Subsidy – misuse of the word
October 2nd, 2012
One of the words used by right wing politicians with no interest in housing anyone who can’t afford to buy a house or pay ever increasing private rent, is the word subsidy. It is almost always used in a perjorative way to suggest that the supposed beneficiary is in receipt of some favour, advantage, or benefit bestowed upon them by a benevolent society when there is no such thing as a subsidy being granted, only misuse of the word.
If a local authority borrows money to build housing for rent, which covers the cost of the land, construction, maintenance and paying off the debt over 60 years, then that is a perfectly equitable arrangement and subsidy free. In the longer term the LA can borrow against the houses and build more. The cost of renting a house works out cheaper than it would if profit were involved.
If the same houses were built by a developer then they would normally be for sale, but if they were built instead for rent they would be advertised at the market rent. The difference between the two levels of rent, for those fictitious houses built by the LA and those by the developer, is called, incorrectly in my view, a subsidy.
It is not a subsidy at all as generally understood, it is simply the difference between somebody making a profit and another organisation not making a profit. What it clearly is not, is a subsidy.
From the Oxford English Dictionary
First of all council housing is not and has not for a long time been subsidised. The residents of council housing are not living in subsidised housing, they are paying their way.
The prime minister seems to misunderstand the economics of council housing when he refers to it as “subsidised” (Suspect’s mother could lose home, 13 August). The biggest subsidies over the past 30 years have been to owner-occupiers in the form of mortgage interest tax relief (formerly), exemption from capital gains tax and huge value-stimulating house purchase lending that we have all subsidised to the tune of £1tr or more when it led to bail-out of the banks. In addition, private landlords have been subsidised by a large part of the increases in housing benefit, to about £25bn a year, which passes straight through to subsidise rents. By contrast, between 1990 and 2004 council tenants suffered a “reverse subsidy” by the abstraction of some £13bn from housing revenue accounts.
Peter Ambrose Visiting professor of housing and health, University of Brighton, Stephen Battersby President, Chartered Institute of Environmental Health, Peter Archer Chairman, Care and Repair, Rev Paul Nicolson Chairman, Zacchaeus 2000 Trust
http://www.guardian.co.uk/uk/2011/aug/15/camerons-law-crackdown-price
Bernard Crofton is a well known and respected commentator on housing matters having had a professional career in housing.
We do not harass or bully tenants in under-occupied homes
bernardcrofton’s comment 18 August 2010 9:34AM
“Council Housing” is a welfare benefit but NOT a subsidy. “Housing Benefit” is a subsidy but is means tested. The fact is that Council housing has for over a decade been making a substantial profit. The reason “Right to Buy” worked is the difference between standard inflation indices and those of rents. Tenants now pay more in rent per month than many of the houses cost to build in the first place. The debt – even paid off over 60 years rather than the typical 25 for a mortgage- has long been paid off for the first “boom” in council housebuilding. Any rent collected or anything recovered from discounted sales is a profit.
Council housing instead contributes rent profits in most of the country* to Housing Benefit costs, a subsidy which is part of the general welfare benefit to the unemployed and retired. Home owners and private tenants do not pay this particular contribution to welfare costs.*Not, I accept, in K&C.
Recommended (8)
http://www.guardian.co.uk/commentisfree/2010/aug/18/under-occupied-homes-kensington-chelsea
19 May 2012 1:16AM
As Radio Partizan says, social housing is not subsidised, it not only pays for itself, and a little bit extra is taken on top.
The lie here is to say that because an equivalent flat in the private sector would cost more, therefore this is a subsidy. (The lie with benefits in general was to say that someone’s “income” is XXX when the great majority of that goes to the private landlord, a true subsidy by the state. Their income after paying rent is still £65 a week, or whatever.) If you own a flat and are letting it, you will want to make a profit. There is no need for a borough to make a profit – the flats are fifty years old and have already paid for themselves several times over.
Sadly, these lies have taken root. Not surprising, perhaps. The politicians are good at it, they do it for a living.
http://www.guardian.co.uk/society/2012/may/19/social-housing-income-cap-shapps
What I think. Well said that man.
19 May 2012 12:19AM
Out with Double Dip Dave, we need a house building scheme to provide growth for our economy.Flogging off state assets is not going to help in the long run.
Council houses should be around 30% of the market and provide a rate setting utility with a right to buy after a 20 year tenancy, to be replaced by another new council house immediately.
Housing is a crisis in the UK, I cannot even aim to own a house until I am 50 at this rate.
http://www.guardian.co.uk/society/2012/may/19/social-housing-income-cap-shapps
More recently from 22nd July 2013
Just because rent is cheaper than market rent does not mean it is subsidised! It simply means everyone else is being ripped off.
Say I grow apples on land I inherited from my grandfather who bought it in 1950 at x pounds per acre, and it allows me to grow apples, and sell them, at a profit at 10p per apple.
Then if you grow apples on land you bought last week at 4x pounds per acre, meaning to make a profit you must sell your apples at 30p per apple, am I being subsidised? No – of course not. I am simply being more competitive than you.
I could of course sell my apples at a few pence less than yours and take the difference in straight profit – but the point about council housing is that land the public invested in years ago can now be used to house people at lower cost. It is not subsidised.
http://discussion.theguardian.com/comment-permalink/25343101
#SociallyHoused know the truth & so it would seem do many others – Please read – ow.ly/eekGO-A blog that makes sense. #UKhomes
— Second_Class_Citizen (@Socially_Housed) October 4, 2012
greyeminence and arabeska – it’s not ‘simply impossible’. The low rents are partly funded by cross subsidising the social housing with proceeds from private sales, and partly funded by government grant. Over the lifetime of the homes the latter is paid back from rents.
Social housing pays for itself over the longer term. The lower cost really just means that there is no profit taken. as a result, London doesn’t turn into a ghetto for the rich, with all the social costs that that involves. so it saves money for both the tenants, and the taxpayer, in the long run.
http://www.guardian.co.uk/society/2012/dec/04/london-homes-rich-poor-communities
Two more from the Guardian:-
http://www.guardian.co.uk/housing-network/2013/mar/04/who-receives-government-subsidy-housing-2013
https://www.theguardian.com/housing-network/2013/jul/22/social-tenants-pay-more-rent
I can’t improve on this comment under the LRB article:-
From John Marais
I must express a reservation concerning James Meek’s apparent acceptance of the notion that council housing is ‘subsidised’ and ‘supported from general taxation on the better-off’. The only ‘subsidy’ is towards the initial investment for new building. In the long run council homes more than pay for themselves. The original building cost is normally recovered within twenty to thirty years.
The total rent that I and the one previous tenant of my 1950s council house have paid far exceeds the potential market value of the house – even in high-priced Cambridge. When I leave, or die, the council has still got the house for someone else to rent, and will still own the land. Being well below market-level rent doesn’t mean they’re subsidised, just that no individual or company is making a profit out of the need for housing.
John Marais
Cambridge
Very interesting and eye-opening. Too often, assumptions are made based on misleading choices of words by those in a position where one expects them to know what they’re talking about.