More ‘convenient amnesia’ of Shapps – its PRS not welfare dependency!

The Valuation Office has published its latest statistical release on private rent levels in England.  This is a huge quarterly survey and contains details of 491,124 private rent levels from a room to a 4 bed property and broken door by local authority area.

Below I discuss some key findings and based on the average rent levels nationally, regionally and in each area for the average property and use other averages in terms of affordability:

(a) National average housing benefit paid (£107.06 overall figure – from latest DWP HB statistics)

(b) National average take home pay from national minimum wage (£213.79 based on 40 hours per week at NMW)

(c) National average net pay from £500pw (£387.85) – a figure the coalition is using as rationale and basis of the overall benefit cap

Key facts:

1. The average PRS rent level is £706pcm or £163.05 per week

Note that this differs from other surveys such as the LTS one which has this at £725pcm or £167.32pw.  One reason is that the VOA survey ignores gross market rent levels for non-eligible HB charges see here for VOA methodology – However the difference is minimal and so the following comments use the VOA figures.

The national average HB to a PRS tenant is £107.06 pw meaning that:

2. A PRS tenant has to make-up £55.99 per week on top of HB or LHA to meet rent

It is often errantly thought that housing benefit meets the cost of private rented housing yet it does not.

3. That HB/LHA makes up on average 65.66% of the rent

The above two figures are important as, typically, HB meets the full cost for a social housing rent which are;

4. Typically 32% lower than PRS HB levels at £80.85 pw and so a social tenant claiming Housing Benefit claims and gets 32% less than a private tenant

This means that private rented tenants cost the public purse much more and so the taxpayer pays more in housing subsidy to the PRS than it does to the social rented sector (SRS) per property.

5. The 1,645,730 PRS tenants claiming HB/LHA get on average £26.21 more in benefit per week and this is £2.25 billion pounds per year more in benefit for the same number of properties.

That is £2,250,000,000 more for the same (though inferior) product and service and something that Grant Shapps, the Tory Housing Minister seeks to deny exists in his convenient amnesia!

That is over £1 billion MORE per year we pay for PRS properties than we do as ‘subsidy’ to social housing!

See here for details on why the ‘subsidy’ of £1.2bn per year saves the public purse £5.3bn per year as that would be the additional cost if social landlords put up their rents to private sector LHA levels (£107.06pw) which they would do if this ‘subsidy’ was taken away.

‘Subsidy’ for social housing is correctly viewed as an invest-to-save programme with the £1.2bn invested each year returning a saving of £5.3bn.  And even as the above shows we pay £2.25bn more for the same number of private properties than we would if they were social housing properties.

Affordability needs to be viewed not just from the individual tenant perspective but from a national perspective.  This is best put in a simple question –

Why does the taxpayer spend £2.25 bn per year on unregulated and non-monitored private housing than it would on the same number of regulated and monitored social housing properties?

Is that affordable for the country?  No clearly not yet that is a fact and exactly what we do.  It makes economic sense to substantially increase the ‘subsidy’ or investment as this would save the taxpayer even more each and EVERY year. Yet to even mention that ‘economic ‘or ‘financial justification’ argument sees the proposer branded as a political dinosaur!

6. Typically the average PRS rent at £163.05 is more than double the average social rent at £80.85pw

It is often stated that the only reason social housing is cheaper than private rented housing is because it is subsidised.  The above points dispel that myth – a myth that Grant Shapps likes to state at every turn but has collective amnesia as he fails to mention the added and higher costs the public purse pays to the PRS.

The overall affordability argument for the individual is simple.  Does work pay?  The individual has to receive a much higher paid job to make a PRS rent of £163.03 per week than a SRS rent of £80.85 per week.  Another question: -

How much is the British economy stifled by not being able to find workers who are willing or able to afford a lower paid job due to high private rent costs?

Follow that (correct) line of argument and ‘dependency’ is not because of high welfare benefit payments making work unaffordable it is down to high private rent levels meaning work doesn’t pay!

However yet again, to even posit that view is to be pilloried and labelled as some left-wing dinosaur!  A convenient label to avoid discussion of the economic madness that high unregulated private rent levels means to the national (apolitical) economy.

7. A tenant working full time on national minimum wage has a net income of £213.79 and of this figure needs to use £163.05 to pay the average rent – this is 76.27% of income just to pay rent in the PRS!

I need not comment on affordability except to say the NMW means you can afford a private rented property.

8. A tenant working full-time on £500pw gross or £387.85 spends 42% of net income on average rent in the PRS.  The same tenant would spend just 20.85% of net income on an average social rented property.

Again little comment needed as the figures are self-explanatory.

Geographic affordability?

London – average private rent level in London is £305.77 per week or 79% of the average net pay of £387.85 per week!

Inner London – average private rent level is £359.58pw or 93% of the average net pay!

Outer London – is £255.20pw or 66% of the average net pay

Note well that the VOA statistics were of almost 60,000 private rents across the capital so this is not a small unrepresentative survey with any semblance of suspect data or extrapolation.

Also note that Surrey (Elmbridge, Runnymede, Woking, Surrey Heath, Waverley, Tandridge); and Buckinghamshire (Chiltern, Windsor and South Bucks); and Three Rivers (Hertfordshire), Sevenoaks in Kent and Oxford all have higher average private rent levels than Outer London.

If we use 50% higher PRS rent than the average social rent as a benchmark – £121.28 pw or 31.2% of average net pay then 280 of the 371 councils are unaffordable in which to rent privately. 

Or put another way 75% of the country has average private rent levels 50% or more higher than social housing rent levels!

The above is a very brief summary of the national scandal that is private rent levels and their impact on affordability, both for the tenant and for the taxpayer and public purse.  The average level of which is more than double social housing rent levels – what Shapps the amnesiac buffoon wishes to call ‘taxpayer-subsidised housing’ when in fact as the above figures show the private rented sector gets almost twice as much taxpayer subsidy at £2.25bn to £1.2bn and all for an inferior product that creates the real worklessness as private rent levels act as the biggest disincentive to take up employment for a tenant.

Private rent dependency doesnt have the same ring to it as ‘benefit dependency’ does it?  It’s far more accurate a picture though however much convenient amnesia one has!

How remiss of you Shapps old boy!! Housing Minister fibs again!

The overt politicisation of ‘social housing’ raises its ugly head again today with Grant Shapps the Tory housing minister stating in an article in the Daily Telegraph that ‘social housing’ should be rebranded as “taxpayer-supported housing!”

Here is what Shapps said: -

“I think it is worth reminding people two things. First of all, the taxpayer pays a fair whack subsidy to build the house in the first place, and then, secondly, there is an ongoing week by week subsidy against what would be the full market rent.

“There are forever arguments, the housing intelligentsia of The Guardian or whatever, who say there’s no cost, it’s already built. Not true.”

He added that it should be called “taxpayer-supported housing rather than the meaningless phrase social housing”.

He went on: “Everybody lives in social housing as far as I’m concerned. So I think calling a spade a spade and calling it taxpayer-funded housing is not unfair.”

What a selective memory and a convenient one Grant Shapps has in these four paragraphs above!!

Paragraph 1

(a)   The taxpayer pay a fair whack subsidy….Yes the taxpayer puts in £1.2bn per year but saves £5.3bn per year from this, a simple but nonetheles valid argument.  Take away the capital subsidy (or investment) and social housing rent levels would rise to private sector levels of housing benefit (the ongoing or revenue subsidy) and this means a £5.3bn yearly increase at today’s figures.

(b)   Ongoing week by week subsidy? – This is just wrong and a deliberate error by Shapps.  The average benefit paid to social housing tenants is £80.85 per week yet the average paid to private renting tenants is £107.06 per week.  These are the latest official government figures and show that the revenue or ongoing subsidy to private tenants is 32% higher to private tenants than to social tenants.  In summary the housing minister has deliberately aimed to mislead here as he must know these figure.

In short he has lied……(How dare you say a minister has lied!!  Dissembled yes, errors or omission or even commission, but lied…guffaw, guffaw, guffaw!)

Paragraph 2

Just superficial nonsense as nobody is saying or ha ever said that there isn’t any ongoing cost.  Quite the opposite in fact as my point (b) above states clearly, the ongoing cost is so much lower in social housing than in private rented housing; and as my point (a) above makes clear that what Shapps pejoratively calls ‘subsidy’ (Boo! Hiss!) Actually SAVES the taxpayer money and in Shapps own language a massive whack at £5.3bn per year for his £1.2bn per year ‘fair whack!’

Social housing is an extremely cost-effective ‘invest-to-save’ programme that returns £5.3bn per year for investing £1.2bn…a lesson there for investment bankers anyone?

Yet that is the reality that Shapps is deliberately denying through his error of commission or in lay terms his convenient lies.

Paragraph 3 – “Taxpayer-supported housing?” 

As I outlined above we (the taxpayer / public purse) pay 32% MORE ‘subsidising’ private rented housing on a weekly basis than we do ‘subsidising’ social rented housing. So using Shapps’s rationale should we rebrand ‘private rented housing’ as “largesse taxpayer-funded housing?”

More correctly private rented housing should be termed “taking-the-piss-out-of-the-more-heavily-taxpayer-funded-housing!”

Paragraph 4 – “so calling it taxpayer-funded is not unfair?”

Again so what do we call the even more heavily taxpayer funded privately rented housing then Minister?

Before you decide dear reader some further facts for you from the governments own official figure on Housing Benefit.

• The numbers of social housing HB claimants has risen by 2.7% since the last election.  The numbers of private rented tenants claiming has risen by 13% – 5 times more than social tenants
• Since these figures were first published in November 2008 social housing HB claimants has risen by 8.8% while the number of private sector claimants has risen by 56%!
• I remind you that currently a private sector claimant gets 32% more in benefit each week than a social tenant!
• Private tenants represent 32% of all HB claimants yet get 40% of the benefit monies
• 100% of social housing is regulated and monitored.  97.5% of the private rented housing is UNREGULATED and not monitored
• Grant Shapps has refused to monitor and regulate private rented housing and finds it acceptable that it receives 32% more in funding from the taxpayer and is not monitored for its quality or cost to the taxpayer

Anyone think the housing minister has made an indefensible political statement above that doesn’t bear any scrutiny?

In September 2011 Shapps criticised John Prescott saying that his failed regionalised Fire Service plans costing the taxpayer £496m had been abandoned by him.  This near half a billion pounds, Shapps said, would have cost each taxpayer £20 extra per year.  By his methodology the £4.1bn saving the taxpayer makes by investing £1.2bn in social housing saves each taxpayer about £162 each per year.

Social housing investment, even if pejoratively called ‘subsidy’ by Shapps, means every taxpayer pays £162 per year LESS in tax!

Ok, I will dumb this down for the average Daily Telegraph reader.  Give me £1200 to invest and within a year I will give you back £5300 – that is what social housing investment does for the taxpayer. It seems that nice young man Shapps forgot to point that out.  How remiss of him!

The serious point is that Shapps want to keep ‘social housing’ in the political sphere because placing it correctly in an economic context  would (a) show that social housing is THE most cost-effective way of paying for rented accommodation, which in turn creates the conditions for less benefit dependency and makes work pay even in our low-pay economy, and (b) keeping it political gives Shapps a target for blame and scorn.

UPDATE 4 September 2012

The Guardian ran a poll on this issue -should social housing be rebranded as taxpayer-subsidised - which closed yesterday.  The results suggest 85% say no it shouldnt be rebranded.

What is a bedroom – and why landlords dont want it defined?

The bedroom tax

If you are a single person living a 2 bed council house you will see a reduction in your Housing Benefit of 14% because you have 1 more bedroom than you need.  If it’s a 3 bed council or housing association house you will lose 25% of your Housing Benefit because you have 2 bedrooms too many.  But what is a bedroom?

The bedroom tax as we see above is based on bedrooms yet there is no definition of what is a bedroom and the coalition are leaving that to social landlords to define and DWP will not define what constitutes a bedroom.  That is unacceptable and wrong.  You cannot have a benefit decided on the subjective opinion of varying landlords it just doesn’t make any sense.

Houses in Multiple Occupation (HMOs) do have a size definition of what constitutes a bedroom.  That size is 6.5 square metres or 70.1 square feet if like me you work better in imperial measurements.  Anything under 10’ x 7’ is less than 70 square feet (and 6.5sq/m) and so if not a bedroom under HMO regulations. Yet many ‘bedrooms’ can be less than this size of area and shouldn’t be classed as a bedroom for HB purposes; and further I would argue and indeed advocate that tenants who have such small rooms to appeal and challenge any deduction of HB on that basis.

Many years ago I headed up the asylum seeker dispersal programme for a NW council.  The government had contracts with local councils which said that properties to be used for asylum seekers has to be dual use so a 3 bed house could accommodate a family seeking asylum or 3 individuals.  They had to be HMO compliant too AND a single bedroom had to be 70sq/ft and a double bedroom 110 sq/ft.  The important central point here is that central government specified, under contract, what a bedroom was in terms of size – they defined a bedroom.

Many properties are defined in housing-speak to be say a 3bed/5 which means 3 bedrooms to accommodate 5 people (two doubles and 1 single = 5 occupancy) yet the single room is often below the 70sq/ft size making it a boxroom and not a bedroom.

If government can and do define what a bedroom is by saying in asylum contracts it has to be a minimum size then surely that size criterion must follow for what is a bedroom for bedroom tax purposes and HB deductions?

The coalition also advises that these underoccupying tenants can take in a lodger.  Yet if a tenant advertises a single bedroom which is less than 70sq/ft are they in breach of the Trades Descriptions Act or some other law for advertising a bedroom which is in fact (legally?) not a bedroom but a boxroom?  Would the lodger have a case in law to refuse to pay rent for a boxroom that was advertised as a bedroom?  Would HB have a case if they refused to pay HB by claiming it was a boxroom and not a bedroom?

I am staggered that there has been no legal challenge to this to determine for the purposes of HB deductions what is a bedroom?  Back in May in an interview with Lord Freud he was adamant the government were not going to define what a bedroom is.  He said: -

Lord Freud is adamant that the government will not define what a bedroom is for the purposes of the policy. ‘It is up to landlords to determine that and they are perfectly capable of doing that,’ he says, speaking slowly and deliberately. This has led to concerns that landlords could reclassify large numbers of properties to allow tenants to avoid the tax – a move which will reduce rental income. Some fear this could breach existing lending agreements and lead to legal challenges from tenants over what constitutes a bedroom.

Lord Freud says: ‘My own expectation is there will be a bit of it [reclassification] but it won’t be a widespread, wholesale move because it has income impacts.’

On the point about legal challenges, Lord Freud, pauses, choosing his words carefully. ‘I’m clearly not expecting that outcome and I’m expecting landlords to act appropriately and smartly,’ he says.

Yet the above doesn’t answer the simple questions of what constitutes a bedroom for benefit purposes.  Put another way how can DWP or our local HB department determine what is and isn’t a bedroom for deducting benefit?  All benefit decisions are rightly open to appeals and eventually full legal challenge.  Lord Freud in his last sentence is clearly passing the buck onto landlords.  Does this mean the DWP will accept what the landlord says in making a decision on a bedroom tax deduction?  Does this also mean a tenant has a legal challenge against the DWP and the landlord in such cases?  “Sorry Mrs Jones your landlord says you are not disabled and so we are not paying you DLA or incapacity benefit” says the DWP decision letter!  Eh!

That is an analogy of how absurd the process and decision making in the bedroom tax is!! What the hell are landlords doing allowing themselves to be embroiled in this farce?  Why are they exposing themselves to costly legal and other challenges in this way?

It’s time social landlords challenged this collectively on behalf of their tenants or TPAS or another umbrella body on behalf of tenants challenged this nonsense.  It’s also time for social landlords and tenants groups to develop standard letters so tenants can appeal every bedroom tax decision or determination where they have a boxroom.

What about public interest lawyers?  Is there a public interest issue here?  Damn right there is as central government are taking money away from tenants living on subsistence level benefits and it affects hundreds of thousands across the country.

I had only thought about the lodger angle today.  The government are advocating and promoting this yet are noticeably silent on what a bedroom is and of course that means they are ignoring a potentially huge legal issue on whether a lodger pays the tenant or on whether the DWP refuses to pay HB to the lodger.  If so taking this one stage further would the lodger also have a claim against the social landlord too?  I could get really semantic and pedantic and say a tenancy agreement may allow a tenant to rent out a bedroom to a lodger or boarder but not a boxroom.  If we have a definition and if we do I fail to see how it can be less than 70sq/ft then has a tenant broken his tenancy agreement is he rents out a boxroom?  The more one looks at this the more ridiculous the Lord Freud and DWP and Coalition policy and position is!  It is a legally fraught position too that as yet to my knowledge has had no challenge….Why?

One other point on the lodger issue has come to mind.  If a tenant has a lodger isn’t that two separate households or a HMO too? If they have two lodgers then that’s 3 separate households surely? Note 3 people living in 3 separate households is one of the benchmark factors in determining what is and isn’t a HMO.

Here’s where this policy gets bizarre and surreal.  If you take in a lodger as the government are promoting then your home forms 2 separate households and comes under the vague definition of a HMO and if you don’t it doesn’t.  So do as the government advocates and promotes and you have a better chance of the HMO size standard being relevant legally and conversely if you don’t the chances of the typical HMO size standard of 70 sq/ft has less applicability!  If you take in 2 lodgers you have 3 people in 3 households and conform to a more definitive HMO and so surely space standards of 70sq/ft would have to apply?

So a quick recap, no lodgers and who cares if it is a bedroom or boxroom.  Take in 1 lodger and it’s easier to argue the bedroom/ boxroom position.  Take in two lodgers and then it can only be a boxroom!  That is the bizarre and oppressive nature of this policy and it is a joke!

Yet you also have as a tenant more legal obligations to ensure the bedroom is a bedroom and not a boxroom for HMO size purposes!  Did you see anywhere in the governments leaflets promoting this any reference to you creating a HMO? Does the all-singing, all-dancing Universal Credit IT system include the tax or non-tax implications of taking in lodgers which is even more confusing thanks to another knee-jerk intervention by Lord Freud that I discussed here in a blog called lodger, bodger, silly old codger for good reason.

If the UC IT system does not cover the mysterious vague tax treatment of lodgers and tenants then how can it deliver a final assessment of a tenant’s entitlement to all benefits?  It can’t can it and so tenants will be waiting longer for decisions and so build up more arrears (and take out more Wonga loans in the meantime?)  Also how is the definitive word of the landlord to be considered by the UC IT system? Does a landlord have to supply it with the landlord classification of whether 1 Acacia Avenue is a 3 bed or a 2 bed property?  And all this digital by default…eh!  I digress.

So is anyone any clearer on what the f*ck is a bedroom then?

The Law Lords in the (little known, relevant and worth reading) case of Uratemp Ventures v Collins determined what is a dwelling which they did, then why is no one asking them to define what is a bedroom?

Landlords and tenant groups need to get off their backsides and ask that the judiciary does determine what is a bedroom?  Surely there is also plenty of interest and scope for public interest lawyers here too.

Hmmm, I wonder how many private landlords are renting out boxrooms and having 3 persons share a 3 bed house?  Quite a lot I imagine and especially as it is in their financial interests and indeed a large government steer to do this with LHA caps.  Is the SRS landlord who wants to constantly (often with good reason) decry the private landlord for iffy practises going to hide behind the fact that they too are renting many 3 bed properties which are in fact 2 bedrooms and a boxroom?  That would be duplicity wouldn’t it and rank hypocrisy.

So tenant groups it looks like it’s all up to you then!!

The fundamental flaw in the overall benefit cap (OBC) revised 24082012

The language in this may shock and if easily offended dont read on.  However when a rocket is needed up peoples arses it’s needed!

Paying social tenants who underoccupy social housing is known as the ‘bedroom tax’ yet we don’t call the overall benefit cap the ‘close your legs you ‘scaggy bitch’ tax? Why? Perhaps the ‘Jade Tax’ would be more suitable particularly to those easily offended and who like Chaucer?

‘Jade’ is an Olde English term for a harlot, a woman of loose morals or in modern parlance the ‘scaggy bitch’ single parent dropping babies like flies to so many different fathers just for the welfare benefits and the council house…you get the (Daily Mail?) picture. Though of course the same situation applies to a good Catholic girl whose husband has just died tragically or has cancer and about to die leaving her with 6 kids – the benefit system doesn’t judge morality after all!

The fundamental flaw in the overall benefit cap (OBC) is a Jade Tax and here’s what I mean as I am amazed this issue has not been taken up and discussed.

Those with 6 children will have to pay their rent from their welfare benefits after April next year, rent which is currently paid for them through housing benefit. That is a fundamental seachange and a tax on having children and is against the inviolable human right to a home as having children equates with being made homeless and perpetuallly!

The OBC limits all benefits to £500pw and works by deducting the amount of welfare benefits from this leaving the remainder or residual amount as the maximum that can be paid towards rent in housing benefit.  So the ‘scaggy bitch’ or the good Catholic girl will from next April receive circa £500pw in welfare benefits and zero, nothing, nada in housing benefit.  Given that a 4 bed council property, the cheapest option, is priced at £120pw or so as a minimum nationally then where is this £120pw tax going to come from?

Contrast that with the bedroom tax of a 14% or 25% reduction and this is a 100% reduction.  So why has it had scant comment across housing?

Yes there are very few families with 6 children I grant you but the OBC overtly penalises large families on benefits (and you will see those in work too) and is the fundamental flaw in the OBC.  These large families will become homeless and there is no other viable option to this as they will rack up massive arrears very quickly and what then happens?

The OBC will make EVERY large family homeless due to arrears and that is in the lowest cost housing option in social housing.  This is not a large family living in private rented in Kensington; this is the pillar of the local Catholic church community, and Mother Earth in a council house in Hull (or maybe Belfast, Glasgow or Liverpool with their high Catholic populations?)

The OBC is social engineering on a massive scale; it is a huge gender and feminist issue too and I repeat WILL affect and make homeless the ‘scaggy bitch’ (SB) and the Catholic Earth Mother (CEM).

What happens next?

The tenant arrears lead to eviction.

A homeless application is made and the SB and CEM will be found unintentionally homeless and in priority need and the local council will have to rehouse and accept a full homelessness duty.  But where do they go?  Leave aside temporary accommodation and it huge cost as the interim emergency housing, I mean after that.

If they are found a 4 bed council property or even ‘sardined’ into a 3 bed property the same situation will recur as they will need to pay their rent from their welfare benefit.

Repeated homelessness is the inevitability due to not being able to afford the cheapest possible housing because of the OBC.

What will be the impact on the children and/or on the mental health of the mother? I could go on with many more stating the bloody obvious consequences and questions but one obvious one springs to mind – Who the hell didn’t consider that OBC equals large families will be made homeless perpetually?

The answer is none other than that self-avowed Christian churchgoer, Iain Duncan Smith!

The ONLY answer for the Good Catholic Earth Mother is to get a job and one that pays enough to cover childcare for 6 children.  If she takes a minimum wage job she will be able to claim working tax credit and be exempt from the overall benefit cap and so have her rent paid by HB. Yet this apparent £120 saving in having her HB paid won’t cover the childcare costs of 6 children will it and she will be lucky if triple that amount covers it and that low estimate of £360pw is 50% more than her gross salary!!! What was that IDS, you will always be better off in work than on benefit? Really!  The Good Catholic Earth Mother will have no choice but not to pay her rent as she needs to pay childcare and feed her family.

Yes with HB direct to tenant even the most avowed Christian who wants to do the right thing won’t have the desired effect at all.  The arrears case comes before the court and another eviction.  The homeless team may even try and decide this is intentionality on the CEM’s part, but even if they do what happens to the CEM and her 6 children?  Where do they live? Where do they go?

• I didn’t see any religious aspects in the OBC impact assessment to this despite the UK having about 6m Catholics? Human Rights Act challenges anyone?  I haven’t read any church condemnation of this policy either.

• Don’t BME families have larger families on average? Yes, yet I haven’t seen any challenge to the OBC policy on these grounds have you?

• I didn’t see any gender aspects and risks covered in the OBC impact assessment either? Another HRA challenge anyone?

Oh I see the Good Catholic Earth Mother is just a ‘scaggy bitch’ who should have kept her legs closed IDS! It’s not the governments fault her husband lost his job, contracted cancer or was run over by a bus is it?  That’s the basis of this policy which denies all large families a right to a home and massively against their Human Rights.  It’s a Jade Tax not a Child Tax then in the governments view?

Reading this and have 5 children or more? What if you lose your job?

One final point to consider that is relevant.  The OBC is nothing more than a housing tax too.  Now and before it comes in we already have a national welfare benefit tax; dole is £71pw whether you live in London or Land’s End to John O’Groats.  It is already capped on a national basis as all welfare benefits are.  The OBC is a housing benefit tax and as I outline above its fundamental flaw is a denial of the human right to a home and needs to be challenged legally.

Notes:

• A 5 child family SB or CEM will only get about £80pw towards rent from next April and the same will happen to them just at a slightly slower rate.
• The systemic flaw which sees the cap rise at a much lower rate of inflation than both welfare benefits and rents will increase the numbers of tenants caught by this partially or in full each year thereafter.
• The cap will also capture all those living with the ‘affordable (sic) rent’ model from next year with 4 children and soon with 3 children (occasionally lapsed Catholics anyone?)

In a few years we will see having children equates with being made homeless.

Perhaps we should start inserting repeat 5 year contraceptives in all women and only allow them to be removed when they can prove they have sufficient financial resources to give birth?  Well that’s the thrust of this policy after all!

Perhaps all marriages and relationships should be forced to have a pre-nuptial agreement in them making both parties fully financially responsible for all children and no funding from the state for them?

Maybe the coalition will dictate to the religious leaders of this country to modify the marriage service and remove or amend the rationale for procreation with a financial caveat?

Flippant? – No and if you want to read how much worse this will be for those living in the affordable (sic) rent model look here

How about the quandary judges will face when arrears happen look at this excellent article by Ben Reeve Lewis (and comments as to why its not a London only matter) in the Guardian

Woods have trees in them you know!

I must have a truly warped brain and I am getting pissed off at writing the “elephant is in the room” which many for some reason dont see.

Today’s bullshit and blinkered responses is in regard to the Cameron loving Policy Exchange think tank report that the best and most asset rich council housing be sold off to fund a massive social housebuilding programme.

This is one of those rarities, a housing story that has made the national news and the BBC website view here is revealing as to the elephant in the room.  Its a good a summary as elsewhere and frankly the idea doesnt deserve consideration anyway BUT the comments of the housing minister Grant Shapps do deserve much more consideration and they are being ignored in the comments and blogs elsewhere.

To explain the BBC (or BBC-placed) story says “Selling top homes when they become vacant would raise £4.5bn a year, enough to build 80,000 to 170,000 new social homes, providing building jobs.”  This is unadulterated Keynesianism.  Stay with that thought and then what does Shapps say: Oops I notice the BBC has updated their view at 10.26 this morning to include the alternate views of NHF and others not there before and taken out the earlier Shapps comment which was such an idea is “blindingly obvious!”

Shapps admitting that what we need is a massive building programme of new social housing is major news.   He also recognises and admits that this will have the Keynesian multiplier beneficial effect and is the ‘blindlingly obvious’ thing to do!  A Tory finally talking sense and finally admitting that we need a massive increase in social housing!  A Tory saying that the Keynesian council house building of just after WWII is the right way to go for the country and ‘blindingly obvious’ to be in the country’s best interest!!!

Perhaps he has been swayed that the £1.2bn of subsidy we invest in social housing per year – a figure he cut in half to that amount – does save the country £5.26bn per year

Yet for some reason – and no I wouldnt dream of saying Shapps’ office has had his original ‘blindingly obvious’ quote pulled! – Shapps doesnt want to put the money up does he?  Is he worrying that the huge talk of his promotion to a real cabinet post is at risk if he agrees to Keynesianism and more council housing?  God forbid I was that cynical!!  No I am much more realistic than that!

Shapps needs to put up or shut up and as he wont put up the money I was going to blog that he should shut up but it seems Conservative Central Office has beaten me to it!!  What was that IDS said yesterday…oh yes the BBC is biased against this government……ahem!!!

The “blindingly obvious” quote from Shapps was a huge political gaffe as it exposes the coalition policy toward social housing is political and not economic.  The same Shapps who admitted on the eve of the CIH conference that the affordable homes programme was a rough and ready exercise!

Note I am not decrying the hundreds of comments that the PX proposal would break up communities, would be a cleansing operation and all the other offensive aspects of the proposal that have correctly drawn scorn.  Just that even the Tory housing minister knows and admits what the known solution is but wont enact that because social housing is anathema and against the political dogma of the Tories even though they now admit it is the right course of action!!

So Minister, come on and let me know should you stay or should you go now?  Dont worry Grant old bean the opposition dont pick up on your gaffes as they are even more incompetent when it comes to seeing elephants in rooms, though if Boris is going to get the support to take over from Call Me Dave, which the rumour mill has it to be, then a gaffe prone replacement will be needed……

UPDATE 3pm

The Director of Policy Exchange has issued an article in the Telegraph to attempt to rationalise this nonsense.  It has a subtitle which reads

“No one has a right to live in Kensington at taxpayers’ expense: it’s time to start recycling social housing“

What a crock of equine anal secretion!

You will see I have emphasised ‘at taxpayers expense’ and for good reason as social housing subsidy is NOT an expense at all and its time we dispelled this myth.  As I say above the £1.2bn per year subsidy delivers a £5.26bn return for the taxpayer and so it is not an expense or cost to the taxpayer at all, in fact as I correctly say it is a net saving to the taxpayer.  The reality and fact of the matter is that this ‘subsidy’ is a simple economic invest to save programme which results in the average taxpayer saving £162 per person per year in tax.

Therefore to start an argument with this false premise means anyone stating a subsequent argument based on that error is a buffoon if we assume he is apolitical or he is giving a political polemic and hoping that Joe Public is sufficiently ignorant enough to believe this “tell-a-lie-often-enough-and-people-believe-it’ bullshit.

Given that the title of this blog is woods and trees to premise an argument based on this myth must mean that that this piece from the Director of Policy Exchange is perhaps ursine anal secretions and especially given the regularity this myth is regurgitated

Yet and it needs saying, why the Labour Party or the housing sector has not advanced the economic argument for social housing is baffling and incompetent.  In not looking at social housing in an economic light it remains in its politically engineered light as a policy for a bygone age.  But even Shapps thinks this is blindingly obvious as the correct form of action needed for the country!!

 

 

 

 

Direct payment of HB to tenants is better for landlords – You what!!

I never thought that I would argue that paying HB direct to tenants is a good thing for social landlords.  Yet it is and we are back to the old Elephants in the room to see this, the fundamental flaw and the systemic flaw in the overall benefit cap (OBC) on which I developed as a posit and have blogged about in plenty of detail.

The operation of the OBC sees the cap as the starting point from which all welfare benefits are deducted which leaves a residual maximum amount that can be paid as housing benefit.  In figures a cap of £500 sees the £400pw of welfare benefits deducted leaving a residual maximum anount of £100pw (£500 less £400) to be paid TOWARDS rent.

Toward rent is significant as until OBC comes in next April non-working social tenants get 100% of their social rent paid in HB.  Yet from April 2013 they wont and arrears will build up.  If the rent is £130pw and HB only pays £100pw, their is a £30pw shortfall which the non-working social tenant can only pay from his or her welfare benefit.  Social landlords have correctly recognised that this will lead to arrears build up and social landlords have been vociferous that the direct payment to the tenant of HB rather than direct to landlord will – again correctly – only increase the level of arrears.

It’s the next step in the arrears process that social landlords have not looked at and precisely why direct payment of HB to tenants is in the best interests of social landlords.

Currently social landlords will seek a suspended possession order (SPO) and the district judge will order the non working social tenant to pay full rent and a token amount per week off the arrears – lets say £5pw to keep this simple.  What that means is two things.  Firstly, that the judiciary believes that a tenant should only and can realistically only afford to pay £5pw out of welfare benefits.  Secondly, that this view is formed because non-working social tenants get 100% of the HB paid.  Yet the OBC changes this and the days of 100% of social rent being paid by HB are over come next April when the OBC comes in.

Use the figures above and imagine a tenant with a social rent of £130pw getting £400pw in welfare benefits.  They will only receive £100pw TOWARDS their rent and not £130pw.  The arrears will build up to a higher level and more quickly and more tenants will be up before the DJ for this.  So what does the DJ award?  If the judiciary now typically belives £5pw is all that a tenant can afford what are they going to order now that the tenant has to find £30pw – 6 times this amount – just to pay full rent and nothing off the arrears?

The District Judges will be appalled at this which will first reveal the fundamental flaw in the OBC – that it penalises the larger families.  A couple with 5 children will in April 2013 receive about £420pw in welfare benefits leaving just £80pw to pay towards rent.  That £80pw is unlikely to cover full rent anywhere in the UK.  (A couple with 6 children will receive about £490pw in welfare benefits meaning they will receive about £10pw towards their social rent!)

A DJ order typically says pay full rent plus £5pw now and for that to continue the DJ will know it mean ordering the tenant to find £55 per week from welfare benefits as opposed to the previous £5pw – an 11-fold increase!!  [If social landlords havent lobbied the judiciary on this huge issue they need to do so asap!]

What I suspect has to happen is the DJ will still have to order ‘full rent plus £5pw’ and will do so because the choice of what to spend all benefit income resides with the tenant.  If HB was paid direct to the social landlord which would expose that the tenant cant afford even to live in social housing because of the OBC then we would see DJs making a much higher percentage of outright possession orders and not suspended ones which is not in the interests of the tenant, the landlord or the public purse.

Over time the systemic flaw will see more and more possession cases for arrears as the cap in relative terms fails to keep pace with rises in welfare benefits and social rents, both of which rise at a higher rate of inflation (CPI and RPI+) than the cap which rises only with average earnings (AWE inflation).

So as the above examples reveal a 5 child family will have their HB cut massively (and HB is the only benefit to be cut because of its residual position in the operation of OBC) shortly because of the systemic flaw it will see 4 child families, then 3 child families etc.  Each year more and more social tenants will lose HB altogether and more and more will have it cut by the cap.  Possession orders will go through the roof and regardless of whether HB is paid directly to tenant or landlord.

The OBC with its fundamental and systemic flaws is the elephant in the room and because of these flaws it makes sense for landlords to have HB paid direct to the tenant and not to the landlord as in simple terms if HB was paid as now direct to social landlords and not to the tenant then more and more costly outright possession orders would follow and cost the social landlord more (and the tenant and the public purse!)

How RTB can work and deliver more than 1:1

I dont like the right-to-buy never have and never will.  Its heyday in the 1980s was in my view simply to buy votes for the Thatcher governments and it is a direct cause of the current chronic shortage of truly affordable housing in the UK. That said, the last Labour conference saw Ed Milliband embracing RTB so it is here to stay despite my view on its huge causal effect on the national housing shortage.

The latest situation is that the RTB2 launch at the last Tory conference and subsequent further relaunch by Shapps in the last week or so has a significant and universally acknowledged problem – it cant ensure the 1 for 1 replacement basis on which it was sold to the public.  This is because after the discount and THEN paying back the original ‘loan’ to government – the RTB receipt – there is not enough left to ensure a 1 for 1 replacement hapens.

So why are we paying the receipt back to central government?  Just abandon the receipt altogether!

Surely not I here you cry this is taxpayers money put into social housing and it should, indeed must, be paid back.  No, that makes no financial sense at all and the argument is fundamentally flawed!

In a previous post that has never been challenged I said the current £1.2bn per year of subsidy saves central government £5.26bn per year.  Even allowing for the fact that the current subsidy is about half of previous decades, or £2.4bn in todays terms, this means that central government has for decades paid out in todays terms a subsidy of £2.4bn each year but received £5.26bn per year back in savings.

The initial money and the cost of that money has been more than recovered as it equates to a 120% return each and every year on this subsidy.  So why is the government insisting this subsidy is paid back?  They have more than made money out of this subsidy every single year havent they?

Im pretty sure that if the government did not take back the capital receipt then it is relativeely straightforward to ensure a 1 to 1 replacement happens and is financially feasible.  It also means that the ridiculously named Affordable Homes Programme would not be needed to.  This AHP costs the government more money as its rent levels known as the affordable (sic) rent model incur far higher HB costs as well as transferring huge risk to AHP social landlord developer meaning they become necessarily too risk averse and hence develop fewer properties.  Of course it also means that non-working and working tenants find employment less affordable and so AHP acts to increase benefit dependency.

Get rid of the capital receipt payment back to government and RTB will work at least financially.  It will also see the non-need for the AHP which is also fundaamentally flawed and promotes benefit dependency so much that it will persuade current working tenants that they are financially better off on benefit and not working.  But then next year the overall benefits cap kicks in and as HB is the ONLY benefit to be cut in all cases excepting those with 6 or more children and makes AHP even less affordable and viable.

So scrapping the capital receipt is the only way to ensure a 1 or 1 replacement with RTB and the replacement can be a truly affordable replacement and not the financially-inept ‘affordable (sic) rent’ model. It even means that the capital with its ridiculous land prices and rent levels can benefit too and more so than they could under AHP.

So if Cameron and Shapps are so enamoured with the aspirant family in council housing and so want to help them and others achieve home ownership then the answer is simple – dont take the RTB receipt.  After all you are already giving away up to £75k in discount which will be far more than any outstanding receipt so why is your government hampering its own policy and political ideology?  It doesnt make sense…unless of course your real rationale is to ensure the erosion of council housing !