Dear Owen Jones – If Council Housing Isn’t For Poor People Then Why Do We Taxpayers Subsidise It?

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Owen Jones tells us that more MPs should live in council housing. This is incorrect for the obvious reason that we taxpayers out here shouldn’t be subsidising the housing arrangements of someone on four times the average wage plus perks – and they’re substantial perks too. Young Owen will try to claim that council or association housing doesn’t cost us anything but that is to ignore opportunity costs. And that’s an important point, for if you cannot get to grips with opportunity costs you’re never going to be able to say anything interesting about economics.

There are two things you’ve got to know about economics:

1) Incentives matter.

2) Opportunity costs – and there are always opportunity costs.

Actually, it’s so important that if you cannot identify the opportunity costs around any specific economic proposal then you’re never going to be able to get that decision correct.

But, you know, Owen and economics:

More MPs should live in council housing. It’s not meant to be a poor ghetto
Owen Jones

Well, actually, yes, it is supposed to be a poor ghetto. Because if it’s anything other than that then we taxpayers are subsidising the housing of people who may well be – in fact, if they’re not poor, are – richer than we are. Which is nice if you’re on the committee that allocates reduced rent housing but an obscenity otherwise.

We are supposed to live in a representative democracy, and parliament should look like the nation it serves. Accordingly, we should bemoan the fact that there are too few MPs who are social tenants, not that there are too many. Increasing the number would mean that the rights and needs of social tenants would be more likely to be championed, and that council housing would be forced higher up the political agenda. It would also mean that MPs were closer to the communities they represent.

Note the logic underlying that drivel. MPs should be like us. Therefore MPs should earn like we do. £22,000 a year average wage and £25,000 a year median household income. Try taking that to Jezza would you Owen?

But think through that thing that rich people should live in council housing too. Why should we subsidise them? To which the usual answer is that council housing makes a profit therefore there is no subsidy. But that is to ignore opportunity costs and as we’ve said you can’t do that and get your economics right.

Opportunity costs are what you give up to get something. That is, the true price, as the true price of something is what you’ve got to give up to gain whatever it is. For the average woman the price of having a husband is not having three boyfriends – not that hubby knows about at least.

OK, let’s say that council housing produces a surplus of cash over its costs. Just to make this argument simple. Some will say that’s a profit but it ain’t. For what have we given up to gain it? Well, we’re charging below market rents. Therefore we’re giving up the difference between council and market rents.

OK. Now, for poor people, who cannot afford market rents, that’s fine. Because if it weren’t council or association housing then we’d be paying housing benefit anyway. But for richer people? Those who wouldn’t get HB? That loss of rent is a loss, isn’t it, an opportunity cost? And as we’ve got less rent coming in then that means we taxpayers have less in the tax pot kitty – it’s a subsidy from us to those richer people.

It’s even possible that having mixed status communities is worthwhile – but we’re still providing a subsidy to those people entirely capable of paying for their own damn house.

All of which means that yes, council housing is supposed to be a ghetto for the poor. Because there’s really no bloody point in us taxpayers subsidising the housing of people richer than we are, is there?

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Mohave Greenie
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Mohave Greenie

The big problem with state subsidized housing is that any “profit” goes back into the tax pot and not into maintaining and improving the property. This coupled with the fact that the tenants have no skin in the game for taking care of the property, leads to rapid degradation. The state also has no interest in improving the property to get higher rents because that would soon price their “clients” out of the market. This combination soon leads to the “projects” becoming hives of scum and villainy until the only renovation possible requires a bulldozer.

literate3
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literate3

If Council Housing makes a profit why are councils and housing associations not building more houses and why are they complaining about cash constraints and why is is the sky green with pink polka dots? Of course council housing doesn’t make a profit – we do not even want it to make a profit. The purpose of council housing is to provide decent housing to people who cannot afford it so the rents are lower than any private landlord could charge and make the minimum tolerable return when BoE lending rate is 0.75%. For those who took up tenancies under… Read more »

Grope_of_Big_Horn
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Grope_of_Big_Horn

We are supposed to live in a representative democracy, and parliament should look like the nation it serves Well voters be damned – because every 5 years they get the chance to elect people who look like them ( there are plenty of social or ex-social tenants on the ballot, and not just in Scotland ), and they decide they prefer the alternative. Then again I find democracy puzzling – consider that three years ago 48% of those who could be bothered to vote thought that being an EU member is better than being not – but only 2 years… Read more »

Jonathan Harston
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Jonathan Harston

When they were originally built council housing wasn’t “for” poor people, it was “for” people. Often upper lower middle class/lower middle middle class. The estate next to where I grew up was known as the button estate as it was populated with uniformed professionals – teachers, policemen, bus drivers/conductors, mid-level bank managers, etc. Households were inspected before being allowed to apply for a tenancy, you needed to be respectable, and have a decent means of support. The problem with council housing came from the very transformation of them into ghettos. Where I live now there are council houses but you… Read more »

literate3
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literate3

No, it was built to house people who had been living in slums that had been/were being demolished. Later in the 1940s it also housed people whose homes had been bombed and later still it also provided houses for people meeting certain criteria.