Friday, 3 December 2010

Rent Boys

Much has been said since Messer’s Osborn and Cameron announced their changes to the rules surrounding social housing rents. Their proposal is to set the rents for new tenants, at not less than 20% below the rents paid by tenants in privately owned accommodation. What is the thinking behind this new initiative?
Cameron is pandering to his money bag friends lurking in the shadows of power!

Private rentals are currently increasing at a rate of 5% per year according to figures from the institution of surveyors (estate agents to you and me). George and Dave would have us believe that this new initiative will provide much needed extra funding for the building of new social housing.

I have never understood why, but house sales are one of the factors used in the calculation of the nations Gross Domestic Product (GDP), and predictions are that house prices are set to continue to fall next year by a further 3%. In recent days the Office of Budget Responsibility (OBR) has adjusted its forecast for the next few years to suggest that growth in the economy will not be as great as it first predicted. 

The millstone that is the housing market, is about to drag the economy back into recession! Is this the reasoning behind Cameron’s brave new initiative?

Those of us with children, wondering how they will ever manage to afford to find a place of their own, might welcome a slow down in the over heated housing market. But one would have to wonder whether it would be seen like that by our masters, the bankers.

One of the major causes of the current housing bubble, was the creation of “buy-to-let” mortgages, and they are currently the greatest concern for the banking industry. There was a rush, by would-be landlords, to jump on the band wagon in order to make a quick buck. “An investment opportunity”, some said. “We are making provision for our old age”, said others. The problem lies in the fact that a lot of these buy-to-let mortgages where given at almost the full market value of the property, and in the good times of low interest, the mortgagees lived the good life on the proceeds of their rentals, rather than paying down the borrowing.

Now we are approaching squeaky bum time! The Monetary Policy Committee at the Bank of England is under increasing pressure to raise interest rates as inflation continues to creep up. But how can they? If the cost of buy-to-let mortgages were to rise, landlords would find it difficult to afford them and their tenants would find it hard to stomach a rent rise in these difficult times. There is a realistic chance of large numbers of buy- to-let landlords simply handing back the keys to their lenders. Then what? Another round of collapse in the banking sector! Yet another bail out!

Government is priming the pump, for the next round of hyper inflation in the housing market

Cameron has played into the hands of the banks with this new initiative! His motive is not to bring parity between the housing associations and the private rental sector, his motive is to try and hide the growing hole in the banks balance sheets. Meanwhile the bosses of those banks are stuffing enough cash into flour sacks to make good their escape when it all goes tits up.

If Cameron wanted parity between private and council tenants, then he should have brought in a rule that said a private landlord could not charge more than 20% over and above rents charged by Registered Social Landlords locally. Then, in the event that the owner of a property bought with a “buy-to-let mortgage” felt he was unable to afford to keep such a property, that property would be handed to the Government and the mortgage outstanding on it would be added to the amount the issuing bank already owes to the government. Or put another way the tax payer would increase it’s stake in the bank. (The tenants stay put with their new lower rent).

This approach would also sit better with another element of Cameron’s policy, the imposing of limits on the amounts councils can pay in housing benefit. His policy as it stands at the moment does not compute! The only people who seem to have enough points to be granted access to social housing these days, are teenage single mothers or people with a disability, and often that disability is a dependency on drugs or alcohol. So a vast number of the new higher rentals that will come as a result of this new legislation will be paid for by the tax payer in the form of housing benefit.

Hard working young families will stay on the waiting lists, forced to live in expensive rented accommodation, while the cost of housing is kept artificially high using tax payers money to keep the banks safe!

1 comment:

Dolewaller Diaries said...

I'm beginning to think that it may be easier if Parliament met not in Westminster but somewhere in the square mile.