Sunday, 8 February 2009

Social housing - the economics of the madhouse

The reporting this weekend of London councils paying their council house tenants to move to areas of low council house demand reveals an administrative system not only in chaos but actively working to create problems for itself.

There was a time, before needs-based letting, when council house tenants were not very different from any other segment of the population; with an equal propensity to work, an identification with their area or neighbourhood, and social mores and standards that were indistinguishable from home owners. As the Hills Report found, council tenants tend to stay put a long time. And over the lifetime of their tenancies they will enjoy, on average, the benefit of subsidised rent worth £65,000 at Net Present Value. Many existing council house tenants will have been in their homes for a long time, pre-dating needs-based letting obligations.

Most of the new demand for social housing is from immigrants with exceptional leave to remain or young women of no means who have decided to bear a child. But as Migrationwatch have shown, the number of new social housing completions comes nowhere near even meeting the demands of asylum seekers, as their graphic below shows:

Over the nine years 1997 -2005, the number of grants of asylum and ELR totalled over 216,000 compared to 167,000 additional social and local authority homes built in this period.

Councils have only two real options; build more social housing, or free-up existing social housing. As both immigrants and asylum seekers and young single mothers want to be housed in areas where their mates live, freeing-up existing social housing by offering incentives to existing tenants to move to the seaside is a rational move.

What of the private market? Private housing targets were driven by the Barker Review. A significant driver for Barker's recommendations was to adjust the supply of new housing to reduce house price inflation towards a long term target of 1.1% in real terms, for which they found an additional 120,000 houses a year would be required.

Right. So the reason we're building so many new houses is (a) to accommodate immigrants and (b) to control house price inflation. But of course these two things are linked; without housing demand from immigrants, aggregate demand would be significantly lower and house price inflation would be lower.

And now, of course, house price inflation is no longer a problem. In fact, the government now agree that the housing market needs a stimulus to increase confidence - in fact, that confidence in the housing market is central to the UK's economic recovery. Following the reasoning of the Barker Review, the way to do this is now to restrict new housebuilding, to decrease supply and increase demand. And this means decreasing the supply of social housing as well as private housing. If government wants to spend to keep builders in work, better to direct resources to public infrastructure projects than housing.

But what of the councils' legal obligations to house all those asylum seekers and single mums? Well, the legislation needs to be scrapped. And anyway, London needs its subsidised social housing for its essential but low paid workers far more than for large workless Somali or Bangladeshi families. If there's spare social housing capacity in Great Yarmouth, or Bridlington, or Scarborough, then by all means let them take it. But starving ourselves of nurses and care workers in London in order to house and provide welfare benefits for asylum seekers in the location of their choice is insanity.

An end to needs-based letting should not only be high on Cameron's agenda, but if Brown is in the slightest bit serious about putting the nation's economic recovery before his personal and party interests, it will be high on Labour's agenda too.


Newmania said...

This is one of the dull but incredibly importnat subjects one feels we should think more about.
One thing about long term tenants is the extent to which the houses are sublet for an income
As many as 10% are

Anonymous said...

All this central planning works sooo well, doesn't it?

manc_ill_kid said...

Its not just immigrants and single mums, you're forgetting the single men, the drug addicts and substance abuser, the vulnerable, families with both parents, people with long-term mental health issues, young people who've been thrown out of their disfunctional family homes, ex-offenders, people with learning difficulties and are all therefore considered to be in priority need by the council.

Camden Council are actively selling off much of their own housing stock and are receiving great praise from teh government for this.