Private landlords cash in on housing scandal

cepheus

Private landlords cash in on right-to-buy and send rents soaring for poorest tenants

Shocking new report on London shows that Tory flagship scheme is poor value for council and taxpayers

A report to be published tomorrow claims that the right to buy scheme, highlighted by David Cameron as one of the greatest Thatcher successes at last year's Tory party conference, is "possibly unrivalled" in providing poor value for money to both taxpayers and local authorities.

It will also raise concerns that the scheme has benefited ruthless landlords at the expense of tenants, coming in the wake of comments by one of Britain's biggest property magnates, Fergus Wilson, who now plans to evict people on benefits because they can't afford his rents.

Loughton_Monkey

Fergus has been debated to death on another thread.

Right to buy is a different debate, although I can't see why Thatcher's brain child is responsible for "ruthless landlords".

The biggest scandal exposed by the article (in my view) is the comparison of £121 a week rent to a council tenant, whereas the private rent for a similar property is £212.

That's a 43% subsidy! This is a criminal amount to burden the taxpayer with when many council tenants earn plenty of money and don't come within an inch of qualifying for HB. And all Cameron can do is some sort of limp-wristed so-called 'action' watered down by applying it only to £60K+ people like he did for child benefit.

By selling the house to the tenant at any reasonable price, it must be cost effective, since it puts an immediate end to this subsidy, although I'd much rather it be sold to the tenant at a price somewhat akin to its true market value. This doesn't raise the 'housing need' by a single unit of houing. It simply turns a renter into an owner. That must be good.

One of the thrusts of the article seems to be some form of disgust that of the houses sold in Thatcher days some 36% seem to have ended up in landlord's ownership and rented out to someone. Well this is a complete non-event. I suspect that a huge proportion of all cheap housing in private ownership at the time is (or was for a period) a BTL property. What's wrong with that? If you want to buy a BTL property, you need to be in an area where it is common to rent. What better than a council estate?

I mean.... have another debate on the right or wrongs of RTB when it was going like a bomb, but that's all over.

A more urgent thing is to claw back some of the massive subsidies still existing in the Council House or Socially Rented sector for people perfectly able to pay their own rent. A rise of, say, inflation plus 5% each year should do it - until they catch up with market values.

What I fear is some new massive building program of "social housing", if rents are going to be set at such derisorily low value for all. It is a complete contradiction to have (a) a clampdown on means tested benefit (like HB) through UC and other measures [perhaps rightly] with one hand, and (b) the creation, with the other hand, of such massive 40%+ subsidies for hundreds of thousands of other people that are not means tested (except, perhaps, at initial day 1, and then the subsidy exists for life).

Pure madness!

cepheus

Loughton do you need to declare an interest just like the Tory MPs who bought up these flats as they became available on the private market? It's a tragedy that councils were not allowed to spend the cash on building more homes. This ensured that the private sector would make big profits out of this.

Graham_Devon

Loughton_Monkey wrote: »

The biggest scandal exposed by the article (in my view) is the comparison of £121 a week rent to a council tenant, whereas the private rent for a similar property is £212.

That's a 43% subsidy! This is a criminal amount to burden the taxpayer with when many council tenants earn plenty of money and don't come within an inch of qualifying for HB. And all Cameron can do is some sort of limp-wristed so-called 'action' watered down by applying it only to £60K+ people like he did for child benefit.

Subsidy....or more a reflection of the different ways public and private sectors work?

The council simply makes no profit. The rent is charged at what's needed. The private market wants profit on top.

Would you describe a patient receiving an Endoscopy on the NHS as receiving a subsidy as the private cost is circa £800?

Theres two markets at play here. The private market does not necessarily charge the "correct" rent, for they need profit. The council, strictly speaking, doe not. Therefore you can't simply assume the correct rent is the private sector rent. It's two different markets.

You have completely glossed over the fact that taking a house out of the council pool means no other person can gain from that council house (to use as a service, not a profit tool). As someone who was bought up in a council house yourself, I would have thought you would have got this. Was it scandalous that your parents got such a break too? Or just scandalous for anyone born after you....as is so often the case.

Conrad

I find RTB to be a massive draw for migrants. I doubt any other CPU try offers such a big windfall for so,ply being granted a home. Literally pennies from heaven.

In London the discounts are staggering sums.

Loughton_Monkey

Graham_Devon wrote: »

Subsidy....or more a reflection of the different ways public and private sectors work?

The council simply makes no profit. The rent is charged at what's needed. The private market wants profit on top.

Would you describe a patient receiving an Endoscopy on the NHS as receiving a subsidy as the private cost is circa £800?

Theres two markets at play here. The private market does not necessarily charge the "correct" rent, for they need profit. The council, strictly speaking, doe not. Therefore you can't simply assume the correct rent is the private sector rent. It's two different markets.

Yes indeed I would call that an £800 subsidy [on the assumption that this was the correct 'market price' for private treatment].... with perhaps an adjustment to take into account that (a) the private operation was done the week after you needed it, whereas the NHS would have made you wait 8 months or so with potentially dire consequences, (b) the standard of room, service, and general comfort is likely to be better in the private sector.

Rightly or wrongly, NHS is a non means tested 'benefit' to everyone. It is 'paid' in kind, but nevertheless has a value.

Where I take issue is the thought that a public body (e.g. council) can provide a service (in this case a house to rent) cheaper than a private concern even though the latter makes a profit. Government bodies have never been known for their efficiency. Much higher wages historically have partly been to blame, but other factors also exist.

Graham_Devon wrote: »

You have completely glossed over the fact that taking a house out of the council pool means no other person can gain from that council house (to use as a service, not a profit tool). As someone who was bought up in a council house yourself, I would have thought you would have got this. Was it scandalous that your parents got such a break too? Or just scandalous for anyone born after you....as is so often the case.

I was indeed brought up in a council house. However, my parents never received a penny of housing benefit. We paid the rent in cash on the nail every fortnight [I think it was]. I would point out, however, that for much of that time my mother never worked, and for much of the time we were a 'single parent family'. My father, having worked "on the shop floor" for 51 years earned very little. Today, he would almost certainly have qualified for full housing benefit.

We would also have qualified for free school meals but they were never claimed.

As for whether or not this was a 'scandalous' situation for my parents, then maybe it was! Being a child at that time I was in no position to judge or even know what was going on. All I can say is that had the council deemed my father to be earning enough, and either evicted us or put the rent up to 'market value', then I can only guess what my father would have done. He would have moved to somewhere smaller for roughly the rent he could have afforded. Maybe he would have got an evening job so that he could have afforded to stay. I don't know. It was (and still is) quite a nice 3 bed semi, corner plot, with generous garde front, rear, and side.

This is, however, your usual muddling because we are aguing things about what is going on today. If in any way you hold me responsible for actions of my parents, then I feel sorry for you. Even had my parents been 24 carat, out-and-out, full benefits scroungers [which they weren't] I suspect my own views today some 50/60 years later would be little different. And I don't have to 'answer' for my parents.

To advocate not selling a council house because it denies others in the future gaining 'benefit' from it is a fallacious argument I think. This might be an argument if the tenant was always a 'qualifying' person requiring this help. Tenants rarely are. Once they get a job, or children leave, or perhaps the tenant remarries..... the HB disappears, but the substantial subsidy remains. And it gets passed down to children if they are living there.

I strongly suspect that - on average - any tenant who buys, even at the 'knock down price' is presenting the council with a small 'profit'. That is (say) £80K cash now in exchange for an otherwise subsidy stream of (say) £5K inflation linked for the next 40/45 years. I can see no concept where one would deliberately choose to lose more money [by not selling it] in order to give a further opportunity - some 40 years down the line - to make yet another huge loss from the same so-called 'asset'.

I don't have an objection, in principle, to a modicum of housing subsidy. I object both to the scale of it and the way in which it is delivered. Legitimate ways to do it include:

1. Housing people 100% in private rented property at commercial rents, overlaid with a means tested 'contribution' towards rent. It should be much more on a sliding scale. Today, I think, it's a silly black/white situation. You either qualify or your don't. If you do, you get up to X.

2. Housing people in publicly owned houses (or a Housing Association equivalent) where the rent is 'means tested'. But rents should range from zero right up to full 'commercial' rent. Or better still, to keep such an 'asset' working properly, tenants would have to leave the minute the means test showed that they no longer qualify for social housing.

Our current system is a hodge-podge mixture of the two and doesn't make sense.

grizzly1911

Just heard an article on the BBC news channel, London Regional news that hilights local councils effectively having to rent sold RTB properties to house people.

Madness.

In our current "civilised" society we (the state) will always have a need to provide accommodation at a full or partial subsidy.

How we provide that at the cheapest cost is the question.

Peoples here regularly say individuals should buy as it is thged cheapest way to provide accommodation regardless of investment opportunity. Yet it is recommended that the state rent to fulfill their obligations. If it is cheaper for the individual why doesn't the same argument work?

In there NHS examples they cost of a standard operation may be £800. To provide that 8 months earlier and with better hospitality probably £4000.

Many of the same surgeons that conduct "nice to have" surgery also undertake the critical emergency work which the private sector will be reticent to touch.

The first part of Monkey's number 2 option needs action. If it deserves to be ratcheted to full rent then either the tenant will voluntarily choose to move or the profit generated used to provide new accommodation. Through evolution people don't necessarily stay with the council house option as many people demonstrate here.

There is no reason why the current moving goalposts couldn't be applied such as "bedroom tax"when suitable property constructed. I have known elderley people moved out of family homes to more appropriate single bed property .

purch

grizzly1911 wrote: »

Madness.

Clearly.

Right to buy was/is not a bad thing.

Right to buy at a deep discount is questionable.

Not replacing the stock sold is irresponsible.

Rents are high/expensive due to a shortage of available properties.

There is a shortage of suitable/available properties because the stock of social housing is too low.

The fact that councils are having to rent their formerly owned properties to house people is irrelevant in the big picture.

The fact that BTL, and this kind of BTL is an economic model that works for many people is entirely due to the lack of social housing.

If there was more (lots more) social housing then rents overall would be lower, so the implied subsidy that offends so many on here would be lower or non existent because market rents would be far lower too.

N1AK

grizzly1911 wrote: »

The first part of Monkey's number 2 option needs action. If it deserves to be ratcheted to full rent then either the tenant will voluntarily choose to move or the profit generated used to provide new accommodation. Through evolution people don't necessarily stay with the council house option as many people demonstrate here.

I've never understood why council housing isn't always charged at market rate. If you're not able to afford market rates then surely the point is that housing benefit should be sufficient to pay for it. Then, when you earn enough that you don't qualify for as much housing benefit you would make up the shortfall.

I would suggest that exactly what you propose: using any 'profit' made from council housing to produce more would make a lot of sense. I do however have my doubts that it wouldn't simply be sold off again.

Even as someone with distinctly economically conservative leanings I really do struggle to understand why anyone thinks Right to Buy wasn't an abject failure. The idea of selling tenants the property certainly makes sense, however not using the money raised to produce more council housing was a massive mistake.

antrobus

Loughton_Monkey wrote: »

....Right to buy is a different debate, although I can't see why Thatcher's brain child is responsible for "ruthless landlords"....

On a point of order; RTB wasn't "Thatcher's brain child"; it was Heath's brain child. Mrs T initially opposed the idea. Which is the realms of quite interesting.

Loughton_Monkey

N1AK wrote: »

I've never understood why council housing isn't always charged at market rate. If you're not able to afford market rates then surely the point is that housing benefit should be sufficient to pay for it. Then, when you earn enough that you don't qualify for as much housing benefit you would make up the shortfall.....

Housing is obviously one of the biggest chunks of basic cost. Other chunks are energy, food, and perhaps clothing.

Forgetting housing for a moment, imagine councils setting up a new energy company, called SocPower. It would be set up alongside all the private companies but deliver energy at 40% below cost to qualifying 'low wage people'. Those who have extremely low (or NIL) income may, in addition, be given cash payments to cover the 60% core 'cost'.

Then imagine the setting up of 'Socbury's' - a social supermarket selling a full range of groceries (and clothing) like Tesco and Sainsbury, but at 40% below their market prices. You would 'prove' that you are lower paid (or unemployed) and get a shopping card that allowed you to go in. Other people are not allowed in. Some people with little (or NIL) incomes might even be given a cash benefit to subsidise the 60% core 'cost'.

This might sound all well and good except for one thing. If the 'card' you required to access this cheap energy, and cheap food was given to you once - against an income/needs qualification at a specific moment in time - was never taken away, then 99% of people would consider that to be madness.

A lesser 'madness' might also be hidden away in the fact that SocPower and Socburys, being run by council employees locally, would be nowhere near as efficiently run as NPower, British Gas, Sainsburys or Tesco.

Since virtually nobody would advocate such a ludicrous system, I cannot understand why so many advocate exactly that system for housing. In very round figures, Social Housing provides housing at a 40% discount literally for life, based upon a fleeting one-time qualification procedure. Social Security then potentially provides help for some/all of the remaining 60%, based upon ongoing qualification procedures.

This is not logical. It is not equitable. It is very costly. It is madness.