Even working households need help to pay for ‘affordable housing’
Rises in social sector rents undermine work, welfare reform and deficit reduction.
The headline finding in last week’s English Housing Survey was that there are now more private rented households in England than social rented. The implications of private rented sector growth and a shrinking social rented stock is something we have written about before. But another key finding, at the bottom of the same page of the report, has been much less widely reported: “There has been a steady increase in the proportion of working households in the social sector in receipt of housing benefit”.
The number of working household in the social rented sector that claim housing benefit has increased from 245,000 to 411,000 in just three years. Meanwhile, the total number of working households in the social rented sector has hardly changed. So, a large number of working households who previously didn’t need housing benefit now do so.
Given how little pay has risen over this period, as well as the number of people only working part-time because they cannot find a full-time job, some increase in the number of working recipients of housing benefit was to be expected.
But the speed of the increase is surprising. What lies behind it? Another part of the survey suggests a big part of the answer: the average rent paid by social renting households has increased by 20% in four years (from £68 per week to £83 per week).
Since social sector rent increases are largely determined by government policy, the increase in the numbers of working social renters receiving housing benefit has been caused by the government. So why would the government permit a rental increase if it results in an increase in the housing benefit bill?
Increasing social rents saves public money as those households with the means to do so meet the additional rental cost through their own pockets. Despite some increase in housing benefit expenditure, the rent increase on the whole transfers money into public sector (government and social landlords). During a time of austerity, there is a certain logic to this. But the negative side effects are considerable.
First, a rent rise leaves working households in the social rented sector worse off. The big increase in the income tax personal allowance since 2011 is good news for low earners. But the increase in social sector rents means that what is given with one, highly publicised, hand is taken away with another.
Second, people in receipt of housing benefit have a very poor return from working a few extra hours or getting a pay rise. At least two thirds of their extra earnings goes back to the government as housing benefit is ‘tapered’ away. Reducing the high ‘taper’, which undermines work incentives, is one of the principal reasons for introducing Universal Credit. But increasing social rents means that many more are caught in this ‘benefits trap’ in the first place.
Third, increasing rents increases the housing benefit bill, both out-of-work and in-work. Here is a real cause of the rising welfare bill which the government is indeed addressing … by making it worse.
The cost of renting now lies at the root of a whole raft of problems to do with work and public spending. The trouble is that government contents itself with treating the symptoms only. Our forthcoming report for Shelter on the impact of Local Housing Allowance changes in London shows the detrimental effect this is having on low-paid private renters in London. The data from the English Housing Survey shows the social rented sector is facing the same problems.
All three of these adverse effects betray the incoherence of government policy, rises in social sector rents undermining tax cuts for the low paid, welfare reform and, by driving up the housing benefit bill, austerity itself. Only when a government comes along that is prepared to do something about the rented housing market will this begin to change.