5 Jan 2010

On Housing Benefit

A challenging and thought-provoking piece in the Times called “We are picking up the bill for Right-to-Buy” by Ross Clark. It highlights some of the iniquities of our housing benefit system, which costs near enough £20billion a year to keep afloat. It is particularly obscene in the richer neighbourhoods of London where claimants are apparently living the life of Reilly in luxury homes at taxpayers expense. And many of them appear to be foreign and black, giving the Daily Mail apoplexy. Whether the situation is quite as comfortable as described by our right-wing press, I have my doubts, but there can be little doubt that the whole system is a mess and it’s not clear exactly what can be done about it.

Clark’s solution is this: resume building social housing with an emphasis on family units (this is primarily where the problem lies). But people have been saying this for years and it hasn’t exactly got us very far. The social housebuilding programme has been largely funded by slicing off some of the profits that the landowners and private developers were making, and now that these have more or less vanished, this avenue is looking a little thin. To re-invigorate it now would cost billions – money which simply is no longer available.

But would Clark’s solution really improve matters, or is it just more sticking plaster? The problem is essentially that we have created a two-tier housing market. There is the private sector, which is expensive and insecure (esp. for renters), and the social/council sector which is cheap and very secure. And subsidised to the tune of £20billion a year. This creates an enormous demand for social housing, a demand that is probably unquenchable as things stand. Building more social housing may go some way to meeting the current demand, but is going to create even more demand further down the pipeline, and may well end up costing even more to subsidise. It doesn’t strike at the root of the problem, which is that there are two different markets operating and cheap and secure housing is always going to be preferable to expensive and insecure, even more so now as windfall profits from owning private housing have been put on hold.

A more logical solution would be to have just one housing market. To do that, you have two options. One would be to privatise the social/council house sector, and remove all housing benefit, instead supporting the poor by some other method – for instance, giving them money and letting them decide how to spend it. Alternatively, you could nationalise all housing and have it all rented out by the state. Somehow I don’t expect to see either of these two options featuring heavily at the forthcoming Election!


  1. Hmm.

    It's wrong to say there is a demand for social housing, there is rather a need. The difference is very important! The waiting lists reflect households living in temporary accommodation or renting privately with high housing benefits, waiting to get a social rented home because they cannot afford private rent. You can't get a social rented home just by wanting it, you must be eligible based on need. So the idea that more social rented housing will create more demand for it is surely nonsense. Need only increases if you either get more poverty or less affordable other models (primarily private rent) or less subsidy through housing benefit.

    Your notion that there are two housing markets, and that they should be merged, is also grossly simplistic. We already have quite a mix of models; RSL renting, council renting, various intermediate models like shared ownership, mutual ownership, mutual renting, private renting, private ownership.

    Privatising all housing will hardly address the drivers for unaffordable private housing, so won't help at all. Nationalising would do the job at a stroke, but of course wouldn't ever happen.

  2. I think you are splitting hairs between the difference between demand and need. Sure there are criteria used to assess housing "need" but the need only exists because private rented housing is so expensive. If private rented somehow became cheaper, the "need" for social housing would suddenly vanish. The very word "need" is used to pretend that the normal rules of supply and demand somehow don't apply.

    And of course you are ignoring the fact the population is not static. People arrive on our shores who immediately qualify for housing benefit because they tick all the housing "need" boxes. The bigger the pool of social housing, the bigger the pool of people who will qualify for it.

  3. The root cause of the 'problem', and it has a long history and deep roots, is poverty. The definition of which has changed considerably but the causes, unemployment, family breakdown, poor health, etc., are pretty much the same. For whatever reason, a good proportion of the population (20%?) can't afford a house of a standard that we now consider adequate, and the country can't afford to subsidise it either.

    In the last 90 years we have tried many ways of re-arranging the furniture; Council Houses, Housing associations, private landlords, shared ownership and mixtures of all these but however you cut it there are lots of people who rely on the state for the roof over their heads. This is fundamentally a problem of money and affordability, not a shortage of bricks and mortar, though certainly the enormously bureaucratic and contradictory planning system doesn't help.

  4. This runs deeper and wider than just housing benefit.

    Taxpayers subsidise millions of employers through Working Tax Credit (think that's the name) to boost the pay-packets of employees (arguably masking unemployment) .

    Then you have things like PFI, Shared Ownership, the WInter Fuel Allowance - the list goes on.

    Plus ca change.

  5. You have an interesting notion Mark. I really appreciate how you dissect that housing market article. Keep it up.