Should council house rents be at normal market value?

[Tony]

Should council house rents be at normal market value?

 

If not, why not?

 

If so, why so?

[chem1st]

What is normal.

 

What is the market.

[Bulgarian]

In theory, No, because council houses are supposed to be for people who are in difficulty and can't afford anything else.

 

In reality, yes, because people treat them as a cheap way of getting their own home.

[chem1st]

You build a 1000 council properties for £2million in 1957-1961. (Parkhill)

 

How much would that cost today?

 

In 2009, the relative worth of £2000000 0s 0d from 1961 is:

 

£33,200,000.00

using the retail price index

 

£33,900,000.00

using the GDP deflator

 

£74,700,000.00

using the average earnings

 

£87,000,000.00

using the per capita GDP

 

£102,000,000.00

using the share of GDP.

 

We'll take the highest value, 102million.

 

That's £100 000 per property in todays money. Let's say we give it to a 20 year old in Sheffield, from the East side of the city with a life expectancy of 70.

 

In 50 years he can pay for this property. (50*52= 2600)

Over 2600 weeks.

 

@ a rate of £38.46 pw.

 

The building has already stood for 50 years. The rents are higher than £38.46 today.

 

 

Market rate should be £38.46?

 

Perhaps even less, as the cost of building has been paid off.

 

Somebody else can live in it and pay rent after he dies.

[spooky3]

Should council house rents be at normal market value?

 

If not, why not?

 

If so, why so?

 

Does that sort of not defeat the whole point!

 

Social housing is subsidised for the obvious reasons. This is why they are saying that when you no longer meet the required criteria why should you still receive the benefit?

 

 

P.S. Abstaining from voting because the question is self defeating!

[Cyclone]

I suggest you go and read some basic economics text books chem1st.

 

The market would be defined as similar properties (size, quality, area, etc...).

The market value would be the average charge for one of those similar properties.

 

Your calculations on paying off the house ignore the basic facts of inflation and interest. If the council borrows to build the house then it has to pay interest. If it uses capital then it looses out on interest. Ignore inflation for now, but that still means that the council (if just trying to cover the cost of building the house) should charge as if interest were being paid or lost.

It also has to cover administration, maintenance and so on.

So if run as non profit, the rents might be slightly lower than the private sector equivalents. But since you don't want to create a non level playing field, they should be run at the same level. The poor will receive housing benefit anyway.

[chem1st]

I suggest you go and read some basic economics text books chem1st.

 

The market would be defined as similar properties (size, quality, area, etc...).

The market value would be the average charge for one of those similar properties.

 

Your calculations on paying off the house ignore the basic facts of inflation and interest. If the council borrows to build the house then it has to pay interest. If it uses capital then it looses out on interest. Ignore inflation for now, but that still means that the council (if just trying to cover the cost of building the house) should charge as if interest were being paid or lost.

It also has to cover administration, maintenance and so on.

So if run as non profit, the rents might be slightly lower than the private sector equivalents. But since you don't want to create a non level playing field, they should be run at the same level. The poor will receive housing benefit anyway.

 

To take into account inflation and interest, add 5%-6% to the £38.46 for the interest of the debt if it is built with debt. The amount should then rise with inflation as time progresses.

It also allows for taxes to be paid, council tax for one.

 

The market is distorted and hard to define. It is distorted by things lie housing benefit.

 

In the UK we pay well over the odds for property, both rent and purchase.

 

Social housing is profitable. In the long run it is very profitable.

[Tony]

To take into account inflation and interest, add 5%-6% to the £38.46 for the interest of the debt if it is built with debt.

 

You need to add the interest to the capital not the monthly payment. That's £96 a week on your 5% interest on £100k capital per house.

 

Not looking so good now.

[chem1st]

You need to add the interest to the capital not the monthly payment. That's £96 a week on your 5% interest on £100k capital per house.

 

Not looking so good now.

 

Fortunately I took the largest value that could be used.

 

We can try the calculation with one of the other values listed.

 

RPI say.

 

Interest is then a 1/3 of that £96.

Capital repayment also a 1/3, of the 38.46.

 

In the long run, the property is bought and generates profit.

[spooky3]

Fortunately I took the largest value that could be used.

 

We can try the calculation with one of the other values listed.

 

RPI say.

 

Interest is then a 1/3 of that £96.

Capital repayment also a 1/3, of the 38.46.

 

In the long run, the property is bought and generates profit.

 

 

Do you realise your trying to architect a communist state?