Posted by: Isabel Hardman
26/07/2010Helen Williams, assistant director of the National Housing Federation, offers alternative suggestions for reforming the housing benefit bill.
Of the 4.7 million households claiming housing benefit, 76 per cent are retired or not expected to work due to illness, disability, or caring commitments. The remaining 24 per cent of claimants are of working age and expected to work, with 540,000 (50 per cent) in employment.
Supporting households with their housing avoids the massive social costs of squalid, overcrowded housing conditions. The Federation is convinced about the need for reform but very worried about the piecemeal range of reforms announced in the budget.
The system would be more effective in helping people back into work if housing benefit for working families was integrated within a tax credit system – this would remove the double impact of benefit tapers, reducing the worst marginal tax rates by over 20 per cent.
It would help make progress towards the Government’s long-term objective of creating a single working-age benefit and give people a wider choice of ways to meet their housing requirements.
The most effective way of reducing the burgeoning housing benefit bill is to invest in more affordable housing. This will secure savings for years to come. We are calling in our joint CSR submission for investment to provide 150,000 new affordable homes; had these been in place today, the annualised saving to the taxpayer could have been as much as £250 million in lower benefit bills.
We are calling for no further cuts to the amount available for spending on housing benefit until a public review of help with housing costs has been held and reform ideas tested.
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From What's the benefit?
The blog for our What’s the Benefit? campaign, which is calling on the government to find a fairer way to reduce the £21 billion housing benefit bill than its current proposals.
Readers' comments (10)
Sidney Webb | 26/07/2010 12:56 pm
All good stuff, but why limit the target for new homes to 1/3 of what is immediately required. Also setting a target for new homes without a deadline is never useful.
The point that providing affordable homes saves money in the longer term will be hard for some on this site to digest, so it is great that it has been made as it is true. Likewise the fact that there are a considerable portion of tenants of working age and health who are in work.
Challenging the propaganda and misinformation as well as setting an alternative path is positive.
The proposal itself is difficult to get excited about. In principle it is good and sensible, and the taper effect tremendous, asssuming that the tapering is not combined in which case it would be as bad. The main difficulty is the issue of direct payment, which still divides the sector and is considered crucial to social landlords suceeding in collection. That therefore is the main stumbling block to the proposal.
In terms of private rents, pegging them to public rents is the only viable long term solution to the massive benefit cost associated with this part of the sector.
In terms of the benefit bill for the social housing part of the sector, rents are already as low as they can go without increased subsidy, which goes against the targeting principles for social support that have been in play through successive governments, including the current one.
Therefore, addressing housing benefit in isolation of the entire welfare system would be least productive. It may be that the principle of universality needs to be reintroduced to replace targeting.
The call upon housing benefit is directly linked to the low level of wages paid. Increasing the income of the lowest earners will reduce the requirement for housing benefit. However, achieving this through a tax credit style initiative is simply moving benefits around. Increased minimum wage levels, such as called for by the London Mayor among others, will lead to real benefit reduction and eventual lowering of tax requirements.
But this would be an interventionist approach, disallowed by the free market idol.
The simple fact is that unless basic poverty, low wages, and excess profit issues are addressed simultaneously we will only be shuffling the problem around without solution.
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raj kumar | 27/07/2010 8:25 am
The simple fact is that unless basic poverty, low wages, and excess profit issues are addressed simultaneously we will only be shuffling the problem around without solution.
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raj.kumar
google
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Alpha One | 27/07/2010 9:46 am
Tax credits just create unnecessary jobs in the economy. You pay tax which is then given back to you.
A more effective, cheaper system is to alter the personal allowance so you pay less tax in the first place.
This takes a cost out of the economy that can be used elsewhere.
That aside, the proposal is a good idea for people working. It provides a solution to the problem of people taking cuts to go into employment.
You could taper the relief so that over 12 months it progressively decreases in line with the workers pay, if the pay doesn't go up then the benefit will remain for a further 12 months, but that would be it.
We need to tailor job seekers so it pays people to go back to work quickly, and stop in work. So small punishments for quitting, but rewards for finding new jobs quickly.
It has been proven that the stick approach doesn't work, punishment never changes behaviour, but positive reinforcement can. It's not to say there should not be punishments, but if you reward good behaviour and create an ideal, you are more likely to get the behaviour you want.
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Anonymous | 27/07/2010 10:00 am
PSR
You are obessesed about capping rents! It will not happen.
Everyone keeps talking about so called 'affordable housing' can someone please explain what exactly 'affordable housing' is?
Affordable to who? The unemployed? Low income families? Is it Shared Ownership? Homebuy Direct? Council housing? I do know that when Chelsea Barracks is complete, there will be an element of 'affordable housing' there too? Again i ask the question Affordable to who? It certainly won't be to someone who is earning less than £50k per annum!!
If we are on the subject of rent caps, why not restrict the purchase of properties to one per person? That why prices would be cheaper and available to all.
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Chris | 27/07/2010 10:32 am
Affordable is as expressed as a proportion of a persons' income. In general terms then an affordable home will be affordable to a person on average earnings.
Generally therefore affordable tends to be homes let through social rent. That would include low cost shared ownership schemes. However, the point made about needing £50k per year to stand a look in is not invalid. London weighting as paid to general staff has long since ceased to cover the additional affordability cost of the city. Strangely, unless it has changed recently, the weighting paid to some public servents is considerably higher, although I do not know why this should be so.
I think that the concept of house purchase on the basis of need may be a step too far too fast, but there is merit in the effect such a policy would have on housing supply. I can appreciate why you remain anonymous in such a suggestion as the howls from the free marketeers will be ear piercing!
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Anonymous | 27/07/2010 10:39 am
Why do you require a deposit when buying this so called 'affordable housing'? Surely the whole point is most people just cannot save the 5 or 10 per cent required. Shared ownership operates like this and i don't understand why?
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Michael Read | 27/07/2010 3:25 pm
Rather than lard herself in moral righteousness, Ms Wiliams might have been better advised to make a Big Issue type plea to the taxpayer - "Gissa money so I can keep my job".
The real agenda of the National Housing Federation is revealed in the story on Connaught in the news section on the site.
It's bust with more debts than cash in the bank, it's got no work and its suppliers are refusing to do so unless they get the readies.
I reckon the days of getting wads of taxpayers' cash for knocking out Barratt boxes at 25% net profit are well and truely over.
The poor have suffered enough from Ms Williams.
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Chris | 27/07/2010 10:48 pm
Anonymous | 27/07/2010 10:39 am
If they can not save a reasonable deposit then they really should not be considering such a major purpose. However, what choice does someone have when renting is not an affordable option either, because of no available social lets and too dear private lets. In these cases people need saving from themselves and the sort of mortgage sharks and advisors who bred in such large numbers through the 80's and 90's.
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| 28/07/2010 7:36 am
Alpha One: "A more effective, cheaper system is to alter the personal allowance so you pay less tax in the first place."
Spot on. Nobody should pay income tax on the first £10K-£12K. Tax credits encourage overbreeding and discriminate against single people big time. It was another bribe from Gordy to encourage people to become dependent on State hand outs and so vote Labour. Didnt work this time and they should be scrapped.
Re deposits a 10% deposit is reasonable and the banks need to return to issuing 90% mortgages in order to get the market moving...
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Anonymous | 28/07/2010 4:26 pm
ILAG - I don’t know about over-breeding but am aware that the cost of some parents going to work was hard on the public purse too - up to 80% child care fees paid and other allowances. Obviously these hard working parents should not be condemned to the dole queue but the subsidy to these families is another name for a social benefit, costing much more than JSA for the individual if they weren’t working.
Getting the market moving - a small flat £150k, less deposit would still require an income of 4 x £34k plus fees. People hate the RTB word and TIS but I think there is mileage in a portable allowance for those that can prove work contract, thus freeing up a social home almost instantly and moving the market too.
Anonymous - Affordable Housing. Compared to what? S/O flats that the ‘owner’ will never fully own along with RSL standard block management. S/O for many now is targeted at the £50k plus as you’ve already stated - even they would have ‘no chance’ re: fully owning these flats at £300k. Another name for glorified rental?
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