This really does piss me off

Thousands of council tenants who make profits by illegally sub-letting their homes will face tough new measures to be announced by ministers this week.

No, it\’s not that bit although that does grate a tad. For as we all know social housing is the least liquid part of the housing market.

We know quite well that illiquid housing markets increase the unemployment rate. This finding is usually referred to when people want to argue against ever higher rates of home ownership. The pain and grief of having to sell up and buy again means that some number don\’t do so when offered a job at a distance. Thus an illiquid housing market leads to a more illiquid employment one, raising unemployment rates.

This is why Gordon Brown\’s stamp duty on houses increases unemployment.

However, among those who make this argument there\’s always a failure to extend the insight properly. Yes, the private rental market is more liquid than the owner occupied one….but the social housing market is *less* liquid than the bought and paid for one. Thus whatever is true of owner occupation is more so for social housing. The pain and grief necessary to move across local authority boundaries is such that it can take years. And yes, by the same logic this does indeed increase unemployment.

Thus these scamsters, while they are indeed stealing from the rest of us, are in doing so freeing up that market in however trivial a manner and making the unemployment rate (marginally) less than it would otherwise be.

But as I say, that\’s not what pisses me off. This is:

The cheats could be charging market rates up to three times council rents. In parts of Westminster, the rent for a three-bedroom council house would be £114 a week but the market rent for the same or similar property would be as much as £530 a week, netting the sub-letter as much as £21,600 a year.

No, not that on its own. Add in to that that report a few weeks back which breathlessly told us that the wealth gap between the 9 th decile and the 1 st decile was 100:1. In the wealth of those at the top were included such things as housing owned, private pension funds and so on. In the not wealth of the bottom were not included state pensions nor housing subsidies.

Yet here we can see what that housing subsidy is (OK, so it\’s Westminster, an extreme case but still). £21,600 a year for a household. A year. And yes, the decile figures were based upon households.

Now, £21,600 a year ain\’t chump change. Given that tenancies are for life (and even inheritable but we\’ll not go there) there\’s a considerable amount of wealth attached to the legal right to receive that sum. I can\’t be bothered to actually do the sums but current annuity rates are around £5,000 for each £100,000 put in the pot. So £20 odd grand a year is equivalent to wealth of £400,000. And given that such tenancies last many years longer than annuities typically do the capital value is much higher than that.

So, back to our two households, the 90:10 ratio. One has £880,000 in wealth as the report said they do (on average). The second, assuming they have a council tenancy in Westminster, does not have the £8,000 the report said they do. That council tenancy itself is worth perhaps £400,000. Thus we don\’t in this particular example, have a 100:1 wealth ratio. We\’ve a 2:1 wealth ratio.

And that\’s what really pisses me off. The country is nowhere near as unequal as is made out. For everyone has a goodly and decent sized chunk of wealth: it\’s called the welfare state.

It\’s just that when analysing wealth no one ever includes said welfare state. Which is wrong.

And yes, it does piss me off, right royally.

6 thoughts on “This really does piss me off”

  1. It pisses me off that anyone who’s entitled to a council house can live in Westminster.

    Either you’re economically inactive (in which case you can go and live in Lincolnshire) or you can afford to commute 20 minutes from cheaper parts of London.

  2. It must have been fantastic living in a council house in Westminister during 1993-2007 as the housing market boomed – every year your net wealth was growing by 10% with no risk!

    Furthemore think of the option value for those who live in council houses outside Westminister given they are entitled to move to Westminister and get their £400k of net wealth. I suppose that they don’t do so much suggest they are happier with a much smaller amount of net wealth, which I suppose we should also take into consideration.

  3. As Tim Almond says, I cannot understand why we allocate housing in some of the most expensive parts of the country to economically inactive people. That’s a massive destruction of wealth.

  4. “I cannot understand why we allocate housing in some of the most expensive parts of the country to economically inactive people.” Let me cheer you up – ‘we’ also allocate subsidised council housing to people who pay higher rate income tax.

  5. The trouble with a council house, is that once you are in it, it is yours for life. This is how Baroness Uddin got to spend so many years occupying a social housing property. It also explains why there are widowed pensioners living alone in three bedroomed houses, while young families languish on the waiting list, and bungalows stay empty. “But this is my home” is the usual lament, but it isn’t theirs at all.

    That should end. Your entitlement to other benefits is means tested, why not that one? If your income picks up, your rent should go up. Not enough to destroy all your incentive to work, but enough to make you start looking elsewhere in the housing market when things are looking up.

    Finally, how much choice should social tenants have about where they live? That is how we get benefit claimants choosing a million pound villa in a smart area and presenting the taxpayer with the bill.

    And under no circumstances should anyone ever “inherit” entitlement to a council house.

    This is what we get for providing a safety net. Mission creep on a vast scale.

  6. Pingback: FCAblog » The idiocy of relative poverty measures

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