Supply and demand has always been the way basic Western economics works. The more scarce a commodity the higher the demand and the cost. Remove the regular supply and expect the product to be supplied by others and costs can go through the roof (no pun intended).
For our younger viewers, in 1980 the Conservative government introduced a Housing Act which gave council tenants the right to buy their homes at a discount. The discount was based on the number of years a family had lived in the property and could be up to 50% of the market value. Since the policy was introduced there have been some amendments relating to who is eligible and the discounts available, and the policy has been recently extended to include Housing Association tenants through the Housing and Planning Act 2016. It is estimated 1.7 million homes have been sold through the scheme. Most of us at Charters Reid Surveyors are old enough to remember the policy being introduced and the excitement it caused among tenants as they were able to get foot on the housing ladder.
Of course, most people who could afford to buy their council home were living in family sized accommodation and they were the properties that were sold first creating a shortage of family accommodation for local authorities. It also accounts for rise in the number of private landlords who have taken advantage of discounted housing and the increase in buy to let mortgages.
By the way, local authorities were not allowed to use the money from the discounted sale to build replacement houses and flats, the money had to be used to pay off debts, thereby exacerbating the growing shortage of affordable housing.
Fast forward to this month and the National Housing Federation has published a report stating that the taxpayer is spending £9.3bn in housing benefit payments to private sector landlords. If the same benefit recipients had been in social housing the payments would have been £2.2bn less, a hefty saving to the taxpayer. 47% of those receiving the benefits payments are in work, up from 26% in 2010. So the perception that benefit recipients are sat around watching Jeremy Kyle on their 60" flat screen TV's is not true. Nearly half are working to keep a roof over their heads.
The National Landlords Association seem to be delighted with the increase in payments to its members. Chris Norris, head of policy at the National Landlords Association, said the private rented sector was "responding to the increasing demand for homes from a growing proportion of tenants who are being failed by the social housing sector and housing associations". He also stated the NHF was taking a cheap shot at private landlords and looking to point the finger of blame at his members for the failure of successive governments to allocate sufficient funding for house building.
£9.3bn would build a lot of badly needed houses. The Housing Minister (Gavin Barwell - pub quiz question) has repeated the pledge to build a million more homes by 2020. Despite this ambitious target it is not enough to meet demand, or replace those sold through right to buy over the last three decades. Does spending this sum of money subsidising the lifestyle of private landlords seem like good value? As we have previously stated we believe most private landlords provide a good service and the quality of the accommodation is good, and the examples cited in the news articles give a skewed view of the real world.
At Charters Reid Surveyors we try to spread good news, but the writer is struggling on this occasion.