Sunday, 21 September 2014

Private rents 'unaffordable' in most of country

Average rents in the private sector are unaffordable for ordinary working families in more than half of local authorities in England, research shows.

The housing and homelessness charity Shelter released findings from its rent watch which showed that in the majority of councils, typical rents from private landlords were over a third of average take-home pay.

Rural areas are among the worst hit with findings showing that it is now more affordable to rent in Manchester, Liverpool or Birmingham that it is to rent in north Devon, north Dorset or Herefordshire.

London boroughs were the most expensive, with the average rent for a two bedroom home at £1,360 – almost two and a half times the average in the rest of the country (£568).

The least affordable local authority area outside London is Oxford, where typical rents account for 55 per cent of average earnings.

Shelter is calling on the government to take urgent action to stabilise the private rental market and develop policies to bring rents in line with average earnings.

Campbell Robb, chief executive of Shelter, said: ‘With huge differences in affordability across the country, there are now worrying signs that families are likely to be displaced by our out-of-control rental market.

‘Over recent years we have seen more and more people forced into renting, as high house prices and a lack of social housing have made it the only option for thousands of ordinary families.  

‘What we’re seeing now is that renting is no longer the easy, cheap alternative to home ownership.

‘We have become depressingly familiar with first time buyers being priced out of the housing market, but the impact of unaffordable rents is more dramatic.

‘With no cheaper alternative, ordinary people are forced to cut their spending on essentials like food and heating, or uproot and move away from jobs, schools and families.

‘With rural areas suffering just as much as cities - or in many cases, even less affordable - it’s no longer enough to encourage people to move out of crowded urban areas.

‘Government must urgently consider how private renting can become a stable, affordable option for families, and not a heavy financial burden that makes parents choose between buying food for their children and paying the rent.

‘This should be the wake-up call needed to finally take action to address our renting crisis.’


Readers' comments (81)

  • Melvin Bone

    I'm waiting for some posts proposing a rent cap..

    I notice that Shelter do not make any suggestions only calling for 'action'...

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  • F451

    'Shelter is calling on the government to take urgent action to stabilise the private rental market and develop policies to bring rents in line with average earnings.'

    I'd interpret this sentance to mean - link maximum rents to average earnings - or, use the legislation at the government's disposal to instal a maximum limit on rents - but that may only be my interpretation.


    I would however be interested to learn of any alternative understandings of just what Shelter are calling for by asking the government to'develop policies to bring rents in line with average earnings'.

    There will be others forming the same view that was obvious to some quite some time ago - but as I've said before, it takes time for others to catch up and realise what the solutions may be.

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  • move to Greece?

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  • Housing People Partnerships

    Housing People Partnerships
    We thought that the ambition behind the affordable tenure is to tackle this issue. Perhaps the problem is that nobody told the LPAs that affordable rent isn’t a variant on social rent?

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  • Rent controls are a good idea. They'd give more affordability to tenants and a feeling of greater security. Landlords can still make money, but would be forced to be less exploitative. The purpose of housing is for people to live in it.

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  • Jono

    Consider my example:

    In Small Town, there are 5 family households who live in 2 bed, privately rented homes.

    They have take home incomes of 10k, 15k, 20k, 25k, 35k, the median income is £20k, mean £21k

    If I have rents of £290, £435, £580, £725, £1,000, the median rent is £580, mean £611.

    According to Shelter, Small Town is an unaffordable place to live. The mean rent of £611 is 37% of the median local income of £20k (although interesting, in Small Town the median rent is affordable - so I wonder why Shelter chose the mean but anyways).

    If the residents rent the properties so the lowest paid lives in the cheapest, and the highest paid lives in the most expensive, they would all individually, according to Shelter's definition, be living in affordable housing. Yet they would include Small Town in their 55% of unaffordable places to live.

    Is their methodology completely sound? Perhaps not.

    Why do rents above 35% of income become unaffordable? If I am earning 100,000 per year after tax, spend 36,000 on my property and have 64,000 left over, is it true that my rented property is unaffordable?

    Let's explore this 35% idea further. If I am earning £10,000 per year after tax, an affordable house would be £292 per month (according to Shelter). Now I might be a single person household, a couple, a single parent, or couple with children etc. According to Shelter, if I have five kids and a partner and earn £10k per year, I should be able to rent at least a three bed home privately for £292 per month. It doesn't matter in fact what size property I 'need' - whether a studio or 10 bedrooms - to be affordable it would have to be £292 per month.

    My view is this article or research from Shelter is thoroughly unhelpful. It is not meaningful to look at affordability in terms of a fixed percentage of income. Housing reflects priority - if you want a home over your head as one of your basic needs, yes you will have to divert enough of your income to achieve this - whether 35% or 50% or even more. To make housing more affordable, each individual should pursue all opportunities to earn more. Regulation cannot achieve this - it is down to individuals to achieve their highest possible potential.

    Perhaps Shelter would spend its resources more effectively by helping in this regard.

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  • It is hardly surprising that rents in the PRS are upwardly mobile...... It is a free market and there are not enough houses. Whilst authorities are insisting on 50% social housing, developers are sitting on land; it would be better to revert to 20% and get them built then "buy" a further v25% through Housing associations and use that mechanism to "fix" rents. Where there are too many houses, in Ireland and Florida for instance, rents are falling as the financial situation deteriorates.

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  • F451

    Perhaps people would understand the splurge of statistics if the true context was put to them - for instance that the data comparison is for a family in a two-bed house and the rent is afactor of the median local wage.

    "Over half (55%) of local authorities in England have a median private rent for a two bedroom home which costs more than 35% of median take home pay in that area, a level considered likely to be unaffordable in previous studies".

    "The analysis indicates that in England:

    8% of local authorities are extremely unaffordable (median rent 50% or more of median full-time take-home pay);

    21% are very unaffordable (median rent 40% to 49% of median full-time take-home pay)

    26% are fairly unaffordable (median rent 35% - 39% of median full-time take-home pay)

    29% are fairly affordable (median rent 30% - 34% of median full-time take-home pay)

    12% are affordable (median rent less than 30% of median full-time take-home pay)"


    The full report can be found at:

    http://england.shelter.org.uk/__data/assets/pdf_file/0008/386828/Private_Rent_Watch_Report_1.pdf

    It includes a precise method statement, which is not ambiguous and clearly explains the data source, how it was treated, and why the % levels chosen were at those levels.

    Expressly, the median rent to median earning comparison excludes bizarre examples such as an upper decile earner renting a market rate property - introducing such examples is increadibly disingenuous.

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  • Jono

    Fair enough - the report did use the median rent but this was not stated either in this article or on the Beeb. Note to self: be less cynical.

    However the value is still arbitrary at 35%, for the reasons I've highlighted above. It ignores residual earnings. The ratio of 35% is based on a notion of fairness, but the case for this figure has not been established robustly in the research Shelter refers to.

    If the maximum rent for a family requiring a two-bed property is 35% - is it fair that a family with the same income requiring a three-bed home should pay 35% or more as well? Or one family with one child under 5 should have access to properties at the same level of rent as another one with two children in their teens?

    The other possible flaw is not considering HB payments when looking at affordability. Whilst I understand that if a household can claim HB in order to pay the rent, then for that household the rent was not considered affordable. But the presence of HB payments means rents can be higher and sustained at a higher level, and in a market where residents did not receive or could not receive HB, rents would be lower. HB payments support rising rents.

    How would the analysis change if market rents were reduced by average HB claims across the areas considered, for example - both on residual income and the ratio. The report by Shelter is too simplistic to give an accurate picture of things.

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  • F451

    2nd note to self - Beeb journalism lazy!!!! (I would not dare to suggest the same of their IH colleagues however - how about 'over-worked')

    Boris prefers 40%, but the main point is comparisons over time. A set figure and method allows at very least 'is it getting worse or better' to be evaluated, whatever 'it' is.

    Excluding HB is not a flaw - unless you subscribe to the Nu-Thatcherite wing and believe letting HB take the strain is a price worth paying. Surely the whole idea is to move away from dependency and state support, not towards it!

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  • BlokeWithAConscience

    Proves what many of the sensible posts have been saying for a long time -the need for private rent caps in a broken housing market. Astonishing then that some peculiar posts have continually backed MV instead of rents that people can afford in social housing as the way forward! Yes it is the way forward if you are a greedy landlord.

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  • Jono

    I agree "the whole idea is to move away from dependency and state support, not towards it". That is the point I am making - rents have become unaffordable in part because HB effectively boosts the size of the market for rent. It creates demand where otherwise there would not be demand.

    Market rent in a free market would entail people renting according to what they are both willing and able to afford. This is the only relevant principle. Answer me this - if more people refused to pay the asking price and demanded a discount, because they could not afford to pay the asking price, landlords would reduce the rent or suffer lost income.

    It is because Landlords can find people who are willing to pay the rent demanded (even if above 35%), and who are able to (with trade offs in other respects), that rents are as they are.

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  • F451

    But previously the argument has been that there is not much scope for landlords reducing rent - they only charge what they need to to pay the costs and make a return.

    Now, it seems they do have scope to reduce rents because nasty HB is the thing making them charge higher rents.

    So which is it.

    Are landlords exploiting the HB system to make higher profits from excessive rents, or

    Landords are charging those rents because it is what they need to cover their costs and make a living.

    Which way are you arguing it today Jono?

    Meanwhile - capping rents (using the scope within the level of rents being charged for lower rents to be charged) moves us away from benefit dependency, lowers benefit costs, and (within your own definition) readjusts the market by correcting the demand equation.

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  • Jono

    Let me make it as plain as I can.

    Let's say in a hypothetical market there is £100k per unit on average demanded for 1,000 units, so the market size would be up to £100m. Now if the amount offered was £100k per unit on average, the amount offered would equal the amount demanded and the market would clear at £100k per unit.

    Now let's say the amount offered was made up of £80k per unit paid privately, £20k per unit is paid as subsidy on average making up £100k. Then the subsidy is removed. So the total amount offered is now £80m, or £80k per unit. This means that the prices of units, on average will decrease to a maximum of £80k because it is impossible for the market to clear at a higher price.

    The question is what options are available to landlords in the private rented sector, who effectively face the above dynamic?

    1. Sell off their homes - increased supply of homes for sale will drive down prices to a market clearing level - home ownership becomes a possibility for more, and due to the correction in house prices, the risk of lending reduces. The increased demand for home ownership would then ease demand on private renting, contributing a further downwards pressure on rents.
    2. Reduce rents - making their homes accessible to more people in the market place, but guaranteeing income flow to the landlord, albeit at a reduced level. However his assets are protected.
    3. Leave some properties empty - the landlord has to pay for the costs of maintaining the property but this now has to come out of the rents collected on other properties, effectively reducing his income. Or he could neglect the property and reduce the value of his assets as well as increase future costs of improvements. Neither would be rational.

    So you see scrapping HB would lead to lower private rents, and possibly higher levels of home ownership. The extent of the pain over time in the transition from here to there reflects the extent of meddling by the Government to try and improve matters. But failing.

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  • There are a number of flaws in lots of arguments here.

    A lot of the Private Rented Sector is not targetted at the, can I say, lower end of the market. Much is, but an awful lot is not. It aims at those who are renting for many other reasons, while their own housing is being refurbished, while they are in mobile jobs, and even in the current market while house prices are falling and they have banked a previous profit on the sale of their houses etc. To these people, they will pick the sort of property suitable to their needs - maybe towards the higher end of the market, especially if in receipt of housing allowance from their employers. These properties need removing from any market rent statistics about amounts charged.

    To those in receipt of LHA, their rents are regulated by the maximum LHA payable - and as we see with university fees the 'maximum' soon becomes the 'minimum' chargeable by all, including such former colleges of Higher / Further Education who have achieved University status offering degrees in Hairdressing, Media Studies etc.

    Any 'rational' solution would simply reduce the LHA payable. As is put above, landlords will simply have to reduce their rents accordingly. There will be some problems - family of 10 made homeless by uncaring landlord, but it's the only way to force the market down.

    As to the real distortion - as long as London Weighting is payable, then the system will remain flawed. Those of us who do not live in Roseland have very little sympathy - if you receive enhanced salary, then pay. If not, then move. Eventually employers will realise that their continued source of cheap labour is elsewhere and move their businesses accordingly (much to the chagrin of their Directors and their wives, but Harrods do offer a delivery service).

    It sounds harsh, but the current housing market is flawed by conflating social / affordable housing tenants with market renters and allowing landlords to abuse the situation (with or without contrivance from their (extended) families).

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  • F451

    Is there anyone else out there who previously claimed that landlords could not possibly afford to lower their rents, that they had their loans to repay, that they had to make a living - and are now saying that it is a absolute certainty that capping benefits will lower rents.

    How will this happen - how have these same landlords suddenly become able to cut the rent that these posters previous claimed could not happen.

    Cut the crap, cut to the chase - cap the rents. All the effects argued, reducing housing costs, reducing benefit cost, increasing responsibility through decreasing dependency are all ensured by capping rents - they are only hoped for by capping benefits.

    Neil - your upper end of the market traders need not be effected, all they need do is work on their contracting or use the same exclusions that exist in the current legislation for regulated rents - their nightmare scenario is just fantasy, unless they enter into it voluntarily, and why would they do that.

    Jono - again, can you not see that you are arguing that landlords can now afford to cut their rents - in which case all the nightmare scenarios of their having to do so were either wrong,or made up.

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  • To whom it may concern

    It appears that every time a report like this comes out, rents go up. Or is it that they go up each month anyway.

    Maybe the landlords are just making the most of it before they all fall into line and reduce their rents like Mr Shapps says they will - but then there have been 3/4Million houses kept empty consistently for years, and somehow the owners afford to keep them that way.

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  • >>Chris.

    Re-read my post. I'm on your side - what I have said is that the full market private sector rent should be excluded from computing 'averages' / 'means' etc. They should be irrelevant to calculations which are therefore skewed.

    Personally, I would like to see EVERY private landlord who is charging LHA via tenants to the Housing Benefit account, being checked by HMRC to see that every penny of LHA received is accounted for in gross income before tax is calculated.

    Your personal implied slight is beneath you. I've already said before I'm willing to produce any accounts needed for the 1 property which I rent out.

    Once again you immediately react and assume that anyone who has looked at the issue slightly differently is wrong. Even Jono is quoting relevant figures which are worthy of consideration mathematically. HB or to be more accurate LHA has distorted the issue - too many landlords are setting their rent to LHA tenants at the absolute maximum. There are effectively rent controls - the problem is that they are set too high! Re-read my post and make a sensible conclusion.

    As usual, I have no intention of prolonging this discussion and risk boring everyone else.

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  • Jono

    F451 - Rent Caps were one of Red Ken's worse proposals, back in 2010 (no wonder Blue Boris got elected).

    I don't normally copy articles in full, but this is just too good an illustration of why capping rents is wrong:

    Plan to cap private rents is flawed, say mortgage experts
    Tuesday 5th October 2010
    Ken Livingstone has said he will cap private sector rents throughout London if he wins the mayoral contest.

    He would not allow tenants to pay rents higher than landlords pay for mortgages.

    Livingstone said: “Tenants should not be paying more on the rent than it costs to have a mortgage on the same property. I would cap the rents. We want to have rent control.”

    But Labour’s mayoral candidate seems ignorant of the widespread requirement among buy-to-let mortgage lenders that rent should cover 125% of monthly repayments.

    Brian Murphy, head of lending at the Mortgage Advice Bureau, said: “Most BTL mortgages are assessed / determined on a formula that requires the rental income to be significantly more than the expected actual rent that the property will achieve. This is typically 125% of the monthly rent, and can be 130%.??

    “Some lenders’ BTL formula are determined not on the initial rate of interest that the borrower will be repaying on the actual mortgage product but on a notional rate or reversionary rate, often the rate that the product will revert to once any initial rate has ceased. Therefore any plans to cap rents to the level of the mortgage payment are likely to result in potential or existing landlords being unable to obtain the financing that they need to provide much-needed private rented property.”

    Jonathan Samuels, CEO of Drawbridge Finance, said: "Ken Livingstone's proposal for capping rents at mortgage repayment levels is impractical and goes against free market economics.

    "Landlord demand would fall as yields would be too low to cover on-going maintenance and other costs. Property prices, currently under pressure, would inevitably fall as demand for investment properties would drop. This is not to mention that getting mortgages would be impossible, as lenders generally require rents to cover 12% of the mortgage repayment.

    "If he wants to send the property market into a nosedive, this would be the way to do it!"

    http://www.introducertoday.co.uk/news_features/Plan-to-cap-private-rents-is-flawed-say-mortgage-experts

    I'm not arguing that Landlord's can afford to cut their rents. Only that rents are, in a free market, determined by the interplay between supply and demand. This interplay is based on the landlord being willing and able to supply one of his homes in return for an agreed rent, and the tenant being able and willing to pay the agreed rent in order to live in the landlord's home. Private rented housing is based on a strong principle of fairness actually.

    Too many landlords are demonised as being greedy and exploitative, when I suspect the majority provide a good service.

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  • Jono

    More on rent caps for anyone not yet dissuaded:

    "The Effects of Rent Control

    Economists are virtually unanimous in concluding that rent controls are destructive. In a 1990 poll of 464 economists published in the May 1992 issue of the American Economic Review, 93 percent of U.S. respondents agreed, either completely or with provisos, that “a ceiling on rents reduces the quantity and quality of housing available.”1 Similarly, another study reported that more than 95 percent of the Canadian economists polled agreed with the statement.2 The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners milton friedman and friedrich hayek on the “right” to their fellow Nobel laureate gunnar myrdal, an important architect of the Swedish Labor Party’s welfare state, on the “left.” Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”3 His fellow Swedish economist (and socialist) Assar Lindbeck asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”4 That cities like New York have clearly not been destroyed by rent control is due to the fact that rent control has been relaxed over the years.5 Rent stabilization, for example, which took the place of rent control for newer buildings, is less restrictive than the old rent control. Also, the decades-long boom in the New York City housing market is not in rent-controlled or rent-stabilized units, but in condominiums and cooperative housing. But these two forms of housing ownership grew important as a way of getting around rent control.

    Economists have shown that rent control diverts new investment, which would otherwise have gone to rental housing, toward greener pastures—greener in terms of consumer need. They have demonstrated that it leads to housing deterioration, fewer repairs, and less maintenance. For example, Paul Niebanck found that 29 percent of rent-controlled housing in the United States was deteriorated, but only 8 percent of the uncontrolled units were in such a state of disrepair. Joel Brenner and Herbert Franklin cited similar statistics for England and France."

    http://www.econlib.org/library/Enc/RentControl.html

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  • F451

    Neil - I did not intend any implication, but if it was felt, apologies. I'm not sure this is about sides though, it's about making housing affordable.

    Jono - welcome to Damascus. I hope your journey was uneventful, but do shake the sand from your shoes and sit down.

    Yes - the financial sector produced some really poor products and the more ignorant (including me) bought them. I do not expect the economy to be further screwed because I failed to properly research what I was getting into (or actually wrongly gauged risks). I see no reason why the rest of the nation should be further screwed to make life easy on those who should not have got into a business that they could not afford if investments went down rather than up.

    I really do not give much priority to those saddled with unviable BTL mortgages - either they use their business accumen to get through this or they realise that they should not have been playing games that were beyond them. Their choice Jono - as I'm sure you'd agree, or do you object and wish to argue for a collective solution for these few poor souls.

    So great - we are all agreed - landlords can afford to reduce their rents (and if cutting LHA produces all the effects you project Jono - i.e. if you are right, then won't those same poor people with the BTL mortgages find it a tad awkward when their £100k becomes £80k, to use your model?). So now there is no argument about the fact rents can be reduced - why not do the simple thing and, reduce them.

    The advantages of a rent cap have been clearly put previously so I will not repeat them - and fortunately we are wiser than in the those dark days before the shortcoming of poor financial products was realised. its nice to find some agreement on something at last.

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  • Jono

    F451 - there is a difference between a business being unviable because of market forces, and a business being unviable because other people are screwing with it.

    Let me put it to you in another way. We are all going to be ill from time to time. If I catch a bug at work, and fall ill, then that's life - I wait til I'm better and get on with my life (or if it is really bad, die). Alternatively, a person deliberately infects me with the same virus in sufficient dose to make me as ill.

    Now the outcomes are the same, but the causes differ. Do you understand F451? If the interplay of voluntary action of life results in a Landlord falling into hardship, then as you say this is the nature of the beast. If a Landlord is literally forced into hardship by another party (Tenants and their representatives) to make life better for that party, it is certainly unjust.

    Do you see F451 - this is not about protecting landlords but about a violation of a principle. No one should expect the unearned - a rent cap is, essentially a reduction of the tenant's costs, or put differently, an increase in their disposable income compared to what would be the case otherwise. This is paid for by the landlord, who is forced to forsake that income. What claim has the tenant over the landlord to make this a legitimate transaction? None. It is a violation of the landlord's rights.

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  • F451

    So, in principle Jono, you agree Landlords can afford to reduce the rents - who gives a monkeys about the cause then if that is the outcome that can be achieved, indeed is the outcome that you want to achieve through benefit capping and I want to achieve through rent capping. The difference is purely your way causes suffering, my way does not. Why should the poor and vulnerable pay the price for your principle when it is a price that does not need to be paid.

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  • Jono

    You are putting words into my mouth. The post is clear on what my views are.

    The poor and the vulnerable are not a different kind of species F451. They are human beings like you and I, and they have to make decisions about how to live, the same as you and I. The same principles which are right for you and I, are right for them too.

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  • Jono

    You are putting words into my mouth. The post is clear on what my views are.

    The poor and the vulnerable are not a different kind of species F451. They are human beings like you and I, and they have to make decisions about how to live, the same as you and I. The same principles which are right for you and I, are right for them too.

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  • F451

    So in your own words

    Can landlords afford to reduce their rents?

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  • Joe Halewood

    London accounts for 16% of the housing market, the rest - yes those plebs in the provinces, account for more than 5 in every 6 houses. Still this doesnt stop any theory of housign being discussed at it would or has applied to the perverse and atypical London housing market does it?

    Of course not as each sucessive housing policy coming out of each sucessive Hosing Minister for the last 30 years (if not more) is developed to address the atypical (but very nearby!) London housing market.

    The perversity of Londons private rented market is a clear case in point, though almost as perverse is the complexity of 'solutions theories' to it on here, which are becomign more and more complex.

    Oh national average figures for HB in-payment are £79.45 for regulated private tenancies and £113.78 for unregulated ones. Simple facts proving a simple point on a national basis (Yes soory that includes the more than 5 out of 6 plebs that dont rent in the capital!)

    What I hear you say theres only 48,000 of then left and none here since 1989? True, but has anyone looked at Northern Ireland and the reintroduction of regulating private tenancies? Highly regarded by the private landlords themselves and by tenants?

    Seems if in that part of the world they can get over hundreds of years of religious dogma, shouldnt really be that hard for this or any other goverment to set aside their political dogma and regulate ALL landlords and then bring the burgeoning HB bill back under control.

    Sorry another pesky fact and repeated again - if unregulated private claimants paid at same rate as regulated ones then thats a £2.59bn saving to the HB bill at a stroke - which is more than the entire HB reforms are projected to save!

    Can landlords afford to reduce rents? Average nat social housing rent level £76.17, average private rent level nationally is £164.55 - more than double the social rent level.

    And ti supplement my vierw that is a gravy train, regulated private landlords at £79.45 receive LESS in HB than housing association tenants do at £80.11 and they still must at least break even.

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  • Rick Campbell

    HouseMark’s information hub to help you keep up with the fast pace of change in housing


    Friday, 14 October 2011

    Shapps won't cap private sector rents

    Shelter has published research examining the rapid growth of the private rented sector and focussing on its affordability.

    The report says, 'Growth of this magnitude has not been seen in a housing tenure since the post-war rise in social housing'.

    Despite this, the report suggests that 55 per cent of English local authority areas have private rents costing over 35 per cent of median take home pay - a level which, according to previous studies, is likely to be unaffordable.

    A selection of findings:

    The highest average private rent for a two-bedroom home in England is found in Kensington and Chelsea (£2,714 per month), with the lowest (£394 per month) in Burnley.


    Extremely high rents are almost exclusively found in London and areas close to London with good commuter links – the average private rent for a two bedroom home in London (£1,360 per month) is nearly two and a half times the average in other regions (£568).


    The geographic distribution of rent levels is an almost perfect ripple effect out from central London – the further away from the capital, the lower the average rent is likely to be. The few exceptions to this are Manchester, York and Harrogate where average rents are on a par with those seen in the South East and East of England.

    Shelter's report quickly grabbed the BBC's attention, prompting a response from Housing Minister Grant Shapps who refuses to cap private sector rents, claiming that the only way to solve the current housing crisis is to build more homes. Talking on BBC Radio 4's Today Programme Shapps said:


    "On this private rented sector issue a lot of people say why don't you cap rents? I'm convinced that's a bad thing to do. When rents were capped the private rented sector shrunk from over half of all housing to just 8 per cent by the time the caps were released. So I don't think that's the answer. But building more homes is."

    Shapps claims that the Government's plans to revitalise Right to Buy, hand over Government land to developers and reform the planning system will create 200,000 new homes.

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  • Rick Campbell

    Sorry, should have stated that the above posting is a direct lift from the latest e-mail I've had from CoalitionWatch.

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  • Jono

    F451 - still missing the point. The question is - is it right to force someone offering a service at an agreed price to drop it, so another party can benefit at their expense? I say no.

    Joe - do you spend all your time watching rents? Besides - if you suddenly removed £2.59bn, which I would agree with actually, you would force those who rely on subsidised tenants to find unsubsidised tenants. Given that the spending power of the market would fall, so to would rents have to as explained above.

    No need for caps or regulated rents - just stop paying the subsidy.

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  • F451

    I remember someone once saying something along the lines that when faced with a fact that proves he is wrong, or a question he can't answer he answers another instead. I remember someone else pointing out that the same could be applied to the person making such a statement. How often it is that I am proven to be correct.


    Meanwhile Jono: Can landlords afford to reduce their rents? It is a very simple question that only needs a Yes or a No.

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  • Rick Campbell

    Is it right to force someone who is providing an agreed service at an agreed price to provide more service for a lower 'reward'?

    I don't think so.

    But the government does -- by dropping pensions?

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  • Jono

    I'm not avoiding your question - just stating that it is irrelevant.

    Say the answer is 'yes' for arguments sake. Landlords can afford to lower their rents (which assumes every landlord is in the same position which is of course an easily rejected assumption). A rent cap within the 'affordable' level will reduce the landlord's income in order to reduce their tenants costs. But not to an extent where supply or quality is necessarily impacted.

    Or let's say 'no' for arguments sake. Landlords cannot afford to lower their rents (an assumption which is as questionable as it was before). A rent cap will result in diminished supply and quality of private rented homes, as well as being detrimental to private landlords.

    These are pretty much what a yes or no means in terms of superficial outcomes. Superficially, you might say if the answer is yes, then as the landlord is not harmed, then it is OK.

    Regardless of a yes or no, in each case the imposition of a rent cap is still unethical for the reasons I gave before. The landlord should not be forced to give up his earnings because of the position his tenant is in, whether he can afford to or not does not factor.

    Rick seems to get the principle of it.

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  • Rick Campbell

    Indeed so Jono, sort of -- but only in the simplest terms.

    I'm not against private landlords per se -- as many are damned good around here according to private tenants but not as good as the cheaper social landlords such as my landlord and the well more than a dozen others operating in the area.

    Private rents are quite dear here -- our rents aren't all that cheap (48 week year) but other than the densly populated areas, land values and property values are very high.

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  • F451

    Go on then Jono - you get out of the corner that you backed yourself into.

    Let's just say both sides of what you say are true.

    Landlords if capped would struggle, but those same landlords will reduce their rents when benefits are capped because they will feel happier that it is their choice. So yes they can afford to reduce their rents and still run their businesses, but no they'd rather max out the benefit system whilst they are allowed to.


    On the plus side Jono - by holding two opposing views on the same subject you do increase your chance of being right, at least half of the time!

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  • Jono

    Funny F451, if it were true. My position is unchanged.

    Your yes or no question was designed as a trap, which failed.

    It is not about the landlord feeling happier. It is about whether it is right for one party to an agreement entered into voluntarily, or their representatives, to force the other party to give them a better deal than the one they entered into.

    Is it right to force someone who is providing an agreed service at an agreed price to provide more service for a lower 'reward'?

    I don't think so!

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  • McMadman

    My observation is this. If private rents are unaffordable in most of the country, and newbuild and new lets are forced to be at "affordable" (eg 80% market rent), how can "affordable" housing be "affordable ?"

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  • McMadman

    Jono

    Interesting philosophical point. "Is it right to force someone who is providing an agreed service at an agreed price to provide more service for a lower 'reward'?"

    Well, yes it is. On the one hand, you might call it negotiation. Or, on the other hand, if you are one of the devolved governments of Britain, or even one of it's many local authorities, that is precisely what happens right now.

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  • F451

    Poor Jono - you were clear that rent capping could not work because Landlords could not afford to reduce rents, then you were clear that because of HB capping landlords would reduce rents, and you were clear that tenants should negotiate reduced rents, implying that they can be reduced.

    Can't you just admit that you were wrong when you said rent capping could not work because landlords could not afford to reduce their rents. Your proposition that they should not be forced to reduce rents is an entirely reasonable argument which is debatable, but your categorical denial of the landlords ability to reduce rent was wrong - however much you try to wriggle against that, it is the the case.

    Yes/No was not a trap but simpy indicating to you that you have tried to be on both sides of the argument and are now trying to recover face - badly.

    In response to your question, because I know you get so upset if questions are not answered, yes it is - that is what negotiation results in does it not. Or are you now saying that the tenant's negotiation should be a once and for ever exchange, never allowed to be revisisted - that's a little restrictive upon the tenant isn't it Jono.

    How about this question: Is it right to permit a Landlord who may have more power (through owning the property wanted) to exercise that power over a prospective tenant who may have no recourse to support or advice, or any leverage to negotiate with? Does your world view support such an arrangement?

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  • Joe Halewood

    Mc Madman

    National Average private rent level is £164.55
    National average LHA in payment is £113.74

    Hence LHA covers 70% of the 'gross market rent'

    Shapps' "Affordable" rent (sic) is up tp 80% of gross market rent or currently £131.64 and so is a higher cost to public purse for this social housing model than the private rented sector cosy.

    Unlike Jono,who asks how much time I spend on rents (about 1% of the time he spends avoiding these pesky facts is the answer!) these facts reveal the economic bankruptcy of the theory of affordable rents model.

    Why the sector has not exposed these figures as part of its strategy baffles me. As I've said numerous times whats the point of arguing whether AR is right or not. moral or amoral, dogma or correct - if the figures expose it produces the opposite of its intentions (to reduce HB bill and benefit dependency) then surely it is right to expose its economic inevitability, that is failure!

    Pesky facts again methinks! Shame as they spoil the fun on here of those that seek to deny them or ignore them with convoluted abstract theory

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  • F451

    The situation concerning affordability was worse of course before social housing was introduced. Because people had no choice but to live in a home provided by either their employer, or some other private landlord, they either paid the going rate of lived on the streets.

    Many ended up sharing a house that was divided into as many rooms as it could hold, some even sharing that room on a 'timeshare' basis by pairing up with an opposing shift worker so each could sleep whilst the other worked. Whole families lived like this, barely existing and never able to amass the funds to improve their situation.

    Is this really the model being followed in this 'modern' age? Or is Shapps's ideal to follow the Maltheus idea, consigning the poor to ever more choking ghettos until through pressure of numbers and crushing poverty the 'problem' resolves itself?

    The policies that he is pursuing seem little to do with improvement, options, and choice. More disablement than enablement. Unless of course you are a property owner. Then you are enabled to convert that property into as many rooms as it may hold and rent it out for as high a rent as you can get away with, and no government busybodies to oversee nor regulate your practice. Is this really the way to solve the housing shortage!

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  • Shelter need to consider the private rented market forms a function and private landlords should not be regarded a providers of social housing. It is a market driven form of housing. The constant drive of legislation, epc's, landlord registration etc only goes to increase cost. the HMO legislation drove many landlords from the market, this reduces supply and increases rent. I was in the profession in the 1970's where strict rent control meant landlords could not afford to repair their properties and the county's housing stock fell into decline. Council housing and housing associations should be providing affordable housing as shelter would put it. OR low earners should not be taxed so highly! Going back to the days of rent control will revert to landlords coming out of the market and back to the days when there was no mobility in the population - this would strangle the mobility of the work force. I am old enough to remember when it was nearly impossible to rent - YES - nearly impossible due to the controls placed on rent under the Rent Acts. It is time shelter got off its left wing tack and acknowledged the private rented market does a fantastic job where the state failed. I have seem many shabby badly maintained council properties due to budget constraints whereas the private rented market has generally raised standards of maintenance and quality of housing except for a small section of poor landlords who have to accept lower rents. So cut the rubbish of statistics and get real.

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  • F451

    I do not want to decry your memory Geoff - but I would ask if others share it, or if they share this memory of mine of the same period you quote.

    Private landlords were very few, providing two niche markets of executives with temporary contracts and students in shared accomodation.

    The majority of working people obtained housing either by buying it, or a significant minority rented their home for the local council. There was also a small but successful RSL sector meeting specific and special needs.

    People waited weeks (yes weeks) for housing because of the plentiful supply. Tenants wanting an exchange simply posted a card in a shop window near where they wanted to move to, and invariably found a match almost immediately. Access, availability and flexibility were no problems, and housing was well maintained, normally by an in-house council worker who had all the tools he needed in a box on the front of his bycycle.

    Rent were highly affordable, about a 10th of current social rents in real terms, and this enabled tenants a decent standard of living, including annual holidays, on a single household wage.

    The shabby conditions may have been in the private sector, and may have been because of rent controls. Perhaps arguing to ease such controls may have been better than the solution that was bought into play.

    Councils were banned from building and RTB ensured half the stock disappeared. Rent subsidy was successively reduced to such a degree that landlords could no longer afford to capitally repair the homes (hence the decent homes funding being required), and to such a degree that lately rents have raised more than the landlords recieved to manage thier homes.

    It is the past 30-years of policy that has given rise to the housing situation that matches your memories of 40-years ago.

    I'm sure that there were areas in Britain where waits for housing were longer, repairs not as good, and being able to trade down or trade up the size of your home was not as simple - but the memory I quote was real and experienced in the Essex community where I was a tenant at the time.

    The statistics of housing by tenure for the 1970's also show virtually no private landlords compared to a massive social sector, which would tend against the memory you are calling upon Geoff - are you sure that you do not mean the 90's?

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  • F451, your comments are interesting and from a different perspective. Private landlords did not enter the market for social housing which is the function of councils and housing associations so there should be no cap. failure of housing associations and councils to keep up with demand have used private landlords to top up their failing supply. The problemsresults not from the private rented sector but the politics of RTB which is where the supply of social housing was depleted. The incorrect policy of not allowing councils to re-invest in home building had a significantly adverse impact on supply of social housing. In the 70's 80's your are right that easy inter council transfers were easy, but be outside of the council housing criteria you had to buy - virtually no choice to rent. Councils have forced developers to provide around 35% of the developments over 12 units for social housing - effectively a payment for granting planning consent - planning gain as it is called. which is where some social housing is being provided by the private sector. Private landlords are there to supply those who can afford open market rents. Housing Associations for social housing and those in between with their shared ownership schemes. RTB, was a political scheme to get votes, caused shortages. Rent capping is wrong as landlords did not invest in a open market to provide social housing, although many do. You don't subsidise bread, water, gas, electricity, or other essentials - there is no justification to subsidise rent in private contracts. Housing Associations need to meet the social housing demands it is not the function of private landlords.

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  • Jono

    Geoff is correct.

    F451 and similarly mistaken posters - again as much as you would like my case to be inconsistent, you are simply wrong.

    Joe & McLoony - let's turn to you first. If affordable rents are 80% of market rents - are they more or less affordable than the market rate for letting a property? Clue - less (I'm sure you will accept 80% < 100% - or will I have to put as much effort into defending that fact of logic?). Therefore anyone who rents one, rather than the alternative (100%) is incurring less cost. Simple conclusion based on the facts. Pesky I know - but it stands whether the private rent is £112.76 per week or something else (can you resist the urge Joe?).

    Where does it say providers have to set rents at 80%. I'm sure when originally launched the criteria was stated to be up to 80% - meaning providers can ask for less. I know of one major housing provider who intends to charge considerably less for some units. You are assuming they all will be but let's wait and see. I say this in response to your points - not because I am a fan of the affordable rent model (I'm not, for different reasons).

    F451 - again you are celebrating a loss as if a victory. For the reasons I have given previously (and on other articles) a rent cap COULD be to the detriment of any given landlord (economists and other professionals agree with me on both sides of the political spectrum as I proved previously - so I'm in good company). As it would be forced, it would be unavoidable - there is no voluntary element involved - no negotiation, no honouring of contractual agreement, and a violation of the principle of mutual consent (incidentally, to join a family of other non-consensual acts. Can you think of some which involve unwilling participants?)

    If the landlord had committed a crime against the tenant and doing this was restitution then maybe you would have an argument. As it stands, private landlords are guilty of no offence, and should not be forced to pay for the circumstances of the tenant. As I have said numerous times before. And will again if pressed.

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  • F451

    Thanks Geoff, you are indeed correct to state that the politics of RTB (and the failed individualist philosophy that came with it) is the cause of todays problems.

    I agree with your description of what the role of private landlords should be. However, we have to face the fact that the outcome of the lunatic tendancy is that we now have a substantial level of social need being met through market renting, subsidised by the benefit system. That is the area where I'm keen to remove the profiteering element so supported by the like of Jono and those he sheepishly follows.

    The real solution is to reinvest in social housing on a scale that reverses the 2.5Million lost units, and takes this beyond to put in place the further 1.5Million that should have been provided. This, in itself, would act to curb the excesses and exploitation within the private sector.

    By the way, the price of wheat is subsidised to ensure bread costs remain stable. The utility companies still receive government sourced funding, as does the transport and freight industries, and all small and medium sized businesses, new starters included. Tax funded subsidy is in most sectors - so why not housing?

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  • Joe Halewood

    Jono - 80% is less than 100%

    100% is Gross Market Rent or GMR which was £164.55 pw when original figures produced for illustration.

    At the same time:

    Council rent of £71.14 is 43% - hence AR is an 85% increase
    HA rent of £80.11 is 49% - AR is a 64% increase
    Regulated PRS rentt of £79.45 is 48% - AR is a 66% increase
    (Unregulated) LHA of £113.74 is 69% - AR is a 16% increase

    All of the above are LESS than the comparable AR social housing renting model (ie ones thats covers benefit payment) of £131.64 which is the 80% figure.

    3.11 of the Affordable Homes Programme Framework document - the official guidance - says that the 80% figure cannot be used where it exceeds the HB caps

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  • Jono

    Thanks Joe - so basically you agree with me that affordable rent is more affordable than unregulated market rent, but want to point out that affordable rents are not the lowest rents. Fair enough.

    F451 - "The real solution is to reinvest in social housing on a scale that reverses the 2.5Million lost units, and takes this beyond to put in place the further 1.5Million that should have been provided. This, in itself, would act to curb the excesses and exploitation within the private sector."

    And who is going to pay for this £400bn new homes development? All the nasty rich people is it Chris? It must be cloudy where you are!

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  • F451

    Why do you refer to rich people as nasty Jono - that is not very nice of you, and is also tarnishing a group of people without any grounds - I do hope you will retract the comment. You do struggle to keep a handle on that other side of your personality, don't you (by the way, that is not a question as I know you struggle to find answers!)

    As to where may the funds come from (you see I do attempt to answer questions), that would be from, for instance, using existing funds in a way where they may be recycled rather than just given as one off payments or subsidies; alternative prioritisation of existing budgets to support the investment in housing development and then using the extra economic growth that would result to restore funding previously redirected. It's hardly rocket science - indeed, if there were a war or two called tommorrow the government would have identified the money to fund it by tea time!

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  • Jono

    F451 - well done for attempting to answer questions - but the next challenge is to answer the question put to you!

    Yes you would recycle part of the £400bn (what part?) - and who would pay for the initial investment? You still haven't answered the question. Alternative prioritisation does not answer who will pay for it either.

    I was right - it is cloudy where you are!

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