Wednesday, 4 August 2010

How Housing benefit has harmed us all

I've been having a debate with BendyGirl on Twitter, which I think is worth a more substantive answer than can be given in 140 characters.

The base-line cost of housing in the private sector is set by the Government: Benefit recipients whose rent is paid from Housing Benefit to private landlords. These people occupy the worst housing, and pay therefore the lowest rents. Landlords are revenue maximising rational agents, and the Government is a stupid customer. Therefore they charge the maximum the Government will pay for their shittiest flats.

If you have a better flat, you rent it out to non-housing benefit tenants for MORE than you could receive off the Government.

The purchase price of the least desirable flats is set by value of the rental stream that the Government will pay. Any better accommodation is priced at a premium to this, grossly inflated level, all the way up to 3-bed family homes.

Basically it boils down to this: There is no shortage of housing - most people have a roof over their heads. It may not be as nice as you'd like; this is because, as anyone who watches 'Grand Designs' will be able to tell you, planning laws are absurdly restrictive. This limits the amount of housing, and also limits the ability of people to make houses to suit their needs. For example, where I live a man built a house with a 'tower' on one corner. This became and still is, the most complained about building in the town, even though the centre of the town contains a 60's concrete monstrosity. The "tower" contains the wheelchair-using owner's lift - He'd had the house build around his needs, and his travails with the planning authorities were legendary. He was rich enough to win his legal battles and build a big, nice house suitable for a disabled person.

Everyone else has to make do with an identikit 'executive' house on a Barratt estate, and even these are expensive. The affordability of housing is the problem because the Government acting as a stupid customer on behalf of the poorest distorts the entire market. If you cut housing benefit, the same flats will be occupied by the same people because no-one else wants them. The cost of this is borne by slum landlords, who get less rent for the same flat.

Anyone going to weep for them?

Thought not. The answer to Britain's housing problems is to phase out Housing benefit entirely, (and 71 other benefits too) and replace it with a smaller number of payments to individuals, replacing direct payment to Landlords. True, some people will spend it on smack, not rent, but that's their fault as individuals, eh? What's true of private tenants is also true of council tenants. The Government should get out of housing provision entirely. Instead of subsidising slum landlords' jetskis on the Costa Del Sol, and making everyone else pay through the nose for shitty little breeding hutches, we'd actually be helping the poorest. Second we need to relax (not remove, relax) planning regulations, and assume that people building houses on a plot of land are rational. That way, there might be a few more desirable individual houses on the market and one or two fewer shitty estates of endless Barratt breeding hutches.

Who loses?

Slum landlords. Who wins?

Everyone else. What's not to like?

Update: Burning our money has a more thorough post.



8 comments:

JimmyGiro said...

Another aspect is, when you do find a nice little job, the over-inflated bed-sit rent, makes some minimum waged jobs, ungainful; hence adds to the poverty trap.

The only issue I would have to the abolishing of the current system, is that the poor will be forced by the market to negotiate from a disadvantage. Unscrupulous landlords are better informed, and can play any leverage upon the desperate looking to dodge homelessness. I witnessed this as a student in Manchester in the 80s and 90s.

Maybe all renting activities should be carried out under licence, to ensure common standards under universal guidelines; to effectively abolish the status of 'private landlord'.

H said...

Housing benefit is indeed already paid direct to claimants, not landlords (which - perhap I am being cynical - gives the tenant a further incentive to collude with the landlord in keeping the rent as high as possible).

Anonymous said...

I'm not sure you know what you're talking about, I'm a landlord on a small scale, but i know quite a few landlords on much bigger scales than me, with 100+ houses. I think you've become drawn into the poor little tenants being maltreated by the german shepherd wielding landlords (this may happen in a very few cases), the reality is the gov pay the going rate, not an overinflated one and if anything landlords don't want those on benefits, you are more likely to have damage and theft and councils chasing you about the state of the back yard than with private tenants, also DSS tenants get given their housing benefit, only when they default 2 months does it get paid to the landlord. Some landlords will only take on those who have already defaulted so it gets paid straight to them in the first place.

You seem to have swallowed the lefty claptrap that landlords are bad. Slum landlords are the exception not the rule.

Anonymous said...

following on from that, i have had housing benefit tenants who only get part of the rent, eg £250 of £330 per month for a 2 bed terraced, that's not extortionate is it? Have you been watching biased BBC doc's?

BenefitScroungingScum said...

As there are almost always significant rent shortfalls in the private sector landlords are very reluctant to rent to tenants on HB as they know what the rent shortfall is and have concerns about receiving the full rent. The majority of properties privately advertised state No DSS.

To Anon: Well said, thank you! I'm about to move into a new property with a different landlord. My current flat is just under the LHA rate, but is becoming increasingly damp and moldy. My landlords are good people who've treated the damp, put in a new boiler etc but ultimately the property needs alot of work doing to it, which will mean once it's eventually done the flat will be relet at a rate above LHA to cover the costs. To get a not damp and for me, vitally, more accessible property I have no option other than to rent substantially above the LHA limits.
BendyGirl

Anonymous said...

Whilst it's anedotal, and not how it always is, i shall tell you why i hate housing benifit.

Both me and my partner work full time, on about average wage. Now this allows us to buy a small 2 bedroom flat, just. We are trying for a kid, and my partner will have to go back to work after maternatiy to cover the bills.

My mate is being given a brand new 2 bedroom apartment throught he council. She will pay 1/4 of what we will pay, for a property that would be worth 30% more that ours (bigger, better and more modern, double glazing, furnished sparkling new kitchen etc).

She doesnt work, and chooses not to as she would rather sign on and spend time with her kid.

Now you can't tell me that isnt just completely fucked up.




As to HB increasing prices, i suspect its more to do with the cummulitave affect of years and years of "right to buy" (at heavily subsidised prices), Years and years of council tenents living in such properties past the financial need to do so, and a cummulitive inflation of the prices due to more money being in the system, rather than just to landlords culluding to extort prices

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Luke said...

Most housing benefit goes to people in social housing of some sort - council or HA. I think that (slightly) detracts from the argument that it acts as a floor on rents.

It also means that we are providing "affordable" housing that is not in fact affordable for the targeted people. That may be justified if it allows councils/HAs to build or maintain homes that they could not otherwise afford, but it hardly suggests a well functioning market.

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