Is it logical Captain?
28/06/2011 4:02 pm
The push towards market level rents and for homeless to be housed in the private sector has a social cost that is debatable - but what about the cost to the tax payer in funding Housing Benefit.
Here is the latest cost data:
At March 2011 There were 4.87 million recipients of Housing Benefit, of whom almost three-quarters were aged under 65.
The average weekly amount of Housing Benefit paid to Social Housing Tenants was £67.83. (£3,527 per annum)
The average weekly amount of Housing Benefit paid to RSL Housing Tenants was £77.16. (£4,012 per annum)
68% of Social Sector tenants receiving Housing Benefit
The average weekly amount of Local Housing Allowance Paid to regulated private tenants was £78.59. (£4,086 per annum)
The average weekly amount of Local Housing Allowance paid to unregulated private tenants was £114.47. (£5,952 per annum)
79% of Private Sector tenants receiving the Local Housing Allowance
(source: DWP STATISTICAL SUMMARY; 15th June 2011)
What struck me the most was the closeness of the regulated private rents benefit cost to RSL levels. This implies that rent levels as well are close. In which case, does it not make even more sense to regulate the remainder of the private market and so protect the taxpayer from further exploitation. That's assuming the obvious expansion of the public sector remains off the agenda.
But how can it be logical to opt for the most expensive form of tenure, as shown by the DWP, as the main housing provider for those without choice?
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22/08/2011 2:44 pm
nonny - a very sensible view.
Perhaps the government will reverse the 30-year detour through the consumerist wondland turned nightmare and come back to sensible policy of investment and sustainment.
15/08/2011 1:08 pm
On this basis I can not understand why anyone wants all poor people to be housed by private landlords - surely spending the same money building houses people can afford is better that having to fork out week after week with nothing to show for it other than one individual getting richer at the expense of the wider taxpayers.
Perhaps if our kids had a view of the future where they could reasonably afford a home they may not feel so angry at the 'grown ups' that have robbed them of that future!
01/07/2011 2:16 pm
Rosa - even if a mortgage is payable by the owner, this will only be the case for the first 25 years and often just 15 with BTL. After that time, and if we assume average life expectancy of a house to be 60 years, then the long-term benefits and operating profit levels can easily reach 70% and more.
The current problem is that BtL has seem an influx of new PSLs with one or two properties who are in the market on a short-term model (<15 years) and so their rents reflect mortgage and upkeep cost PLUS profit
01/07/2011 1:39 pm
So you mean I am talking about return on investment whereas profit is just operating profit of the business without taking into account the capital invested?
70% profit still sounds a bit high though, if you consider the costs of maintenance etc, plus of course the cost of repaying a mortgage if you needed one to buy the property you are letting.
30/06/2011 7:45 pm
Rosa - profit is not the factor of the value but of the cost.
Mr P - how are you working out that it only costs £140 to house someone in a private property as a total cost - if that were true then the profits must be even larger than first thought!
If the State supports private tenure it gets nothing long term for its money, however if the State provides social tenure then it retains the asset - the money thus spent becomes an investment - true?
What is more important though is that the tenant gains an affordable home via social rent rather than the financial albatros via private rent. Private rent keeps poor people poor by preventing them from ever saving and looking to improve their options. Social rent enables people to have choice, security, positive optinions, and future plans in their lives. I'm not sure how that equates on a sliderule, but the value appears to be immense.
30/06/2011 11:20 am
Nothing you've said is exclusive to housing or private landlords. As you know benefit money is spent on everything, not just housing. Is everyone from Tesco to your local market trader a vile greedy leech for selling something and making profits from taxpayers money?
You truly don't know what you're talking about.
The company i work for doesn't calculate it's profits by measuring their revenue against council rents. This is because council rents have no bearing on the companies costs or revenues in any way, much the same as a private landlord.
As i said before, profits are calculated using the businesses cost and revenues, not some other unrelated businesses revenue.
A) PSLs aren't being used over council housing, they are being used in addition to council housing.
B) What is the alternative? How much would it cost the tax payer to build enough social homes to house every private tenant? More than £140 each is the answer.
C) You can't prove anything with made up figures. Provide some real numbers based on actual profit levels and i may agree with you. I may not
29/06/2011 10:37 pm
"Profit = Revenue - costs. How have you worked out the 70% margin without knowing any of the landlords costs? You've just chosen a number which happens to be 70 haven't you"
Take your simple equation and
1.Revenue for PSLs in HB is 70% above council rent levels
2. Council rents make a small surplus at 70% less revenue than PSL
3. Council renst incur higher expenditure cost than PSL rents due to regulatory burdens that PSLs dont have
Therefore, if PSLs get 70% more revenue (income) from HB than councils do and PSLs hae a lower expenditure cost then 70% profit margins for PSLs are conservative.
I note you fail to comment on my other points -
A) that the use of PSLs over council rents means a current £3.5bn per annum increase to the public purse
B) that this costs every household in the UK the equivalent of £140 more per year in tax just to pay the PSL added costs
C) that this proves the market you advocate so much fails in housing
And then the further obvious conclusion that as you state that private firms are more efficient then councils (which do return a surplus to the exchequer) then the 70% profit figure I mention is even more of an understatemant as PSL operational costs much be much lower than councils due to their uber-effficiency!
Or, conversely, I could have just plucked that 70% figure out of thin air!!!
29/06/2011 8:47 pm
70% profit sounds very unlikely. I seem to remember one of the reasons people first suspected Bernie Madoff was a bit dodgy was that his consistent 10% returns on investment were too good to be true...
If I bought a 200k house I could rent it out for about 12000 per year. Which is a 6 percent profit, out of which I will have to pay for repairs, admin, periods when there is no tenant etc.
I'm neither a landlord nor a finance person so happy to be proved wrong on this!
29/06/2011 4:24 pm
I think Jack is being conservative with 70% profits in private rents. The normal commercial exchange would be 100-150%, otherwise you may as well have gambled the money at Ascot or on the Stock Exchange.
The lower returns than the stock market are acceptable to the landlords however, as the risks in letting are minimal. There are load of people in desparate need for accomodation and the goverment is still prepared to underwrite the rents through the benefit system. Insurance for loss or damage is relatively cheap, and a tax deductable cost anyway, plus improvement and insulation grants are still available, along with concessionary lending for the business rather than personal loan model. All told, investing in private letting is about 'as safe as houses'. Why am I bothering with this paragraph - out of anticipation of the next offering being about how the landlords deserve the profit because of the risks they take -sorry, try another tack because that one is not true.
The 17% increase in reposssessions reduces risk for the private sector landlord even more as they can gather around the corpses, like the vultutres that they are, to buy up the homes a dirt cheap prices, throw a few tax-deductables at it and rent it out for multiple factors - turn around time ideally no more than four-weeks - little risk and little loss, just loads of government guarenteed profit, funded by the likes of Mr P.
29/06/2011 3:32 pm
"Therefore PSL LHA rates must reflect at least a 70% profit margin for which this government is more than happy to pay."
Profit = Revenue - costs. How have you worked out the 70% margin without knowing any of the landlords costs? You've just chosen a number which happens to be 70 haven't you.