The hidden bailout?

franktheplank

Am I the only one that thinks our current rent allowance system is ludicrous?

We currently have a huge amount of state owned property sitting idle. Yet we are paying private landlords a fortune to house the poor. In effect this is creating a false floor in the rental market, as the rent allowance price sets the lowest rental price.

Aside from the cost to the state of paying rent allowance, this raises the price private tenants have to pay in rental costs. Again more money to the property investors who are renting the property.

Now if you want to argue that private investors need to be subsidized then please do so, but as it is, I strongly feel we have a hidden bailout in this country.

Lets look at the figures: At present it costs 500 million per year to pay for rent allowance. Since the economy crashed in 2008 that means we're coming up on 2.5 billion on rent allowance costs.

At present people receiving social welfare have to pay 30 euro per week towards their rent. So I think it's fair to assume that we're these people housed in state owned properties we could cut social welfare by 30 euro's. Which would save the state .6 billion per year. So we can approximately estimate that we are coming up on 3 billion in excess social welfare payments.

So in total we could estimate 5.5 billion needlessly paid out since the economic crash, and that's before we look at how much private renters are (over)paying for their rent. :eek:

Now you might say we can't move all the unemployed people into state owned houses because there aren't enough. We don't have to. If there is over supply in the market (which there would be by just making these houses available) then prices will drop significantly, so we wouldn't need rent allowance as we know it and the cost of private renting would plummet.

In short, despite our perilous economic situation our government is using borrowed money to prop up the property market and put cash in the hands of property investors.

Hippies!

Hit the nail on the head into your plank frank

kneemos

How much have you factored in for making these houses liveable,maintenance etc,also the thirty euro the tenant pays goes to the local authority whici would need to be replaced by the government if the tenant didn't pay it.

franktheplank

kneemos wrote: »

How much have you factored in for making these houses liveable,maintenance etc,also the thirty euro the tenant pays goes to the local authority whici would need to be replaced by the government if the tenant didn't pay it.

Nope it goes to the landlord for private rented property in the rent allowance scheme. I think you might be thinking of people already in social housing?

Victor

franktheplank wrote: »

We currently have a huge amount of state owned property sitting idle.

Do we? While the state or its agencies and shareholdings own lots of loans, it doesn't own the properties.

kneemos

I think your putting way too much stock in the effect rent allowance has on the market it cant be more than a tiny fraction of the rental market plus private rents are already way lower than what the social welfare pays out.

franktheplank

Victor wrote: »

Do we? While the state or its agencies and shareholdings own lots of loans, it doesn't own the properties.

I don't understand you're point? As it owns the loans, it can, if these loans are not paid, take control of the properties.

I'm pretty sure it is part of the current program for government to use the 'ghost estate's' for social housing, so what you're telling me this can't be done?

squod

franktheplank wrote: »

I don't understand you're point? As it owns the loans, it can, if these loans are not paid, take control of the properties.

I'm pretty sure it is part of the current program for government to use the 'ghost estate's' for social housing, so what you're telling me this can't be done?

The banks have no interest in doing so. It doesn't fit with their business model of making a handy few quid. Also, our government are way more concerned with other matters. Like what kind of cake they might serve to other European heads of state.

franktheplank

kneemos wrote: »

I think your putting way too much stock in the effect rent allowance has on the market it cant be more than a tiny fraction of the rental market plus private rents are already way lower than what the social welfare pays out.

Rent allowance is paid to 97,000 people in Ireland at present. It's my understanding that this would mean 97,000 households or individuals renting a room or single apartment.

That's not a tiny fraction of the market.

I haven't seen private rents to be lower than what the social welfare pays out. I know that in Cork where I'm currently renting the lowest private rent is typically a certain amount above RA rates.

frozenfrozen

everyone else is in on it. you've caught us

keith16

IMO, things that the gov is doing wrong in this country:

Interfering in the property market in their own interest. The government could regulate the market in a way that is beneficial to all, or at least the vast majority of people. They choose not to.

The government also have ownership of things like the health, the electricity network and public transport, but seem completely incompetent in running these services and seem to think that privatisation of these services is in the public interest.

I wish that the government were as ruthless with the latter as they appear to be with the former.

franktheplank

squod wrote: »

The banks have no interest in doing so. It doesn't fit with their business model of making a handy few quid. Also, our government are way more concerned with other matters. Like what kind of cake they might serve to other European heads of state.

Because the debt of the banks involved with NAMA has been nationalised, our government can, under the 2010 Credit Institutions Act, force these banks to restructure in any way, in secret and at any time.

So it could quite easily force the banks to allow the 'ghost estates' to be used as social housing. But yes it's interests lie elsewhere.

franktheplank

frozenfrozen wrote: »

everyone else is in on it. you've caught us

I've no problem with people being on rent allowance. I'm all in favor of social housing (within limits of course).

My problem is that we're paying double. In essence we're paying for rent allowance and we're paying for empty houses.

kneemos

If they lower rents more property owners default on morgages which means more money to the banks.

frozenfrozen

franktheplank wrote: »

I've no problem with people being on rent allowance. I'm all in favor of social housing (within limits of course).

My problem is that we're paying double. In essence we're paying for rent allowance and we're paying for empty houses.

I know exactly where you're coming from. The government are paying for private homes to be filled with people, instead of filling the homes they already own with people.

Solair

I know a few people who are genuine rent allowance recipients and the other issue with the rent allowance system is that the quality of accommodation is really bad in major urban areas.

We allowed developers to ride roughshod over the idea to create mixed developments with small numbers of integrated social housing units. That would have allowed the creation of non-ghettoised social housing.

Rent Allowance wasn't ever designed to be anything other than a temporary solution to a housing crisis situation. Instead, it morphed into a long term solution where the Government essentially pays landlords via the tenant and the tenant ends up with woefully bad accommodation.

I'm not going into the details of people I know, but suffice to say that one of the properties in particular is only a couple of steps above being a 1950s tenement. It's fitted out to barely comply with the definition of an apartment, it's absolutely tiny, there are endless problems with plumbing, flooding, bad smells, it's next to impossible to heat and it's just generally unpleasant.

Creating huge ghettos of housing estates may have provided a lot of housing and quite often reasonably good standard of build quality too, but it also created social disasters in cities like Dublin and Limerick in particular. Cork, to a lesser extent as the estates are a little less unwieldy and somewhat less bleak.

There was mass panic when mixed developments were suggested as OMG - you might have smelly poor people living near you!

I remember one case in Cork where there was uproar in a particular suburb when social and affordable housing was suggested at the peak of the boom. They were having none of it!

Instead we've ended up pushing people who cannot afford housing into crap heaps of accommodation at the lowest rung of the rental market and we are rewarding those providing this low-standard accommodation with a steady supply of tax payers' money.

I know there are problematic tenants, but you can get that at most levels of the housing market and I know there are also some nice landlords out there too, but in my general experience of it, it's just a stupid way to provide social housing.

franktheplank

kneemos wrote: »

If they lower rents more property owners default on morgages which means more money to the banks.

Well we're agreed then it's a bailout!

sogood

franktheplank wrote: »

Because the debt of the banks involved with NAMA has been nationalised, our government can, under the 2010 Credit Institutions Act, force these banks to restructure in any way, in secret and at any time.

So it could quite easily force the banks to allow the 'ghost estates' to be used as social housing. But yes it's interests lie elsewhere.

The government cant force the banks to do diddly squat, as has been clearly demonstrated already. The banks run the country, not the government. The banks tell the government how it's going to work. As in, " We screwed up and now we need a bailout of x or we bring the economy down" Government pays up, banks release more accurate figures of how badly they screwed up, more bailout, etc. etc. But the government said they would carefully monitor the banks and ensure/ force them to release credit into the economy to get things moving again. Banks ignored the government and used bailout funds to buy more loans, and let the government do their worst.

franktheplank

sogood wrote: »

The government cant force the banks to do diddly squat, as has been clearly demonstrated already. The banks run the country, not the government. The banks tell the government how it's going to work. As in, " We screwed up and now we need a bailout of x or we bring the economy down" Government pays up, banks release more accurate figures of how badly they screwed up, more bailout, etc. etc. But the government said they would carefully monitor the banks and ensure/ force them to release credit into the economy to get things moving again. Banks ignored the government and used bailout funds to buy more loans, and let the government do their worst.

I think it's more the government won't force the banks to do diddly squat, rather than can't.

K.Flyer

Whilst a couple of fair points are raised, I don't think moving everyone that receives RA into the one estate is a good idea. You are running the risk of creating a ghetto style sceanario, thus reducing a persons chance of finding work because of the "...oh, you're from there!" judgemental attitude of certain employers.
You only have to look back over 30 years to certain Dublin City suburbs to see what I mean.
Anyway, there are already quite a lot of people who are receiving RA living in properties that are under NAMA, except they are not all concentrated in the one development.

kneemos

franktheplank wrote: »

Well we're agreed then it's a bailout!

Well if as you say the lowest private rents are set by rent allowance rates you lower these you also lower private rates thus more defaults more bailout.

franktheplank

kneemos wrote: »

Well if as you say the lowest private rents are set by rent allowance rates you lower these you also lower private rates thus more defaults more bailout.

And the money being spent to keep prices inflated isn't a bailout, how?

franktheplank

K.Flyer wrote: »

Whilst a couple of fair points are raised, I don't think moving everyone that receives RA into the one estate is a good idea. You are running the risk of creating a ghetto style sceanario, thus reducing a persons chance of finding work because of the "...oh, you're from there!" judgemental attitude of certain employers.

You only have to look back over 30 years to certain Dublin City suburbs to see what I mean.

Agreed but I don't think you have to do this. These properties only have to be available to the market. In reality perhaps very few people would have to move to them.

In terms of creating ghettos I think the rent allowance system is already doing this. In Limerick, where i'm from there's quite a few apartment complexes where the majority of tenants are on rent allowance, so this effect is already taking place.

Perhaps, in opening up the ghost estates a rent to buy system could be put in place for some of the properties, so as to counteract this effect.

kneemos

franktheplank wrote: »

And the money being spent to keep prices inflated isn't a bailout, how?

You can give it to the landlords or the banks,if it is a bailout.

Del2005

franktheplank wrote: »

Perhaps, in opening up the ghost estates a rent to buy system could be put in place for some of the properties, so as to counteract this effect.

The reason why they are ghost estates is because they where built in places no one wanted to live and have no facilities nearby. I'd guess only a tiny % of ghost estates are anywhere near being suitable for living even if completed to high standards.

By taking people out of their current homes and making them move to a house in the arse end of nowhere, with no facilities, isn't going to improve these peoples lives and will ad extra costs to the government. As they'd now need to provide support for these people living in the middle of nowhere with nothing to do.

franktheplank

Del2005 wrote: »

The reason why they are ghost estates is because they where built in places no one wanted to live and have no facilities nearby. I'd guess only a tiny % of ghost estates are anywhere near being suitable for living even if completed to high standards.

By taking people out of their current homes and making them move to a house in the arse end of nowhere, with no facilities, isn't going to improve these peoples lives and will ad extra costs to the government. As they'd now need to provide support for these people living in the middle of nowhere with nothing to do.

I think one of the biggest reason we have ghost estates is that we have too many houses and not enough people. These houses wouldn't have been built in 'the arse end of nowhere' if it weren't reasonably expected that people would be willing to move there.

And it's not necessarily about moving a huge amount of people, it's about making the houses available and allowing that effect to hit the rental market. It only requires some people to move there, and as an earlier poster pointed out, a lot of what is now used for rent allowance accommodation is sub-standard. I'm sure quite enough people would be happy to move to a newly built house.