General Discussion

Housing benefit - why is the bill so high?

People

rwfpidding
dot
noramsinger
Imageswishes
Helen
TheTalkingShed
Floss85
Pete B
Olavs63
Sumanth123
Lynne
Lynne
15 May 2013 08:26

Been thinking for some time about maybe starting a thread about HB given how much taxpayers' money gets spent on it and how much the government says it needs to be reduced and stuff cos for years now it has really, really, really, riled me that private sector landlords,via HB, get shed loads of taxpayers' money given to them. Have property, rent it out, taxpayer will cough up the rent either in total or partially.  What a wheeze! Have always thought of it as some kind of scam, though feel sure it can't be of course........and now that Brazilnut has mentioned HB on the Universal Benefit thread I've thought to myself "Yeah - let's have a discussion about HB and why so much taxpayers' money gets spent on it etc".

So, far starters, here are some extracts from B'nuts posting (hope that's okay B'nut).

 

"Some social tenants are downsizing into private lets and they then qualify for full HB at a price as the rent is higher than what their social house was. The main profiteers from taxpayers money is investors in buy to let property,( several MPs and Gov Ministers own such properties) with no rent assessors around anymore they can charge what they want and if the tenants are on low income the tax payer, as you all put it, picks up the tab.  

Along came dear old Maggie buy your council house she said with a discount.  

If those houses hadn’t been sold there would still be 2million houses in the Social Housing sector. A lot of those have been sold on to private investors who are now renting them to people on low incomes with HB picking up the tab, there is 3 at the back of me ex local authority owned by the same person and the rent is double what I pay."

 

 

   

2 Agrees
Brazilnut
Brazilnut
15 May 2013 09:08

yes thats fine Lynne

burneside
burneside
15 May 2013 14:23

Some neat editing there of Brazilnut's post.  The original stated that although she was against selling council houses she still made enquiries about buying hers.   She can't have it both ways, even though her enquiries came to nought, the intention was still there.  A tad hypocritical if you ask me.

2 Agrees
Brazilnut
Brazilnut
15 May 2013 14:34

@burnside I was young 25 and my father told me to enquire which I did, but would never have gone through with it. Theres nothing hypocritical about being young and maybe foolish then getting older and wiser. you have picked on the wrong points of what I and Lynne are saying, CBA

1 Agree
DJ
DJ
15 May 2013 16:41

so @Brazilnut, you lived with your inlaws in the 1960s in overcrowded accommodation until you could get your own council house, and then at 25 (after 7 years in the property and 3 children) you looked at buying your council house, yet margaret thatcher didn't bring the act in to do that until 1980, so you must have married very young!

 

And actually it wasn't Thatcher who brought in the right to buy.  There always was a right to buy, it was just very rare although the numbers did increase in the early 1970s long before the act was brought in.

 

I think Burneside had it just right, it is hypocritical because had you been able to get a mortgage you clearly WOULD have bought your council home.

 

There have always been private landlords - the foolishness and the rise of the HB budget is because successive Governments have been stupid enough to pay more and more benefits of this kind to people.  The changes they have brought in to restrict how much people get per week to the average wage means that supply and demand will force prices to come down to meet the new levels.  It might take a while but landlords are going to want a rented property rather than an empty one so they will adjust their requirements to meet the new benefit levels, or find employed tenants who can afford the higher rents.  Either way economics will sort it out.  But if you just keep increasing HB then landlords will feel justified in putting rents up. 

2 Agrees
Lynne
Lynne
15 May 2013 17:41

So, what are we saying here? That provided there is a cap on the maximum amount of HB payable that it is okay for private landlords to receive taxpayers' money if their tenants cannot

meet the rent from their own pocket?

2 Agrees
Brazilnut
Brazilnut
15 May 2013 18:03

@DJ typo slip it should have said 35, and yes i did marry young and was left on my own at 25 and my circumstances have nothing to do with this thread.

Lynne
Lynne
15 May 2013 18:28

This link gives info about the benefit cap. .

https://www.gov.uk/benefit-cap

HuwMatthews2
HuwMatthews2
15 May 2013 23:37

I've been on both sides of the fence - private landlord and in the social sector.

Wherever it's been no one likes paying money to the LL be it private or social.

 

The big questions are: What is the alternative to private landlords? Homelessness? There isn't enough social housing to go round. 

Should we build more? Yes...Of course we should but that will take time.

Where should it be built? Where people want it of course based on demand!

 

Then there will be massive development in South Devon; all along the south coast in fact and in the countryside. Is that what people who live there want? No!

 

There is no easy answer to this.

2 Agrees
Lynne
Lynne
16 May 2013 08:07

Well now, if the allegations you make on another thread were to be true then the issue of there not being enough social housing to go around could be resolved if open market housing were to get bought up by social landlords and then rented out at affordable rents (80% of market rents). Might be one way of reducing the housing benefit bill........

 

1 Agree
Lynne
Lynne
16 May 2013 17:41

From the Insitute for Public Policy Research:

"Government is turning the facts about housing benefit on their head

IPPR North, housing, personal finances

Author(s):  Bill Davies
Published date:  26 Mar 2013
Source:  Guardian - Housing Network
 

To take a leaf from Roald Dahl's The Twits, we must stand housing finance on its head. The government's attempts to control housing benefit expenditure bring to mind the famous scene in the children's novel, where Mr Twit attempts to convince his wife that she is shrinking by adding small discs of wood to the base of her cane.

 

The series of caveats and exceptions to new welfare rules are adding increments back on to the budget. Like Mr Twit's behaviour towards his wife, the government is trying to convince us that housing benefit is shrinking – but it is not. Last year's budget forecast, which included most of the housing benefit changes, shows spending rising to £23.374bn by 2016-17. The incremental reversals for armed service families and foster carers will only add back on what had been taken off.

The reversals of policy at the Department for Work and Pensions show that despite their best efforts to control spending, they are missing a key element to successful policymaking: a plan.

Analysis shows that housing benefit is sticky. Because we are spending so little on building homes that people can afford to live in, when the number of housing benefit recipients drop aggregate expenditure just keeps rising.

Last year, the Institute for Public Policy Research (IPPR) showed that, over the current spending review, the expenditure on housing benefit is likely to be £95bn, compared to just £4.5bn of capital investment made by central government on building affordable housing. For every £1 the government spends on building houses, £19 will be spent on rent subsidy.

It hasn't always been this way. In the 1970s, 80% of housing expenditure went on building houses, and only 20% on rent subsidy. The fact that local authorities are not building enough new homes, and the country is spending excessive amounts on housing benefit shows that something needs to be done. History teaches us it can be.

The two issues are linked: without enough affordable homes, the reliance on subsidising rents (particularly in the private sector) will continue to rise, as this graph illustrates:

IPPR housing benefit graph

The rise in the number of tenants in the private sector and fall in local authority tenants goes some way to explaining the continued rise in housing benefit expenditure. This is because the average cost of private rents is £30 a week higher than local authority rents – more than £1,500 a year. In spite of the persistent cost gap, local authority construction has, like Mr and Mrs Twit did in their sticky end, all but disappeared.

Continuing along the same path will not solve the problem of not having enough houses, to rent or buy, that people can afford. A long-term strategy for both rent subsidy and capital investment is needed, that is structured around increasing the supply of local authority homes, and who better to build them than the local authorities themselves? They have the legitimacy, and the knowledge of their housing markets that the Treasury, the Department for Communities and Local Government and the Department for Work and Pensions do not.

IPPR North's affordable housing fund proposal argues for devolving all current capital and housing benefit expenditure from central government directly to local authorities. With the right incentives and greater control over their own budgets, local authorities are better positioned to build their own affordable homes and develop systems of rent subsidy. Building homes will help to stem the tide and be an investment for the future.

Without more homes built by local authorities and housing associations, the housing benefit bill will be out of control. Homes have to be built now, or the savings will never come later. We should stand the system on its head, and let local government take control."

 
 

 

 

1 Agree
HuwMatthews2
HuwMatthews2
17 May 2013 21:56

@Lynne (again!) That's just daft.

 

Private landlords are not all profiteers. Many have worked all their lives in jobs that provide no pension other than that guaranteed by the state. They have provided for themselves by buying property, often on a mortgage or with an inheritance, and now you want them to sell it for social housing?

 

They are already being creamed by local councils for full council tax in the case of those that are holiday lets (as opposed to holiday homes) which bring in revenue in the form of tourism and further measures against them are also being considered by some CCs.

 

Now, bearing in mind that rental property is usually sold based on the income that can be realised, you want private owners to sell up for 80% of the worth of their properties? Who's going to do that? Unless they are forced to...which is a 'redistribution of wealth' in the old, discredited, Marxist tradition.

 

Please feel free to correct me if I'm wrong.

 

Additionally, if what I wrote on another thread becomes reality, you are absolutely right! Unfortunately you'll never hear a local accent again and most of the south coast will be under concrete, bricks and mortar. Is that what we all want?

1 Agree
Lynne
Lynne
18 May 2013 08:25

I don't have a problem with private landlords per se. Not at all. If people have property they want to rent out and other people want to rent it then fine, I can't see a problem. One person is offering on the open market what another person wants. What someone does with their own money is entirely up to them. 

No, what sticks in my craw is when private sector landlords have rents paid partially or in full by HB. In other words, taxpayers' money. That is a redistribution of wealth - from the taxpayer to the private landlord. 

 

I wasn't suggesting that private landlords sell up for 80% of the value of their property(ies). Rather, and as I think you have been alluding to on another thread, that properties on the open market get bought at whatever the local market selling price is by a social landlord, and then get rented out by that social landlord at 80% of the local market rent.  

Will developers of the new housing estates be bothered who they sell to? I don't see why they should be. If there is a dearth of individual private sector buyers and an organisation comes along looking to buy a number of houses to be used for affordable rent why should the developer be bothered? He'll be selling his houses which surely was his reason for building them inthe first place.  

 

Why do I think we have a huge HB bill? Basically because of a lack of housing (both private and social).  That in itself pushes both the price of buying somewhere and of renting somewhere higher (law of supply and demand - in this case the demand for housing is outstripping the supply).

 

So, how to reduce rents and house prices? Build more homes. 

How to have people in a situation where they can buy(hence no HB applicable) or rent if they want/need to without recourse to help from the state? - By getting the economy going again with jobs that pay living wages.

 

How to get the economy going again? By building houses perhaps?

Anyone else any thoughts on how to reduce the HB bill?   

     

1 Agree
DJ
DJ
18 May 2013 09:26

The sad fact of the matter is that private landlords in some instances have become greedy.  They are fully aware of the maximum HB that can be given for their property so they set the rent accordingly.  It has taken a change to how benefits are paid for anything to be done about this and hopefully now that people are going to have a maximum weekly amount they can receive, landlords will realise that a tenant paying something is better than a no tenant and reduce rents to a lower level.  As I've said before, it won't happen overnight, but the economics of supply and demand will come in to play on this.

 

As for endless building of new homes - there are huge areas of brownfield sites, buildings that can be converted into flats and so on - why does it always have to be about covering the countryside with new homes?  Developers love building on green fields because it is less hassle than converting brownfield sites or old buildings, but it doesn't make it the best solution.

1 Agree
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