Council Home Sub Lets & High Income Council Tenants

The government has announced plans to make it a criminal offence to sub-let a council house and to increase council rents for those tenants with incomes in excess of £100,000 a year. http://www.bbc.co.uk/news/uk-16376455

The fact that this is a problem shows not that council tenants are criminals, but that the state has so distorted the housing market that opportunities for arbitrage now exist.

Council housing is supposed to provide homes for people who are unable to provide for themselves on the open market, a welfare state “safety net”.

Why should such housing be so desirable that those earning over £100,000 a year would gladly chose to live there, or that people would pay enough on the open market to allow the council tenant to find alternative acceptable accommodation and still turn a good profit ?

This  clearly demonstrates that the housing provided as a safety net is far too good for the task!

As usual the state’s answer is not to correct the core problem, but to add layers of regulation and unjust laws to attempt to try and hold back the logic of the marketplace.

The idea that breaking the terms of a lease agreement with the state is a crime (with a prison sentence) while breaking an identical contract with a private landlord is not a crime but a civil dispute shows, once again, that the state’s understanding of what a “crime” is comes straight out of Alice in Wonderland:

“When I use a word,” Humpty Dumpty said in a rather a scornful tone,”it means just what I choose it to mean — neither more nor less.”

So let’s consider what the proposed “solutions” will actually achieve:

If we outlaw sub-letting, then the original tenant will lose the additional income from letting and will move back to a luxury home that was more than they needed. The new tenant will be forced to move out of a home that was worth more to them than the rent it cost and spend more on an equivalent home.

Both parties involved will be worse off, and who exactly benefits ? There is no reduction in the burden on the taxpayer. There are no additional homeless people housed.

Even the injustice of the tenant making a cash windfall at the taxpayer’s expense has not been eliminated. It has just been replaced by the injustice of the tenant making a “quality of housing” windfall at the taxpayer’s expense. We even know the value of this “quality of housing windfall” on the open market, it is exactly the cash amount it was previously sold for!

If we increase rents for those earning over £100,000 to market levels then these tenants will move out. (If you are paying market rent then it is unlikely that this property will be your first choice.) This will certainly free up accommodation for someone else.

But if the objection to the first tenant is “Why should taxpayer’s pay for something that somebody doesn’t need?” Then the objection still exists. Why should taxpayers pay for accommodation of a standard acceptable to someone earning £100,000 a year for somebody to use as a safety net, surely they can’t need such a high quality of accommodation.

Taxpayer’s are quite happy for  their own children (when they are students, or starting work) to share homes to reduce housing costs, or live in cheaper areas. Why is it not acceptable to provide a similar standard of housing to people requiring the taxpayer’s safety net ?

Surely a better answer to both problems is to sell these luxury properties and buy (or build) 2 (or 3 or 4 or 5) smaller properties with the money, in less desirable areas. This would provide additional safety nets, helping more people who need them ?

As a Libertarian I am, of course, against all state housing provision on principle, but if as a country we are going to provide it then we should at least try and get the best return on the taxpayer’s money. This is achieved by listening to what the market is telling us, rather than adding more humpty dumpty laws to the statute book.

 

email
This entry was posted in Current Affairs. Bookmark the permalink.
  • The best response, is to increase supply of housing.

    • How would that help with the high value housing that already exists?
      It might take people of the housing waiting lists, but unless you fund it by selling off the high-value housing (as I suggest in the post) the problem remains.

      • Eaglemobler

        You recently critised my understanding of economics, as you saw it.

        Google ‘supply and demand’ and then you’ll see that when supply outstrips demand, prices fall.

        You are also getting ‘high-value’ confused with ‘artificially high-cost’.

        • Yes, of course when supply increases prices fall and I am not confused about the meaning of high value.

          You miss the point.

          Building more houses will, of course, lower rents, but it will not eliminate the rental premium that people will pay to live in more desirable areas.

          The high rental value Council properties(i.e. those located in very nice areas to live such as Kensington & Chelsea) will still provide the opportunity to sub let at a profit.

          • English Viking

            I wish you’d make your mind up. You accuse me of being a socialist, then want everyone to live in houses all worth the same, especially when provided by the State.

            There is no solution to the ‘problem’ of some things being worth more than others.

            The solution to the sub-letting of Council housing is to close the loop-hole and make it a clause in the contract that it is not permitted under any circumstances.

            The problem of persons living in fine housing, expensive even, who earn large amounts yet recieve large subsidies on the rent is simple – a pro rata scale subsidy (if we really must have a subsidy at all). Earn 20 grand? Nice subsidy. 40 grand? not so nice.  60 grand? Next nothing. More than that? Move out, buy your own place, and allow the house to be re-let for the intention it was originally aquired by the Council – low cost housing for the low-earner.

  • Mthmacdonald

    The whole raison d’etre of social housing is that the rents should be artificially low, and therefore affordable to those who might not otherwise be able to live in a particular area. Therefore all social housing should present “opportunities for arbritage”, because it is a deliberate and necessary distortion of the market.

    These houses are not “luxury homes”, as you describe them, they are simply located in desirable areas. To confine those who need public assistance with their housing to the poorest areas of a city would begin to create income based ghettoes in an otherwise fairly mixed and vibrant metropolis. It is no solution.

    • The system is supposed to be a safety net. It makes no sense to provide a safety net that is above the level that ordinary working folk can afford. On what basis should people on benefits enjoy homes in areas that the rest of us can’t afford ?

      • Mthmacdonald

        I absolutely agree that welfare should supply a safety net. But instead of having a race to the bottom and ghettoising the poor, why not question the fact that “working folk” can’t afford to live in these suburbs? Surely if they work in these neighbourhoods more should be done to ensure that they can afford to live there too. Raising minimum wages, having income tax breaks for the lowest paid, offering benefits such as free childcare to those with families – these are some of the ways in which the living standards of those who work can be raised. The net is low enough already, especially in light of the enormous soci0-economic disparity between those at the bottom and those at the top. Tax those who have the means in such sickening excess to ensure that those who are able and willing to work enjoy an existence that is preferable to the safety net we have available.

  • Van

    Anything that is subsidized will be more expensive to everyone. Mix in with this the market-distorting effect of the restrictive planning laws in the UK and you have a cocktail for outrageously high accomodation costs.  

    It is any wonder that young people are happy to scrounge off the dole when a job won’t even get them a roof over their head?  Even in supposedly less affluent countries people are able to afford accomodation. We are poorer as a nation if we cannot afford to house ourselves.

  • Pingback: Housing Benefit | Landlord Portfolio()

  • Martin

    I totally agree that people who profit from un needed subsidised housing should be punished.

    However, the MP expences scandal cost 6.4 million. How many new homes could have been built with that money? How many improvements to old, run down council properties could it have funded?

    2 Years in Jail. Don’t make me laugh – The MP’s who were jailed for false expences claims did a small fraction of their jail sentences. Look it up online. I don’t think the “Common Man” would serve only 4 months out of an 18 month jail sentence for subletting a council house for a few grand. These MP’s were stealing tens of thousands of pounds of OUR money.

    £600,000 of OUR money is spent every year by the government sending home staff who work after hours. Are you kidding

    Theres a saying in Lancashire “Where there’s least room there’s most thrutchin”. It means “Look at yourself before complaining about others”.

    There must be Billions of £ of Tax payers money squandered and wasted on all kinds of rubbish