By Brian Madican
If government wanted to save £27 billion in housing benefits, it should first build council housing and then scrap Right to Buy.
Crunching the Numbers
We are paying out approximately £27 billion in Housing benefits each year according to a report described in The Big Issue. The Department for Work and Pensions’ statistics show that there were 4.2 million recipients of Housing Benefit (HB) at May 2018. The majority (70%, 2.9 million) were tenants in the social sector and the rest (1.2 million) were in the private sector.
Temporary accommodation – photo courtesy of Justlife Foundation
Between April 2022 and March 2023, councils also spent a whopping £1.7 billion on temporary accommodation for homeless households. A paper published by the Library of the House of Commons states that there were 94,870 households in temporary accommodation at the end of June 2022.
From these figures it is possible to draw two conclusions. Firstly, that building 100,000 council houses for the people in temporary accommodation would save around £1.7 billion per year. Secondly, that building one million council houses for a quarter of the 4.2 million people claiming Housing Benefit would shave approximately £7 billion a year from the £27 billion bill.
The figure is approximate because some of the people in the UK’s current 1.6 million council houses might still need to claim Housing Benefit. The saving therefore may not be exactly £7 billion, but it would be in this region. However, it is also true that any Housing Benefit paid to council renters is returned to the public purse via the council. This is unlike benefits paid to subsidise renters in private or housing association (HA) accommodation which goes towards the profits of private landlords and housing associations.
A Manifesto Commitment
In its manifesto, the Labour Party committed to building 1.5 million homes over this parliament, 2024-2029. This will no doubt help, but these homes are not going to be snapped up by the poorest in society.
Ideally the government needs to borrow and invest in building council homes.
Building one million council homes would solve the temporary accommodation issue and shave approximately £8 billion off the UK’s annual Housing Benefit bill. The money saved could then be invested in more council homes to achieve greater savings.
Photo courtesy of Labour List
In addition, the physical, mental and emotional life of the men, women and children living in temporary or substandard accommodation would be vastly improved through living in more secure homes.
The Right to Buy council houses should be done away with so that councils can benefit by building up their housing stock. As one critic of Right to Buy asked “Who would invest in building a house if they had to sell it a few years later for 50% of its price?”.
Adding Rent Caps
There are further steps that government could take to rapidly reduce the housing crisis. Government could move towards capping private rents instead of allowing them to rise multiple times in a single year, usually after a landlord has exercised a no-fault eviction.
And where rents are capped for social renters and shared owners, the formula is based on inflation instead of being pegged to average wages. One further measure to make sure that housing costs do not act as such a drain on either the benefits bill or people’s budgets would be to devise a social rent formula based on actual earnings instead.
What all this adds up to is clear evidence that the housing crisis and the misery it causes is neither inevitable nor unavoidable, but the consequence of decisions made by successive governments. It is our task to make sure that alternative approaches are demanded, and to keep doing so until we force decision-makers to listen.
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20 October 2024
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