Solving one of the most pernicious failures of the UK housing market


It appears that George Osborne intends to solve one of the most pernicious failures of the UK housing market. Which is that once you have, through whatever temporary circumstances, gained access to housing subsidies then you get them for life. This is of course a nonsense: there's a huge difference between receiving a helping hand when needed and gaining permanent access to the wallets of the rest of the population. What he's going to do is:

Measures to force middle-class council house tenants to “pay to stay” in their homes rather than rely on taxpayer hand-outs. Rent subsidies for social housing tenants will be removed from anyone earning more than £30,000 outside London and £40,000 in the capital. They will have to pay full market rents or move out, under the plan.

It has always been absurd that temporary circumstances that lead to being granted subsidised housing then lead to a life tenancy on such subsidised housing.

That we do have a system whereby those who need it gain access to housing they otherwise could not afford is obviously going to be a feature of our society. But the idea that some life event, say, divorce, unemployment, whatever, should then lead to permanent subsidy has been a feature all along. Once you've qualified for council or housing association housing and got it, then that's a permanent tenancy. But circumstances change: and there really never has been any good reason why someone should continue to gain subsidy 20 or 40 years after the just reason for its original grant has faded.

An aside for those who claim that such housing receives no subsidy: opportunity cost. Renting something out at less than market rate is itself a subsidy.

We don't want though, to insist that people have to move out of such housing if they get a pay rise: that would be much too high a marginal tax rate. But people who are earning above the average wage (and £30k is well above it) why shouldn't they pay market rent, not be subsidised by everyone else?