Social housing is a silly idea whose time has passed. The idea is that people who cannot afford to house themselves are covered by the state, or the local council. These people are charged less than market rent. There are few limits (if any) around the duration of the lease. Allocation is based on 'need' rather than means, as this is the entire point of the policy.
Any economist will tell you that this doesn't work. There are many reasons, so I will only cover the really basic ones. The BBC has just done a little show on it, and the story is on their website.
Firstly, since the joint is offered at below market cost, the demand will be higher than it would otherwise be. In fact, demand can be assumed to be infinite, up to the population of the country, and beyond if people immigrate and are eligible for cheap housing. In practice, demand starts out moderate and slowly increases year on year as more and more people learn about the programme and become ensconced. This means there will always be a waiting list. Almost by definition, this waiting list cannot ever clear, except temporarily, and even then only with additional funds. So we see:
And there are plenty of people waiting to be housed. There are more
than 70,000 people currently in desperate need. They are being housed
in temporary accommodation like bed and breakfasts. More than two
thirds of them are in London.
It is thought 2 million people could be on English housing waiting lists by 2011
Secondly, social housing gives the government a way of introducing really silly housing policies, without causing a popular revolution. Green belts restrict the amount of housing land available and push the price up to silly levels. The process is gradual, but you can see the result of 40 years of land restrictions in the UK. People live cheek by jowl while green space lies idle, building land costs millions of pounds per acre (versus 10-20k for farming even with production subsidies in place) and first time buyers cannot afford a pad.
Thirdly, social housing creates a relatively large group of people who are not paying their way. Seeing this in political terms, it becomes impossible to reform the policy, since so many people are reliant on it. In fact the green belts (which create a rigged market) and social housing both create dependants. The social housing beneficiaries cannot afford to be turfed out into rigged market, and the rigged market 'owners' cannot afford to be turfed out into a real market, as without green belts their property values would collapse. Both of these policies produce uncertainty and are captive to changing political winds. So the housing market is much more unstable than it should be. Buyers and sellers are operating more in a lottery situation than a real market.
He saves more than £500 a month by renting a one-bed housing
association flat from a friend and insists that he cannot afford to pay
[a related point is that without the green belts there would not be a need for social housing in most cases, or at least the need would be drastically reduced. Social housing and green belts are perhaps two sides of the same coin]
Fourthly, it creates a secondary market where people who can benefit from social housing have a strong incentive to bargain it away to others with cash. If you imagine an impoverished family living in a massive London house, they could double their income by moving elsewhere and renting the place out. While the secondary market is really only a symptom of the rigged market, it is a corrupting influence on society. The cost of uncovering this fraud is substantial too:
In these cases the landlords are often making huge amounts of cash from subletting their property at market rates.
In some inner city areas people can make more than £12,000 a year from subletting - money rarely declared to the Inland Revenue.
Southwark, in London, has a dedicated team of housing investigators specially trained to interview suspected tenancy fraudsters and find evidence using various data. Between them they recover more than 100 properties per year, saving hundreds of thousands of pounds.
Fifthly there is the massive, insane cost of it all. Just one family is costing Ealing council £150,000 per year, close to half a million NZ$. This cost is borne by the general ratepayer, and drags down everyone as a result.
Sixthly, need is a relative term. Need can be created. I don't need a new car but if someone offered me one, I have a feeling that would change. Perhaps I would even crash my current car or drive less carefully to create the need. You get the idea. We need people to live their lives so that they don't need assistance, not so that they do. Or put another way, as someone once said, don't fund what you don't want more of.
Finally, let's face it, state/council housing is not the best. Ugly concrete blocks which are a blight on the landscape and scar the residents for life. These buildings are definitely a 'negative externality of social housing policy' Children brought up in this environment would be considered deprived in countries like New Zealand. Councils are not good at doing it well. This leads to 'sink estates', high crime areas, and other social problems like day leads to night.
It amazes me that the policy itself is not being questioned. Talking about the fraud (which is surely a side issue) is a bit like discussing the type of bullet you want to be shot with, and ignoring the impending death.
Let's hope it is social housing that gets the bullet.