Should council house rents be at normal market value?

[studentbob]

Who says council tennants are not paying the normal market value?

 

A quick check on rightmove confirms to me that I am actually paying above market rate for my council house.

 

My house is worth about £80,000 and the rent is £70 per week.

Just over the hill in Crookes a house worth £150,000 is available to let for £495 per month or £114 per week.

 

So over a year I will pay 4.55% of the value of the house in rent whereas if I were to move into the advertised property, I would only be paying 3.96% of the value of the house.

 

Given that these values are determined by the market, it seems a bit unfair that certain posters on here seem to think I am being given a free ride at their expense.

 

Can any of you explain exactly how you would justify a rent increase for my home and what criteria would be used for setting the new rent.

 

Or is it just that you haven't bothered to look into the figures at all, and have just swallowed the governments propaganda ..........again.

[truman]

Who says council tennants are not paying the normal market value?

 

A quick check on rightmove confirms to me that I am actually paying above market rate for my council house.

 

My house is worth about £80,000 and the rent is £70 per week.

Just over the hill in Crookes a house worth £150,000 is available to let for £495 per month or £114 per week.

 

So over a year I will pay 4.55% of the value of the house in rent whereas if I were to move into the advertised property, I would only be paying 3.96% of the value of the house.

 

Given that these values are determined by the market, it seems a bit unfair that certain posters on here seem to think I am being given a free ride at their expense.

 

Can any of you explain exactly how you would justify a rent increase for my home and what criteria would be used for setting the new rent.

 

Or is it just that you haven't bothered to look into the figures at all, and have just swallowed the governments propaganda..........again.

 

Where do you get the value of your house from?

[studentbob]

Where do you get the value of your house from?

 

I checked on rightmove.co.uk for the cheapest in my area, then deducted amounts to take into consideration the improvements that can be seen to have been made by the vendor.

[truman]

I checked on rightmove.co.uk for the cheapest in my area, then deducted amounts to take into consideration the improvements that can be seen to have been made by the vendor.

 

So a guess then really?.. As is the 150k for the house in Crookes..If you think you'd get a better deal in the private sector then why not move..?

[studentbob]

So a guess then really?.. As is the 150k for the house in Crookes..If you think you'd get a better deal in the private sector then why not move..?

 

I don't need to move. I am quite happy living on a council estate paying a fair price for what is a low value property. The point is, why should council rents be the same or similar to private when the house you are getting for your money can be worth up to 50% less.

[Mecky]

Who says council tennants are not paying the normal market value?

 

A quick check on rightmove confirms to me that I am actually paying above market rate for my council house.

 

 

Too true, mine is above the rate too

[L00b]

Who says council tennants are not paying the normal market value?

(...)

My house is worth about £80,000 and the rent is £70 per week.

Just over the hill in Crookes a house worth £150,000 is available to let for £495 per month or £114 per week.

(...)

Can any of you explain exactly how you would justify a rent increase for my home and what criteria would be used for setting the new rent.

Yes.

 

Use the "Rule of 12" (note that it is a rule of thumb):

12 x annual rent = property value

12 x (70x52) = £43,680

 

Depending on the country, some would rather have the above as a "Rule of 15", so:

15 x annual rent = property value

15 x (70x52) = £54,600

 

You are paying about half of what the rent should be, according your estimated value.

Given that these values are determined by the market, it seems a bit unfair that certain posters on here seem to think I am being given a free ride at their expense.

That's just the point, though: they aren't anymore (or, at any rate, less and less so).

 

Private landlords (especially the small-scale ones that dabbed into BTL during the latter part of the boom) are scrambling to get tenants in for offsetting even historically-low mortgage repayments. Cue dropping rental prices/race to the bottom.

 

I used to own and rent out flats to students in France and Luxembourg until about 10 years ago or so, and back then the rule of 12 was actually quite accurate (and had been for some time before). RoI was working at a nice 15-20% net, plus whatever capital appreciation. But the FR Gvt changed taxation on expatriates overnight (literally: 31Dec vote -> 1Jan application of new regime), which killed the RoI so I sold up sharpish.

 

As a tenant myself in the last 6 years, in Ireland and the UK, the above rules of thumbs haven't been verified at all: in Ireland (2004-2008 ) it was a "rule of 43" and in the UK (2008-2009) it was a "rule of 32"!

 

The rental market is all over the place at the moment, IMHO, and the thread appears redundant. As an ex-'player', I certainly wouldn't be looking to BTL now, or anytime soon.

[studentbob]

Yes.

 

Use the "Rule of 12" (note that it is a rule of thumb):

12 x annual rent = property value

12 x (70x52) = £43,680

 

Depending on the country, some would rather have the above as a "Rule of 15", so:

15 x annual rent = property value

15 x (70x52) = £54,600

 

You are paying about half of what the rent should be, according your estimated value.

That's just the point, though: they aren't anymore (or, at any rate, less and less so).

 

Private landlords (especially the small-scale ones that dabbed into BTL during the latter part of the boom) are scrambling to get tenants in for offsetting even historically-low mortgage repayments. Cue dropping rental prices/race to the bottom.

 

I used to own and rent out flats to students in France and Luxembourg until about 10 years ago or so, and back then the rule of 12 was actually quite accurate (and had been for some time before). RoI was working at a nice 15-20% net, plus whatever capital appreciation. But the FR Gvt changed taxation on expatriates overnight (literally: 31Dec vote -> 1Jan application of new regime), which killed the RoI so I sold up sharpish.

 

As a tenant myself in the last 6 years, in Ireland and the UK, the above rules of thumbs haven't been verified at all: in Ireland (2004-2008 ) it was a "rule of 43" and in the UK (2008-2009) it was a "rule of 32"!

 

The rental market is all over the place at the moment, IMHO, and the thread appears redundant. As an ex-'player', I certainly wouldn't be looking to BTL now, or anytime soon.

 

Don't quite see what you are arguing for here.

 

If we work on rule of 12 then my house should be about £128 per week and the house at Crookes should be £240 per week. That's clearly not going to happen.

 

And where has rule of 32 come from? If this was the case then my rent should be more like £48 per week (I wish).

 

I appreciate your experience in this matter, and agree that the rental market is all over the place at the moment, but this is the same market that the government are upholding as the standard to which all rents should be set.

I honestly think that they don't have a clue what they are doing and the council tennant bashers on here are ridiculing themselves by supporting this policy.

 

Whichever way you look at it, I am already paying at or above the market value.

[L00b]

Don't quite see what you are arguing for here.

I'm not (arguing for anything), only pointing out that...

Whichever way you look at it, I am already paying at or above the market value.

...there is no "market value" as such. It's become too micro-economical.

If we work on rule of 12 then my house should be about £128 per week and the house at Crookes should be £240 per week. That's clearly not going to happen.

Exactly. The private market usually conforms to the rule of 12, this would have to hold for validly comparing council rent vs private rent (given similar enough properties). If there is a property bubble, or has been a property bubble which is undergoing correction, there are too many variables for reliably estimating this market on the medium term (or even on the short-term, depending on volatility) and the rule of thumb is completely skewed. In these circumstances, unless you can find several sets of neighbouring, identical houses, in each case one which is council rented and the other private rented, there is little point in comparing at all.

And where has rule of 32 come from?

In 2008 and 2009, I was renting privately a house worth £250k in 2006 (transaction value obtained online) for £650 pm.

 

(650 x 12) x 32 (32 instead of 12) = £250k

 

Using the rule of 12, the rent should have been nearer £1700! (for the landlord to be making a 'reasonable' return, rather than rely upon the paper gains of the bricks, which many BTLers got done by lately).

 

Between 2004 and 2008, I was renting privately a house in Dublin worth €650k in early 2005 (valuation based on neighbouring properties FS) for €1250 pm.

 

(1250 x 12) x 43 (43 instead of 12) = €650k

 

Using the rule of 12, the rent should have been nearer €4500! (and I had friends nearby, who were paying not far from that at the time. The question of whether the landlord was making anything at all, and how much, depended entirely on when had the landlord bought the rental property). If that kind of ratio differential didn't tell people (and the banks!) there was a very serious problem with property in Ireland, I just don't know what would.

[INTERVIEWER]

No, council housing rental rates are lower so that the less well off can afford to have a roof over their head.

 

'Normal' market values will be whatever the local Tory/Lib Dem property speculator demands the poor must pay - or on the streets they go.