SOCIAL AND AFFORDABLE RENTS -- should there be a difference?
19/09/2011 12:35 pm
The Pollitical Party Season is upon us. Already there has been a difference of opinion on the Affordable Rent issue --
So, should there be an Affordable Rent level AND a Social Rent level AND a Market Rent level at all? Should they all be the same?
I expect that there might be some 'high-brainpower-required' replies.
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19/09/2011 1:00 pm
Social housing is one of our greatest post WW2 acheivements. It exists to provide low rent homes to those who need it, those on low or minimum wage, or people with vulnerabilities and illness. "Affordable rent" is government doublespeak for rents the poor cannot afford. Social rent housing should be protected at all costs. Of course there should be a difference Rick. "Affordable rent" should be abandoned - it is a contradictory idea that betrays the very people who are most in need of social housing.
19/09/2011 1:08 pm
My view is that rents should be determined by people who are both willing and able to pay the rent requested by the landlord. Landlords should be free to set the rent at whatever level they like - if they get the decision wrong it will cost them. This is what I call market rent.
People are concerned if all we have are market rent properties, there will in some areas be no homes for people on low incomes. However, in a free market, there is nothing to stop landlords voluntarily offering rents at lower levels. What we call social landlords could voluntarily decide to set the rents at a lower level and be free to decide who they want to offer those homes to, without interference from anyone else (including Government employees). In a free market, landlords would be free to determine whether to offer a secure, or short term agreement depending on their judgement of what agreement they want to enter into.
The real issue then centres around those who have such low incomes they cannot afford any rent level. They effectively require free access to housing. Who should pay for this? My view is that it should be charities, funded by individuals who are willing to help those in need.
19/09/2011 1:09 pm
Sorry Paul -- social housing does not exist just for those on low incomes and vulnerabilities. Welfare housing or indeed housing association housing (as per originally designed to do) is perhaps more along the lines of what you are suggesting?
I feel that the lines between what council housing was originally intended to do and what successive governments have tried to make it do have become blurred in many peoples' minds.
There will be many viewpoints on the issue I forward for discussion and perhaps some good points (such as yours) will be raised in an understandable manner.
19/09/2011 2:32 pm
Jono, with respect, what you term 'market rent' is not the applicable issue: The "Affordable Rent" Model has an explicit definition and this is 'gross market rent' (GMR). This iss detailed in the Affordable Homes Programme Framework (AHPF) document released by central government
The current GMR on a national basis is £713pcm (and rising weekly) and gives a GMR weekly rent of £164.55.
The national average unregulated private tenancy HB in-payment figure is £113.78 or 69% of GMR
The national average regulated private tenancy HB in-payment figure is £79.45 or 48% of GMR
The national average in-payment for all social housing figure is £76.17 (46% of GMR
The national average HB in payment for council properties is £71.14 (43% of GMR)
The national average HB in-payment figure for housing associations is £80.11pw (49% of GMR)
The above figures from SBHE official HB statistics
These reveal that regulated private tenancies attract less HB income than housing associations. We have to assume that regulated private lets break even or make a small profit as they would be withdrawn from the market. Yes they may well have been bought many years ago and mortgage paid off, but this just shows that private letting is a long-term investment that can provide profit to the owner.
The unregulated private housing rental market (at £113.78) charges the public purse 43% more than the regulated private rental properties at £79.45.
The much vaunted private market that is so much more effcient than the wasteful and poorly managed public sector (or so we are told) is on a short-term gravy train that becomes a long-term one and all at the public purse expense. Extrapolating the statistics reveals that if the vast majority of unregulated PSL tenancies were paid at the same rate as the regulated ones then the public purse would save £2.59 billion pounds each year.
Yet instead due to PSL tenancies attracting benefit rising by 50% over the past couple of years from 1m to over 1.5m the overall HB bill has rocketed (both Labour and now the coalition) have done nothing about this and HB bill now stands at £22.345 billion and rising by £3.8 million per day.
The question of "affordability" is therefore misframed. Its not whether tenants can afford the current or proposed system, its whether UK plc can afford it.
Even the coalitions HB reforms announced in June 2010 expected onlly a "near;y £2bn per year saving" from reforms and already the current bill is £1.87bn higher than they inherited and will be £5.3 billion above their £18 billion target figure when the first HB reforms come into play in January 2012.
UK plc cant afford to not regulate PSLs and the laissez faire free market approach to them that shapps announced in June 2010 (ie non-regulation) sees UK plc paying £3.27bn more per annum to them for mostly inferior properties and inferior service levels than the same number of council properties.
Its not a free market its an unregulated one and those are chalk and cheese and the unregulated private market is on a massive gravy train at the tax payers expense.
Regardless of which political party created it or its conditionss, it needs to change and the current official policy of inaction cannot be sustained.
19/09/2011 3:01 pm
All rent needs to be affordable - it is affordable to whom that makes the difference.
The abortion of a policy from the current government looks to magnify the extent of state subsidy of affordability through benefit payments. This is unsustainable as more of our income will be required to support ever less affordable rents.
The progressive way forward would to plan to supply homes to fit the budgets of people in similar proportions to their wealth. Therefore 20% of rents would need to be affordable to those on average wages, 40% for low wages and 1% affordable to those with the higher band incomes.
19/09/2011 3:05 pm
Market rents in London are pushed up by some people who are very well off, therefore leaving poor Londoners with few places they can afford. It's not morally right or fair to say "well leave London then" - these are Londoners, born and bred, they have a right to their city.
19/09/2011 3:45 pm
Rents should be capped so that they remain affordable, thus saving the benefit bill Millions. Why does nobody ever realise that all these low paid poor people are the ones who actually make everything work!
Perhaps people want to return to a time when there were no roads, no sewers, and filth just lay in the street where the affluent threw it.
19/09/2011 7:09 pm
Joe - what we have in the market rented sector is not laissez-faire so you are mistaken on that point.
In laissez-faire, you would not have individuals participating who would be subsidised by the state via benefits for housing. HB is exactly the cause of the problem - it creates demand in the market that would not exist otherwise, and this materialises as an upward pressure on rents. You cannot improve the market unless non-interference is complete. Stop paying HB, and then unregulated landlords would attract zero benefits at zero cost to the public. Of course this creates other problems, but demand for market rent would fall (at current rents) and so rents would have to come down unless PSL can afford to have properties sat empty for ages while they find ever fewer people who want to and can pay what they are asking (its unlikely most landlords would, given the make-up of supply in the sector).
The affordable rent model is largely irrelevant - it just gives those participating a chance to charge up to 80% (and get some more subsidy). Will all participants set the rent at the maximum? No Joe - some providers will set the rents across a range of rents below this, depending on their judgment. Regardless of how the landlord sets their rent, what is important is people are both willing and able to pay those rents. Due to Government HB support, there are people who are willing and able to pay rents they would not be otherwise. This sustains rents and demand at the high levels we are seeing now.
20/09/2011 9:39 am
Jono, I fundamentally disagree that HB (and subsidy as you errantly call it) is a significant reason or factor in private landlord rent setting policy.
35% of PSLs accept benefit claimaantss according to Rightmove and Property Week meaning that 65% or the vast majority dont. There are 1.563m PSL tenants claiming LHA and this suggests about 4.5m private tenancies of hich 44840 are regulated tenancies. Hence 99% are free to set rent levels are whatever they choose and I would call that laissez-faire with good reason.
LHA as a national average pays only 69% of the overall rent and also cant be a significant factor in rent level setting as even maximum LHA can hardly be decsribedd as an incentive on that basis to a tenant. In fact there is more eveidence that this statistic is used as a deterrent rather than an incentive by PSLs. The average tenant in receipt of full LHA needs to make up about £51 per week out of their other benefits and how you see that as an incentive I cannot fathom.
As for your grand plan to get rid of HB/LHA wouldnt that mean the 1.56m LHA claimanst who couldnt pay would be evicted by PSLs? You seem to think some benevolent charity would appear out of the ether and find 1.56m homes which they would charge nothing for. Anyone know what Paul Daniels is doing this weekend or would this plan need the grandeur of David Copperfield to pull off such a grand illusion?
20/09/2011 1:22 pm
Joe, it is simple economics. What is the total available spend on rent in a location? If private landlords are trying to tap as much of this as possible, given a fairly static level of supply, they will increase rents. What happens if the total available spend on rent drops? Given a fairly static level of supply, rents will drop in time to reflect the reduction in total available spend.
I never said that Landlords set the rent based on benefits - just that in a world without HB, tenants who would receive it now would not, and how would they pay the rent? Many would have to move or downsize. Therefore in a world without HB, the total available spend would fall. In fact, many are lamenting how much the cost of HB claimed in the market rented sector is rising - meaning that HB is expanding the total available spend in this sector. HB to an extent also makes demand more inelastic - less responsive to changes in rent - meaning suppliers can increase rents without incurring greater void losses.
Joe - who pays for those 1.56m homes now? I would have it that the same people who pay for it via taxes now, would choose whether to put their money into housing. I don't actually think the spend offers best VFM and if the choice of how to spend it was properly localised, we would see housing provided according to both willingness and ability to pay - which is a far more just system isn't it?
20/09/2011 11:23 pm
Housing Benefit works well with a reasonable supply of social rented homes and rent controls on private landlords. The problem is rent levels, especially in London. Also those totally unable to work due to extreme illness or disability often rely on HB and many would be homeless without it.
20/06/2013 1:36 pm
Most of us who live in social housing in central london cannot afford affordable rent; thus whole families are living in overcrowed conditions whilst new properties are no longer for 'social renters' but those who can afford to pay 80% of market value. In Central London this is having a huge impact as it means anyone in social housing is stuck or pushed out to B&Bs - people loathed Thatcher for selling off council properites - I doubt she could ever have envisaged this three-tier model all of whom live within the same property