The UK Government Have Got it Wrong on Housing Benefit Reform

Kosovo it might not be, but the UK Government’s proposals to reform housing benefit has created a political storm with senior Tory figures, Lib Dem MPs and opposition politicians in open revolt. The intervention of the London Mayor Boris Johnson was quite extraordinary, and with good reason. Implementing these proposals will at a stroke undermine mixed income communities and increasingly lead to poverty ghettos in the imperial capital. The effect in Wales will be no less felt, the Department for Work and Pensions itself admits that 48,530 people will lose out under the reforms.

The Housing Benefit bill rocketed 50% in the past five years alone, primarily fuelled by the boom in house prices and the legacy of thirty years of Tory and Labour failure to invest in building public housing. Consequently the UK and Welsh Governments have become increasingly reliant upon the Private Rented Sector to deliver its housing strategies. At the mercy of inflated rents it was inevitable that the HB bill would increase.

The UK Government’s proposals to limit HB to £400 a week for a four bedroom house and £290 for a two bedroom flat, aim to save £2.5bn annually. Interestingly, the debate around the proposals is centred on fairness. The argument of the UK Government seems to be based on the unfairness for people not in work to be able to afford rental prices in areas ordinary working people can’t afford. Proponents also argue that limiting HB would have minimal effect as reducing benefit levels would drag down rental values.

On the other hand housing charities warn that the effect of the plans will be to drive people out of their homes, increasing homelessness levels or in the very least forcing people to make ever increasingly difficult decisions around food, heating and rents costs – driving more people into spiralling debt. Shelter estimate that as a result of the changes, only a third of all homes available for rent in the private rented sector will be affordable to those in receipt of housing benefit.

There is another way. The UK Government could reduce its Housing Benefit bill without the negative social justice impact of its current proposals. In 2004 the Government of the Republic of Ireland introduced the Residential Tenancies Act. A Private Residential Tenancies Board was set up to deliver the reforms.

Its aim was to regulate the private rented sector by extending the length of tenure towards a more European model; clearly defining rights and obligations for both landlords and tenants; providing access to inexpensive dispute resolution; safeguarding bond payments and crucially capping rents.

By placing a cap on rents and driving down artificially high rental costs the Government would have direct control over its housing benefit bill in terms of Local Housing Allowance payments. This would mean that the UK Government could reduce its liabilities without short changing some of the most vulnerable people in society. It would also mean that working people would have a better chance of affording rent costs in some of the more affluent areas of city’s such as London – stopping the Diaspora of the middle classes to the suburbs as lamented by right wing commentators.

Rent Caps have been a fixture in New York since the 1940s. It’s an old policy intervention whose time has come again. Considering its implementation by the Republic of Ireland at the height of its economic boom, it can hardy be seen as some sort of socialist plot to undermine free enterprise.

Of course the long term solution as Plaid’s Welsh Government Housing Minister, Jocelyn Davies, has identified is to increase the provision of affordable housing.

The UK Government should acknowledge they’ve got this wrong and put in place a comprehensive plan to deal with the Housing problems caused by decades of Tory-Labour under investment. Regulating the private rented sector in the short term would be a significant step forward.

2 Responses to “The UK Government Have Got it Wrong on Housing Benefit Reform” [latest first]

  1. the housing benefit bill is far too high, and this issue needs to be rectified.

    the problem is not the people who claim, rather its the people who rent, there needs to be a way of controlling the rent charged. its ironic that many of these rent to buy landlords are those people who have access to high bonuses. yields on the oroginal investements are far higher than bank interest.

    in west wales outsiders are pouring in , buying their homes and then purchasing another home to supplement their income. affordable homes is a joke, rent levels are making people cash poor, and often housing benefit is not paid in full. capital gains tax needs to be increased on second home owners in the hope that housing costs come down..

    we also need restrictions such as there are in the yorkshire dales to protect local people from wealthy outsiders.

  2. Housing in the UK is in a total mess after Thatcher’s right to buy short sell. For today, forget tomorrow capitalism for The City, and we were conned. Same with Friends Building Societies that were allowed to turn into current banks for a quick buck for all, mainly again, The City. Before that it was the asset stripping of engineering companies all over the land at the start of the 1980s, again, by The City. And where was oil wealth off Scotland pipelined to? Yes, again, The City! Give me strength!

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