My God! The Bastards!

Instead, the housing minister, Grant Shapps, has outlined plans that would force households that collectively earn over £100,000 to pay market rents.

Blimey, would you believe it, eh?

The average family income is £32,779 before tax.

Households who make only three times the national average will be forced to pay for their own housing. Without subsidy even!

The bastards!

26 comments on “My God! The Bastards!

  1. Council houses don’t receive a “subsidy”, in fact council house rents often fund other services run by councils.

    Council house rents are just that much cheaper because the state doesnt have the same massive profit overheads the private rented sector has, and because if they haven’t payed off their initial capital investment already, they’ve still probably got massively preferential rates of finance.

    But next time I want to get libertarians to agree to a huge tax increase I guess I’ll just call it a “market rate” or something.

    Tim adds: Please go and look up the concept of “opportunity cost”. When you have done so, when you understand it, then we can consider whether council houses receive a subsidy or not.

  2. Jon, you’re ignoring opportunity cost.

    This is important, because a council could choose to put one council flat in Westminster (where land is expensive), or they could choose to put three in Plumstead for the same cost. Ignoring opportunity cost means fewer council houses.

    What the council spends the rent on is irrelevant. If the rent is below market rate, that’s money the council could have spent on something else going to allow some people to pay less rent than everyone else. That’s a subsidy.

    If you’re paying less than a market rent, someone else must be bearing the cost. That someone else is subsidising you.

    “Council houses don’t receive a “subsidy”, in fact council house rents often fund other services run by councils.” What they spend it on is irrelevant. Council tenants are no more subsidising other council services than my tenants are subsidising me.

  3. Christ, you’re a condescending shit, aren’t you? I know what opportunity cost is.

    The implication of saying that if there is ever the possibility of the state charging a higher price then it is a subsidy is that you consider the default status of every economic actor to be a profit maximiser. (Because if they weren’t “supposed to be” profit maximisers then charging a price that wasn’t the market equilibrium would have no special meaning)

    There’s no particular empirical grounds for economic actors “having to be” or “supposed to to be” profit maximisers – it’s just a pure commitment of ideology on your part.

  4. Jon said: “Council houses don’t receive a “subsidy”, in fact council house rents often fund other services run by councils.”

    Does everyone in a council house pay their own rent?

  5. “Christ, you’re a condescending shit, aren’t you? I know what opportunity cost is.”

    Evidently you do not so the condescension was deserved.

    “The implication of saying that if there is ever the possibility of the state charging a higher price then it is a subsidy is that you consider the default status of every economic actor to be a profit maximiser.”

    No that is not the implication at all. If someone is charged less than the market rate for something by a private party, this is charity, if they are charged less than the market rate for something by a tax funded party, this is a subsidy.

    Quite why you are defending people on £100K a year receiving benefits is a mystery to me.

  6. Instead, the housing minister, Grant Shapps, has outlined plans that would force households that collectively earn over £100,000 to pay market rents.

    I might be being cyncial here, but since it has been pointed out that Bob Crow lives in a council property and earns £133,000 it might well be that the’ve instituted this new rule just to get this bugger out, although no doubt a few innocents will get hit as well, we’re not exactly talking breadline figures here even in Westminster and Chelsea.

  7. “Council house rents are just that much cheaper because the state doesnt have the same massive profit overheads the private rented sector has”

    You do realise that private rent levels are determined by income levels in a given location, not the level of ‘profit’ any particular land lord might want? I can’t go and buy a house and say ‘I fancy a 10% return on my money therefore I’m going to charge £x/month in rent’. One has to accept the the going market rate in the area, which is determined by the ability of people to pay.

    If the council owns lots of houses in a given location and rents them out at lower than the market rate, it is forgoing lots of revenue, revenue that must be made up by increased taxes on everyone else in that locality. Thus the local population as a whole are paying higher council tax than they otherwise would, and that money is a subsidy to council house tenants.

  8. @JP Still banging on about LVT !Give it a rest: we all know that the absence of LVT (or the abolition of Schedule A in 1963) delivers a massive subsidy to private homeowners effectively bribing them by maintaining house prices while letting the rest of the economy go hang.Good figures you can use in future:in 1959 the average house price (£2,000) was four times that of a Mini (£500);now the average house price is fourteen times a Mini.And all the younger generation are Priced Out.

  9. DBC Reed. Good figures you can use in future:in 1959 the average house price (£2,000) was four times that of a Mini (£500);now the average house price is fourteen times a Mini.And all the younger generation are Priced Out.

    What was the average wage in 1959, I can’t see much point in comparing house prices to car prices, everyone knows the latter are relatively cheaper now than fifty years ago so of course the comparison will look bad.

  10. Council house rents are just that much cheaper because the state doesnt have the same massive profit overheads the private rented sector has…

    Profit overheads? Accounting fail.

  11. DBC. I did a bit of googling around and it seems that the Mini when it first appeared was sold at or even a little below cost. According to Ford ( not an unbiased source obviously ) the effective subsidy on each car was about £30, a lot of money in 1959, so your comparison really doesn’t stand up. On the other hand wages appear to have risen by about 2% above RPI ( I can’t vouch for the accuracy of that ) compared with a 2.7% comparative rise in house prices, so yes houses are more expensive than they were ( we already knew that I think ). However most households of more than one person now have more than one income and prices vary considerably throughout the country, so it depends who you are talking about and where. As for LVT I’m not getting involved in that argument as it one of those things that winds me up and at my age that’s not a good thing.

  12. That £100K income band looks far too low to me, even for London. It should range from maybe £30K in the cheaper parts of the UK, to maybe £50K max in London.

    In fact, I would even go so far as saying the rental rates should be means tested, with no upper limit. So the richer you are, the more rent you have to pay to stay in that house. I suspect that rather a lot of council accomodation would be freed up.

  13. Jon (#2) – “Council houses don’t receive a “subsidy”, in fact council house rents often fund other services run by councils.”

    Doubtful, on average, even if you ignore Timmy’s opportunity costs, according to this little bit of light reading:
    http://www.communities.gov.uk/publications/housing/managementmaintenancecosts

    You want the tables on page 15. 2006/7, the latest “actual” figures:

    National averages per property:
    + Rent (inc. service charges): £3,382
    – Maintenance & management: £2,137
    – Depreciation & RCCO(*) : £785
    – Interest etc. :£548

    That gives a net loss of £88 per property, even ignoring opportunity costs and just using a simple income minus expenditure basis.

    Yes, they were projected to make a small surplus in 2008/9 (higher rents and lower interest rates), but I wouldn’t bank on that until we see some final figures.

    * RCCO (Revenue Contribution to Capital Outlay) appears to be major renovations funded out of income.

  14. @thornavis.You declare that “everybody knows” (dread words) that cars are relatively cheaper now than fifty years ago .Why are they? And cheaper than what?Houses ?Why have houses gone on an inflationary trajectory of a different order of magnitude than everything else ?As I am sure LVT obsessive JP would say to all house- price- inflation deniers: if you’re put off by LVT what’s your alternative? You can’t really pretend there’s not a moral problem, as do all of the political parties in Britain.

    Tim adds: Why have houses had a different, higher, inflation rate than most other things? Two reasons.

    1) Baumol effect. Houses are still largely built with high labour contents. As real wages over time rise faster than prices in general (must do, that’s how we all get richer) then things using large amounts of labour become relatively more expensive. That’s how *houses* have become more expensive.

    2) We’ve many more households but not many more planning permissions. So, the right to build a house, the planning permission, has gone up in scarcity value.

  15. @TW
    There is considerable doubt whether real wages have gone up over recent decades >see Stewart Lansley’s TUC pamphlet.You have certainly agreed in the past that the share of wages in the earnings profile has gone down.Also houses have got considerably smaller (Cars are much the same size) See “Shoebox houses become UK norm” a story from BBC on the NET.(The reason has nothing to do with Baumol and more with Henry George: developers are cramming in more houses to the acre because land prices have inflated).
    The planning permission issue is just a euphemism for the land value question (which you are scared to come clean about because you harbour heretical Land Tax tendencies which would alienate your True Blue supporters who think rising house prices are a fact of nature (or proof of Election).
    There is enough land with extant planning permissions in UK developers’ land banks to keep them going for years at maximum output.
    But as Jim Claydon of the RTPI so sagely observed “All landowners including housebuilders maintain land values by managing supply.It is not in their interests to release large quantities of land because this deflates its value.”
    It’s the old switcheroo : deflecting the blame from developers to planners.
    ( You are somewhat averse to planning having
    wished on everybody the right to live down unadopted roads i.e without street lights ,tarmacadam, street drainage and everything grown-ups realise that the local authorities provide at bargain low prices via taxation which also makes rich bastards pay more than working stiffs.)

  16. “But as Jim Claydon of the RTPI so sagely observed “All landowners including housebuilders maintain land values by managing supply.It is not in their interests to release large quantities of land because this deflates its value.””

    Er no they don’t. Housebuilders who own land with planning permission may control the number of houses they build in any year, yes. That makes perfect sense. They have a scarce resource, by feeding it into the market slowly they can control the price (to some extent).

    But ‘landowners’ as a whole (and I am one) have no such power. If planning control were abolished there would be a mad rush of landowners to build houses, or to sell plots for houses to be built. Each individual landowner would have no incentive to not sell, because there would always be another who would sell. Contrary to popular opinion there is no landowners cartel, just thousands of different people with differing views and needs.

    Thus land for housebuilding would very rapidly reduce in value to little over the agricultural value. The only difference would be in location – a plot of land in Surrey would be worth more than one in Scunthorpe.

  17. Pingback: Hey! Leave My Reserve Of Protected Species Alone! | Orphans of Liberty

  18. “All landowners including housebuilders maintain land values by managing supply.It is not in their interests to release large quantities of land because this deflates its value.”

    This is crazy. There are far too many of them to run a cartel.

  19. DBC. OK so maybe everyone doesn’t necessarily know that cars are cheaper now than they were fifty years ago, strange then that when I were a nipper, fifty years ago, very few working class families like mine had one, now most of them do. I’m at a loss to explain that any other way than that they’ve become relatively cheaper and it has bugger all to do with house prices. You LVT fans really do need to stop shoehorning every damn thing into the folder marked “my hobby”.

  20. @Thornavis
    I stand corrected (not).House prices clearly have nothing to do with land values.How could they? That is just left-wing madness.I am glad you brought this to my attention.

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