RTB2 – the Porter House Blues return

The RTB2 consultation response is out.  Discount, discount, discount is all that the media is interested in, with a few exceptions as to will this produce a 1 for 1 replacement.  What nobody is focussing upon is the real interest – how much this will cost every taxpayer on an ongoing basis.

Ignore the obvious flaws that the figures just don’t add up and for a second assume we will see 170,000 new RTB sales replaced with 170,000 new affordable rent (AR) tenancies.

Let’s be generous and say of those 170,000 RTB sales 20% of those exercising their ‘right’ to buy are currently receiving Housing Benefit.  I would suggest it will be nearer to 10% as after all these will need to get a mortgage but let’s not quibble over that – I doubt anyone thinks more than 20% of the 170,000 RTB2ers will be claiming HB. UK plc will save 34,000 HB claims which average £76.48 per week in the social housing sector.  UK plc saves almost £136m per year by reducing the HB bill.

However, the 170,000 new AR properties which replace them attract HB at 80% of market rent (note private properties on average attract 66% of market rent through LHA) and this 80% figure is £134.68.

If two-thirds of the 170,000 new AR properties house benefit claimants (the approximate current average) then we need to set against the £136m pa saving the added costs of 114,000 new benefit claimants at £134.68 each per week.  The cost of which adds £801m per year to the HB bill.

The overall increase in the public purse HB bill for UK plc is therefore £801m – £136m or £665m more per year in HB.

My first quick calculation on Inside Housing today assumed 100% of both were on benefit and this adds £516m to the yearly bill.  Yet that figure must be incorrect.

Firstly, as I briefly discuss above what percentage of those taking up the new RTB will be benefit claimants?  Those able to afford and be eligible for a mortgage on their current council property are likely to be no more than 10% of them (a saving of just £68m per year).

Secondly, the percentage of council tenants claiming HB now is approximately two-thirds, meaning one-third self pay their rent.  Yet this is at an average rent of £76pw.  The new AR replacements will have a typical average rent of £134.68 pw, this being 80% of average market rent.  Will the same percentage only claim HB on this 76% higher social rent level?  Of course not a much higher percentage will need to claim HB.  Let’s be very conservative and say the 67% figure only increases to 75%.  This means 128,000 will be claiming the £134.68 pw – an increase of £912m per year to the HB bill.

Take away the £68m saving and the overall effect is HB bill will rise by £844m per year.

So, let’s assume Shapps and the Coalition achieve their best option and that RTB2 stacks up financially and 170,000 RTB2 sales materialise to be replaced with 170,000 new AR properties.   Even if it does me, you and Uncle Tom Cobley and every other taxpayer will be out of pocket to the tune of £844m per year as the Treasury needs to find this additional money in HB.

Wow £844m for 170,000 votes – thats about £5k per vote… well no its £5k per year per vote – £25k per parliament and rising.  Oh hang on I forgot the initial £75k bung… thats £100k per vote…for the best off social tenants of course not the majority.  But hey turning feckless workshy scum into aspirational citizens overnight what a result at any cost.  Hang on, £100k a pop!  Bloody hell bring back Dame Shirley at least she did it for far less than that!!  Hey Minister you can call it Porter House Blue, nice and snappy


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