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3. A Fundamental Misconception

The transactions of an investment market are quite different from the transactions of a consumer service. They cannot be compared as if they were equivalent, yet Conservative thinking has constantly done this. Heath defined "economic" council rents as equivalent to private sector rents.

<> But that is like comparing apples with oranges.


APPLES: The equity of investment in a rented stock is a growing income that can be used to eliminate subsidies and reduce rents.


ORANGES: PRCS rents are transactions in a consumer market, which are naturally expensive, because they are expected to yield a weekly profit to a landlord, based on the value of the property that is offered.

The result of the Conservative failure to compare like with like, is that low-income tenants are asked to pay five to six times more for their accommodation than high income homeowners. Of course, they can't afford it, which means that taxpayers must foot the bill for rent subsidies. Both tenants and taxpayers are the victims of bad policies; but they are encouraged to blame each other by ministers who support these policies.

The PRCS needs the support of high rent subsidies, yet they restrict rather than support the interests of the tenant and of first time buyers and the costs to the taxpayer rose to £23 billion in 2010. The subsidies were cut in 2011 and again in 2012, but the policy of a high cost PRCS has been maintained, so tenants are being forced to pay; not with money, which they don't have, but by overcrowding and reducing the quality of their accommodation! Housing policy is back on the path, which leads to Boot & Shoe Yard.

The Pre-war PRCS: Unacceptable

The PRCS developed since 1972: Lose-Lose

Investment in Homeownership: Win-Win

Investment in a Rented Stock: Win-Win

Comparing Like With Like

Private rents cannot sensibly be compared with the rents of an investment stock or with homeownership because their costs are so different. Conservative policy had to adopt extreme rent subsidies and then sale discounts in order to establish and maintain the PRCS. But it is a system that serves us badly. Compare the co-existence of council houses and homeownership before 1972. Both of them were forms of investment housing and they both expanded rapidly at the expense of the private rented sector, which simply could not compete with them.

RIH stock and HO both benefit from the advantages of investment but they delivered it with different timings. They are complementary alternatives that provide affordable housing for tenants and owners alike.

The evidence is that the right wing 'free market' party has distorted the housing market in order to stem the decline of the private rented sector. But these policies to restore a PRCS cause high rents and high prices that make it more difficult to buy. Rather than achieve a "property owning democracy" they have created a monstrous PRCS that is the antithesis of homeownership. A recent survey shows that 46% of young people believe that they will never be able to buy their own home and 40% of first time buyers now rely on help from property owning relatives.

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