The benefit cap & social housing — February 28, 2012

The benefit cap & social housing

Is an increase in social housing the answer to the benefit cap debate?

My regular followers on Twitter will be sick to death to hear me once again talk about the benefit cap. But when my dissertation is partially on the benefit cap, what can you expect? I have blogged about the benefit cap in the past, as have many others.

This week has seen a bit of a revival in the debate, especially in The Daily Mail who as ever, is on a crusade against “benefit scroungers”. Yesterday they ran a story about how over 100 people are claiming so much in housing benefit that they could easily afford to be paying a mortgage valued in excess of £1m.

Shocking headlines like that invoke a reaction for sure. Firstly we shouldn’t victimize existing tenants who “are costing the tax payer so much in housing benefit”, it is not explicitly their fault that the Government pays such ridiculously high rents on their behalf. (They could try getting a job, as many Daily Mail readers would fall over themselves to suggest). The real issue that has to be tackled is the housing benefit itself.

The benefit cap of £26,000 a year has caused a lot of debate, yet if you look closely in many instances, especially in the South East and London the bulk of a claimants benefits are incurred by housing benefits. £400 a week (the cap on housing benefit to come in) is nowhere near enough to cover rents of existing tenants in these places. “To live in Kensington is not a right, but a privilege.” – this is a line often used to ignore the rights of those existing tenants, one I myself have been guilty of suggesting.

I am not suggesting that the Government should continue paying the rents of these people, but to attack them personally, is a redundant argument. They are not to blame for the lack of rent control on housing benefit and spiralling costs of housing.

And herein lies the crux of the problem. There are NO rent controls on housing benefit. Private landlords have been allowed to charge rents as high as they choose and the Government has continually been paying them. There should be no way that the Government pays £5,000 a month in rent for anybody. In fairness to the private landlords, they are simply following the capitalist, free market approach, they aren’t to blame for garnering as much profit as they could.

So should we have rent controls? No. I don’t think this is idea either. Rent controls are illiberal, I’m not in favour of state regulation on the whole. It would force private landlords out of the market in the long run as their profits would be eroded, and the availability of housing would fall even more.

So what should the Government do? It should create more social housing. Yes, this would increase Government spending in the short term, but it would drastically reduce its spending in the long-term. Gone would be the days when the Government paid out £1,000 a week rents for housing benefits. Gone would be the days when housing benefit cost the country £20bn+ a year.

An increase in social housing would be to every taxpayers advantage. With expensive rents no longer being paid by the Government and claimants relocating  to social housing, private landlords would have to reduce their rents to compete for customers. The housing market could once again become competitive, something that hasn’t happened since the housing bubble boom.