Sunday 7 November 2010

A brief history of housing benefit

Given that my line of work for more years than I care to mention is suddenly constantly in the news, it seems remiss of me not to share some of the inside secrets of the housing benefit industry.

Housing benefit in its present form was orginally conceived by the Tories in the reign of Thatcher in the early 80's.  It was part of their ideological shift away from state solutions to housing need (through social housing investment) in the hope that "the market" would provide. HB provided and continues to provide a huge subsidy mainly to private landlords, and spending on HB really started to rise as private sector rents were deregulated and landlords were allowed to charge what they liked. the Tories would have it..."landlords and tenants were free to negotiate rents between themselves".  (Stop laughing at the back!) 

Yes that's was under the Tories that the meteoric rise in HB spending really began, just as they knew it would.  In 1979, HB was 12% of  all government spending on housing.  By 1997 it had grown to 69%.

When I first started working in HB, the Rent Act was still in force and a tenants faced with exhorbitant rents could get a fair rent registered by a rent officer.  Landlords could not charge more than the amount set by the rent officer.  Local authority housing benefit offices could apply for a fair rent to be registered if a tenant applied for HB and the HB office thought the rent was too high to be met through the benefits system.  Often the mere threat was sufficient to really help a landlord his thinking about what rent his property was really worth......

But this was all swept away by the 1988 Housing Act, which deregulated private sector rents and introduced the notion of the 6-month shorthold tenancy.  To get landlords to let property... the argument was necessary to give them carte blanche to set rents to the highest figure they could get away with, and take away any notion of security of tenure - something to which the ConDems are now turning their attention in the social sector.  Small wonder that HB spending ballooned, despite various schemes which were designed to restrict HB on the highest rents. The job of rent officers became setting the amount of rent that would be met by HB - not the amount that could be charged by the landlord

Such schemes often just created hardship for tenants because although rents were "capped" for HB purposes, there was no compulsion on landlords to cut the actual rent they charged, which just left tenants having to pick up the shortfall.

While this was happening in the private sector, over in the social sector, housing for rent was shrinking as "right to buy" kicked in.

New Labour tried to square the circle with the Local Housing Allowance, a flat-rate benefit designed to give tenants some incentive to bargain for the cheapest rent and in return get to keep any of their allowance which they did not spend on rent.  Again it was about putting the onus on tenants, but without giving them any effective bargaining power.  Predictably, landlords simply raised rents to the levels of the the Local Housing Allowance and laughed all the way to the bank again.

One important myth prevalent in what passes for "debate" in the housing benefit field concerns what tenants on HB do with their time.  Contrary to what you read in the tabloids (and even the broadsheets). the majority of people receiving HB are in work...low-paid work which is effectively state-subsidised through tax credits and housing benefit.  The cuts to HB will affect these people as well as those who are unemployed.  The cuts will create more of a poverty trap for those who work....people who already suffer huge levels of marginal taxation as benefits are clawed back and negate the smallest rises in pay.

So next time someone tries to tell you that HB is paid to tenants, you might point out that in fact, it acts as a huge subsidy to private landlords on the one hand; and to employers paying minimum wages on the other.  These are the people really coining it from housing benefit....but don't expect to read that in the papers.

Two things would cut the housing benefit bill drastically and swiftly - a return to statutory rent control, and a decent minimum wage (perhaps around the European decency threshold of about £8 per hour.  But no ConDem minister would sign up to such measures. They are counter to every political instinct these people possess.

Just a few things to bear in mind next time you hear a politician pontificate about "out-of-control housing benefit".

1 comment:

Anonymous said...

Good Post