Why we should evict the rich from council housing

Taxpayer-subsidised housing should be made available to those who need it, says Merryn Somerset Webb - and not to those earning £60,000 a year.

You know that council tenants don't pay commercial rents - of course you do. But do you know just how much their rent subsidy comes to? I wonder.

Anew report just out from the Centre for London estimates that the "average London social household receives £5,300 subsidy every year" (the average rent on social housing is £102 a week about half the market rent). Outside London, it is lower the average subsidy is more like £3,600. But that's still proper money. However, odds are that you don't mind this particularly. After all, you probably think that council housing/social housing is only for the needy and the poor and that we have made a decision as a country (quite rightly) to provide a welfare safety net for the needy and the poor. But here's the thing: council housing isn't just for the needy and the poor.

The same report points to the 115,000 social tenants in London (that's one in six) who earn more than the average London income. Those interested in this kind of thing will remember the general outrage last year when it was leaked that there are some 15,000 council tenants in the UK earning more than £60,000 a year (and perhaps as many as 34,000) and 6,000 earning more than £100,000 a year and that's just declared income. Across the country more than a fifth or 720,000 social tenants earn more than the average wage.

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How did we get here? It is worth remembering that you don't have to be in need to put your name on a council house list. Look at the official site on this and you will see that the only actual requirement is that you are over 18. You do not even have to live in the area in which you are applying for taxpayer subsidised accommodation. Nuts, isn't it?

Obviously applying isn't getting. If you aren't in need, you certainly won't make it to the top of the list in anywhere remotely desirable and you'll have to wait a while even in pretty iffy places those who are homeless, living in cramped conditions or have medical problems get first shout. But the lack of absolute criteria makes the point that the original idea of council housing was that it was for anyone who wanted it - Bevan claimed to hope for new estates where "the working man, the doctor and the clergyman will live in close proximity to each other", for example.A universal benefit if you like, and one that couldn't be taken away once you had a council house, it was yours for life.

You could change it, swap it and sublet rooms in it as you liked. Under some circumstances, you can even transfer it to someone else. The government has recently announced changes to the council house rules. Councils can now choose to offer flexible tenancies which come with fewer long-term rights, and they can also, should they choose, offer new tenants "affordable" rather than social rents these are higher and can be up to 80% of the market rate.

But here's the question we need to be asking: if some one living in a council house is making £100,000 plus, surely they should be paying the full market rent whether they are a new or an old tenant?

The government sort of answered this with its 'pay to stay' proposals in the last budget the idea there was to impose a sudden rent hike on anyone living in social housing and earning over £60,000. But the Centre for London argues against this (cliff-edge changes such as this are very distorting), and instead suggests that rents should go up "incrementally" for anyone earning "above benefit levels". That, it says, will raise a total of £300m a year which can then be spent on building new social housing to ease the current pressure.

In an ideal world, I suspect most of us would think that anyone earning much more than the average wage shouldn't be subsidised by the taxpayer in this way at all (and that anyone on £60,000 plus should be evicted sharpish to make way for someone who is not). But given our very un-ideal welfare world, this seems like a good way to start moving away from the idea that council housing should be in theory at least a universal benefit.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.