A little time bomb under UK buy-to-let housing - Maybe

Generali

ruggedtoast wrote: »

The idea of buy to let landlords wailing and gnashing their teeth in woe, lamentation and despair, makes me tremble with orgasmic excitement.

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Killerseven

Generali wrote: »

https://medium.com/bull-market/the-overall-benefit-cap-a-little-time-bomb-under-uk-buy-to-let-housing-9575030792d3

A very interesting piece.

Basically the argument goes, under the benefits cap, out of work payments and child payments are fixed so the only thing that can be cut is housing benefit.

The author goes through the numbers in quite an interesting way (and I'd be fascinated to see how this would impact different specific areas).

Anyway, I enjoyed it and the writer does make one very good point is that if we know one thing about the housing market for rentals in the UK, prices tend to be very sticky.

Housing benefit has pushed up rents, if it's cut then rents will fall.

High housing benefit payments have pushed up rents all round so even those paying rent out of their own pocket have to pay more than they would if not for high housing benefits

Killerseven

buglawton wrote: »

Well at least it's a frank admission that the taxpayer currently shores up house prices via subsidies. Never mind just the prospect of house prace falls in many locations, the sharper benefits cap may actually result in a mini recession in some regions.

The last bit is key....One thing we do know about the British economy is that rents are sticky. I would guess that the frictions in the housing market would be significant enough to mean that we saw plenty of evictions (which destroy the cost-effectiveness of the scheme, as the evicted families have to be housed in expensive temporary accomodation), plenty of arrears, downward pressure on house prices and real danger of a meltdown in the social housing sector. I’m not sure this one has been brilliantly thought through.

BobQ

Generali wrote: »

https://medium.com/bull-market/the-overall-benefit-cap-a-little-time-bomb-under-uk-buy-to-let-housing-9575030792d3

A very interesting piece.

Basically the argument goes, under the benefits cap, out of work payments and child payments are fixed so the only thing that can be cut is housing benefit.

The author goes through the numbers in quite an interesting way (and I'd be fascinated to see how this would impact different specific areas).

Anyway, I enjoyed it and the writer does make one very good point is that if we know one thing about the housing market for rentals in the UK, prices tend to be very sticky.

Ironic that the BTL landlords who probably voted Conservative will be the first to suffer, while the tenants will get evicted and need re-housing. Still in the short term Cameron will have lots more immigrants coming into the country who will be more than willing to live in these empty houses.

cells

the exact same arguments apply to the £25k cap and the rental market has no disappeared its actually got larger and rents have gone up

With a £23k cap, the same will be true. Some tenants will have less HB to pay their rents and the landlords will have a choice to accept the lower payment or to evict and seek more

cells

i think the website is correct when it says the £25k cap had no impact as it applied to so few people, but it deadwrong when it suggests the £23k cap will impact lots of people

it suggests " credible estimates suggest that as many as 200,000 households might be subject to the cap"

well i would say that is not credible at all.

PasturesNew

What will happen is a swift S21 and a new inbound tenant who has a bit more money and just sucks it up.

cells

ONS data says that in private rentals, 221k households or 5.6% of the private rental stock has a unemployed reference person

That means for 94.4% of the private rental market, the cap does not apply at all as they are working or retired

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So 221,000 households in the PR market who could be impacted.
How many of them actually will be impacted?
Sure London rents are crazy, but go to the second or third or fourth biggest city and monthly rents are closer to the £600 mark for a three bed so why would a £600 rent be impossible for someone getting the £1916 net benifits on a new cap?

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my guess is there are 50,000 private rental tenants who are unemployed and could have the cap impact them. but most of them would be impacted by the £25k cap

my guess is that the rental market will not collapse, rather that a lot of these people will just get a job and avoid the cap or will be moved to a cheaper part of London or elsewhere with little to no impact on rents or prices

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Moving 50,000 households within London, will have virtually no impact. The London plan assumes over 60,000 homes should be built per year just to meet demand. I would be much more worried about 60,000 homes built per year than I would with 50,000 tenants having a one off move from inner to outer London

Thrugelmir

Killerseven wrote: »

The last bit is key....One thing we do know about the British economy is that rents are sticky. I would guess that the frictions in the housing market would be significant enough to mean that we saw plenty of evictions (which destroy the cost-effectiveness of the scheme, as the evicted families have to be housed in expensive temporary accomodation), plenty of arrears, downward pressure on house prices and real danger of a meltdown in the social housing sector. I’m not sure this one has been brilliantly thought through.

Many corrections are simply gradual adjustments that become the norm. No fuss no noise. Plan seems to be going ok.

buglawton

Cameron needs to get straight to the point and restart poorhouses.