Council Tenants - the next Ponzi Target

Council Tenants - the next Ponzi Target

Written by  Ross Ashcroft Tuesday, 03 April 2012

In another desperate effort to prop up the British Ponzi housing market David Cameron is offering council tenants £75,000 to help buy their own homes. 

This attempted reinvigoration of the 1980’s right-to-buy scheme is another ad hoc response to short term pressure. Tempting people to take on a huge debt and enter the bottom of the housing market pyramid is a cynical way to attempt to ‘re-boot’ the housing market. Implicit in this action is the view that an inflated housing bubble is actually an optimum national economic condition. Crass short-termism.
 

Negative Emotional Propaganda

The aim is to get a further two million council homes sold off and in Cameron’s words have council tenants “achieve their aspiration of owning their own homes”. This should not be an aspiration and peddling this negative emotional propaganda - at a time when house prices are going to decrease over the foreseeable future – is irresponsible. The Prime Minister “wants many more people to achieve the dream of home ownership” but has not realised that dream will actually be a nightmare for many. He is out of touch with the economics and therefore with the concerns of ordinary people.
 

In an effort to get consumer spending moving again Mr Cameron will use urge people to “do up their home, change their front door, improve their garden”. But this ‘community building’ effort puts the economic focus on the wrong issue. What people really want are decent wages and long term employment stability so they don’t have to rely on land / house speculation to top up inflation ravaged savings. Mr Cameron has been strangely evasive on this fundamental economic issue.

  

Thatcher Throwback

This eighties throwback fatally assumes the same economic playing field as Margaret Thatcher presided over which is another glib assumption that will lure many less savvy tenants into a debt trap. To give this wheeze a 21st Century lick, housing minister Grant Shapps enters the fray to launch a new mobile app and Facebook page to encourage more people to take up the right-to-buy. When have you ever needed a smart phone to buy the single biggest asset you will likely ever own?
 

Mr Shapps stated “This Government is unashamedly on the side of hardworking families who want to aspire to owning their own council homes”. I beg to differ – this Government is unashamedly propping up the housing market and discriminating against current homeowners. They are using every trick in the book - regardless of the human and societal cost. 

Ross Ashcroft

Ross Ashcroft

Award winning filmmaker / Co-Founder of the Motherlode Studio / Renegade Economist

Website: www.rossashcroft.com

6 comments

  • Comment Link Jeremy Edwards Wednesday, 04 April 2012 14:00 posted by Jeremy Edwards

    "Right To Buy" and all of the populist crap that goes with it really annoys me. Social Housing was intended for the relief of poverty, not getting politicians re-elected or stimulating the housing market by proxy. It was a stupid idea under Thatcher and it is still a stupid idea.

    Right to buy only makes sense if you are using it to remove older housing stock from the social housing bank AND using the receipts to build new housing stock. Otherwise it is just a very expensive of bribing tenants to vote for you.

  • Comment Link Lee Hyde Wednesday, 04 April 2012 14:46 posted by Lee Hyde

    Having grown up in a council house, and having two hard working parents who remain reliant on council housing, I cannot imagine that there are many tenants left who (even given this discount) could afford to partake in righ to buy. Certainly not in London and the South East.

    In spite of my philsophical inclination against the wholesale sell-off that this new right to buy represents (the new housing built in lieu will be 'affordable' rather than 'social' housing, and it'll be anything but affordable) I did attempt to calculate (using various online mortgage calculators, and assuming the previously advertised 50% discount to council tenants - which is more generous than the offer which his since materialised) whether my parents would be better off buying their council home. It turns out, that they'd worse off (by ~ $150 pcm) even accounting for the obscene year-on-year ~8% rent rises planned for council tenants. That's does even factor in the reality that my parents are in the mid-50s and are hardly in an optimal position to take on a 20-30 year mortgage.

    I'd far prefer it if our housing minsiter, who also happens to be 'my' MP and a notorious PR whore, would institute a social rent based on ability to pay (i.e. as a percentage of disposable income - say 20%). With a minimum floor, and no maximum ceiling. If a tenants household income resulted in rents above the market rent, they'd have three choices: 1) Give up their secure tenancy and venture into the wilds of the private housing market, 2) Pay the larger rent, realising that they're subsidising the rents of less well off families (in essence, a voluntary act of charity) or 3) buy their council house at full market price (although I don't have much regard for the housing market in the UK as a means of price setting) with the proceeds to be hypothecated to new social housing (building or purchasing, depending on social needs).

    I can see the justification for giving discounts (or vouchers?) to council tenants. After all, they've paid in rent all their lives (and take it from me, the services delivered, do not match the money paid. Not by a long shot!). However, such discount schemes make it difficult for local authorities or social landlords to maintain housing stock without seeking other modes of financing (which means either tax payer subsidy, council tenant subsidy and subsequent degradation of tenant services or new mortgage debt). In any case, to play the right-wing devils advocate here, private tenants do not get discounts (or vouchers) for having paid rent to private landlords (unless there are some incredibly generous landlords out there), so why should council/social tenants.

    All in all, the right to buy, as it was in the 1980s, is a short-termists confidence trick. We are still living with the dire consequences of the original scheme (my generation more than any other). The only saving grace of this scheme is that with an inflated property market and stagnant remunerations for the 99% (or falling for many in the bottom 25%) there's no council tenant south of the Watford gap in a position to partake in this little ponzi scheme.

  • Comment Link RG Friday, 27 April 2012 11:54 posted by RG

    "this Government is unashamedly propping up the housing market and discriminating against current homeowners"

    Make up your mind. Is this scheme going to increase house prices or decrease them? And how is this discriminating against current homeowners...care to explan

  • Comment Link RG Friday, 27 April 2012 12:00 posted by RG

    In response to Lee Hyde

    "(and take it from me, the services delivered, do not match the money paid. Not by a long shot!)"

    well if that is the case they could always move out from social housing into the private rental. But they won't do it because the above statement is a hypocritical lie.

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