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;

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;

‘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.

Housing quality and equality

Is it possible to improve the quality of housing for people on low incomes in an unequal society?

That might be a strange question but the case of the Decent Homes Standard shows how hard it actually is to improve the quality of social housing when society is unequal.

The Decent Homes Standard was introduced in 2000 as a way of ensuring that all social housing in the UK was up to a certain quality.

It cost somewhere between £19 billion and £37 billion and was, by its own standards, a success.

Here is a chart showing, over time, the percentage of houses owned by local authorities or housing associations that met the standard.

 

As a result of a significant investment of public funds many people had new kitchens and bathrooms and other improvements made to their homes.

You might expect that people who live in social housing would be much more satisfied with their housing as a result of this investment, but you would be wrong.

Here is a chart showing how satisfied people were, over time, with their accommodation.

 

We can see that there was no noticeable increase in the number of people living in social housing who said that they were satisfied with their accommodation.

Why might this be? One reason is inequality.

If a government spends public money improving the quality of social housing, this doesn’t stop middle class people who own their own homes spending their own money (or their parents money) improving their homes.

In fact, it is conceivable that public investment in social housing might encourage middle class people to spend even more money on their homes, to make sure that their homes remain of a higher quality than social housing.

Housing is, to an extent, a ‘positional good‘, a lot of the value of a house comes not from some objective measure of it’s worth, but through a comparison with other houses. It gives people little satisfaction to look at their kitchen and to think that it is much better than the kitchen their grandparents had, when their neighbours have a nicer kitchen still.

We all know the phrase ‘keeping up with the Joneses’. It might just be that it is impossible for public investment in social housing to keep up with the Joneses, when the Joneses are so much richer than those on low incomes.

How to build popular support for social housing

What would a popular, left wing housing policy look like?

Three of the most pressing and controversial areas of government policy in the UK at present are; childcare, housing and adult social care (see for example Nick Pearce’s blog on the subject).

It was no surprise when in his recent budget, George Osborne included announcements of extra money in these three areas.

Briefly, he announced tax cuts to help families with childcare costs, government guarantees for people trying to get a mortgage and a cap on the maximum people can spend on care in later life (the cap will be £72,000).

The left in British politics has been developing strong counter arguments on these topics in recent years. However, I do not believe that the left has yet developed a strong idea that the public will back on how to reform the housing system on the UK.

The left has stronger arguments on adult social care and child care.

On adult social care, the government is doing far less than the Dilnot commission recommended (they recommended a cap of more like £35,000). More impressively, Andy Burnham has been floating the idea of a national care service that would be free at the point of use.

On childcare the government’s announcements seems to disproportionately benefit richer households. In contrast, the Resolution Foundation and others have been making the argument for more universal, high quality childcare services.

In both cases, the left has developed a case that a sizeable percentage of the public would support.

Despite a lot of work I do not think that the same could be said for housing.

For example, Jack Dromey’s response to the new housing policies announced in the budget rightly pointed out the government’s failure to stimulate the construction industry. However, it was weaker on what Labour’s alternative approach would look like.

For many on the left the default housing policy is to build more council houses. One of the major problems with this policy is that it is not popular with the public.

In general the public do not support the idea of building new homes of any type.

By a massive majority the public far prefer the idea of owning than renting.

And, when asked to say which housing policies they most support they chose giving assistance to first time buyers and increasing access to mortgages more than they chose building more council housing.

The challenge for the left then is, can they develop housing policies that both address the major problems of housing need facing the country and are popular with the public.

Any thoughts from readers would be most appreciated.

Housing ideas for Local Authorities in tough times

Local Authorities wishing to tackle major problems relating to housing find themselves in a tough situation.

Grant for building new council housing is very limited. The ability of Councils to borrow money to build new housing is very limited. Large numbers of people are out of work, benefits are being cut and wages are stagnant so more and more people are finding it difficult to make rent or mortgage payments. The government seem complacent in the face of these challenges.

So what is a local authority to do? Well, there is only so much that they can do in the current circumstances. However, within the limits of our times, here are some ideas for what an ambitious local authority might do;

1. Stop all evictions for rent arrears from council housing

I have seen households evicted for rent arrears of less than a thousand pounds. Evicting people for rent arrears does not help anyone. It makes a household homeless, it means lots of money spend on legal fees and it gives up any chance of recovering the lost rent. Far better to have better benefit and debt advice services and, if necessary, to go to bailiffs to take and sell tenants’ possessions.

2. Use the pension fund to develop private rented housing for those on middle incomes

Local Authorities have been used to helping housing associations to build houses for people on very low incomes. Households on middle incomes were left to rent privately or to buy their own homes.

Increasingly, households on middle incomes are renting since the amount needed for a deposit is so high. Rather than propping up the already very high house prices by offering discounted mortgages and the like, local authorities could start building homes for these households to rent.

This would probably have to be done by a new company set up by the council. Part of the money needed to acquire land and so on could come from the council’s own pension funds (which already invest a lot in property).

3. Establish your own letting’s agency

Lots of landlords only own one or two properties. This means they often do not know the first thing about being a landlord. Instead, they trust a lettings agency. Some agents are good and others aren’t but the industry is not well regulated. This can mean shorter term tenancies are promoted and fees constantly increase.

Local authorities could establish their own letting agents to provide more impartial advice to tenants and landlords. This could go along with other initiatives such as requiring landlords to be licensed, as is happening in Newham.

4. Promote room sharing schemes

We hear a lot about how many spare rooms there are in council housing. Indeed, the government is introducing a new scheme (‘the bedroom tax’) which takes money off people’s housing benefit if they have spare rooms and live in council housing.

We hear less about how many spare rooms there are in properties which households own themselves.

A number of properties with empty rooms are owned by people with some kind of limiting long term health condition. These people will often get support from the local authority. There are already some schemes like Homeshare where;

someone who needs a small amount of help to live independently in their own home is matched with someone who has a housing need and can provide support or companionship

 

These schemes could be made central to the way a local authority supports someone with long term health conditions.