Is the UK benefits system a CDO?

by Daniel on May 16, 2015

Almost as an illustration of the sort of thing John’s looking at in terms of misplaced opportunity costs, I have a piece up at medium.com on forthcoming changes to the UK benefit cap system, and how they could have fairly serious consequences for housing benefit tenants. I probably don’t emphasise it enough in the piece, but these knock on effects destroy the cost economics of the policy – once tenants are evicted because they can’t pay the rent, they become emergency cases and have to be accomodated by the council in short-term accomodation, which is one of the most wasteful and expensive things you can do in housing policy. As I said in discussion of the piece, if you don’t like subsidising these guys as buy-to-let landlords, you’re unlikely to love them when they come back as bed-and-breakfast proprietors, at twice the price.

{ 117 comments }

1

Josh Jasper 05.16.15 at 4:21 pm

What makes you think the government won’t abolish emergency cases, and end short term accommodation as the next logical step to creating mass homelessness?

2

Peter K. 05.16.15 at 4:53 pm

The Daily Show had a piece not too long ago about how Salt Lake City in conservative, Republican Utah moved in the opposite direction. They figured out that just paying for decent housing for the homeless was the cheapest way to go and it’s working.

http://thedailyshow.cc.com/videos/lntv3q/the-homeless-homed

On the other hand , no matter how expensive undermining Syriza turns out to be, it will be cost effective in terms of provinding aun exemple pour les autre.

3

Phil 05.16.15 at 4:58 pm

I was about to say something more tentative and hand-wring-y about not excluding the possibility that the government had thought this through*… but yes, what Josh said.

*The part about attacking the income stream of small BTL landlords in towns on the south coast does make this harder to sustain, but the question is still “who, whom”. Hundreds of natural Tory voters letting (perhaps reluctantly) to feckless benefit spongers are about to find their tenants becoming a lot more feckless; that will be unpleasant for them (as well as the tenants), but politically speaking it only matters if they blame it on the government – and how likely is that?

4

Daniel 05.16.15 at 5:03 pm

Guys, this is a bit odd. As I pointed out in the piece, the benefits cap is popular, populist politics. It’s particularly popular with the working class. There’s no hidden Bond-villain agenda here whereby it’s part of a long term plan to create mass homelessness because (insert purpose here). It’s just a policy that’s been taken on because lots of people like it, and it superficially looks like it might save money.

5

Josh Jasper 05.16.15 at 5:11 pm

I’m serious – if saving money is the goal, creating a situation where zero dollars are spent on housing assistance is the easiest way to save money, thus mass homelessness with no assistance, while not actually labeled as such, is the goal. This will be followed by the idea that “private charities” will be able to pick up the slack much more effectively. I expect that to be a massive failure, so I’m not seeing mustache twisting villains so much as bureaucrats with budgets being shrunk to pay to austerity and tax cuts to corporations and the wealthy.

I think you’re seeing creeping libertarianism being packaged as a savings to the populists by making UK versions of “Cadillac driving welfare queens” the poster children for why the cuts are necessary.

6

Pejar 05.16.15 at 5:23 pm

Excellent post.

Minor nitpick – you say the current cap is £25,000, when it’s actually £26,000 (£500 per week).

I’m not sure about it harming buy to let landlords. Certainly round my area (in London) it’s increasingly hard to find a landlord who will accept Housing Benefit anyway, so it won’t affect them. May be different where there’s less pressure on housing though.

7

Daniel 05.16.15 at 5:26 pm

Well, it’s a view I guess, but it looks like scaremongering to me. And although people hate to admit it, there is a genuine political issue which is raised by the level and regional pattern of UK house prices – to what extent is it reasonable to take taxes from people who can’t afford to live in London themselves, and use them to keep non-taxpayers living in houses that they couldn’t otherwise afford? People go very shouty crackers when this subject comes up, but that’s because it doesn’t have an easy answer (or rather, it has two diametrically opposed easy answers, both of which are very unattractive).

8

Daniel 05.16.15 at 5:29 pm

Certainly round my area (in London) it’s increasingly hard to find a landlord who will accept Housing Benefit anyway, so it won’t affect them.

Yes, I think this phenomenon is going to spread around the country. From the landlord’s point of view, HB tenants are reliable to the extent to which HB covers the rent. The excess of the rent over the HB is money that has to come from the budget of a household with low income, and so it’s much more risky. I linked to an article by Joe Halewood which discusses this in depth.

9

BruceJ 05.16.15 at 5:30 pm

“popular, populist politics” can be perfectly in line with draconian policies generating mass homelessness.

To paraphrase Kay from “Men in Black”: “A person is smart. People are dumb, panicky, innumerate animals and you know it. “ Stoking populist resentment of those shiftless, mooching ‘others’ has been the stock in trade of American conservative politics for many decades now, and clearly their counterparts on the other side of the Atlantic have watched and learned.

Here in the US criminalizing the homeless is a ‘popular, populist’ policy. Micromanaging what foods the poor may or may not buy with their benefits are ‘popular, populist policies’ , even when they result in the nonsensical outcome that canned tuna would be banned.

A very large number of people will happily agree that providing healthcare to people gratis will waste enormous amounts of money; these same people cheered when it was suggested that a person unwise enough to purchase private health insurance should simply be left to die.

Drug testing welfare recipients is a perennially popular policy here, despite the fact that in each and every instance it’s been implemented, it has been a tax-wasting, pointless process.

There is no great conspiracy to create mass homelessness for any evil purpose, other than the perennial conservative dogma that the poor are lazy, shiftless freeloaders, poverty is a moral failure on the part of the poor, and so they must be punished, like willful and disobedient children.

10

Phil 05.16.15 at 5:43 pm

I’m not coming at it from an “evil Tories being evil” perspective at all – just floating the possibility that IDS and/or the people around him have actually done the maths and do know what a crazy and self-defeating policy this is, on the assumption that all those people have to be housed somewhere. Remove that assumption and you can make real savings. (So, OK, we are back with evil Tories being evil – but that’s where I ended up, not where I started from.)

11

Josh Jasper 05.16.15 at 5:43 pm

Well, it’s a view I guess, but it looks like scaremongering to me. And although people hate to admit it, there is a genuine political issue which is raised by the level and regional pattern of UK house prices – to what extent is it reasonable to take taxes from people who can’t afford to live in London themselves, and use them to keep non-taxpayers living in houses that they couldn’t otherwise afford?

That question is not one unique to London at all. I think the answer is that ultimately, if we have any metro area where rents rise past income increases regularly, you either build cheap public housing and have a reasonable safety net for those who’re unable to work/out of work, or you engage in practices where no aid at all for long term “non-taxpayers” out is the end goal.

The idea that non-tax payers want to stay on benefits because it’s super awesome and lack the desire to work factors into why we’re not going to have what I’d like to see.

12

Phil 05.16.15 at 5:44 pm

(Also, who are these “non-taxpayers” btw? How do they manage that?)

13

Josh Jasper 05.16.15 at 5:55 pm

Question for those who’d know the laws – if you start renting while on housing benefits, and then fall into a situation where you’re needing them, can an existing landlord refuse to take them?

14

dsquared 05.16.15 at 6:06 pm

Oh, “net recipients from the tax and benefit system” then but I doubt anyone was confused.

And with respect, I don’t think #11 is an answer at all. The fact – and this isn’t a dogma of any sort – is that due to the particular way things have shaped up in the UK, the subsidy to housing in some parts of the country are very large relative to incomes. It’s a real life version of one of Ronald Dworkin’s hard problems; some people seem to have a claim on society’s resources to be provided with a very expensive good, one that many people can’t afford and one that by definition can’t be provided to everyone who wants it.

15

Josh Jasper 05.16.15 at 6:17 pm

This isn’t “a very expensive good” in the same way that say, high end single malt whiskey is. It’s “a very expensive good” in the way somewhere to live while (hopefully) working a reasonable distance from your job is.

We either subsidize that particular good somewhat to keep the items created by low wage jobs cheap, or we raise prices on literally everything urban dwellers need, which means no more middle class in cities either. Cities will be a place the rich live. No poors allowed. Which will mean corporations will move offices out of cities, because you can’t have corporate offices while average employees are paying twenty five pounds for a soy latte

Of course not “everyone who wants it” gets it. Public housing is not unlimited, but you have to have a reasonable amount of it or you get the situation described above.

16

MPAVictoria 05.16.15 at 6:22 pm

Wait is “evil Tories being evil” a controversial belief here now?

17

Daniel 05.16.15 at 7:12 pm

It’s “a very expensive good” in the way somewhere to live while (hopefully) working a reasonable distance from your job is.

This isn’t the difficult question though. Someone with a job to be close to isn’t receiving Income Support or JSA, and therefore is very unlikely to be affected by the benefit cap. The difficult question is, given a limited supply of housing in city-centres and favoured locations, and given a limited amount of resources for subsidising housing, is there still, and nonetheless, a case for providing some of that scarce housing to people whose income comes mainly or entirely from the benefits system? I think there probably is, because otherwise you end up creating a lot of very hard cases and carrying out a sort of class-based ethnic cleansing. But if you do that, then you have a hard time selling that policy to people with two-hour commutes, don’t you?

18

BruceJ 05.16.15 at 7:17 pm

@15

Cities will be a place the rich live. No poors allowed. Which will mean corporations will move offices out of cities, because you can’t have corporate offices while average employees are paying twenty five pounds for a soy latte

In purely cynical mode, no, they’ll simply make those employees live farther and farther out, because the bosses want to work close to where they live. That this puts their employees into a less productive mode is of no concern for them. It’s not like the cost of living thee affects anyone THEY know, unless it’s the increasing difficulty in finding a maid or nanny who doesn’t require live-in quarters…

Employees are merely costs on the Great Spreadsheet of Share Value, it’s not like they’re important or anything…

19

Daniel 05.16.15 at 7:22 pm

Can we maybe talk about the here and now rather than projecting into the future? I think there’s a really interesting question about what intuitions about fairness make us think that it’s the right thing to do to subsidise people with no non-benefit income to keep living in say, Islington. I think this *is* the right thing to do, but I can see how the benefit cap is politically attractive, because I can see how lots of people who can’t afford to live in Islington themselves might object to having other people so heavily subsidised to do so.

20

Josh Jasper 05.16.15 at 7:45 pm

Is the question is why subsidize people to have a better life than you are if you’re working at a lower-middle class wage? Or is it just more conveniently located housing?

Are there really cases like this? An example would be nice.

21

Daniel 05.16.15 at 7:58 pm

Are there really cases like this? An example would be nice.

An example of what? We both know that there are workless households in LB Camden and LB Islington, and we both know that lots of people commute in to these boroughs because they can’t afford to live there.

22

thorazine 05.16.15 at 8:03 pm

@Phil – Are you seriously suggesting that IDS has some kind of evil master plan here? I mean, maybe – but he’s always seemed to me like the type who’s fortunate to be wealthy because, if he had to tie his own shoes, he’d never get out of the house in the morning.

23

Daniel 05.16.15 at 8:34 pm

Ian Duncan Smith, btw, to refer back to a recent discussion, being a prime example of the competence and empathy that one picks up in a “real job” like the Scots Guards.

24

Stephen 05.16.15 at 9:26 pm

MPA Victoria: no, the Evilness of Tories is not even slightly controversial. We know that Tories are Evil because they do Evil things: and we know that what they do is Evil because it is done by Evil Tories.

Others, by contrast, not being Tories are by definition Good.

Glad to have that sorted for you.

25

Phil 05.16.15 at 10:29 pm

#22 – no, not really, but then I don’t believe that the… er… the government of Germany in 1933 had plans for what it would do eight years later. (Hope I got away with that.) What I am suggesting is that IDS’s goal is “cut welfare by £12bn” (this much isn’t controversial) – and that, when his department implements a plan which will predictably lead to welfare payments going up rather than down, he or his advisors may have spotted this and roughed out a plan for getting round it. And that, if we’re wondering what that plan might be, we shouldn’t exclude one really obvious possibility just because it would inflict serious hardship on a bunch of people – particularly when it’s a group of people that the Tories have been demonising for the last five years.

On the (genuine) Islington Problem, on the other hand, I get a bit Tebbit – I grew up in two places 250 miles apart and now live in a third, so the idea of having to move to where the work is doesn’t seem crazy to me. The work has to be there to move to, though – and that’s not IDS’s department.

26

MPAVictoria 05.16.15 at 10:43 pm

Stephen there are some reasoning problems with your post. :-)

27

Josh Jasper 05.16.15 at 10:49 pm

I’m asking for examples of non working households who take in benefits enough to pay for a home in an area where someone commuting in would not be able to afford similar accommodations.

28

Daniel 05.17.15 at 12:46 am

Well, LB Camden and LB Islington. This is a real issue, not a made up one.

29

engels 05.17.15 at 2:03 am

What about scrawling a ‘W’ on all the workless households in Islington, then one night going and smashing their windows, Problem solved.

30

magistra 05.17.15 at 6:06 am

The benefits battles generally also seem to mark the development of an informal ‘two children’ policy in Britain (along with the suggestion that child benefit should be restricted to the first two). There are a lot of heated claims that people shouldn’t have “more children than they afford”, but that now seems to mean more than two, as Dan’s example shows. And since very few families can guarantee that they’ll never end up on benefits, it’s increasingly risky even for the employed to have a third child. (Given that Iain Duncan Smith is a Catholic with four children, someone really ought to ask him at some point whether if a woman on benefits becomes pregnant with her third or subsequent child, he thinks she ought to abort it).

I suspect that this informal attempt to restrict the fertility of the ‘underclass’ doesn’t just reflect the traditional middle-class fear of the poor breeding fecklessly, but also new British trends. Houses in Britain are unusually small and childcare is unusually expensive, compared to the rest of Europe: many middle-class families now can’t afford to have more than two children (or have taken so long to get on the career/housing ladder that they don’t have time subsequently to have a large family). It’s sad but not surprising that this in turn influences attitudes to people having ‘too many children’.

31

kidneystones 05.17.15 at 7:47 am

We face a similar situation in Japan. Urban centers such as Tokyo are booming. The countryside is bleeding jobs and people. Local economies used to flourish because large companies sourced much of their parts production to small and medium-sized firms in the rural areas. One of the reasons Tohoku is regarded as safe is that if the region were deemed ‘unsafe,’ the national economy would tank. Property values outside major urban centers for the simple reason that too few people want to live there. Young people who travel to urban centers to work or study feel the pull of family and locale, but remaining in urban centers simplifies career and spouse selection prospects.

Property values in London are considerably higher than those elsewhere in the UK. Regional disparity and regional resentments have extremely deep historical roots. Subsidizing London has been a policy few outside the city have ever supported. Free healthcare is not free, it’s paid for with taxes. Free housing is not free, it’s paid for with taxes.

Labour lost the vote by forgetting their traditional commitment to equality, and equality does not necessarily mean asking everyone to pay taxes so that those who are not paying similar taxes can live in the most expensive urban center in the UK.

Or, does it?

32

Philip 05.17.15 at 8:04 am

To me the welfare state is a safety net to help out in hard times. Making people move to new areas with lower cost housing is going to give them more barriers to finding work and cause more stress and instability, so there’s that opportunity cost to account for too. The worst case scenario of the policy would be the current policy of Home Office accommodation for asylum seekers where they are given dispersal accommodation on a no choice basis, they will be allowed to request where to live for medical reasons and moving to be near family is a factor that will be considered. I know there are households with a second or third generation not in work but I don’t see how relocating them on the whim of the government will help.

33

novakant 05.17.15 at 8:10 am

Simple answer: rent control.

34

George Berger 05.17.15 at 8:27 am

@Philip Besides the Cap there is the Bedroom Tax, which has been in effect for some time. Why not consider the total effect of these on housing?

35

Josh Jasper 05.17.15 at 10:30 am

So how many families are there in LB Camden and LB Islington who get paid out more than the folks commuting in to work there ear? 10,000? 1? Who are these people and what’s the story?

Saying “This is a real issue” isn’t confirming anything for me. Republicans in the US talk about voter fraud being “a real issue” and use it to disenfranchise as many people as they can manage. If you call something a real issue enough and get enough people mad at it, no one will look at the actual statistics, the people who’re really behind the numbers and why they’re there. It’s easy to make them faceless, or better still, to pull out ONE bad actor, and then make them the face of the whole problem. Ronald Reagan set the entire conservative US against the poor by talking about “Cadillac Driving Welfare Queens”.

36

engels 05.17.15 at 10:34 am

If some HB claimants are still able to live in London when many low wage workers increasingly can not, it seems to me the problem is with the second part of the conjuction. Harrison Bergeron would doubtless have a different view.

37

Momentary 05.17.15 at 10:39 am

The solution to this was council housing. But then the Tories sold it all.

38

Chris Bertram 05.17.15 at 11:01 am

Interesting further corollary: to make a large city function, you need people to do the shit jobs. If low wage native workers can’t afford to live in London, because their housing benefit/tax credits etc have been cut then who will do those jobs? Answer: immigrant workers (no access to benefits, but prepared to work long hours and to tolerate really bad housing conditions because they see the condition as temporary.) That doesn’t sit well with other aspects of Tory policy.

39

Philip 05.17.15 at 11:18 am

Engels, surely most HB claimants are low paid workers. Josh the benefit cal was £26,000 and is being reduced to £23,000, there will be plenty of people commuting to London, or to different parts of London, who earn less than that. I just used an online benefits calculator and a single adult on £20,000 in Camden would not be able to get housing benefit and I am sure they would struggle to pay rent there. If I got it right you wouldn’t get anything for £15,000 either

40

engels 05.17.15 at 11:22 am

‘surely most HB claimants are low paid workers’ yes, you’re right – I should have written ‘unemployed HB claimants’ to be clear

41

Josh Jasper 05.17.15 at 12:33 pm

Again, I’m still not sure about the individual people claiming benefits and the circumstances that put them there. Who are these people, how many of them are there, and what are thier circumstances?

This is fast approaching a point where I am going to back out of the conversation. I’m asking questions and getting either misunderstandings or evasions.

42

Phil 05.17.15 at 1:03 pm

Philip – researchers have been unable to find any households where two generations of adults have never worked, let alone three.

I think if we changed the way we look at unemployment – and stopped thinking in terms of “the unemployed” at all – a lot of very real problems would go away. For as long as the default assumption is that anyone not in work is taking the piss, we as a society are going to want to pay them less – meaning less than whatever they’re getting now. If we thought of unemployment as a period of unwelcome enforced gardening leave, which some people are unfortunate enough to get stuck in, it might look a lot more affordable.

43

magistra 05.17.15 at 1:03 pm

Josh@41
You can get some idea of scale from Neighbourhood Statistics. For example, in Islington, there are 6100 households with no adults in employment in the household and dependent children (6.6% of the total households). Of families with dependent children generally in the borough (nearly 21,000), around 17% (3600) have 3 or more dependent children. So you’re probably looking at 1000-1500 out of 90,000 households in Islington with large workless families and with no-one getting disability benefit. As a percentage of households overall it’s small, but in absolute numbers it would be a major problem rehousing them.

44

Momentary 05.17.15 at 1:06 pm

Josh Jasper, there is a lot of statistical data at https://www.gov.uk/government/statistical-data-sets/social-and-private-renters

Lots of retired, disabled, and single parent.

45

david 05.17.15 at 1:18 pm

“workers can’t afford to live in London” is not, I think, yet an issue for those employing said workers, at least geographically speaking. Kensington and Chelsea is long since a lost cause but Islington can still push people to Haringey and Haringey to Enfield. What’s a few more stops on the Northern Line?

But that’s not really the intended topic. Short-term accommodation is expensive, sure, but voters who balk at paying £small to Mr. Undeserving may nonetheless be willing to pay £large to Ms. Vulnerable, despite the fact they both take up one bed each. Voter preferences are not the same as technocrat preferences, the former don’t see the individuals who make up homeless statistics as fungible.

46

Josh Jasper 05.17.15 at 1:22 pm

Now we’re getting somewhere. Presumably of these 6100 non working people living in Islington, a large percentage are unable to work. I’m guessing that they have large expenses (like children) and are not living high on the hog.

So who are these people? What are thier stories?

47

david 05.17.15 at 1:23 pm

I suspect “6100 non-working people” is about as fine-grained as privacy concerns in statistics would permit. I don’t understand your emphasis on “their stories”, though, honestly.

48

dsquared 05.17.15 at 1:26 pm

If some HB claimants are still able to live in London when many low wage workers increasingly can not, it seems to me the problem is with the second part of the conjuction. Harrison Bergeron would doubtless have a different view.

Thank you Professor Holmes. So all we need to do is solve the London housing affordability problem and we’re sorted. Any ideas how we might go about doing that? Note that raising the wage rate doesn’t necessarily work as these workers are bidding against each other for a basically fixed supply (and even if you change the planning rules, the new supply is going to be in far outer boroughs).

49

Josh Jasper 05.17.15 at 1:28 pm

David: Because it’s very easy to assign whatever values you want to a faceless mob. Also, understanding the circumstances that create the situation is important in reducing it’s recurrence.

50

dsquared 05.17.15 at 1:32 pm

not living high on the hog.

Josh, the point isn’t about anyone living “high on the hog”, it’s about living in Islington. Which, as Phil points out, is something that’s basically impossible for someone earning £20,000 a year from wage income. You seem to want this to be a story analogous to one you already know about in the American welfare system but it isn’t.

51

Ronan(rf) 05.17.15 at 1:43 pm

” So all we need to do is solve the London housing affordability problem and we’re sorted. Any ideas how we might go about doing that? “

I was going to ask this, but decided not to on account of my own personal ignorance. Is more council housing with upper limit controls on rent (perhaps) part of a solution ?

52

kidneystones 05.17.15 at 1:59 pm

@38 One of the interesting differences between the west and Asia is that there are no ‘shit jobs’ here. All work has honor. That isn’t to say that there aren’t bad jobs, but that would be precisely the type of job currently done by undocumented workers in the US, and by migrants from poorer countries in the EU in Britain. There are status barriers, class, etc., but the baseline is that one has a job, one is contributing to the whole. Given our last exchange, I’ve really no interest in opening a fresh rift. I do think the language we employ to identify necessary labour needs to change, and that the pay for doing these jobs needs to improve. One way to accomplish this is to reduce the numbers of people willing to do this work in order to force employers to pay people more. That means planned immigration, a policy I’ve advocated as reasonable rather than racist, and one that is employed by nations such as Canada and Australia. You’ll have noted, I’m sure, Chuka’s membership in an extremely swanky club, the news of which had nothing at all do with his decision to withdraw from the leadership race. Liz and Andy have both called for an early referendum on EU membership, which strongly suggests to me that they believe refusing to grant British workers a voice on political union with Europe before the election cost Labour votes and seats, if not the election, as I’ve argued. A lot of the work people do is not particularly pleasant, but that does not mean we need not take pride in doing it and in those who do it. One visitor from the US, who happened to be a Dem organizer from Boston, asked me to take a photo of him standing near an older gentleman in an immaculate uniform scraping gum off the floor of a generally pristine train station. He claimed nobody in Boston would believe it. Pride in work, all work, and all workers should be, IMHO, a core Labour value. I’m sure you agree.

53

Philip 05.17.15 at 2:02 pm

Phil, you’re right I meant to write about long-term unemployed and multi generational disadvantage but fell into using lazy short hand. I was trying to make the point similar to yours.

Josh, most of the net welfare recipients in Islington or Camden will be families and most of the people who can’t afford to live there will be low(ish) income single adults. So your asking about similar accommodation moves the goal posts from Daniel’s original point. Families in a low housing price area might be net payers and a a family on the same income in a high house price area might be net beneficiaries. So yes exact comparisons are hard to make but Daniel’s point is right and a lot of people see it as unfair and that is something that needs to be acknowledged when looking at political solutions. This is all stuff people living in the UK are aware of, hence the confusion over what you were trying to find out or prove.

54

Daniel 05.17.15 at 2:06 pm

Is more council housing with upper limit controls on rent (perhaps) part of a solution ?

Possibly. Although given the history of allocation of council housing in inner London boroughs (not great, often very corrupt), and the history of rent controls (also not great although they do not literally destroy buildings and make the living envy the dead, the way some economists go on), it’s not what you’d call an ideal solution. In my view, the only real solution is for some genius to stand up, shout “Eureka” and realise that not literally bloody every thing has to happen in London.

55

engels 05.17.15 at 2:09 pm

Any ideas how we might go about doing that?

Quite a few actually–they’re not very original–for starters: social housing, rent control, tax the rich (wealth tax), tax landlords and homeowners (CGT / land tax), perhaps politely point a few major banks in the direction of Hong Kong…

56

Momentary 05.17.15 at 2:17 pm

Return to pre-Thatcher council housing, and serious reform of the council tax bands, which currently make it financially attractive for the super wealthy to buy up London property just as a place to stash money. http://www.theguardian.com/society/2014/jan/31/inside-london-billionaires-row-derelict-mansions-hampstead

57

Tiny Tim 05.17.15 at 2:21 pm

the council tax bands are ridiculous

58

engels 05.17.15 at 2:40 pm

(Also toying with the idea of local taxes on organic food and cycling…)

59

Momentary 05.17.15 at 2:42 pm

engels: quinoa tax!

60

david 05.17.15 at 2:50 pm

council housing in the postwar era before Thatcher did not exist in a vacuum; the system worked (however clumsily) because new towns in England would pop up to absorb population growth. But if you build new towns, then inter-town traffic must be made available so that the distant towns have the infrastructure to support them, and the center necessarily accumulates rail interchanges or highway on-ramps

the end of new towns and the rise of highway revolts in the UK is not coincidental

61

ZM 05.17.15 at 3:01 pm

“So all we need to do is solve the London housing affordability problem and we’re sorted. Any ideas how we might go about doing that? “

Ronan(rf) “I was going to ask this, but decided not to on account of my own personal ignorance. Is more council housing with upper limit controls on rent (perhaps) part of a solution ?”

I already mentioned this since I looked into this last year as when I called The Prince’s Foundation to see if they were a realistic stakeholder for our Australian and Chinese student group’s indicative urban design framework for an Eco-neighborhood for the old gas and fuel site near Clifton Hill the man said it was a very exciting proposal and we should look at their 2014 Housing London: A Mid-Rise Solution Report.

As you would know Prince Charles is very interested in sustainability and architecture so the idea is 1. Stop people land banking in London’s limits (eg taxing unused blocks highly ) as there is enough land it just is not being used; then 2. develop lovely mansion block mid rise buildings to house people, these can be designed with nice shared courtyards with allotment gardens, and 3. build them to the best sustainable building practices with renewable energy co-generation and water tanks and water recycling to water the gardens and so on.

To do this the government needs policies to stop land banking, then to make multiple unit developments have 10-20% affordable or council housing, then encourage midrise developments over high rise through height restrictions, then mandate sustainable building practices. Probably not all of them can be in the neo-classical style as people will complain – but this is a nice example at Highbury Gardens

http://www.highburygardens.co.uk/the_buildings.php

62

engels 05.17.15 at 3:24 pm

Could we have something like the benefit cap but for unearned income from house price inflation? No-one should be allowed to make more than the average wage from the rise in value of her home, or something like that?

63

david 05.17.15 at 3:27 pm

The problem with merely taxing “land banking” highly is that you incentivize the construction of cheap buildings designed for easy demolition (as opposed to safety, attractiveness, ease of use, etc) on those lots, and there’s no real way to distinguish that from mere bad taste.

Land banking emerges from an oddity in the planning process, where land that is granted planning permission affects regional limits on uses, even if the land is not actually then employed toward those permitted uses. In the meanwhile it blocks other development whilst sitting idle for legitimate reasons, e.g., whilst aggregating multiple lots for a higher-value development, arranging for finance, etc. If you found a nice lot to build a lovely mansion block mid-rise on, and then your backer pulls out and you spent a couple years digging around for a credit line, then you too would be land banking. This is more or less the game that Persimmon, Berkeley Group, etc are playing, is it not? And you, o would-be eco-developer, would be doing it too.

64

magistra 05.17.15 at 5:10 pm

The Guardian had a story about families who have already been pushed out of central London by the benefit caps. And now they’re again being pushed out of London suburbs, because those have got too expensive. The single parents in this article can’t find work because childcare is too expensive; councils have to rehouse them because of the children, but there aren’t any cheap properties to put them in, unless they’re relocated long distance (sometimes hundreds of miles). These aren’t the ‘work-shy’ of popular imagination, but people who would be emminently capable of getting a job in a few years time when their children are at school. But they probably won’t be able to do so if they get dumped in Grimsby, as might happen.

65

engels 05.17.15 at 5:28 pm

Could we have something like the benefit cap but for unearned income from house price inflation?

This is the kind of thing I’m talknig about, and the kind of place I want to start if I was worried about ‘fairness’ and ‘making work pay’:

Homes have earned more than their homeowners for the past two years in one in five local authorities – almost exclusively in London and the south-east – according to analysis by Halifax. The London borough of Hammersmith and Fulham has seen the biggest explosion in house prices relative to pay, Halifax said. Average prices there have gone up nearly £200,000 over the past two years, while households in the area have had median earnings totalling £56,698 over the same period.

66

novakant 05.17.15 at 5:34 pm

Low-wage workers cannot afford to commute because the costs are prohibitive:

http://www.mirror.co.uk/news/uk-news/train-ticket-prices-london-commuting-5266469

67

Metatone 05.17.15 at 6:50 pm

@Daniel

Maybe I don’t understand the market correctly – but aren’t many of these landlords servicing the mortgage on the property using the rent? Doesn’t that make rents potentially *very* sticky?

68

dsquared 05.17.15 at 8:45 pm

No, you understand correctly

69

Pete 05.17.15 at 10:08 pm

So long as “living in London” is something that the aspirational middle class find themselves priced out of, the benefit cap is going to be popular. It also has some support if you’re thinking in terms of cost-effectiveness from a constrained budget.

And it’s mostly a London problem. To me there are three elements:

– regressive property taxes in London: low carry cost for a high-value appreciating asset
– Lack of a regional industrial policy. No encouragement or coordination for moving businesses out.
– Running the London property market as an export industry to bring in (slightly dodgy) foreign capital.

70

stubydoo 05.18.15 at 12:26 am

Am I the only one whose response upon seeing the 26K figure was being dumbfounded at how ridiculously large it is. Does every CT commenter except me live in cities where 26,000 pounds (market-rate) rent cannot house a family of six in opulent luxury, within an easy commute of every single workplace? Y’all should move here (i.e. New York City), apparently this is a low cost-of-living city now.

26000 pounds = slightly over $40,000US = $3400 per month.

71

Daniel 05.18.15 at 12:38 am

It’s a London problem for now, by the way, but as Joe Halewood points out, at £23,000 it’s a national problem.

72

ZM 05.18.15 at 12:40 am

david,

You just change the planning laws/development controls to forbid cheap poorly built housing developments. Eg everything in Eco-development 1 zone must be 4 storeys high and meet best green building standards.

If there is not enough money in the economy for this development then the government starts a new government sustainability bank for the purpose like France did recently.

Also you get a good architect like Porphyrios in the example I gave to give indicative architectural designs then you get people to buy off the plan to fund the construction.

In Australia this would take ages to construct so many Eco-mansion blocks but in China it happens more quickly which is why they have lots of empty houses where Chiba could take in some refugees to live, and the UK could take in some skilled builders on temporary or permanent visas to help build mansion blocks.

73

Marshall 05.18.15 at 12:49 am

Nice point about the lack of a regional policy, but I suppose such a thing would be held to unreasonably restrain markets. Too bad, it would seem that the city could unilaterally apply some push through business taxes and just end up with more space to sell to (& tax) who will be spending all their time in New York or Shanghai anyway.

74

Daniel 05.18.15 at 1:09 am

People are very much overestimating the extent to which the supply side can work here – “land banking” is a massive red herring. Let’s say you can build another million houses inside the M25 (which is what we would have to be talking about here to have a measurable effect on rents). Who is going to build the infrastructure to serve them? In the case specifically of transport infrastructure, can it be done at all? Nobody knows how the Tube as it is currently designed is going to be able to serve the extra million passengers it is going to pick up by 2050 at current rates of growth, and moving this problem forward in time definitely doesn’t make it easier to solve. The price mechanism isn’t telling you to build a lot more London – it’s telling you to stop having so many people needing to live there. And given that there’s a limit on the number of people who can live really close to the centre of one of the greatest cities on earth, there’s a question about how these desirable locations should be shared out, and particularly a question of how much of society’s resources are dedicated to making sure that some of them go to poor people rather than rich people.

75

david 05.18.15 at 3:24 am

“Let’s make Birmingham into London” is difficult, there’s scale effects for being in the financial capital, cultural capital, governance center, etc. Separating the financial center from the government center helps but only so much. People will want to move and you would need either price or regulatory barriers to deter them

The level of infrastructure investment you would need to make Newcastle as attractive to live in is so great that I would seriously question whether it is necessarily cheaper than upgrading London’s extant infrastructure

76

Phil 05.18.15 at 8:43 am

stubydoo, the total welfare payment of a household is capped at £26,000, and it’s proposed to reduce the cap to £23,000. Quoting Daniel’s piece (which you really should read),

In the Inner North London [example], a family with two non-adults and three children would be receiving £335 [per week] in welfare and tax credit. That means that as the cap changes [from £500 to £440 p.w.], their maximum Housing Benefit payment would go from £165 to £105. Effectively, by removing 36% of their subsidy, their cost of housing has gone up by a very large percentage — if, say, they were paying £180/week rent beforehand … the amount of money they have to find from their benefits to cover housing costs would have gone from £15 to £75 — from a relatively minor expense to more than a fifth of their income.

Previously, if a family was entitled to welfare payments totalling (say) £14,000 p.a., and if they lived in an area where a family house couldn’t be rented for less than (say) £16,000 p.a., the state would cover whatever portion of the rent they couldn’t make – which might well be the entire £16,000, giving them a notional income of £30,000 (notional because they don’t get to spend it in any meaningful way – half of it goes straight to their landlord).

There are two ways of looking at these figures; one is to say “not having a job is horrible, raising a family on £14,000 is nobody’s idea of fun and the total number of people we’re paying out for in this way isn’t going to break the bank, so let’s leave the poor sods alone and concentrate on creating the conditions that will increase overall employment”. The other is to say “lots of hardworking families can only dream of a post-tax income of £30,000, how can it be fair for people who don’t work to get that kind of money?”. Unfortunately (in my view) the government’s gone for plan B. Daniel (I think) thinks that this will cause short-term misery and then blow up in the government’s face; I suspect that it will cause short-term misery and then cause long-term misery, without doing the government any harm at all.

77

Salem 05.18.15 at 8:48 am

But they probably won’t be able to [get jobs] if they get dumped in Grimsby, as might happen.

Doesn’t seem very fair on the people who do live in Grimsby. I’d much rather spend that money on making Grimsby a nicer and more prosperous place than on cramming more people into London because it’s unacceptable for them to have to live in Grimsby.

78

Seeds 05.18.15 at 9:06 am

Doesn’t seem very fair on the people who do live in Grimsby.

What doesn’t seem fair? That they have high rates of unemployment, or that they may be about to receive an influx of even more unemployed people? I’m honestly having trouble understanding how your comment responds to 64’s quite reasonable point.

Incidentally, if you’re interested in the politics of Grimsby and the employment market there, both Vice and the LRB wrote quite decent long-form pieces about Grimsby during the lead-up to the election.

79

Pete 05.18.15 at 9:20 am

@stubydoo 70: that’s a total figure which has to include food and bills. If you spend all of it on housing it gets you a reasonable house in Plaistow: http://www.rightmove.co.uk/property-to-rent/property-52217393.html but then you can’t eat.

Part of this is the question “if the local authority has a duty to accomodate you locally, how local is that?” Someone searching for a private house they’re paying from their own pocket will put the entirety of London in their search. Whereas the housing authorities are obliged within quite small boroughs.

80

Seeds 05.18.15 at 9:40 am

As a separate comment that may end up in moderation purgatory, here are the links to the pieces I alluded to in 78.

Vice: Stag parties and empty Saturday nights

LRB: Why are you still here?

81

engels 05.18.15 at 9:48 am

“particularly a question of how much of society’s resources are dedicated to making sure that some [houses in London] go to poor people rather than rich people”

Well I’m glad we didn’t ask the question of how much of society’s resources should be dedicated to making sure that basic human needs like housing and capacities like labour power are bought and sold as commodities in the first place. Phew.

82

Salem 05.18.15 at 9:50 am

What doesn’t seem fair? That they have high rates of unemployment, or that they may be about to receive an influx of even more unemployed people?

It doesn’t seem fair that the unemployed in London should be subsidised more than the unemployed in Grimsby, on the grounds that without those subsidies the Londoners would have to live in Grimsby, where they would certainly never be able to find work. The argument states by construction that being unemployed in Grimsby is much worse than being unemployed in London! The reasonable conclusion is that we should direct our limited resources preferentially to Grimsby rather than Haringey or even Hornsey.

83

magistra 05.18.15 at 9:57 am

Just to add to Seeds@78 and 80, it’s worth noting that although UKIP’s percentage of the vote went up substantially in Grimsby (to 25%) of the vote, they still only came 3rd and Labour (who won), substantially increased their % of the vote (up 7%). I’m all in favour of improving the economy in such areas as Grimsby, but exporting unemployed Londoners with dependent children there isn’t going to do that, and it’s not clear how you’d save enough money by relocating such families there to improve the local economy.

84

engels 05.18.15 at 10:04 am

“The reasonable conclusion is that we should direct our limited resources preferentially to Grimsby rather than Haringey or even Hornsey.”

Limited by what? (Just to put this in perspective)

85

ZM 05.18.15 at 10:15 am

“People are very much overestimating the extent to which the supply side can work here – “land banking” is a massive red herring. Let’s say you can build another million houses inside the M25 (which is what we would have to be talking about here to have a measurable effect on rents). Who is going to build the infrastructure to serve them? In the case specifically of transport infrastructure, can it be done at all?”

Land banking in London is not red herring — I read two reports on it last year and it is a recognised problem. The forecasted population growth in London can be accommodated by stopping land banking and building mid-rise developments.

In terms of transport the current thinking is to encourage more walking and cycling. If the train system is inadequate and it is not technically possible to update it to be adequate you just get a good bus and tram system.

If you think London’s population should not grow — then you could copy China’s policy of linking access to welfare, health, and education to birthplace I suppose — but this is unpopular in China and not likely to be met with enthusiasm in the U.K.

We already had a conversation about London’s population, I said what matters is decreasing consumption levels not population. Once consumption in London goes to fair and sustainable levels perhaps it will not be such a destination for people to move to which will thus fix the population growth problem.

86

Pete 05.18.15 at 10:32 am

“encourage more walking and cycling” “just get a good bus and tram system”

I doubt you’re going to get people to accept >1 hour walking commutes, and the buses are already near-gridlocked in places. Transport For London has the most heavily funded public transport system in the UK, much more so than any other UK city. There is a train expansion in the works – Crossrail – that has been on the drawing board for 25 years.

87

sanbikinoraion 05.18.15 at 10:57 am

I don’t think you can fix “the London problem” by capping housing benefits — as Daniel said, I think you need not every bloody thing to happen in London, and that means massively incentivizing commerce and industry to bugger off Up North, where land values are low and housing plentiful.

I suggest a stringent LVT, moving parliament to Leeds, and a 300mph maglev train line connecting Liverpool, Manchester, Leeds and Hull (with a cross line running York, Leeds, Sheffield).

88

engels 05.18.15 at 12:02 pm

Have there been any studies on the effects of 2011 riots on house prices in affected areas? Someone might think that if that sort of thing were to be repeated a bit more regularly Zone 1 + 2 might start looking a bit less attractiveness to Sebastian and Annabelle again (of course I’d never condone that).

89

dsquared 05.18.15 at 12:44 pm

Engels, this is a yellow card.

90

engels 05.18.15 at 4:55 pm

Fine (although given topic at hand, ‘ASBO’ or ‘Section 21’ might have been a better metaphor). Apologies for lowering the tone.

91

stubydoo 05.18.15 at 5:14 pm

to those who replied to me above (e.g. 76,79), my math still works just fine if you downgrade the accommodations from opulent luxury to merely adequate and/or include the proceeds from a job (UK minimum wage now 6.5 pounds per hour – just looked it up, it was only 3.6 back when I was in the UK and earning UK minimum wage, wasn’t all that long ago).

I’ll grant that for a zero-worker household the financial math is initially less accommodating, but then the geography no longer constrains – at least if we can sweep away the absurd bureaucratic silliness of treating people as confined to a specific London borough. 26,000 pounds is a rather generous level of handout, and 23,000 is still clearly adequate.

92

novakant 05.18.15 at 6:04 pm

It’s not only about benefits claimants. London may soon loose its cultural attractiveness and capital due to basically everybody but bankers and rich kids being priced out.

http://www.telegraph.co.uk/men/thinking-man/10744997/Cool-London-is-dead-and-the-rich-kids-are-to-blame.html

Berlin is already preferred by many creatives for that very reason.

93

TM 05.18.15 at 6:42 pm

“Berlin is already preferred by many creatives for that very reason.”

What are they doing right in Berlin that they are doing wrong in London? Might there be something to learn?

I found magistra’s comment at 30 most interesting. I always thought being blatantly anti-child was neither polite nor politically a winning strategy. Apparently the UK has gotten farther along than I thought.

94

dsquared 05.18.15 at 6:57 pm

What are they doing right in Berlin? Mainly things like “being poor”, ” not having lots of other industries”, “lousy transport infrastructure”, stuff like that. That’s not to say that there’s nothing to learn, but while Berlin has such high unemployment and low GDP relative to London, it’ll be hard to simply transfer policies from one to the other.

I doubt many people will be convinced by the literal use of ” nobody wants to go there any more, it’s too popular” in #92 but well shall we say … I am very familiar with Alex Proud’s snobby and self-important clubs and gallery venues, and in my view, the reason that they’re not “cool” any more has less to do with economic geography and more to do with the fact it’s not 1997 any more.

95

Chris Bertram 05.18.15 at 7:40 pm

Oh yes, the Alex Proud thing. Well he’s wrong about Paris being boring but right about Geneva. And there are swathes of London – Kensingon, Knightsbridge etc. – that have become very Genevan in recent years because they’re full of high-end shops and nothing much else. But if creatives can’t afford London any more then there are other places to be creative: Bristol, Liverpool, Manchester, to name but three.

96

TM 05.18.15 at 8:44 pm

d2 94: My question was serious. I simply don’t know much in detail about how either city is run. But the argument that Berlin doesn’t have a housing crisis because they are so poor sounds … counter-intuitive. Or I’m getting you wrong. (And lousy transport infrastructure, really?)

97

engels 05.18.15 at 8:58 pm

At the risk of getting my second yellow can I also say the exodus of ‘creatives’ from London to Berlin is imo the silver lining in a very dark cloud. (I understand Berliners differ: the last time I was there I walked out of my hotel to a large graffito reading ‘Hipsters raus!’)

98

TM 05.18.15 at 9:02 pm

For whoever cares, I looked up statistics on housing in Berlin. There are 1.9 million units, 16% of which are city-owned (http://www.stadtentwicklung.berlin.de/wohnen/wohnungsbau/download/ausstellung_wohnenswerte_stadt.pdf). Total population is about 3.5 million.

99

dsquared 05.18.15 at 9:02 pm

But the argument that Berlin doesn’t have a housing crisis because they are so poor sounds … counter-intuitive.

What’s counterintuitive about it? Berlin doesn’t have lots more people wanting to live there than houses, and the people who do want to live there aren’t usually rich, so rents are low. London has loads and loads of people who want to live in its housing stock and some of them are very rich, so rents are high. It’s certainly not the case that Berlin is building loads and loads of cheap houses every year – that would be a daft thing to do when they can’t fill the ones they’ve got.

100

novakant 05.18.15 at 9:47 pm

To illustrate my point a bit:

http://www.theguardian.com/business/2014/jan/03/berlin-poor-sexy-silicon-valley-microsoft-google

Also, Berliners are not poor – and if you factor in quality of life they probably beat a lot of Londoners who are killing themselves in the rat race.

101

engels 05.18.15 at 9:59 pm

Iirc population and rents were extremely low in 1989 but they’ve rising recently and although there isn’t a housing crisis there are some of the same issues with gentrification but at an earlier/lower stage, eg. Nathan Barley types displacing workers, artists rather than bankers and oligarchs displacing the upper-middle class, as in parts of London.

Btw expect to see more of this
http://www.standard.co.uk/news/london/reclaim-brixton-march-protesters-smash-up-foxtons-shop-front-and-storm-lambeth-town-hall-10203936.html

102

novakant 05.18.15 at 10:07 pm

And since when does Berlin have “lousy” public transport?

103

dsquared 05.18.15 at 10:22 pm

OK Engels, that’s enough from you on this thread.

104

Pete 05.19.15 at 9:20 am

Berlin has a population density of 4000/km^2 while London has a density of 5200/km^2, and overall more than twice as many people. That’s a big factor. If you dropped Berlin into the UK, it would be the “missing” second city, but it would still rarely show up on the evening news and everyone in search of a job would *still* preferentially head to London.

I’m unconvinced about the “lousy public transport” angle, but I can imagine that East Berlin isn’t so well connected. There’s still plenty of Communist-era housing stock around holding down prices.

http://www.bbc.co.uk/news/uk-england-london-31082941

105

ajay 05.19.15 at 2:28 pm

One of the interesting differences between the west and Asia is that there are no ‘shit jobs’ here. All work has honor.

This is a slightly startling statement, consisting as it does of
a) a universal statement concerning a continent of four billion people in forty different countries
b) the largest of which is famous for having had an elaborate caste system that determined, at a very granular level, who could do which jobs and how high-status they were.

106

TM 05.19.15 at 8:20 pm

104: That London is bigger is a matter of scale. There is no a priori reason why size should be a factor in housing efficiency (Zurich is a smaller city with some of the problems of London). However what probably does play a role is the fact that Germany is multi-centered whereas the UK and France are much more oriented towards a single center.

99: You are talking about London being more unequal, not richer. That distinction should be obvious to you. Regarding public transport, I don’t know what your point is and why you think it matters. Maybe you have a point (the airport debacle perhaps? rich people want to live close to a big airport? But Germany has fast trains), it’s just not obvious to anybody else.

I happened on statistics on Local Authority dwellings in London (http://data.london.gov.uk/dataset/local-authority-housing-stock). Apparently the number has declined from 645,000 to about 400,000 since 1994. Compare Berlin’s 300,000 city-owned units for less than half the population. And on housing quality, the GLA says:
“Alongside some of the country’s finest housing, London has some of the worst housing conditions, and this has a direct impact on people’s quality of life, their health and educational attainment. In March 2013 there were just over 90,000 council or housing association homes below the standard.” (https://www.london.gov.uk/priorities/housing-land/improving-quality/existing-housing-stock)

107

dsquared 05.19.15 at 8:37 pm

You are talking about London being more unequal, not richer. That distinction should be obvious to you

No, London is also richer. That’s why something like 90% of its population can afford to pay the rents there.

108

dsquared 05.19.15 at 8:39 pm

#105: although, in context, “all jobs have honour” might be using “honour” in that particular sense of “rigidly defined social code which is considered worth murdering family members over”.

109

nick s 05.19.15 at 8:41 pm

There’s a certain amount of ‘be careful what you wish for’ there, particularly with regard to the treatment of children. The high HB cost of accommodating large families is something that keeps the Daily Mail in headlines, especially in London, and there’s a big distinction between the socioeconomic status of smaller families vs larger ones. (ONS’s most recent figures are from 2012.)

It’s politically easy to sell a benefit cap to middle-class owner-occupiers who raise small families in small homes or flats, and it’s a policy that also gets traction among lower-wage adults in less affluent parts of Eng/Wales, but withdrawing secure housing from larger families is a disinvestment in human infrastructure that older generations expect to rely upon in retirement.

110

TM 05.19.15 at 8:52 pm

108: Any reasonable measure of standard of living is based on both income and cost levels. To say that people who pay high rents must be rich because they can afford those high rents is self-defeating. Anyway, we wouldn’t be having this conversation if there weren’t a considerable number of Londoners who are poor and in need of public assistance.

111

novakant 05.19.15 at 10:55 pm

Yeah, that’s why people are flatsharing in their forties:

http://www.theguardian.com/society/2014/jan/26/over-40s-forced-flatsharing-rents-housing

112

novakant 05.19.15 at 10:56 pm

Above in response to 107

113

ajay 05.20.15 at 2:37 pm

London has a per-cap income of about 20k, Berlin more like 15k. http://www.worldcitiescultureforum.com/indicators/average-income-capita-year-ppp

And the UBS Prices and Earnings survey puts London prices (including rent) at 76 (where NY is 100) and Berlin at 64. So, yes, London is roughly 20% more expensive, but the people there are 33% richer.

114

TM 05.20.15 at 3:07 pm

Otoh, median weekly earnings (click to the next statistic from your link above) in London is surprisingly low. That is consistent with high inequality. Not sure whether these figures are very reliable in any case.

115

novakant 05.20.15 at 6:04 pm

The oligarchs and city boys might skew the statistic a little …

116

TM 05.20.15 at 9:41 pm

Of course, that is understood. I would be interested in actual numbers, if anybody has them.

117

ajay 05.22.15 at 9:17 am

Those median figures look exceptionally dodgy. Istanbul is poorer than Turkey as a whole? There are two figures for Moscow, one twice the size of the other? Median Sydney is double median London?

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