Impact of Housing Benefit Cuts

shark99

I've not seen much discussion on the possible impact of the recently announced housing benefit cuts on rents and house prices.

As far as I understand it, the new caps on "Local Housing Allowance" will start from January 2012 though I'm not sure whether this is for all claimants or not.

Where I am, in "Inner West London", it looks like the maximum allowance for a 2-bed property will drop from £1320 to £1200 pcm, which must have some effect on rental yields and hence house prices?

Though having said that, I'm not sure many landlords let to benefit claimants at that sort of price anyway ...

Thoughts?

HAMISH_MCTAVISH

There's a huge thread about it.

It'll make very little difference outside of a few areas of central London.

The average national difference between old regime and new regime is about £9 a week.

HAMISH_MCTAVISH

jpmorgue wrote: »

The end result is lower national average rents and house prices.

Unlikely.

The probable end result is just a slowing down of the rate of increase of rents.

And it'll make no difference to prices at all.

drc

shark99 wrote: »

Thoughts?

People receiving housing benefit will move to places that they can afford (or rather housing benefit will pay), just like non-housing benefit recipients have to do when the rent goes up or they lose their job etc etc.

Graham_Devon

Apparently, rents will go up.

At least, this is the answer to every other policy or slight change which has any knock on effect to the rental sector.

chewmylegoff

HAMISH_MCTAVISH wrote: »

There's a huge thread about it.

It'll make very little difference outside of a few areas of central London.

The average national difference between old regime and new regime is about £9 a week.

The figures suggested that there would be an impact in about half of all London boroughs, and about 20,000 households would be affected. That, however, is only the effect of the cap, and not the reduction to 30% of average rents.

The majority of houses affected by the cap are 4 bed or larger. There may well be a reduction in the Market value of these properties, but that ain't going to do much for the average FTB. The borough with the most properties affected is Westminster, I think about 5,000 LHA claims over 400 per week. The price of a 4 bed property there is still going to be completely unaffordable even with sharp falls in price.

macaque_2

HAMISH_MCTAVISH wrote: »

There's a huge thread about it.
It'll make very little difference outside of a few areas of central London. The average national difference between old regime and new regime is about £9 a week.

Perhaps you are hasty in declaring this to be a non issue before the full effects of cuts have taken place.

I recall that the government aims to cut housing benefit by £10 billion. If private renters are no longer bidding against local authorities then private rents could fall by a similar amount. If the rising level of rental defaults are added in, this could mean a total rental revenue reduction of £10-30 billion.

Where would this cut hit home? The answer must be largely in the private rental sector since housing associations are already charging below market rents.

The value of the private rented sector amounts to £587m
http://www.ft.com/cms/s/0/5de50358-1a88-11e0-b100-00144feab49a.html#axzz1L7QCGyKc

Therefore, the average reduction in revenue going to private landlords will amount to between 1.7% and 5.1%. Given that many BTL incomes are already below 4% after costs, the changes to housing benefits would appear to be a ticking bomb.

HAMISH_MCTAVISH

macaque wrote: »

The value of the private rented sector amounts to £587m
http://www.ft.com/cms/s/0/5de50358-1a88-11e0-b100-00144feab49a.html#axzz1L7QCGyKc

Therefore, the average reduction in revenue going to private landlords will amount to between 1.7% and 5.1%. Given that many BTL incomes are already below 4% after costs, the changes to housing benefits would appear to be a ticking bomb.

Woah there monkeyboy.....

You mean the "the average reduction in revenue going to private tenants" will amount to between 1.7% and 5.1%.

Given that housing is a primary need, and housing is in such short supply that rents are soaring by over double the rate of wage inflation, I'd be prepared to bet that landlords will tell their tenants to "jog on" and find the money from some other part of their budget.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Given that housing is a primary need, and housing is in such short supply that rents are soaring by over double the rate of wage inflation, I'd be prepared to bet that landlords will tell their tenants to "jog on" and find the money from some other part of their budget.

I'm in admiration of you trying to put the old BTL are scum theory to bed.

DervProf

HAMISH_MCTAVISH wrote: »

Given that housing is a primary need, and housing is in such short supply that rents are soaring by over double the rate of wage inflation, I'd be prepared to bet that landlords will tell their tenants to "jog on" and find the money from some other part of their budget.

And I'd be prepared to bet there will be a riot at some point, if this carries on (cue Kaiser Chiefs song).

macaque_2

HAMISH_MCTAVISH wrote: »

Woah there monkeyboy.....

You mean the "the average reduction in revenue going to private tenants" will amount to between 1.7% and 5.1%.

Given that housing is a primary need, and housing is in such short supply that rents are soaring by over double the rate of wage inflation, I'd be prepared to bet that landlords will tell their tenants to "jog on" and find the money from some other part of their budget.

Housing is a primary need but so is food and medical treatment. In countries where food and medicine are expensive, people go without. Rents have cetainly been rising but rent defaults are rising faster.

UK house prices and rents are substantially higher than our economic competitors. The only question is; will it be politics or economics that restores normal service? It would only take one small change in tax laws or tenants rights to turn the economics of BTL on it's head. New Labour repeatedly used the ticket of high house prices to get re-elected. They bought off the poor with housing benefit and silenced their back benchers with expenses (which allowed them to build up chains of BTL's with tax payer's money). With each passing year, another 2-3 million voters come of age. This group cannot afford houses or rents and are saddled with ever rising student debts.

Remember Hamish, politics created the housing bubble and politics can take it away.