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Latest Housing Benefit figures – £4bn over target and PRS largesse

Joe Halewood argues that it is time for a radical rethink of housing benefit policy and the private rental sector's role

The day before yesterday, the latest official Housing Benefit figures were released by the DWP.

These detail the position at 12 January 2012.

As I have said before - why do we need a three-month lag on official figures for HB when we have just a one-month lag on unemployment figures, which were also released? This is puzzling and simply tardy.

1. Claimant count - 4,976,210 now claim and receive HB. This is up 23,950 from the previous month and an increase of 142,740 year on year - a year on year increase of 2.9%

- Of the total count, 67.6% reside in social housing and 32.4% in the private rented sector (PRS)

- Of the 23,950 monthly increase from December 2011 to January 2012, 13,120 or 55% reside in the PRS

- Of the yearly 142,700 increase in claimant numbers, 91,220 come from the PRS or 64%

The ever increasing role the PRS plays in rented housing is there for all to see. 

The average payment to PRS tenants is 41% more than to a social tenant at £108.18pw to £76.56. This added cost of £31.62 per week for less secure and often lower-quality PRS accommodation is paid to 1,613,200 claimants, meaning us, the taxpayer, fork out £2.7bn more per year for PRS properties than we do for social housing ones.

This £2.7bn is revenue subsidy in the unregulated PRS - yet it is rarely mentioned when anyone talks about housing ‘subsidy.’

It needs to be discussed and viewed in that context.

If we compare LHA directly to council house HB, we see a 54% difference from £71.27 to £109.86. Put simply, we pay £38.59 more per week for each PRS property than we do for a council property - in a year, £3.25bn more for a lower quality product.

Yet again, all we read is that social housing is subsidised with capital grant. There is no discussion of the opportunity - or alternate cost - of paying £3.25bn more in revenue subsidy to the PRS than we do to council housing. That lack of discussion is not healthy - and it is especially not healthy for the public purse bill.

Even in these straitened times of austerity, housing is unique in that political arguments defeat economic ones.

Refusing to regulate the PRS, the lack of invest to save in social housing and letting “HB take the strain” has a massive economic cost.

2. HB overall cost – the total HB bill is now £22.6bn. This comprises the 4,976,210 claimants each receiving an average weekly payment of £86.86. This is a year on year increase of £1.2bn from the January 2011 figure of £21.361bn to £22.553bn.

3. HB target cost – the latest cost of £22.6bn is over £4bn more than the target cost of circa £18.5bn set by the Coalition in their June 2010 announcement.

Target Cost of HB – In June 2010, the overall cost target for the HB reforms was save ‘nearly £2bn’ by 2015 from the then-known February 2010 figure of £20.48bn, giving a Coalition 2015 target of £18.5bn.

The latest figure of £22.6bn is therefore more than £4bn per year over the Coalition target

That is chronic mismanagement and economic incompetence by this Coalition.

In every other area of welfare spend, we see "feckless workshy claimants" being blamed for the benefit cost.

In housing, we even see "workshy" tenants being blamed for the social housing element of the HB bill - they are all [said to be] underoccupiers taking advantage of a scarce national resource - indeed a privileged one - and so the "feckless workshy social housing tenant" is having housing benefit reduced with the bedroom tax.

This - according to government ideology - levels the playing field with the private renting tenant who is paid on average 54% more in benefit than the council house tenant!

The HB statistics only need a cursory glance to reveal the chronic incompetence of paying so much more in ever-increasing revenue subsidy for privately-rented properties.

Where else does government, or even an individual, pay 54% more for an inferior product?

It’s time for a radical rethink of HB policy and time to regulate the largesse of the PRS.

UPDATE 19 April 2pm

Just a quick update on the ‘subsidy’ issue. In the last week or so, it has been mooted that social landlords should get used to receiving no capital grant subsidy in the future.

If this ever comes to pass, then all social landlords could not be said to be public bodies - and why would they not then raise rent levels to those in the private sector? After all, they deliver a better product, so let the market reign and we would see 1.46m council rents rise by £38.69 per week and 1.9m HA rents rise by £29.31 per week.

If councils and HAs received the same benefit level as PSLs, the HB bill would rise by £5.85bn per year.

In other words, the investment in capital subsidies saves £5.85bn per year in HB revenue subsidy – over £29bn per parliament.

If that isn’t an invest-to-save policy, I dont’ know what is!!  Yet why is the social housing sector not making that argument? Why is there no discussion of this with the CLG or the DWP in the public arena?

As I mentioned above, housing is only discussed in political ideological terms and not in economic terms – that needs to change too.

If social housing is a privilege as the Coalition maintains forcefully, then it should be apolitical.

It shouldnt see the defence of the merits of social housing being perceived as a left-wing argument (ie a political one) which it always is.

Social housing is an economic argument of invest-to-save, not some dinosaur from a byegone age that is out of place.

Shapps is calling for ‘transparency’ at every turn - yet his glasshouse, just like his ideology is opaque. Time for a rethink!

From Joe Halewood's blog at SPeye.

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