).

To clarify this - the selling price of the housing stock is as a going concern, which may appear less than the market value.

This is calculated as a Net Present Value. In simple terms this looks at the income and expenditure for each property over a period of years to provide a cash flow, this is discounted at the rate set by govt to end up with a valuation.

This income is the expected rental income, which is subject to government capping (and most stock transfers guaranteed this) - the expenditure the managment, repairs, and capital work over the same period. The discount rate is set by govt and takes account of the cost, risk and opportunity cost of borrowing.