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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28/06/2011 4:35 pm
I will have a close look later but have to say these stats do seem to support the lack of logic in some of the propsals we are saying. To follow the analogy surely we need something radical in engineering to get things flying in the right direction.
29/06/2011 8:53 am
Are you out of your Vulcan mind?
The wording of the report is (typically for the DWP) a little muddled.
'68% of Housing Benefit recipients were tenants of Social Sector' logically this means that only 32% were in the private rented sector.
Oooh there are lots of stats in these reports...more study required...
29/06/2011 9:41 am
68% of social renters claimed benefit, and the average benefit they claimed was £67.83
79% of private renters claimed benefit and the average benefit they claimed was £114.47
Therefore a higher proportion of private tenants than social tenants are supported by benefit, and those private tenants receive higher payments than their social rent counterparts - in other words the private sector is a double whammy against the taxpayer.
Does that help you Mr Zulu?
29/06/2011 10:01 am
It does Me Checkov. Merci.
29/06/2011 10:05 am
So, following your logic you want 100% benefit dependant ghettoes so the tax payers total exposure to LHA/HB is less?
29/06/2011 10:48 am
On the contrary Mr P, I want social housing to be the tenure of choice, so that truly mixed communities are returned to the positive experiences that people grew up with before the axe was taken to affordable and decent housing being available to all. In a society that offers choice and opportunity the demand for benefit will be lower than current rather than 100%. The current government's own proposals conversely are aimed at creating the horror you describe.
Why do you wish to pay an extra £2,500 per tenant per year Mr P and also achieve the 100% benefit ghettos you mention - are you able to afford that?
29/06/2011 11:06 am
Chris, the Diamorphine Hydrochloride isn't licking in as fast as it should today so I'm a little out of kilter so please forgive me if I seem a bit of a knob.
HB -- 4.87 million people of which the social sector average was £67-83 with housing association average being £77-16.
I know stats can be used to prove all sorts of things but this seems to suggest that there is less paid to council tenants than housing association tenants?
I think I'll go off and have a look at the figures for a bit -- I might get myself a t-shirt too. Energise.
29/06/2011 11:10 am
I'd imagine this is your latest angle for regulation of all rents?
I assume you are also after the return of the RPI as well?
I can see your point of view. I disagree with it though (surprised?).
29/06/2011 11:18 am
The same statistics also reveal the public purse is paying £3.5bn a year more to private sector landlords than they would pay for the same number of council houses.
That is also an alarming increasing trend as since May 2010 (the last election) 71% of the new HB claimants have been in the private sector.
The cost means as ive said elsewhere that every household in the UK already has to pay £140 a year in tax just to pay this excess to unregulated private landlords. Or the other side of this is that if these were council properties eery household would pay £140 a year less in tax. (Based on 25m households)
The 69% extra HB pays to PSLs over what it pays to council landlords is a national disgrace with no rhyme or reason. Council tenants have greater rights to security, repairs, involvement etc than private tenants yet private tenants are paying (at least) 69% more for this inferior service.
The market rented model fails and clearly fails by providing a product and service that is far less qualitative than a council let for a whopping 69% more and the PSLs dont hae the regulatory and other expenditure constraints that councils have imposed, and those councils even delier an oerall surplus back to the public purse.
Therefore PSL LHA rates must reflect at least a 70% profit margin for which this government is more than happy to pay. It shows this governments hypocrisy towards 'cost-efficiency' however defined and means Joe Public is paying unneccesarily far more in tax to pay for this significant cash cow to private owners
Rick - HA rents are higher than council rents and this is why the figures differ. Both figures invariably meet the full rent unlike the £114 or so in PSL lets which invariably dont cover full rent (hence why the excess is at least 69%)
29/06/2011 11:41 am
Most informative about the difference between council and housing association rents Jack.
I have to admit my knowledge of council rents/housing only goes as far back as our transfer (3 weeks short of 5 years ago).
I am having trouble assimulating (a Borg/Star Trek reference) the other data (not a Star Trek reference) becuase of the darned medication - so I might get back to you on that (the dsta) later.
29/06/2011 11:57 am
Slightly jovial note :-
I have just had an email from a housing professional friend who has pointed out a couple or so 'errors' in my postings to this thread this morning ---
1. 11-06am "Chris, the Diamorphine Hydrochloride isn't licking in as fast as it should today so I'm a little out of kilter so please ...." Please read as "kicking in" not 'licking in'.
2. 11-41am " I am having trouble assimulating ,,,,- so I might get back to you on that (the dsta) later." Please read as "(the data)" not '(the dsta)'
3, Thanks too, to Chris for the info too.
To my housing professional friend (who is an avid reader of but non-poster to these IH forums) enjoy the rest of today ( a day taken as annual leave) doing your voluntary work.
29/06/2011 12:02 pm
And there was me thinking we now knew where the smile on your face came from Rick - if semantic accuracy was a prerequisite of any posting I made, few would make it off of the keyboard!
29/06/2011 12:40 pm
It's far too often that it's the medication that keeps the smile on my face Chris but mostly it's there because there are so many posters who believe in social housing (although not on a one-size-fits-all basis in some cases) whilst there are others who demonise tenants.
Can I just point out that my housing professional friend works for a neighbouring local authority and has no professional connection with me -- just in case someone thinks there's an unhealthy relationship going on.
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.
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 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 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!!!
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
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.
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.