Last Friday, I got an email suggesting a topic I might like to blog about. Getting this kind of an email isn’t in itself unusual. In fact they come in waves that probably average out at one every six weeks or so; a very few are so desperate they offer me a (tiny) financial incentive to blog about their revolutionary new ironing-board cover, or whatever it is they’re trying to promote. Up until now, every single one of those emails has gone straight in the trash, but last Friday’s was different. For a start, it noted that I’d already blogged briefly on the subject in question, so it wasn’t just a wild stab in the dark.
The email was from someone who works at the Building and Social Housing Foundation. I’ll be honest, even as a tenant in social housing, I hadn’t heard of the BSHF before I got the email, but a quick look at their About page tells me they’ve been around since 1976. Given that this date coincides pretty much exactly with the beginning of the wholesale destruction of the social housing sector in the UK, I imagine their christmas parties must always have been rather sombre affairs. Anyway, the email was sent to me by one of the authors of a report the BSHF have produced examining the proposed changes to housing benefit that were announced in the recent emergency budget. The report (which can be downloaded for free from here; don’t panic when you see the page asking for personal details, there’s a link to download without registering) goes into detail on what those changes are (not a small thing, since it turns out some of the most far-reaching ones have barely been reported), and gives some initial analysis of what the potential outcomes of the changes may be.
I’d strongly recommend that you download the report. It’s not all that long – 12 pages for the main body, excluding covers, notes, executive summary etc – and it’s exceptionally clearly written. I’ve waded through a few policy documents/ reports from various think-tanks and foundations in my time, and they’re usually so horribly written that you can’t work out what they’re trying to say. This is a real paragon of clarity and concision, with very little reliance on jargon and acronyms, and where they are unavoidable they’re defined in the text. (Hmmm, this is starting to sound like a book review…) The main reason to download it, though, is to get a very clear handle on what the proposed reforms to housing benefit may mean in both the short and the long term. I’m going to spend the rest of this post giving my reactions to a couple of aspects of the report, but really you’d be better off reading the original for yourselves.
One of the things the report highlights is a certain wooliness in the government’s thinking as to what housing benefit is for, and what goals and policy objectives it is designed to support. The benefit was initially intended to be a means of securing access to decent quality housing for poor people, and ensuring that the necessity of paying rent does not eat up what little income they have to pay for other things. Even now, this remains one of its primary goals; you can only claim housing benefit if you pay rent and have a low income. However, and as the report highlights, there seems little doubt that the coalition government are proposing to add significantly to the range of additional outcomes the benefit is designed to achieve.
So, for example, the proposal to reduce the housing benefit paid to people who have been claiming Jobseekers Allowance for longer than 12 months is clearly intended as a negative inducement for the long-term unemployed to seek employment. As another example, the decision to penalise tenants in social housing who live in properties that are ‘too large’ for their requirements (by withdrawing the benefit which pays for a bedroom they are assessed as not needing) seems aimed at ensuring that these larger properties are made available to people who need them more.
As the report points out, these goals may be perfectly reasonable in their own right, but the problem with attempting to use housing benefit to achieve them is that it can end up undermining the primary goal of the benefit, and may even end up costing more. An unemployed family unable to meet the cost of their rent once the 10% penalty for long-term unemployment has been applied, for example, may find themselves homeless, at which point their local council will be required to find them emergency housing at a cost that may well exceed the money ‘saved’ by reducing housing benefit. Even setting aside the issue of cost, though, it’s hard to accept that a system of housing allowances that increases rather than decreases homelessness is functioning as it should.
In the case of those who occupy properties that are deemed to be too large for them the issues are even more complex. As the report notes, for example:
The property size restrictions will […] have an impact on separated parents (usually fathers) who have access to children at weekends. Eligibility for a property with sufficient rooms can already be a significant barrier for fathers who are not living with their children. The introduction of this reduction in housing benefit will make it harder for these fathers to be able to stay living in accommodation which enables them to retain access to their children. This may undercut other policy objectives, given the importance of the continued involvement of fathers in their children’s lives if their relationships end.
That last sentence is very circumspectly worded, and I would put things a little more bluntly. Writing in 2008, Iain Duncan Smith bemoaned the fact that so many fathers living in social housing had little or no involvement in the lives of their children. It seems more than a little odd, therefore, that in his new role as Secretary of Sate for the Department of Work and Pensions he is pursuing a policy which seems likely to worsen this situation.
The report also points out that a tenant who finds themselves in an outsize property as a result of a change in circumstances – when a grown-up child leaves home, for example – may face an impossible situation given the catastrophic shortage of social housing in many areas.
This has the potential to effectively end security of tenure for some tenants; although their legal security of tenure will be retained, the result would be that if they are unable to afford their rent once the benefit level is reduced they will have to leave the property. […] For many households […] it will not be easy to move to a smaller property as there is a shortage of accommodation in the social rented sector. The housing benefit system cannot require social housing landlords to make offers on allocations, so the tenant may be faced with a shortfall in benefit with no viable option to move
As with the proposal to reduce housing benefit for the long-term unemployed, this change therefore also has the potential to increase homelessness.
One of the very useful things the report does is highlight some of the less well-publicised changes to housing benefit, some of which may have very far-reaching effects. There was quite a lot of focus at the time of the budget on the proposal to introduce national caps on the amount of money that can be paid out in housing benefit, but there were also changes to the system of Local Housing Allowances, or LHAs. Currently, local councils set their LHA (the maximum they will pay out for a particular type of property) at the 50th percentile of the private rental market. In other words, the LHA is adequate to cover the rents charged by the cheapest half of the private sector. Under the new system, councils will set their LHA at the 30th percentile, meaning that it will only be sufficient to cover the rents charged by the cheapest third of the private sector. All of this seems quite technical, but what it means is that, while the headline-grabbing national caps will initially only affect people living in the most expensive parts of the country, the changes to the LHA mean that the maximum amount payable in every part of the country is to be significantly cut.
The major problem with this is that, even while the LHA has been set at the higher level, many tenants have found that they can only find properties which cost more than the maximum payable. The report quotes figures given in parliament earlier this year which showed that 48% of claimants were having to make up an average shortfall between their housing benefit and their rent of £23 per week. It seems likely that, when the LHA is cut to an even lower level, many people who currently have the whole of their rent paid will find themselves having to make up a shortfall, and those who are already doing so will have to find a significantly larger amount of money. For a single person whose only source of income is JSA (currently paid at £65.45 a week for people aged 25+) these increased demands may very well prove impossible to meet. As with the proposals to introduce a national cap, it’s very hard to see how this can fail to lead to an increase in homelessness.
Another change relating to Local Housing Allowances, and one which may turn out to be even more significant in the long run, is that, from 2013 onwards, instead of being pegged to the actual level of rents in a given area, they will instead rise in line with the CPI (Consumer Prices Index – a measure of inflation). At present the CPI excludes housing costs altogether, although the government are proposing that these should be included. Even when this happens, this will still reflect the average increase in housing costs across the country as a whole. It stands to reason that people who find themselves living in an area rapidly increasing in popularity will quickly find that their rent is increasing at a much faster rate than their housing benefit. Once again, it seems likely that people affected in this way will find themselves at increased risk of homelessness.
So far, I’ve concentrated quite a lot of my comments on the fact that the combined, synergistic effect of many of these changes will mean that benefit recipients will be at an increased risk of homelessness. However the BSHF report also draws attention to another likely synergistic effect – the increasing ghettoisation of the poor. Almost all of the changes will have this effect. For example, the national caps on housing benefit and the significant reductions in Local Housing Allowances will both have the effect of encouraging (more accurately: forcing) many claimants to move to cheaper areas. As the report notes
Since many low-rent areas are also high-unemployment areas, it is […] possible that people will move to secure cheaper accommodation, but then find their ability to secure employment reduced.
The report also notes that
In the longer term, concerns will centre on the potential for the creation of Parisian-style banlieues, areas on the outskirts of the city with concentrations of high depravation, while the city centre becomes exclusively for the very well off. Further analysis will need to be undertaken to establish what is likely to happen in the UK […], but the potential for total exclusion of the poor from large areas is clearly present in the measures announced in the budget.
Barring a coded reference to problems with social cohesion, the report doesn’t particularly spell out what the consequences of this may be. Allow me to be a little more graphic: many observers of the situation in France think the prevalence of extreme social disorder – multi-day riots and the like – and the conspicuous success of the far right are both related to this ghettoisation of poverty.
Even if we set aside the ethical case against these outcomes – which I don’t think we should – there are clear costs associated with concentrating poor people in areas where they are even less likely to be able to find work. As the BSHF report notes, Iain Duncan Smith, who is now Secretary of State at the Department for Work and Pensions, wrote the following in 2008:
Over the years, our housing system has ghettoised poverty, creating broken estates where worklessness, dependence, family breakdown and addiction are endemic.
It seems, therefore, that two years ago the present-day Secretary of State was convinced of the need for housing policy to address the problems caused by ghettoising the poor. All of which makes it a little strange that he is now advocating policies which, taken together, will price the poor out of the housing market in areas where they have a chance of avoiding the negative effects of the ghetto.
In this post I’ve really just concentrated on a couple of aspects of the BSHF report. It covers a lot of issues besides the ones I’ve raised here. For example, the authors note that the policy of docking housing benefit payments to people who have been claiming Jobseeker’s Allowance for longer than a year may impact particularly hard on those people who have been moved off incapacity benefit under the new medical test, but nonetheless have significant health/ disability problems which make them a less attractive prospect for potential employers. They also include a section focussing on the particular effects the changes will have on old and young people, and note that the decision not to incorporate any kind of transitional relief when housing benefits are cut will leave households of all kinds abruptly unable to afford their rent, and with no time to make alternative arrangements.
The report also looks at what they term the supply-side implications of the changes. For example, they note that private landlords, concerned that all the changes may impact on the ability of housing benefit tenants to pay their rent, may become even more unwilling to lease properties to tenants who are in receipt of the benefit. This is already a significant problem – many landlords specify that benefits tenants will not be accepted in adverts, and many lettings agencies refuse to accept them (or, as I should say, us) as clients. Clearly, this reduction in supply is a problem, since it is likely to worsen a housing shortage that is already very acute in many areas. Another supply-side issue the report notes is that there may be a significant impact on social landlords – housing associations and the like. Often the majority of the tenants of these organisations are claiming benefits, and the 10% reduction, in particular, may have a significant impact on their revenue stream, and, in the long term, their economic viability.
If you want to find out anymore about these topics – or the ones I have written about – then I definitely recommend that you download the report, but as a way of concluding this post, I want to add a few more general comments.
It seems pretty clear that the underlying driver of these reforms is the need to save money on the housing benefit bill, but it also seems that the government are hitting out at the wrong targets in their desire to achieve this. The real reason for the size of the bill is not that significant numbers of people are receiving overly-generous awards, or that the benefit system is rewarding laziness and lack of ambition (although the ‘benefits trap’ is real, and does need to be tackled – by increasing the minimum wage, not cutting benefits). The real problem is that the cost of housing in this country is very high. These high costs are reflected not just in the housing benefit bill, but also the difficulty many reasonably well-paid people have in finding affordable, secure housing. The reason housing costs are so high is, of course, because there is a shortage in supply, not just of affordable rented homes, but affordable homes to buy as well. There are several reasons for this, and the causes are in any case disputed, but, whatever the cause, the solution is the same in every case: build more houses. This kind of long-term planning is precisely the thing that government should be doing, and it would have the great advantage of not just tackling the size of the housing benefit bill, but improving the situation for everyone else as well.