Workers claiming Housing Benefit nearly doubles in 3 years

Loughton_Monkey

I am greatly out of my depth in knowing all the complex rules about benefits claiming. So I just spent a little while ramming some figures into "Turn2Us" benfits calculator.

I 'set myself up' as a 35 year old married person - wife not working - but earning just £10K a year from a part time job of 22 hours a week. I had three children - of an age and sex mix that qualified me for £1,000 per month housing benefit in this area!

It staggered me to learn that I would get £24,440 in benefits (inc £1200 Council Tax, £8,618 Child Tax Credit, £2,456 Child Benefit, and (very perversely) £12,167 HB - although I only pay £12,000.

I checked my 'take home pay' from my job (£9,334) and added it to benefits (£24,440) and found that if I worked full time, I would need to earn around £46,500K to get the same net income.


I didn't bother to check what additional unemployment or other benefit my wife would get.

If this isn't taking the p1$$ then I don't know what is.

I don't have kids, but I am rather confused as to how I could possibly spend £11K a year feeding and clothing my three young kids.

ILW

Generali wrote: »

In the jargon of economists, housing benefit shifts the demand curve to the right. To translate, at any given price more can be demanded with housing benefit in place because it is a subsidy to a group of renters.

It's a market distortion but it doesn't throw the rules out of the window. The housing market is pretty free compared to many in the UK given the amount of red tape and coercive taxation around these days.

Iwould suggest that once you get to the 30% or so receiving HB then it does distort the market.

chewmylegoff

ILW wrote: »

Surely demand and supply theory does take affordability into account. HB in effect removes this element. Whilst this should not have a great effect, I believe that in some parts of the country (London) something like 30% of private tenents are in receipt of HB.

it doesn't cause the supply and demand theory to break down any more than pay rises do. the amount of money that people have to spend on something feeds into the "demand" side of the equation - where they got that money from doesn't really matter. it might "distort" the market, in that it makes the market value of rental property increase, but it doesn't fundamentally change the way that the market sets market values.

Generali

ILW wrote: »

Iwould suggest that once you get to the 30% or so receiving HB then it does distort the market.

To get back to the point, it doesn't matter if every single renter in the country gets housing benefit. If you hold rents below market clearing prices then you will end up with a lack of rented accommodation.

You can believe that or not but any basic economic text book will tell you exactly the same thing. Maybe your assertion is right, maybe the only economic theory that isn't contested by any economist is correct.

Eellogofusciouhipoppokunu

ILW wrote: »

The majority of BTLs were bought 10 or so years ago and would still be making a healthy profit even if rents were substantially lowered

I thought that most BTL empires were created by MEWing? Either from the principle residence or from subsequent BTL properties?

In this scenario, the BTL landlord would be carrying a lot of debt that needs to be serviced before they make a profit. If the rental income is reduced then so is the profit and many will ask themselves if it is worth the risk of carrying so much debt for so little profit.

the_flying_pig

Generali wrote: »

Yes they will. It isn't worth, for example, maintaining/doing up a run down house if you aren't able to make an economic return.

It's economics 101, lesson 1. If you put in place a price cap below market price then you will reduce supply to below existing demand and at the same time increase demand!

no. no. no. that is not economics 101. it is very bad, thoughtless, bar-room economics.

Eellogofusciouhipoppokunu

Graham_Devon wrote: »

Surely if you put in a price cap, from today onwards, you'd in effect, be stemming price increases in property too. BTL landlords won't simply be buying up stock, competing with the FTB, UNLESS it makes economic sense taking the cap into account.

The lack of competition from BTL landlords, (letting to private individuals using taxpayer funds in a growing number of cases), should, in effect reduce house prices to a level real demand can play out.

I don't think anyones suggested imposing a cap below market rent, and I don't think anyone would suggest doing so retrospectively.

But, IMHO, you can impose a cap going forward, which wouldn't have the effects you talk of, as the cap would be known and planned for.

At least....it seems to work perfectly well in other countries, without the effects of which you talk of?

Depends what you are putting a cap on rents for. Your argument here seems to be in favour to putting a cap on rents so that there are fewer landlords and more properties to buy. You seem to be concentrating on reducing house prices for those lucky enough to afford a house, yet your actions will compound the problems for people who want/have to rent, due to reduced supply.

Still, as long as you can get a house on the cheap, eh?

coastline

ILW wrote: »

The majority of BTLs were bought 10 or so years ago and would still be making a healthy profit even if rents were substantially lowered

only 89,000 btl's 10 years ago...1.4 million today..

http://www.dailymail.co.uk/news/article-2186354/Record-number-buy-let-mortgages-worth-160bn-drives-rent-bills.html

http://www.pricedout.org.uk/PR/20100315/graph.jpg

somethingcorporate

Loughton_Monkey wrote: »

I am greatly out of my depth in knowing all the complex rules about benefits claiming. So I just spent a little while ramming some figures into "Turn2Us" benfits calculator.

I 'set myself up' as a 35 year old married person - wife not working - but earning just £10K a year from a part time job of 22 hours a week. I had three children - of an age and sex mix that qualified me for £1,000 per month housing benefit in this area!

It staggered me to learn that I would get £24,440 in benefits (inc £1200 Council Tax, £8,618 Child Tax Credit, £2,456 Child Benefit, and (very perversely) £12,167 HB - although I only pay £12,000.

I checked my 'take home pay' from my job (£9,334) and added it to benefits (£24,440) and found that if I worked full time, I would need to earn around £46,500K to get the same net income.


I didn't bother to check what additional unemployment or other benefit my wife would get.

If this isn't taking the p1$$ then I don't know what is.

I don't have kids, but I am rather confused as to how I could possibly spend £11K a year feeding and clothing my three young kids.

Kaboom!

This means generally the only families able to afford 3+ kids are the ones that are massive drains on the coffers. It's an unsustainable pyramid that is going to have to have a massive adjustment - somehow.

I cannot believe quite how lucrative it is to churn out kids and be low paid. I wouldn't have bothered with 17 years of education and 5 years hard graft in the work place to get to my salary when all I need to do is work 22 hours on low pay and get handed the rest by the current government to breed more. Utterly insane.

ILW

Eellogofusciouhipoppokunu wrote: »

Depends what you are putting a cap on rents for. Your argument here seems to be in favour to putting a cap on rents so that there are fewer landlords and more properties to buy. You seem to be concentrating on reducing house prices for those lucky enough to afford a house, yet your actions will compound the problems for people who want/have to rent, due to reduced supply.

Still, as long as you can get a house on the cheap, eh?

I already have a house, bought and paid for.
I do object to having to pay extra tax to subsidise rents being forced up artificially by the said subsidies though.