London exports rent inflation – HB bill set to rocket right across the UK

London exports rent inflation – that for me is the issue with the Newham to Stoke story.

I have made many posts and comments on the HB diaspora since the summer of 2010 when the HB reforms and caps were announced. It was therefore no surprise to read today the LB Newham story all over the media over moving up to 500 homeless families to Stoke, or at least attempting to. It is now being mentioned across media sites that Westminster are looking to do the same homeless exporting to Derby.

In recent times we have also read many articles that Croydon is doing the same with Hull, and before that many London Boroughs trying to block book hotels and B&Bs in Brighton, Hastings and many other areas. All of these issues I have commented on before and the latest blog from Jules Birch recounts these admirably here (saving me the time to reference!) and in yet another must read he states the crucial issue is the suitability of the homeless placement, in Stoke or elsewhere.

I disagree on the crucial issue as I see this as the exporting or rent inflation and rent levels of London to lower cost areas. This will add a huge amount to the overall HB bill. This is the HB diaspora – not a shock, but shocking nonetheless and today’s media led by the BBC is clearly shocked at this and for once, housing and the manifestations of the near-sighted and superficial reforms has become national news and not just housing news!!!

What is really going on here if the London Boroughs HB diaspora plans happen is many things many have commented upon already today. Are there enough schools in Stoke to accommodate these 500 families? What will the impact be on the NHS there? Are there any jobs in Stoke? Isn’t it  a disgrace to uproot families and move them away from friends, family and other support networks? And I could go on with many similar and obvious questions.

However the real issue for me is:

LONDON BOROUGHS ARE EXPORTING THE CHRONIC PRS RENT LEVELS AND RENT INFLATION THERE TO THE REST OF THE UK.

Yes I’m ‘shouting’ and I need to shout with that capitalisation. Here’s why using the scenario that Newham exports 500 families to Stoke (or Westminster to Derby):

The families will be housed in the private rented sector (PRS) as the private sector landlords (PSL) will love this idea as it increases their income massively. A 2 bed house in Stoke will typically be rented after a quick look at letting agent sites at £400 per calendar month and now attracts LHA of £91pw or £395pcm. Supply and demand are well balanced.

Yet the Newham plan (one of many HB diaspora plans) is to pay PSLs in Stoke 90% of the LHA rate (presumably Stoke LHA rate) of £91pw and then a further £60pw on top. This comes to £142pw. Imagine you are a PSL in Stoke. Do you accommodate a local family in a 2 bed property for a monthly rent of £400 pcm or let your property to a Newham family for £615pcm? That is a no-brainer and more than a 50% increase in rental income!!! The same percentage increase will apply to a 3 bed property in Stoke too.

The HB diaspora plan creates a huge increase in demand for PRS properties in Stoke yet with a stagnant supply. We have an imbalance and when demand exceeds supply we have a cost increase. So Stoke with its 8,000 PRS tenants in receipt of HB now will see a general increase in market rents due to this upsurge in demand. But LHA is frozen this year and so the rent increase this surge in demand creates will mean average rental prices of PSR properties in Stoke will rise sharply.

Additionally 500 of existing local private renters in Stoke will be displaced through eviction as the PSLs clamour to free up 500 properties so they can receive the £615pcm income rather than the £400pcm income.

We see 500 locals in Stoke becoming homeless at a huge additional cost to the local council. The same local council that is hit with a rapidly reducing capacity due to the huge increased demand because of the Newham plan!

Stoke and its environs will undoubtedly see a huge surge in the necessary but inappropriate use of B&B by the council to accommodate its newly increased local homeless surge. The PSLs that run such B&Bs are also in a very pretty financial negotiating position. They have the council over a barrel and can charge what they like cant they? Further rent inflation being exported from London.

It doesn’t matter whether its Newham to Stoke, Westminster to Derby or Croydon to Hull, the result is still the same – it is exporting higher rent and benefit levels from London to wherever the HB diaspora end up.

The actual impact on the HB bill is difficult to quantify. It will undoubtedly raise rent levels in the PRS in every area outside of London and also bugger up every housing strategy of every council like Stoke and put huge strain on NHS, Police and Council Tax (amongst many others) in all of those areas.

PSLs in all areas outside of London will be bombarding every London council with offers of PRS accommodation in their locales. The obvious place to look for London councils is those areas of the country that have high levels of PRS benefit claimants. Nationally, the HB figures reveal that 72% of HB  claimants reside in social housing and 28% in the PRS. Yet these average figures hide many discrepancies. Blackpool for example has 71% of it benefit claimants in the PRS. So basically if you are responsible for the Housing Strategy in Blackpool this means you are well and truly buggered.

The PSLs there will seek to entice London boroughs to accommodate London’s homeless there so they can get 50% increased income! My apologies if the language offends but the HB diaspora will bugger up all local housing strategies and will put strain on NHS, schooling, all other local services, the local employment prospects and will increase rents across the board as demand increases hit the stagnant supply. It will inevitably push up Council Tax in these locales.

The same applies to every area whose LHA rates are low in comparison to London boroughs and have even moderate levels of PRS provision in their areas – Stoke has only 31% of its HB claimants in the PRS. Neighbouring authorities to Stoke include Shropshire with 32%, Hereford with 33% and Telford with 34% of its claimants in the PRS. All more than Stoke… cue outcry from Council Tax payers in those areas next year as costs rocket to pay for the London homeless HB diaspora, outcry as their private rent levels rocket and cause more unemployment and local homelessness.

In simple terms the direct result of the HB and welfare reforms to London on those unlucky enough to live there and become homeless or unemployed is in plain language bugger off and live somewhere else, we don’t care about you or about the city or town we are dumping you on and where we are exporting the rent inflation and rent levels of the greedy London PSLs….. that of course the Housing Minister won’t regulate!!

Shapps won’t regulate and won’t deal with the problem of the ridiculously high London PRS rent levels created by London PSLs because it doesn’t fit with his political ideology. He also changes the homelessness guidance to allow London boroughs to meet their homeless duties by exporting their local homeless through the HB diaspora to Stoke, Derby, Hull and so many other places – Jules Birch’s suitability pointssumed here.

Now today we see Shapps having the hypocrisy to blame this on Newham because they are a Labour run council. Has he said the same over Tory flagship Westminster City Council? Of course not! Those in housing know the major issue in housing, there is not enough supply. The HB diaspora simply creates PRS demand and PRS rent increase in all areas outside of London. It increases HB cost which means more taxpayer money. It simply moves people from one area to another and does nothing for supply.

The 500 homeless families in Newham will see replacements there at same HB cost, the 500 displaced in this diaspora will see 50%+ added costs in LHA paid to Stoke PSLs. The hundreds or thousands displaced from Westminster, Croydon and all those other London boroughs that follow will see the same – a massive increase in PRS and LHA costs wherever they are dumped. What a truly farcical consequence of the housing policies of this Coalition – well unless you are a private landlord of course, those well known Tory party donors.

I don’t think this is by deliberate design, IDS and his cronies at DWP simply aren’t that clever; rather their incompetence in pursuing policies that can a priori be easily spun – Somali families getting £100k per annum in HB, all on benefits receive £26k per annum, et al – have massive negative consequences for housing and for the economy – consequences the balding Numbskulls at the DWP in IDS and Grayling simply didn’t foresee. Yet they will again blame on tenants and the vulnerable as the political attacks on Labour-run Newham are an own goal once Westminster and the other Tory-run ‘radicals’ implement the HB diaspora.

In May 2010 and early June the incoming Coalition expressed outrage at the £20bn HB bill they inherited from the last lot and promised to reduce this by £2bn by 2015. Will we see May 2015 seeing a Labour Minister saying the £30bn HB bill we inherited from the Tories is a disgrace? I don’t know whether Labour will return to office in 2015 but whoever does will have to deal with a £30bn per year HB bill!

UPDATE Wednesday 25th April

If my comments above see Private Sector Landlords with dollar signs in their eyes – which they do – then the updates today see lawyers with the same dollar signs.  A recently bereaved widow in Walthamstow has been given a “reasonable” take-it-or-leave-it offer from her council to rehouse her and her daughter in Walsall some 130 miles away.  Listen to it here as she explains the situation on Radio 4 this morning.  It is 4 minutes of incredulous listening.

It cannot be ‘reasonable’ in legal terms for a council in London to discharge their duty to a local person by offering them a property 130 miles away.  It certainly isnt in moral terms obviously.

Another interesting aspect of London ‘exporting’ its homeless ‘oop North’ is that this is likely to be the first impact of the Housing Benefit caps that we were informed 74% of Joe Public agreed with.   Why should the workless and feckless and indolent get £500pw in benefits and live in areas they, the working population not afford and other pithy and superficial spin was much in evidence at the time.   Aside from the superficiality that London is a desirable place to live – it has many areas I wouldnt want my worst enemy’s dog  to reside – like areas of any major city, Joe Public is most definitely outraged at the social cleansing of London that Newham to Stoke or Westminster to Derby entails. It would be interesting if the same people polled them were asked today if their views had changed on this!

Unfortunately, superficial spin and ideology characterises all of the current governments HB reforms and its only when the IMPACTS of these policies are known by Joe Public that they realise what they mean for them – as the council tax payers of Stoke are beginning to wake up today!  Some of these manifestations or impacts were not even discussed in the House of Lords or Commons such as will the SAR apply to social housing through the backdoor of the bedroom tax, which many in the social housing sector now believe to be likely.  Or the fact that extending the shared accommodation rate (SAR) to under 35s will adversely affect a women with no children fleeing domestic violence.  Not only were these aspects not discussed in parliament, they were not mentioned or considered in any impact assessment on thes HB reforms.

That is a worrying and all too common characteristic of much of this coalitions social policy and not just the HB reforms which is one of ‘this sounds good, the electorate will swallow it and not realise the impact.’

I’m sure the private landlords and the lawyers will though…kerching, kerching!!

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One thought on “London exports rent inflation – HB bill set to rocket right across the UK

  1. Joe this has been going on for years. Every 10 years there has been an over flow from London. In the past new cities were built or smaller towns were expanded but not this time. Out of sight out of mind! No new property supply.
    I have just done a quick check on rents in the outer London of Barnet as this is where I live.
    London councils are taking the piss. A 2 bed house here is a minimum of £300 PER WEEK with many in the £400 range and some in the £500 range PER WEEK.
    Paying PRS landlords up North £150 per week is a minimum of a 100% reduction in homeless sector rent. No wonder they can afford to throw in £60.00 on top.

    It’s a multi billion pound theft of a publicly owned asset. It’s a heist but no one reacts???

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