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Capping the benefit

Karen Buck on the homelessness, poverty and social dislocation arising from housing support cuts.

It looks like an easy target, of course. Even those prepared to defend the case for keeping a roof over the head of families in areas like inner London are not necessarily seeking to make the case for handing over large sums of public money to private landlords.  A cluster of media stories about workless households in attractive homes in expensive neighbourhoods, and that is it- time for a fundamental policy review!

Hence the government decision to introduce new caps on the total amount payable through the Local Housing Allowance system to private tenants - one of a package of cuts to Housing Benefit coming in from April onwards.

But reality is rarely as simple as government wants it to be, and that is certainly the case here.

Perhaps the most important thing to be said about the deep cuts which will soon start affecting private tenants is that the 'cap' on maximum allowances, which has occupied so much of the media attention, represents the merest sliver of the total savings. By far the larger cuts (rising to £415 million) come from entitlements for private tenants across the whole country, as they will be allowed to get assistance with rented property in only the cheapest 30% of each local area, rather than the cheapest 50% as now.  The de facto inner London cap saves a much smaller £65 to £70 million.

Tenants receiving Local Housing Allowance, close to half of whom are either in employment or moving in and out of the labour market, will suffer real pain in almost every region of the UK.  Nor are the consequences simply personal- the OECD criticised the policy on the grounds that it could reduce labour mobility just when the economy needed it most. A crackdown which, for example, pushes workers and potential workers out of areas with employment prospects and towards lower cost areas without job opportunities makes little sense.

Government ministers repeat the mantra that Housing Benefit expenditure is 'Out of control', quoting the increase in spending over the past decade. It will, indeed, be possible to quote eye-watering figures for rentals in places like London and South East, and find some unsympathetic examples  which no sensible person would want to defend, to support the case for radical surgery,

Yet cooler analysis provides grounds for caution. Recent rises in expenditure have, in fact, reflected changes in caseload, as larger numbers of low-paid working households and the unemployed have turned to Housing Benefit to ensure that a drop in earnings doesn't also mean losing their home. This is exactly what a modern social welfare system is meant to do, provide support and security for people during difficult times.

Meanwhile, (and largely back in London), there are further twists. In recent years, there has been an increasing tendency for councils to place their homeless families in privately rented flats, a fact which did wonders for the homelessness statistics, but little to solve the underlying problem. Last year alone, 60,000 plus households were helped in this way. Should their new homes be denied to them on the grounds of affordability, they will simply be forced to present as homeless again.  Even Boris Johnson could do those sums and found that the costs of the homeless outweighed the potential savings!

But perhaps the most damming critique of the whole policy has come from the government's own impact assessment, which mapped out the potential for 'an increased numbers of private rental evictions, increase in debt recovery, homelessness and insolvency applications as a result of this policy' together with 'wider impacts on the wellbeing of families and children which it is not possible to quantify. Families could be affected by overcrowding particularly where they downsize to find affordable accommodation. This could have an adverse affect on health and mental well being. For children, particularly those of school age, overcrowded conditions could hamper their ability to do homework and affect educational attainment. Extended families may need to set up separate households, this could increase elderly care burdens on social services departments or affect the ability of non-dependant children to stay at home and attend further education... Families that require additional support, for example those with a history of anti-social behaviour who require rehabilitation through social services intervention could be forced to move. This would not only affect the wellbeing and stability of the family but could also have knock-on impacts for their new neighbourhoods.'

Oh, and did I mention that the Office of Budget Responsibility calculations, based on expectations of future job losses, predicts a rise in HB expenditure anyway, as more people are forced to claim help? Or that the rent rises being driven within the Department of Local Government and Communities cuts right across the stated aim of reducing spending on using support by the Department of Work and Pensions?  

Since the early 1980s, when the then Conservative government slashed capital spending on housing and announced that 'Housing Benefit would take the strain' in, the two strands of policy , housing investment and policy and support with housing costs, have been viewed in isolation. A radical reform agenda is certainly needed, but it must address that dichotomy or it is likely to fail. None of us want to use public money to subsidise private landlords or high rents, but the point is, to deliver a viable alternative without unfortunate unintended consequences.

So, easy target that Housing Benefit may be, that doesn't mean hitting it lands you a prize. From increased homelessness to a squeeze on labour market mobility, from massive dislocation to increased financial pressure on low income working households, the risks of this going wrong are profound and alarming.