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!

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