Lodger bodger happy old codgers?

An article appeared on Inside Housing last Friday stating Lord Freud has announced a change in how lodgers will be viewed in Universal Credit.

Briefly the changes ‘appears’ to be that from October 2013 when Universal Credit begins a lodger (not to be confused with a sub-tenant) will (a) not be classed as part of the household and so the tenant will receive a bedroom tax penalty; however (b) the tenant will not have any income they receive from the lodger affectign their benefits.  This latter point needs clarification and IH say it is in new draft UC regulations which it doesnt reference and I cant find anywhere.

At face value imagine the implications, some of which I have outlined. on the IH discussion site.

Scenario 1 – A single tenant (widow/widower) in their 50s in a 3 bed council flat in London with the kids having flown the nest – the all too typical example used paying £120pw in rent.

(a) will receive a 25% reduction of £30pw to their HB – a reduction of £1565pa

(b) yet apparently will be able to rent out both rooms to lodgers at say £140pw (cheap in London) thus receiving £280pw income or £14,610 yearly increase in income yet still get the HB paid.

(c) the two lodgers will be able to claim HB too and if they receive £125pw each in HB then this adds £13,044pa to the HB bill for that property.

Hence the same property will see HB rise by £11,479 for that one property [(c) - (a)] and means the overall HB bill will rise surely?

More bizarrely it provides a huge incentive for the non-working tenant who is underoccupying (the nasty workshy scrounging feckless scum as portrayed by the coalition) being massively incentivised to stay non-working and become to in effect a sub-letter (boo – further evil nasty workshy scrounging…etc scum as portrayed by the coalition).

Even accepting that the tenant lettigng to lodgers will probably incur a tax liability (first £4250 is tax free of rental income in own home) this is still a financial incentive to take advantage of HB.  And think if tenant will only let out a room to working persons (a la Rigsby in Rising Damp) charging each of her two lodgers £280pw in rent – a mere £40 per night – this becomes £29k per year income while getting her own rent paid by HB!

Imagine if she has a 4 bed flat!!! – Kerching indeed!

The wording of the IH article says: -

“The major impact of the move, which the Department for Work and Pensions described as a ‘positive side effect’, is that it will help under-occupying tenants pay the bedroom tax. The change was made possible because the government has amended what counts as income in its draft regulations for universal credit.

Currently, claimants must declare income from lodgers. This can affect their entitlement to housing benefit, jobseekers’ allowance and income support.

Under the new regulations, from October 2013 tenants will be able to keep income from lodgers and retain full entitlement to benefit. The room let to a lodger will, however, be classed as a spare room and fall under the bedroom tax, which will be £14 per week on average”

I have emphasised the key sentence which says “…tenants will be able to keep income from lodgers and retain full entitlement to benefit.”  Currently the first £20 of income is disregarded (and then taxed at the marginal rate of 65% – more than anyone else pays!) and this apparent change – as I say no link is given to this – represents a massive change and one that will see the bedroom tax produce a net cost to government and not a saving.

We are informed that there are 660,000 (feckless, workshy, privileged etc) underoccupiers who will lose on average £14pw in HB this according to govt estimates realise a £430m pa saving (despite 660,000 x £14 being £482m per year!)

Yet if just one in 5 take in a lodger at £70pw then any saving will be wiped out.  And with this level of incentive more than one in 5 will.

What is the purpose of the bedroom tax other than to save money as it clearly wont with this change? Thats a rhetorical question.  What is to stop an underoccupying tenant renting out to say her niece or nephew or other familial members or their partners or friends?  Absolutely nothing as these would qualify for HB and give younger persons their own space fully paid for in HB.  Such an arrangement takes away the many potential pitfalls of taking in a lodger too.

This is ill-though through and wholly illogical policy which is a knee-jerk one from Freud that will end up costing the HB bill even more than it proposes to save and financially reward the workshy, privileged underoccupying scum that the bedroom tax iss supposed to financially penalise!!

Absolute madness!….unless you are an old codger!

UPDATE

The more you think on this the worse the reality becomes.

660,000 new social housing tenant landlords – what form of tenancy / licence will the lodger receive? How will they evict a bad lodger?  Will greater wear and tear on properties mean higher rents eventually being charged by social landlords? Under new allocation policies and localism and the subjectivity within both see prospective tenants going to view large properties with padded brown envelopes for the viewing officer?

As Ive commented upon in response to Shapps today publicising a new phone number for RTB, does remaining a tenant taking in lodgers provide a better financial incentive than RTB.  Yes it does.  Take in lodgers for 5 years then take up RTB a much better option and see many more potential RTBers given the income they have realised as a tenant.

Will we see brothers and sisters each taking each others adult children in as lodgers so they can all claim and get HB? Or friends children swapping houses as definitively no contrivance there in HB regulations. The system is ripe for taking advantage of hugely and all over the country.  Swap houses claim £90 per week in HB and just give me £60 – I can see the feckless scheming ne-er do well indolent scrounging benefit-dependent scum (etc, etc) loving this idea.

Has Freud nicked this idea from an episode of Shameless anyone?

 

 

HB claimants – working and unemployed

Yesterday I released a blog on the latest monthly HB data for April 2012.  April is always an unusual month as it factors in the yearly rent rises in social housing which takes place mostly in April.  The HB overall cost rose sharply by £600m despite the numbers of claimants reducing by 1,950.

I also commented that the numbers of those in work claiming HB had risen again and since the last election in May 2010 there has been 261,170 new claimants of which 240,500, or 92%, have been working.

What I failed to notice and report on is the sharp declien in the numbers of those unemployed and seeking work – by definition the total IS and JSA claimants – who also claim HB.  At May 2010 there were 1,989,630 such claimants yet at April 2012 this had reduced to 1,788,9650 – a fall of over 200,000.

Figure 1 below shows the trends in both.

Figure 1 – Working and unemployed HB claimants since election

We can see the two lines converging since the last election and this represents the data which shows on average 10,000 or so more working HB claimants each month and also a fall of about 8,000 or so unemployed (IS/JSA) claiming HB tenants.  The rise in working HB claimants has been evident and discussed for a few months now yet nobody has yet commentedd on the sharp decrease in unemployed HB claimants.  The simple graph below at figure 2 which continues these two trends of 10,000 more working HB claimants and 8000 less unemployed HB claimants and the graph is remarkable.

Figure 2 – If last 2 years HB claimant trend continues

The graph is a startling one and of course speculative.  Yet if the trends over the last two years continue it would see working HB claimants would overtake unemployed HB claimants by May 2016.  It wont happen as quickly as that as even an ardent Tory would not expect 8000 unemployed tenants to stop claaiming HB every month.

Or is it speculative?

What the graph does show is the trend and the huge uptake of Housing Benefit by those in work who perhaps havent claimed in the past. As I stated back in December last year £6.7bn per year of HB is known and admitted by the DWP to go unclaimed.  These were from figures published by DWP a year ago and presumably are published yearly.  This years underclaimed HB total will be an interesting figure and as and when released I will comment upon the figures.

Yet let’s look at those figures

If we look back on last years figures for HB take up rates we see a staggering difference between those not in employment who take up HB (93:97%) and those working who do at a mere 40:50%.  This means the numbers of those working and claiming HB could increase by a factor or 2 to 2.5!  In numbers this means the 800,000 or so claiming HB in May 2011 could have been 1.6 to 2 million claims.

Staggering that between 800,000 and 1,200,000 additional working tenants could claim HB but dont!

The table below is taken from the official DWP figures at June 2011

The reality is that if every tenant was assessed for all benefits they were entitled to (which is the rationale behind Universal Credit) then 5% more or 95,850 unemployed tenants or would receive HB yet 222% more working tenants or 981,444 working claimants would receive HB. (May 2011 figures)

The figures would then be 1.883m unemployed claimants of HB and 1.872m working claimants of HB and thats almost parity.

The reality is that as many working tenants as unemployed tenants are eligible for HB! 

Table 4.3.7: Table of caseload take-up of Housing Benefit by   employment status
	Year	In Employment	Not in employment	All   Non-Pensioners
				(Thousands)
Number of Recipients	2008-09	360	2,190	2,540
	2009-10	410	2,190	2,600
Range of Entitled Non-Recipients	2008-09	350 : 600	90 : 220	450 : 810
	2009-10	420 : 620	70 : 170	490 : 780
				(Percentages)
Take-Up	2008-09	38 : 51	91 : 96	76 : 85
Ranges	2009-10	40 : 50	93 : 97	77 : 84

HB bill rises by £21m per day in April

The latest Housing Benefit figures have been released today for April 2012 and show:

• An increase of £20,803,606.86 PER DAY during April 2012.

• The overall total spend on Housing Benefit in April 2012 increased to £ 23,398,757,267 (£23.4bn) from £22,774,649, 061 (£22.8bn) in March a rise of £624,108,206 (£624 million)

• Regular readers will know this coalition inherited a £20.8bn HB bill and promised its reforms would reduce it by £2bn, to circa £18.8bn, by 2015.  It is now £4.6bn above that target.

• The claimant count has actually fallen by 1,950 to 5.013m (table 4) and despite another rise in PRS claimants of 1,070 while social housing claimants fell by over 3,000.

Working Claimants (see table 6)

• Interesting to note is that working claimants rose by 8,160 this month which means a higher percentage of HB claimants are in employment.

• The number of working claimants of HB has risen every month for the past 40 months – so much for HB being an out-of-work benefit!

• The number of working claimants has more than doubled since November 2008 when the records begin from 430,130 to 891,050.

• It has risen 240,000 in the past 24 months alone so 10,000 new working families are claiming HB every month since the election.

Table 7 reveals the working tenant receives on average £89.18pw in HB.  Table 5 reveals the average HB payment to all claimants is £89.46. This means the working family receives 99.7% of the rent in HB revealing the staggeringly low level of Britain’s low-pay economy that sees full rent being paid despite being in receipt of a working wage

For those who prefer to see this graphically below is a chart that represents the percentage of working tenants claiming HB of the overall claimant count since November 2008.  Anyone notice a trend!!

Figure 1: Working Tenants Claiming Housing Benefit (Nov 2008 to date)

.

And for those that would like a graphical represntation of the overall HB bill since the election Ive included that for you too below.  Again, anyone notice a trend?

Figure 2 – The Overall HB Bill since May 2010

 

 

 

 

 

 

UK households 2001 – 2011 – the rise of the PRS

A few are getting excited in the media today with the first release of the 2011 census data due this morning.

It is expected to show a 3 million increase in population seemingly, so expect the usual let’s ban the immigrant / we are a small island etc comments to proliferate.  Some one has just asked where are these 3m housed? Thats simple and the English Housing Survey released last week tells us that already.

Owner occupation remained much the same with an increase of 9100 households (a rise of 6 per cent.)

The social rented sector (SRS) saw a fall of 157,000 households (a fall of 4 per cent)

The private rented sector (PRS) saw an increase of 1,556,000 households from 2,061,000 to 3,617,000 households – and increase of 75 per cent!!

So later today when you read immigrants get all the council housing etc…. you know where they reside!

Source EHS – Figure 1.1: Trends in tenure, 1981 to 2010-11

Cameron text to armed forces…LOL

Right to Buy – Who is Blackadder?

Grant Shapps is in the Telegraph today saying he wants 2,500,000 more RTB2 sales at up to £75k discount – thats a government giveaway of up to £187.5bn – What a nice man he is!!

He is even promoting this on Twitter I see:

Grant Shapps MP‏@grantshapps

How more families will benefit from Right To Buy – thanks to “social proof” provided by friends & family >
http://ow.ly/1Og3AD

The article says “He is planning to use the same techniques for a new right-to-buy   scheme, enabling as many as 2.5 million people to buy their council houses   at a discount of up to £75,000″

I’ve seen some electoral bribes in my time but £187.5bn Minister!

Back in October 2011 it was 200,000 new RTB2 sales which Shapps hastily revised to 100,000 and now its 2.5 million.

What was that you said about Affordable Rent Minister - Oh yes it was a rough and ready programme?

“When we got into government we realised we had to sort out this deficit so (Affordable Rent) was a pretty rough and ready exercise in all honesty”

Wow I really do admire your honesty that you now want 2,500,000 council house sales under RTB2 to be replaced by 2,500,000 affordable (sic) rent alternatives which are 68% more expensive for the tenant and for the HB bill seeing as though you say AR levels are nationally 75% of the £160pw average market rent (ie £120pw) and average council house rent is now £71.82 according to the DWP HB statistics - only a mere 67% increase then!

Thats only an increase of £6.285 billion per year to the HB bill

Rough and ready – nudge, nudge, wink, wink!!

UPDATE Friday 13th July

I quickly drafted the above sarcasm yesterday and it was literally no more than 5 minutes to expose the level of Shapps’ smugness and publicity and attention seeking but it deserves far more reasoned comment.

Of course not all 2.5m RTB sales would attract a £75k discount leading to a £187bn giveaway but thats just a practical point that exposes RTB and the paucity of thinking that underpins it.  £187bn is about one full years total welfare and housing benefit and pensions payments.  Think on that for a minute and you get my point.  In theory at least this government is willing to give away an amount of money equivalent to the sum of all welfare benefits and housing benefit and pensions to the same council tenants it now describes as (a) privileged and (b) scrounging indolent workshy feckless scum!

Unless of course they have the money to afford RTB which at the same time makes them aspiring citizens if they choose to take up RTB bung and also scrounging scum who should pay more to stay and are denying more worthy and needy people from having social housing and yes by that they mean more scrounging indolent workshy feckless scum from having the privilege of being labelled that!

Shapps sees no contradiction here or the blatant duplicity and hypocrisy of the RTB policy in its correct context.  £187bn is one hell of an electoral bribe and especially from a government who cry austerity and deficit reduction at every turn yet are prepared to throw £187bn at a piece of political dogma.

But its not just the one-off bung is it.  Even if the RTB sales are replaced on a one-for-one basis we will see the HB bill increase by over £6bn per year to pay for that.  Thats a 26% increase on the current near £23bn HB bill – yes the same one the coalition promised to reduce from £20bn to £18bn and is now £5bn already above that target!

So carry on with this wish and we see 2.5m more ‘affordable’ (sic) rent housing units out there that are populated by new privileged scrounging indolent workshy feckless scum that now cost the state £6bn more per year than the previous privileged indolent workshy feckless scum who take the RTB bung and cant afford to work as the level of their rent is too prohibitive to make work pay.

We have 5m on the waiting lists so the new 2.5m privileged blah blah scum are only half of the problem solved. (At a cost so far of £187bn plus £6bn per year.)  The other 2.5m not given the ‘privilege’ of an ‘affordable (sic) rent’ property are going to be even more indignant arent they?  The 2.5m lucky privileged ….scum are also not going to be best pleased either when they realise they are paying about 60% more in rent than their neighbours in ‘ordinary’ social housing (they are the new really privileged feckless bastards in housing association accommodation which doesnt have RTB and the RTA that could apply there isnt available in the affordable (sic) rent programme.)

Now that Shapps has got rid of the really feckless bastard scum in council housing through RTB he has transferred the blame game onto the new feckless indloent workshy bastards who have a housing association tenancy.  But Shapps says these housing associations recieve public monies through social grant yet have massive surpluses and they are ripping off the public purse!!

[Note: Shapps is such a consummate politician he will deflect any charge that this is the rationale and modus operandi of the private rented sector by saying they have to charge more as they are not subsidised!]

So the next great plan is to remove all social grant or subsidy to Housing Associations, which has already been mooted in one of many kite-flying proposals this colaition is fond of.  The public are behind this and no doubt spurred on by (a) the original feckless workshy bastard scum who took the RTB bung and are now aspiring citzens; and (b) by the new feckless workshy bastard scum who replaced them in ‘affordable’ housing who now want to exercise their right to RTB (another bung?) ; and (c) the HA tenant who is deniedd RTB and has limited RTA rights; and (d) the 2.5m who are languishing in the private rented sector paying 60% more than the HA tenant yet have no rights to buy or even acquire – all of whom stating this is unfair and in Shapps theory they would be correct to say they are being discriminated against.

So even the initial £187bn of taxpayer national assets that Shapps et all are prepared to give away as a bung will not be sufficient to hold onto the electorate they bought with this initially proving there’s nothing so feckless as a voter!

Nudge Nudge Wink Wink – nah!  RTB doesnt get to the level of Monty Python at all: A whitehall farce perhaps starring Brian Rix maybe with IDS playing the vicar possibly given his avowed Christian views though plenty of foundation on his pate to cover up his MPB (male patterned baldness not must pay benefits obviously!)  Perhaps Louise Mensch as the tart to the vicar, though with all that white powder on IDS’s head perhaps not!  Shapps wouldnt be in it of course hes far too clever for that and probably would be directing it … well if you can ‘announce’ that government policy is to giveaway £187bn he has all the attributes of a director pulling the strings doesn’t he?  Though that still leaves the central acting role of the hapless buffoon who is believable to an audience!  Plenty of hapless buffoons in the coalition but credulous as well…come on!!

Though as Shapps has admitted that affordable rent was a ‘rough and ready’ policy (Poltical speak for bag of a fag packet thinking) and managed to fool the social landlord into agreeing to (not hard really) and pulled the wool over the bankers and financiers eyes on the risk too far that is AR (far far easier) then perhaps he knows he can wing it?

In summary though, you do have to take your hat off to Shapps.  He has managed to make government policy out of the cunning plans of Baldrick and not just get them heard but implemented!  That really is an achievement and all without a slug on his top lip too! Yes of course he’s close to Cameron but not up his backside.  And yes there’s plenty of coalition candidates to play Melchett and of course Clegg is Darling but who is Blackadder?

 

 

Social Housing Decline – the blame lies within

It is easy to forget the failings of the social rented sector (SRS) in the last 30 years and too easy to simply blame successive governments of left and right for the housing crisis we have. 30 Years ago in 1982 we had 17.47m households with 59% in owner occupation, 11% in the PRS and 30% in the SRS. Now we have 66% in owner occupation and 17% in the PRS and 17% in the SRS. (English Housing Survey 2010/11 Fig 1.1) reproduced below.

Figure 1.1: Trends in tenure, 1981 to 2010-11

The above graph shows the change in tenure over 30 years and it is dramatic change. The rise in owner occupation from 58% to 69% though now is falling back slightly; and the huge decline in the numbers renting in the social sector against a huge increase in those rented privately.

In 30 years social housing has gone from being 3 times the size of the PRS to now being smaller than it.

The same ‘sector’ now worries about the capital grant (the subsidy) it receives being taken away, yet it doesn’t put forward the simple monetary saving it creates of £5.26bn which is the extra cost to the HB bill if social housing received PRS levels of HB – and the SRS would be private housing to all intents and purposes with the removal of ‘public’ subsidy.  Social housing gives true affordability of rent that works positively for the UK economy by making work pay, even lower paid work.

Yet the old post-war ‘council-house’ model just being proposed on such an economic basis is decried by both Labour and the Tories as old thinking and simply not worthy of consideration at all and merely dismissed.

The SRS – the social rented ‘sector’ has done next to nothing to promote the massive economic benefits that social housing holds and has seen it become the minority rented sector by all accounts.

We are told there are 5m on the social housing waiting lists – one in almost every 4 of the 21,883 households we now have.  In simple terms there is huge demand for a product recognised as being better in quality and security than its competitor  - the PRS  - and so much cheaper for the tenant (the customer) and for the public purse too.

The politicians may sneer derisorily at social housing or the ‘council house model’ and dismiss it on political grounds yet the electorate don’t in monetary terms at least. The electorate recognises the benefits of the true affordability it offers and that is why social housing waiting lists are so staggeringly high.

The EHS survey has 7.443m rented households and so 5m additional households who want social housing means it could expand by as much as 67% to meet the demand of these additional 5m households who want a social tenancy.  Even if that 5m figure includes all 3.617m existing PRS tenants it still leaves an unmet demand of 1.383m households and unmet demand is at its lowest 19%.

Forget for a second this is housing with all its emotive connotations, and imagine it’s a business like any other sector.   19% unmet demand and a further 3.6m customers from the only competition wanting to switch to your product is staggering.   In any other sector this would see a ramping up of production to meet demand for such a core product.  Yes diamonds and precious metals are controlled and excepted perhaps but they are not core everyday products needed as opposed to wanted.

How has the social sector been so benign in terms of challenging this and so complicit in allowing this to happen?  What is self-evident is that the SRS and its leaders as a lobby and/or in its marketing have been woeful and inept over the last 30 years. Gerald Ratner may well have been the head of marketing for the SRS!

Yet is there a sector?  By that I mean a homogeneous body lobbying on its behalf such as the Road Hauliers Association has.  Think of the primacy of the car and lorry for transport of the last 30 years or more over rail or other forms of transport and you start to get my point.  The RHA has been one of the most powerful and successful lobby groups in the post war period.  By comparison social housing has no ubiquitous or homogeneous lobby.

It has lobbies such as CIH or NHF and lobbies for sub-sectors such as homelessness in Shelter, Crisis, Homeless Link and others who lobby for parts of the sector; yet there is no lobby for the whole sector – one that fights and lobbies for social housing and its many huge economic benefits it gives to the country and to every taxpayer.

We see successive governments playing divide and rule with the ‘sector’ as oh this week it’s the rough sleepers lobby moaning about rising numbers let’s throw £20m or £50m at them to placate and create No Second Night Out (NSNO) and then let’s regionalise it when some lobby says it’s not just London that has rough sleepers; Or the women’s refuge lobby kicking off next week so let’s create a Violence Against Women and Girls (VAWG) part of the Home Office, etc.  Other than that it’s laying blame on the sector – and its model – as a hot bed of workshy benefit dependency that is riddled with anti-social behaviour, etc.

There is, literally, hundreds of social housing and social housing associated sub-lobbies yet not one overall lobby that represents and advocates on behalf of the social rental sector to extol and raise awareness of its many economic benefits.  That is a major reason why social housing has or is shortly about to become the minority rented sector from such a dominant position 30 years ago.

Just imagine a simple precept that saw every social landlord give 1p per rent per week to such a lobby – that’s about £2m per year for an overall pressure group to lobby for social housing.  Very simplistic yes, but as 60% or more of this would be met by government through Housing Benefit then it’s not going to be any sort of strain on the sector.

As we will shortly enter a new radical system that will see Housing Benefit as the ONLY benefit being cut in the overall household benefit cap and the introduction of Universal Credit such an overarching lobby is needed even more.  Each cut or cap is a cut in Housing Benefit and each cut in Housing Benefit is a potential cut in income for every social landlord.  The bedroom tax, the overall benefit cap, the affordable rent programme which increases the likelihood of the overall benefit cap (OBC) applying, the fundamental flaw in Universal Credit that penalises and cuts HB for larger families and the systemic flaw that sees rent inflation rising faster than the cap which will see more and more families hit by the OBC – the time for an overall lobby has come.

If it doesn’t happen then social housing and the SRS will become a nostalgic memory until someone realises on economic grounds alone it is the most-economic model for the whole country and for everyone – the taxpayer, the tenant, for business and for the public purse.

Political parties are in large agreement that we have a national crisis of housing supply yet all of them advocate right-to-buy and the demise of social housing supply.  Even many within the housing sector are swayed by ‘pay-to-stay’ – making working social tenants pay more because they are working – an absurd penalty; or by banning under 25s from receiving Housing Benefit, a similarly bizarre and unworkable disincentive.

Yet it seems despite these ‘knee-jerk’ spin policies some councils are planning to introduce them such as Barnet (and do read Nearly Legal’s withering expose of how ridiculous this is) or the larger Housing Associations such as Family Mosaic no longer giving assured tenancies and security.  This is a classic example of the divide and rule policy of successive governments.  Family Mosaic are one of a handful of super-sized HAs that are and will continue to swallow up smaller ones and dominate the market and become more and more removed from their customers and from their original ethos.  We even had one larger HA last week promoting the £705,000 affordable property!!!

This divorcing from the original purpose of benevolent societies seeking to safely accommodate the less well-off has been marked over the last 30 years and seen the rise of the 50,000+ social housing landlord – the super HA – through aggressive takeovers to seek market share is the result of this divide and rule and absence of one overarching lobby.  These super HAs have benefitted massively from looking after themselves alone and we see large regional power players in these super HAs each promoting their proprietary agendas and not a universal one.  This is what the lack of a sole lobby has allowed, the fragmentation of the sector into a small number of power players each with their own different and self-serving agendas.

Even if you view this reality as an inevitable consequence of economies of scale or other business theory, in every other sector you still see a universal overarching lobby for that sector…..except in social housing.

Yes the CIH, NHF and others do get together on single issues such as the bedroom tax, but these are single issues and only occasionally happen and the impact and influence they have had is marginal to say the least.  And this characterises the last 30 years of the SRS; the same 30 years that has seen social housing implode into a minority and fragmented sector of little influence and even less power.

One simple factor for every taxpayer according to Grant Shapps, the Housing Minister is for every extra billion pounds the government spends it costs every taxpayer £40 per year in additional tax.  It doesn’t matter whether that taxpayer is a sandal wearing Guardian reading supporter of the political theory of social housing or whether the taxpayer is to the right of Genghis Khan and detests any form of public intervention.  Social housing investment at its current record low still saves the taxpayer £225 per year or over £4 per week each and every week of the year.  That includes every taxpayer. Under the previous government that was £450 per person per year at today’s rates as social grant – the public sector investment or subsidy – has halved.

You don’t need to be a fan of its theory to appreciate the massive economic benefit social housing gives to every person.  In fact, politically, you can rant and rave against it and blame all social ills on it; however, economically, it makes sense to quadruple the current ‘subsidy’ as you will have an extra grand in your pocket every year through reduced taxation.  It also means less spend and less of you taxes being spent on homeless costs, higher policing costs and higher NHS costs the current halving of the housing investment obviates and will cost even more as a result of this political ‘norm’ that sees social housing being perceived as a dinosaur from a bygone age because it is viewed politically and not economically.

Ethnicity of households – exposing the myth!

The English Housing Survey 2010/11 has been published today (5 July 2012) and this details a huge array of household statistics.  It will take weeks to digest and comment on all of them but a quick look at the figures and data rather than the comment is very interesting.

‘Bloody’ immigrants get all the council houses?  - Really?

How many times have you heard that immigrants or words to that effect?  Often probably and the EHS shows definitively we can put that inherently racist charge to bed by looking at the actual data.  The source and reference for this is here and look at Tab ATI.3 for the data.  The table below puts this in simple and easily readable form.

Table 1 – Ethnicity of head of household

	BRITISH / IRISH	OTHER NATIONALITY
OWNED OUTRIGHT	98.30%	1.6%
BUYING WITH MORTGAGE	95.90%	3.8%
ALL OWNERS	97.10%	2.7%
COUNCIL	92.25%	7.8%
HOUSING ASSOCIATION	94.40%	5.5%
ALL SOCIAL HOUSING	93.30%	6.6%
PRIVATE RENTED	76.70%	22.6%
OVERALL PERCENTAGE	93.10%	6.7%

The overall percentage of ‘other nationalities’ is 6.7% and yet 6.6% reside in the social rented sector (SRS) or all social housing as stated above.  This means social housing accommodates LESS than the national average of ‘other nationalities’.

Contrast this with the private rented sector and we see 22.6% of all households renting there to be not British or Irish – almost one in four and almost four times the national average.

In summary (and in language the misguided bigots can read) council and/or social housing does NOT house the immigrant.  Please direct your bile at private rented housing.

Affordable Rent – the NAO report reveals a further hidden £5bn risk to SRS

Affordable Rent, (AR) the great plan of Shapps has today been assessed by the National Audit Office (NAO) which comes out with some headline figures that have just repeated in the media by journalists who have not bothered to read the 40-page NAO report the glaring mistakes become self-evident. This is sloppy journalism for which Shapps will be delighted as they massively understand the added costs of AR to the public purse.

Q) Why does the report look at 80,000 affordable rent homes when Shapps has announced the programme will deliver 170,000? (See here, here and especially here )

The added cost to the public purse of 80,000 properties appears in total much smaller than it is for 170,000 properties.

Q) Why does the NAO look at cost of the extra Housing Benefit this will have on just 80,000 properties and not 170,000?

This 80,000 AR unit report produces their estimate of an additional cost of Housing Benefit at £17,500 per property over 30 years or £1.4bn at today’s figures – the figure that is reported in Inside Housing, Guardian, 24Dash and everywhere else.

Let’s look at that figure shall we?  Section 1.8 on page 14 of the report says:

“Rents totalling around £500 million a year on new homes will be paid by tenants, approximately two-thirds of whom are supported by housing benefit.”

What does this simple sentence tell us about costs?

• £500m per year is the rental cost of 80,000 new homes which means that each one has an average rent of £6,250 per year or £119.86 per week.
• Two-thirds of these 80,000 or 53,333 will be paid by Housing Benefit.

What do we know of current costs?

The current average HB paid to social housing the average of council, HA, ALMO etc is according to latest HB stats is £77.20. (See Table 5 cell D54 here).  This tells us the average increased HB amount per affordable rent property is £119.86 less £77.20 or £42.66 more per week

This means:

• Each AR property is paid £2,226.10 per year more in HB.
• Which means 53,333 getting £2226.10 more HB spent is £118,725,330 more in HB pa.
• Over 30 years this becomes £3,561,729,911 or £3.56bn and not the £1.4bn the NAO claim it to be.

In fact it is 2.5 times what NAO claim it to be. Ergo the average higher HB per property is not the £17,500 that the NAO report states it to be; it must be £43,750 per property.

Let’s look at what this means and dig a bit deeper?

I say above this makes the average ‘affordable rent model’ rent figure £119.86 per week which I reference.  Note here that the average HB paid to private landlords is £107.24 (same Table 5 as above cell G54) and so affordable rent means paying £12.66 per week per property MORE in Housing Benefit than we pay private landlords.  Shapps denied this would happen and would cost more back in March 2011 yet he was wrong again.

Minister quick question for you – Is £119.86 higher than £107.24? 

Now let’s look at the definition of ‘affordable’ which is given in the NAO report to be at section 1.3 on page xx as: “The Department defines affordable housing as social rented or below market price housing for households whose needs are not met by the market”

HB pays £107.24 for market rent as a national average yet now it will pay £119.86 so  by its own woolly and vague definition of ‘affordable’ this shows that the AR model is not affordable as it will be paid out at MORE than market price.

Finally and perhaps more highly significant than anything above is the fact that the NAO modelling is and must be much more sophisticated than my £1 calculator bought from Poundland.  If they are predicting only a £1.4bn added HB cost over 30 years than my simple workings above at £3.5bn where is the reduction in the HB cost I am missing? Or to put another way how come I can say the cost is £3.5bn extra yet NAO maintain it is only £1.4bn – It must mean that the HB cost is reduced by £2.4bn from a different mechanism and one no obviously apparent.

The answer is the welfare reforms and specifically the fundamental and systemic flaws in the overall benefit cap that I revealed a few weeks back.  The systemic flaw is that the overall benefit cap (welfare and housing benefit) of £500pw will capture larger families initially but will capture and cut the housing benefit of smaller families over time as rents rise faster than the cap.

The NAO report alludes to this when it discusses the impact of AR on real affordability.  It says on page 25:-

Impact on rent levels

2.21 The Department’s modelling assumptions were based on providers charging a rent level between 70 and 80 per cent of market rate, which proved accurate with providers planning to charge an average rent of 75 per cent. The 80 per cent rate was adopted by only 40 per cent of providers and in London providers typically planned for rent levels at approximately 65 per cent. The proposed rent levels took into account that tenants might not be able to pay higher rents, especially if subject to the proposed benefit caps.

I updated the original systemic flaw argument last week and applied it to AR which said that AR is a risk too far for social landlords even if working as the risk of arrears is too high.  That risk according to the NAO report on 80,000 AR units is the missing £2.4bn, which on 170,000 properties in the first phase of AR becomes £5.1bn.

Or simply the first tranche of AR as projected by NAO shows a risk of a further £5.1bn of arrears to social landlords who offer AR units.  The government has in effect transferred this risk from the HB bill to social landlords, the antithesis of ‘letting HB take the strain.’

As I said last week when I applied the systemic flaw to AR are the bankers and financiers aware of this risk or were they when they advanced the funding for AR developments?  Will they now wish to look again at the risk the overall benefit cap adds with its systemic flaw to the monies they have advanced social landlords?

This is especially significant as the AR funding model unlike previous capital grant schemes sees the government only pay on completion of the AR units and not mostly upfront as before.  The NAO report states this risk and gives it strong significance and says it is a key risk for providers (social landlords).  It even questions whether social landlords were aware of the risks.  On page 9 it says that government needs:

“To understand the impact of transferring financial and delivery risks to providers, the Agency should evaluate how far providers priced risks into their offers, and whether the price paid represents value for money”

Given the bids social landlords put in for AR units were many moons ago and before the overall benefit cap was announced and its process which sees to cut only housing and not welfare benefits and then the systemic flaw on top of that, then those financial risks are huge and add to the cost of money from social landlords having to wait until completion of the AR units before they receive government money.  Oh and the probable further transference of £5bn or so worth of added arrears from HB not taking the strain!

AR is not a risk too far it is far riskier than that!

Social Housing – Its the economy stupid!

Social Housing is a political football.  It always has been but that doesn’t mean it always needs to be and I maintain here it shouldn’t be; rather social housing should be seen for what it is a massive saving to the public purse and taxpayer of £5.26bn per year.

It is often said that ‘social housing is subsidised and that is why it is cheaper’ than market or private rented housing.  There is some validity in that but it is an overwhelmingly superficial statement and largely used to further political arguments of opponents to social housing and to justify the much higher private rents the market delivers.  The reality is the amount of subsidy is currently £1.2bn per year yet it produces savings of £5.26bn per year and this figure is correct and easily provable, yet it is never mentioned or even recognised. The detail is in the official government HB statistics and referenced here in a post called HB facts

Social housing is more correctly called the Social Rented Sector (SRS) and is the latest term used to describe council house landlords, housing associations, ALMOs, housing trusts and all other social housing.  The term is useful as it correctly covers the myriad of ‘social’ housing providers as well as making it easier to compare to market rented housing, the private rented sector or PRS.

The context of the £5.26bn saving social housing produces for the country is in the overall rented housing market and the (welfare) benefit paid for rented housing by the government.  The amount paid out is published each month and the latest figures show a huge increase in payments to PRS tenants (a huge trend in last few years) and that seven in every ten new claimants of housing benefit since the election of May 2010 live in the PRS.  This in large part is the reason why the overall housing benefit bill has increase by £2bn per year since the election as PRS tenants receives 49% more in benefit than a council tenant.

The private tenant on average receives £107.04 pw to pay for his private rent yet a council tenant receives just £71.82pw.  That is a simple economic fact.

This huge added cost of PRS housing is usually ‘justified’ by the oft-heard statement that the PRIMARY reason social housing is cheaper because it is subsidised and the discussion ends,  If on the rare occasion the discussion continues on this the proponents of social housing are then (politically) labelled as left-wing dinosaurs and ‘council housing’ is from a bygone age.

However the obvious but never viewed or debated consequence of the ‘subsidy argument’ is this.

Take away the subsidy social housing receives and social housing rents would be at PRS or market levels and cost the country £5.26bn MORE!

In pure monetary terms this would see council and all other social rents costing the government, the state, the public purse and the UK taxpayer – call it what you will – £5.26bn per year more in housing benefits.

In economic terms then the subsidy of currently £1.2bn pa sees a return, an impact, a consequence or a saving – again call it what you will – of £5.26bn per year.  SRS subsidy is a fantastically cost-efficient ‘invest to save’ programme in economic terms.

The UK has a chronic national housing shortage which is admitted by all political parties with anything up to 5m people on social housing waiting lists yet the one thing that is not being advocated by any political party – or even by the SRS lobbies such as the Chartered Institute of Housing, National Housing Federation et al – is more social housing.

The huge monetary savings are also huge welfare spending reductions too.  The current coalition welfare policy of making work always pay more by reducing the amount spent on rent would incentivise a greater take up of employment.  It would make even lower paid employment more attractive to the benefit claimant.  Far from being some reconstituted socialist political policy it accords and fits perfectly with the current governments claimed economic one!

Let’s really dumb this down and look at the maths. Subsidy paid to social housing is a £1.2bn investment that saves £5.26bn and means for every £1 spent we save £4.33.

If you invested £1 in a building society and got back £4.33 at the end of the year would you be happy? Of course you would and that is the simple question and correct analogy for government – an economic question not a political one yet social housing is seen as a political issue.  That perception is fundamentally an errant one.

Would you pay £100 per year for a product that saved you £433pa on your electricity and gas usage?  That’s so much a no-brainer it becomes a rhetorical question!  Yet it is the exact same analogy for social housing.

Looking at social housing and its ‘subsidy’ issue in this way would be seen as radical as the ‘subsidy’ element has always been seen even by its proponents and the SRS as a negative.  It is not: It is a huge positive and a huge benefit to all – the tenant gets cheaper rent, the landlord gets more stock and income and the government pays up to 49% less for this.  I fail to see the negative as who is the loser?  The only loser is the private sector landlord who sets the rent level and at a level that currently receives 49% more in income than the council landlord. And then he asks the tenant to pa more on top of this as the benefit doesnt cover the rent level he sets. Housign benefit typically covers just 70% of the market rent level in the PRS yet the lower amount paid to SRS typically covers all the rent.

Think about that for a second and ask yourself is it right we the taxpayer pay 49% more out of the public purse for the same product and service – the rental of a property?  Of course it is not it is a waste of public money.  Then ask are the two products like for like?  No they are not.  A SRS property is more secure for the customer (the tenant) the customer has better rights of service through repairs, has much stronger legal rights and the good he is purchasing – the social rent – is of a standard that is invariably better than the PRS property.

Are those that say we shouldn’t call tenants ‘customers’ inadvertently politicising social housing and detracting from its real economic bottom line benefit? I digress.

The correct question becomes why is the government paying 49% more for an inferior product? And especially so when it can ensure a better alternative ‘product’ from which it saves £4.33 in day-to-day cost for every £1 it spends.

Note well this is not just a critique of the current government.  It applies to the last Labour ones, current (and likely future?) Labour policy for its absence, the previous Tory ones to that and the previous Labour ones to that as well.  It is a simple argument based on the bottom line not on political ideology.

It is however a huge critique and condemnation of the SRS and its leaders.  Their lack of challenging government policy over the last 30 years has led to the PRS becoming the majority rented sector.  Their lack of marketing the huge economic benefits of social housing has led to the SRS moving from having 8 out of 10 rented homes to less than 5 out of 10 in 30 years.

The SRS leaders couldn’t have done worse if Gerald Ratner was their head of PR!

What other lobbies for the best product at the lowest price for its customers in any other sector sees that product being viewed as the product of last resort? Yet that is how ‘social housing’ is perceived by Joe Public we are told politically.  The same politically bad product that has 5m customers (1 in 6 households no less) queuing up in its waiting list for that ‘bad’ product shows that the customer thinks economically or how it affects his and her pocket and not politically.

Perhaps it is time the SRS threatened government by saying keep your subsidy we don’t want it but our rents will rise to market levels and we will compete with the PRS.  We have a better product and service and cost-base and economies of scale than them, we will develop out own houses and sod your meagre subsidy!  After all that is the strategy the PRS adopts to any government interference with their business and it’s been so successful that they have gone from 2 out of every 10 customers to more than 5 out of 10 in the last 30 years – a phenomenal success for any business.

Food for thought?

There are so many other benefits.  However, the simple and correct point I wish to get across is that social housing is extremely cost-efficient when it is correctly viewed in an economic context and not as is it and has been, in a political context. Or as Clinton infamously said, then Blair, then Cameron even – all correctly – It’s the economy Stupid!

Postscript

All the above is pure nonsense of course and I am a sandal-wearing, Guardian-reading, undiluted, reconstituted socialist, Pinko-Commie who is wedded to some political construct of nearly 70 years ago – you know that one created for building homes fit for and prioritised for returning heroes…oops the Housing Minister beat me to it yesterday…well if the returning war hero soldier is over 25 of course!