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The Chartered Institute of Housing is the independent voice for housing and the home of professional standards

Shift spending from benefits to building homes and tackling unemployment

15/09/2014


Shifting spending from housing benefit to house building and tackling low pay and unemployment is the best way of lifting people out of poverty and cutting the housing benefit bill, according to a new report.

Grainia LongThe report, from the Chartered Institute of Housing (CIH), concludes that short-term measures that cut the amount of benefits people can receive (such as the bedroom tax and the benefit cap) do nothing to tackle the causes of welfare dependency and are unlikely to have any significant impact in reversing it.

Using 2013/14 prices, spending on housing benefit has risen from £16.5 billion in 1996/97 to £24.4 billion in 2012/13 – a 48 per cent real terms increase. CIH said the main drivers are increasing rents (for both private and social rented homes), the growth in insecure employment (such as zero hours contracts) and the falling value of wages (in real terms).

The report recommends a fundamental shift in housing, labour market and regional policy, including:

  • Substantially increasing investment in low-cost rented homes that are genuinely affordable, partly through increased grant rates for new social homes and partly by allowing local authorities to borrow more so they can build more homes
  • Making sure that housing and welfare policies are more strongly linked to meet the common aim of helping workers escape welfare
  • Allowing councils to use more of the cash from right to buy sales to make sure that every home sold is replaced by a new one for social rent
  • Scrapping the bedroom tax
  • Creating regional grant rates and rent-setting mechanisms to reflect the country’s widely differing housing markets
  • Making consideration of current and future rent affordability for local workers a key element in the assessment criteria for the social housing grant bidding regime.

Since 1996/97 there have been two major economic downturns and, in the immediate period after each crash, housing benefit spending has risen sharply as unemployment rises and peaks. But the report argues that the bigger cause for concern is that spending failed to fall off significantly during the periods of growth in between.

The biggest factor is the increase in rents that claimants have to pay – not only in the growing private rented sector but in the social rented sector because of a combination of rent restructuring, successive above inflation rent increases and more recently the shift towards market-based housing such as new tenancies under the ‘affordable housing programme’ which are let at up to 80 per cent of the market rent.

And the growth in insecure employment and the falling value of wages means that benefits are increasingly subsidising low pay - the number of people in work who still have to claim housing benefit has more than doubled from around 445,000 to just over a million in the last five years.

CIH chief executive Grainia Long said: “The housing benefit bill has increased so significantly because of the problems in our housing and labour markets – we need to tackle those issues rather than relying on stop gap measures which at their worst can increase poverty and misery for already poor and vulnerable people.  If the government really wants to cut welfare spending, it should be subsidising the construction of genuinely affordable homes not housing benefit.  Combine that with action on low pay and unemployment and we have a chance to create a welfare system that works for the long term.”

Read the full report

Find out more and hear from the report's author Sam Lister at our latest event on welfare reform on 17 September in Southampton.  Book your place


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