A quick thought on council house abuse

Housing Minister Grant Shapps has this morning announced that the government is considering criminalising subletting of council homes with the punishment potentially being up to 2 years in prison and fines of up to £50,000.

Given that those who are abusing the system are simply taking advantage of the fact that council rents are subsidised, why not just remove the subsidy and hence the distortion it makes in the market?

Or is that too simple?

18 Comments

  1. jess says:

    As a former director of a Housing Association which managed a trance of ex Local Authority stock, yes, MG, that is too simple…

    However the Housing Ministers comments are to simplistic as well.

    Both affordability of housing and availability of affordable housing are issues where there needs to be well thought out intervention. Alas it can’t all be private sector. The danger however is that if you play with the supply side, you simply transfer the problem to the benefit system and the slum land lords.

    • Misanthrope Girl says:

      Is more intervention really the answer? It is arguable that the current availability and affordability of housing is a direct result of previous government intervention in the planning system.

  2. Demelza says:

    The simplistic view is that if you put the subsidy into provision of housing you only do so once; if you put the subsidy into the consumption of housing you subsidise it forever. Besides, when I was on the housing committee of my local council in the 1990s our low housing debt meant that our rent account was in surplus: spending constraints meant that rent money ended up subsidising the Council Tax. And housing benefit for council tenants was (and may still be) funded from the rent account, so as rents went up the better off tenants were subsidising the poorer ones.

    But at one level the minister is right: a secure tenancy in affordable housing can be a huge financial prize, and using that prize to make a profit rather than house yourself is an abuse.

    • Misanthrope Girl says:

      One time solutions never occur to politicians or civil serpents. They want repeat customers in order to justify their jobs and their policies. It’s not called the ‘Client State’ for nothing.

      I don’t disagree with the assertion that abuse of the system exists, simply the proposed solution to it.

  3. jameshigham says:

    Too simple. The aim is criminalization, not solving anything.

    • Misanthrope Girl says:

      That much is obvious. We all know that the government doesn’t like it when people other than them steal. :)

  4. The Thought Gang says:

    Fine. Except I wouldn’t trust my council to figure out the market value of a Mars bar.

  5. I heard this on the radio this morning. It’s a very clear indication of just how little has changed under the new government compared to the last one. The same authoritarian control-freakery. I note this part of the story:

    “Local authorities would also get stronger powers to investigate fraud, including easier access to data from banks and utility companies.”

    • Misanthrope Girl says:

      Did we really expect anything different? We both know that all an election consists of is reshuffling the deck chairs whilst the civil serpents carry on as before.

  6. jUSTsAYIN says:

    I own a business and live in a council “subsidised” house. To be honest, I do not know if I receive a subsidy, or everybody else is being screwed. A private rental in my street is a little less than double what I pay. But I do remember a simple- and old- test of housing cost being 100 X monthly rent. This would make my house with about 60 grand, or just over double the annual wage.

    My parents live in a far better area and 100 X their monthly rent would make their house worth about 100 grand- they “claim” it is worth 160 grand “on the market”. At present, as an employer, I am actually on the verge of eviction, and have the bailiffs at the door for council tax too. Yet I always manage to come up with the cash and pay my staff; it is my kids that go without.

    Rightly I wrongly I will not apply or accept housing or council tax benefit. I tried it before with tax credits, and all it done was take away my desire to make money. I knew HMRC would send me a few hundred quid every two weeks, and that sort of made me relax. (by the way- I now refuse to accept tax credits too and have HMRC chasing as well as the above.)

    Now some will call me totally stupid and I deserve bailiffs at the door. And maybe I do. But that is what makes me get up in the morning, drag my sorry arse to work and make money. My kids are amazing, and the definitely deserve more than I give them, but if I continue to go to work and continue to make money, they will get it.

    In summary, I do not think it is the subsidy for council housing that is wrong, it is the rents that are paid under housing benefit that are wrong. Believe me, as soon as I can afford it I will leave. I will not buy, but I will pay a higher rent for a better house, location etc.

    • Misanthrope Girl says:

      If you are living in a council house then you are getting a subsidy from the tax payers to live there in the form of below market value rents. Said subsidy is being reduced (rents are going up) as this government wants rents to be about 80% of market value.

      That house prices may well be too high because there is a shortage of housing resulting from what Mark Wadsworth would term Home Ownerism making the building of new developments difficult is certainly very arguable.

      I suspect that the equilibrium lies somewhere between the two points and applaud your efforts to make your own way with as little assistance as you can get away with even if it does mean sacrificing things that others would happily pocket.

      The real money spinner though is, as you say, housing benefit for those in privately rented accommodation with the winner being the private landlord. Even with the new government caps, a one bedroom property can net them £250/week from the taxpayer. That works out to £13,000 a year. For comparison purposes my monthly repayments on my mortgage for a two bedroom property are currently less than £400/month (£4,800/year)…

  7. Yes, renting them out for market rents (i.e. “as much as they can get”) is the best solution*. This will only affect a small number of council houses in a small number of areas. Scrapping housing benefit for private landlords will lead to a fall in rents, and the whole thing will find a new equilibrium.

    * If you want to soften the edges a bit, then cap the rent at a certain % of a tenant’s income.

    Ta for linkage.

  8. uk Fred says:

    Why should we be subsidising anything? Surely we should be supporting people who need support and not any object or property. Subsidising rents makes it less likely that any private sector development will take place. Why shoulod the ownership of a property make any difference to the amount of subsidy the tenancy attracts? Public sector guarantees or ownership (ie Housing Association or Council Housing) are subsidised by the lower interest rate atracted due to the debt being assumed to carry only sovereign risk.

  9. The idea that Council rents are subsidised is a myth. It suggests that there is a direct transfer of money from the treasury to help maintain council rents at a low level. There are however vast subsidies paid to private landlords charging extortionate rents in the form of Housing benefit payments. If the law allowed for tennants in the private sector to have secure tenancy as well as some form of effective rent tribunals this could solve a lot of housing problems. Housing is one of the biggest problems facing this country. The government has no interest in taking on landlords and trying to stop the buy to let boom. Probably because most of them are buy to let landlords themselves.

    • Misanthrope Girl says:

      Whenever someone in the State sector is paying less than the market rate then the tax payer is picking up the difference. That is a subsidy.

      As noted above by myself and others housing benefit is a scam which enriches private landlords to the detriment of us all. The caps put in place by the current government either need to be reduced to more reasonable levels or, as Mark suggests, the benefit should be scrapped entirely.

  10. Rahul says:

    Why not just sell off all the council housing stock at market prices and give people under a certain income level a direct cash grant. If your really want them to spend it on housing, make it a partial housing voucher/ cash grant. They can then decide what house they want to rent. This at least allows the subsidy to be explicit. And prevents the winner/ loser picture we have today w/ people in council housing vs. housing benefit vs. on their own.