The benefits of housing benefit

I feel the same way about housing benefit that Millwall fans feel about their football club, no one likes it and I don’t care.

On the left wing of politics housing benefit is called “‘taxpayers’ subsidies to landlords” while the right talk about how spending on housing benefit is ‘out of control‘.

Despite arguments by some, the fact is that housing benefit is here to stay. Because;

  • It stops people who lose their jobs from being evicted
  • It pays for the rent of people who rely on state pension or disability benefits for income
  • It funds a big chunk of the cost of building new social housing (because housing associations or councils borrow for part of the cost of this housing against future rents, which partly come from housing benefit)

Perhaps most importantly, the reason house benefit is hear to stay is because it accounts for a significant proportion of the income of poorer households.

This chart shows the percentage of poorer people’s income that comes from housing benefit;

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You might say that housing benefit isn’t really income because it goes to the landlord. This doesn’t really make any sense. It’s like saying my wage isn’t really income because it pays for my mortgage. People are getting something for this money.

None of this is to say that the current housing benefit system is perfect. Far from it. Just look at this chart which shows how much, on average, poorer people pay on rent even after housing benefit is taken into account;

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‘Net rent’ (ie rent costs on top of the amount paid for by housing benefit) still accounts for over 10% of the incomes of poorer people.

There are a number of problems with the current housing benefit system, including;

1. Low take up

In 2009 to 2010, the number of people that were entitled to but not claiming Housing Benefit was between 0.75 million and 1.14 million. The total amount of Housing Benefit unclaimed was between £1.85 billion and £3.10 billion.

2. Stigma

In a recent survey, 4 out of 5 landlords said they would not accept tenants who receive housing benefit. This gives even more power to landlords who do have tenants on housing benefit, because they know their tenants are not going to be able to easily shop around.

3. Paid in arrears

Like most benefits, housing benefit is paid in arrears. This can cause problems for tenants, especially if there are any delays or complications, if they can’t afford a deposit or if any other of the number of things that can go wrong with administration of a complex benefit go wrong.

These problems with housing benefit are not being addressed in contemporary political debate because housing benefit is so unloved. Perhaps it’s time to change that, for example by proposing a ‘basic income‘ for all citizens.

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In defense of ‘pre-distribution’

Ed Miliband’s speech today has attracted some comment, especially over his use of the term ‘predistribution’.

Putting debates about language to one side, this is an excellent approach to age old questions about income inequality and one which is in step with the British public’s views.

‘Predistribution’ means how wages are spread out before tax and benefits. Some societies (e.g. Japan) have more income equality than Britain or America while actually distributing less through the tax and benefits system. Wages are just more equal.

What do the public think about these questions?

People in England certainly think that there is too much income inequality.

 

 

 

They also think that the current system is rigged and that there is one rule for the rich and one for the poor.

 

And that ordinary workers do not get a fair share of the nation’s income.

 

However, there is little support for government to take a more active role in redistributing money (for example through the tax and benefits system).

 

What this means is that there is great potential for Labour to promote policies which will bring about greater income inequality, without requiring redistribution of income through the tax and benefit system.

These could be policies around reforming the way pay levels are decided within companies, efforts to modernize the Trade Union movement or even efforts to make businesses less hierarchical.

The High Pay Commission have some interesting thoughts on this, as does Duncan Weldon at the TUC.

Whatever you want to call this theme and whatever policies come from it, it is clear that the public are firmly behind the idea of ‘predistribution’.

P.S. These numbers are taken from the British Social Attitudes Survey. I am indebited to this blog post for inspiration for this article.

DC displacement facts

The White population of DC is growing, from 217,000 in 2007 to 244,000 in 2010.  The black population is declining, from 326,000 to 314,000
Black households usually earn less than White households. More than one in four Black DC residents lived in poverty in 2010 (8.5 percent for non-Hispanic White residents)
Black residents are less likely to be in work than White residents. The unemployment rate for Black DC residents has doubled since 2007, from 10 percent in 2007 to 20.6 percent in third quarter 2011. From 2007 to third quarter 2011, the unemployment rate for White (non-Hispanic) DC residents rose from 1.9 percent to 3.7 percent.  
The number of households earning over $75,000 per year has increased, the number of families earning less than $50,000 per year has decreased.

Percentage change between 2000 and 2009

Household incomes

Renters

Homeowners

Overall

Less than $50,000

-24 percent

-32 percent

-26 percent

$50,000 to $75,000

Unchanged

Unchanged

Unchanged

More than $75,000

+81 percent

+58 percent

+63 percent

The number of low cost rental properties has decreased. The stock of low-cost rental stock has shrunk by more than one-third since 2000. The number of rental units with rent and utility costs of $750 or less fell from 69,000 in 2000 to 45,000 in 2007.  (all figures are adjusted for inflation to equal 2007 dollars.)

Low-cost homeownership options also shriveled, the number of DC homes valued at $250,000 or less fell from 58,000 to 15,000 between 2000 and 2007.

There is a shortage of housing that people on less than 50% of the Area Median Income can afford.

Certain neighbourhoods are becoming less black and more white.

A growing number of DC households are finding it difficult to afford housing. Nearly 100,000 DC households — or two of five — spent more than 30 percent of their income on housing in 2007 (20,000 more than in 2000)

Four of five DC households with incomes below 30 percent of the Area Median Income (about $28,000 for a family four) spent more than 30% of their income on housing. 62 percent of this group spent half or more of their income on housing in 2007 — up from 50 percent who had housing costs this high in 2000.

In 2009, 24.8 percent of District renter households (34,140 households) had severe housing costs (spending 50 percent or more of their income on housing)

In 2006 the National Low Income Housing Coalition estimated that a full-time worker would have to earn an hourly wage of $24.73 — three and a half times the minimum wage — to afford the rent for a modest two-bedroom house or apartment. The minimum wage is $8.25 per hour in DC. A person making that much would have to work 153 hours a week to afford to rent a two bedroom apartment in the open market.

Funding for all of DC’s major housing programs has been cut in recent years, however, which means that the city is unlikely to have made much progress on the affordable housing problems highlighted in this report.  The budget for core housing programs in FY 2010 is $64 million, a nearly 50 percent cut from 2008 and the lowest level since 2004.  The Housing Production Trust Fund will receive $18 million in 2010, compared with $62 million in 2008.

The 160 unit Columbia Heights Village development 14th Street and Columbia Road Northwest recently started accepting applicants. It is a project-based Section 8 development that bases tenant rents on their income level. People waited in line for over 4 hours for a chance to put their name down on the list for these properties. One woman in line said

“They are pushing us out! … Average people deserve to live in the city.”

Another said

“I was born and raised here I’m not moving. I will find affordable housing.”

D.C.’s old Capitol Gateway housing project during demolition in 2005

Capitol Gateway today.

Capper/Carrollsburg site in 2006

The unfinished site in 2008

Partially completed in 2010 with properties going “from $781,300”