Cameron announces new Right to Buy (RTB) with even bigger discounts is the headline announcement today. Early reports on this are on the Guardian website and there they restate what Cameron said on the Andrew Marr show this morning. -
“That could build 100,000 homes, 200,000 jobs in our economy. We’re not stopping there, we’re saying let’s bring back the right to buy your council house, with proper discounts that Labour got rid of, and let’s use that money, as people choose to buy their council home, let’s use that money to build homes for rent, for low rents for families that are currently stuck on housing lists.”
He said there were more than 2m council homes still available for purchase.
“This is something that could make a big difference and again that could provide another 100,000 homes, another 200,000 jobs. So taking those two policies together that could provide 200,000 extra homes, 400,000 extra jobs.”
I have emphasised what Cameron said and especially the word could rather than will or shall or some
other more definitive term. Am I being pedantic here or even cynical in my interpretation? I don’t think so as I strongly believe that such a policy announcement would have been scripted very carefully from the coalition, yet that’s a minor point.
Let’s assume there is a replacement new build for each council house sold. Isn’t selling off something,
let alone a national asset, at an increased discount and then replacing it with a new one in need of extra money to bridge that gap? But if the new land is free then perhaps it can work so that’s not my problem either.
Grant Shapps the Housing Minister has tweeted that each RTB sale WILL be replaced with a new council house at his “affordable rent.” No my beef is not with believing that the Housing Minister would choose to use the more definitive and more politically appealing terminology. After all that is what one would expect from a Housing Minister discussing a housing issue!
My beef and problem is that Shapps, Cameron, the Coalition and especially Iain Duncan Smith the Welfare Minister still doesn’t get ‘affordable rent.’ The figures show in stark and unambiguous terms that the ‘affordable rent’ model WILL cost so much more (and that is the correct use of ‘will’ unlike Shapps version.)
National average rent for a council house is the same as the national average amount paid to council house HB claimants as HB covers 100% of the rent there. So with some accuracy we can say the average council house rent is £71.14 per week. In the 1 for 1 replacement of the new RTB these 100,000 replacement council properties will have their rent set according to the errantly named ‘affordable rent’ model and this currently is £131.64 per week – a whopping £60.50 and 85% increase!!
If all of these new council tenants claim HB the overall increase to the HB bill will be £315m per year, or if this follows the national average and has 69% of council tenants claiming HB it will be £218m more per year. This is because the misnamed ‘affordable rent’ model sets a rent level of up to 80% of the gross market rent which currently stands at £164.55 / £713 per calendar month. So this new RTB will at best produce a net increase of council houses of zero and this will cost the public purse £218m or £315m.
The apparent ‘logic’ of Shapps is that the new 100,000 council tenants will have transferred from higher cost rented properties and especially the private rented sector and so (as Shapps has said before) there
will not be an increase to the public purse. The national average amount paid to claimants from the
national HB statistics in the private rented sector is £111.18 which will be replaced with his ‘affordable rent’ figure of £131.64 which is £20.46pw more. Multiply this by 100,000 to give the best outcome for Shapps ‘logic’ and we see the additional cost is £107m per year.
In words which Cameron and the coalition will not wish to here this is an additional ‘subsidy’ of over a hundred million pounds a year to the feckless workshy benefit claimants that will further exacerbate their
The ex-private rented sector tenant may also decide to give up work as well in these circumstances.
The figures again using the national averages explain the new environment: -
Current situation is a gross market rent of £161.55 of which £111.18 is paid through HB and this approximates to 70% of rent paid for by the public purse with the tenant having to make up the other 30% of £50.37 per week and hence the private tenant has to work or be evicted on arrears.
The new environment is a gross rent of £131.64 of which £131.64 will be paid through HB and equates to 100% rent paid. There is also more security of tenure making it harder to evict and the reassurance that if not working at least the roof over ones head is secure.
This creates a massive incentive for the non-working current private tenant to transfer to the new affordable rent scheme. Yet at the same time it is a strong incentive not to work at all as the new tenant has on average £50.37 more per week and £2628 per year to spend on other things other than housing from the same non-working position.
The reality is stay on benefits and get a free packet of fags per day / a fortnight’s jaunt to Benidorm paid for OR get a job and pay 85% more rent than your council neighbour.
The non-working council tenant or non-working HA tenant would have an 85% or £63% rent increase and so condemn them into benefit dependency is not there already but give them a new-build house. This is a perverse disincentive to work and a perverse incentive to move and of course increase the overall HB bill even more massively than the ex PRS tenant becoming a new AR tenant.
So tell me again MR Shapps why is this called AFFORDABLE rent?
Politically of course it’s a good deal as it buys another 100,000 voters to accompany the success Thatcher had with the previous 2.5m RTB sales, and maybe even another 100,000 with the new AR tenants. Yet you won’t keep 75% of the sales of the proceeds anymore like her governments did and your colleague IDS will have the hundreds of millions of pounds more to pay out in HB too. It seems the cost of buying the electorate has risen substantially, but then again that’s perhaps to be expected as the
best council houses have already been sold. Be interesting to see how many of these 2.5m RTB sales now comprise the PRS market though as their numbers will increase again and give the PRS an even bigger percentage share of the overall rented market, and of course at a higher benefit rate than existing social market rents so even more cost to the overall HB bill.
Please note the inherent assumptions in this too, not just that we will see a 1 for 1 replacement but (a) tenants will wish to buy; (b) banks will wish to lend; (c) banks will lend for ex-council stock and of course
I couldn’t leave out your huge but errant assumption that LHA payments are more expensive than your ‘affordable rent’ model which they are not as this proves. Its basic arithmetic Mr Shapps that even the
Daily Telegraph won’t like as they will have to start calling you the incompetent innumerate rather than the Chancellor.
Your numpties in the CLG as expressed in their Equality Impact Assessment on Affordable Homes http://www.communities.gov.uk/publications/housing/affordablerentpolicy made the mistake that ‘market rent’ is LHA and so AR would be 80% of this. They, like you should have read the “Affordable Homes Programme Framework” policy document which says that it is 80% of the ‘gross market rent’ (see 3.11) which is the £164.55 per week figure and not the average PRS benefit figure of £111.18 or even the £113.74 LHA figure which is part of that overall average.
That was a ‘gross’ error and pun intended. Now you have sold your party down the river by compounding that error and costing the public purse hundreds of millions of pounds per year with the renaissance of RTB.