One of the jobs of university faculty is to read the riot act to students who are failing. My job today is to read the riot act to you, the reader. This summer, Inside Housing set you all the task of working out how to reduce housing benefit without driving people from their homes. I have read your responses, and to be honest, you’ve failed. It’s retake time.
Let’s look at some of the ideas that have come in. Yvette Cooper deserves an A* for cheek, but absolutely nothing for achievement. In her recent interview with Inside Housing she suggested that the government should create an integrated benefit that combined housing benefit with other benefits. I fell off my seat - after all, Yvette Cooper was secretary of state for work and pensions, before that she was chief secretary to the Treasury and before that minister of state for housing and planning.
Benefit of hindsight
In short, she had three years in which she could have done this, or at least argued for it, worked up some plans, and so on. But no, she waited until she was out of office before suggesting it. Tip: if you want to be an effective minister, come up with the ideas while you are in office, not after you leave.
Nor will this suggestion, in itself, save any meaningful amount of money. After all, the idea is to save money without driving people from their homes. You might save a bit on administration, but, ultimately, that is small beer.
Ms Cooper also says that the most expensive properties in an area should be excluded when we work out the median rent. That has some merit, but let’s be clear: the only way it saves money is by making some properties that are currently below the median above the new ‘median’, so that people who live in those properties have to move out. The result is a lower housing benefit bill, but only by driving some people from their homes.
Even fewer marks go to her new boss, Ed Miliband. Somewhat surreally, he declared that he wanted social housing to become the tenure of choice. Social housing is costly to the taxpayer and we don’t have enough of it. In that context, how is increasing demand going to help?
Former London mayor Ken Livingstone has weighed in by proposing to reinstate rent controls. For younger readers, that means that the government simply bans landlords from raising rents. I wasn’t surprised that Mr Livingstone suggested this, but I was a bit more surprised when one cabinet minister told me that he thought this was the only way forward, at least for a few years. But rent control only ‘works’ if tenants have security of tenure. Otherwise the landlord can simply tell the tenant to leave and sell the property. That is self-evidently what will happen. How that helps anyone is quite beyond me.
What does it all mean?
The Conservatives are not doing much better. Steven Greenhalgh, leader of Hammersmith & Fulham Council, told Inside Housing that ‘the answer is giving greater powers to councils to allocate housing benefit according to local needs’. Now what does that mean? More precisely, who is Mr Greenhalgh going to take housing benefit away from?
Housing professionals are not excelling themselves either. Helen Williams, assistant director of the National Housing Federation, in a joint submission with the Chartered Institute of Housing, called on the government to build 150,000 new affordable homes. She argued that were this done, the housing benefit bill reduction could be ‘as much as £250 million’. But saving £250 million is trivial in the context of cutting a £20 billion bill. To save £5 billion, the sort of figure government would be interested in, would mean building 3 million social houses. Even if the land was free, that would cost around £200 billion, which is never going to happen - not in your wildest dreams.
Others in the housing association world have suggested that they should be allowed to raise rents and use the proceeds to build more houses. But with some three-quarters of tenants on housing benefit, that is effectively a request to central government for more housing benefit upfront, in order to cut it in future years. Just like the NHF/CIH suggestion, it doesn’t really stack up.
In all of this, the only possible ray of light comes from Grant Shapps. There was much talk before the political conference season of prime minister David Cameron addressing the Liberal Democrat Conference, and deputy prime minister Nick Clegg the Tory one, but - quite rightly - that did not happen.
Party conferences are pretty tribal affairs and best left, in the main, to members of the tribe. But full marks to Mr Shapps, who spoke at a Centre Forum think tank event at the Liberal Democrat conference. In his speech he said explicitly that he thought Britain would be a better place if house prices did not rise in nominal terms over the course of this parliament.
The price is right
That is a brave thing for any politician to say, because rising house prices are widely - and in my view wrongly - seen as a good thing. So for Mr Shapps to argue the opposite is very promising. Nor is he the only voice on the right to say that - Neil O’Brien, head of the Cameronian think tank Policy Exchange - argued in the Financial Times recently that Britain needed to build more houses, so that house prices fell. Rumour reaches me that some of his board choked on their claret when they read his piece, but he was right: lower house prices would be good for Britain, and they would lead to lower housing benefit bills.
So, now Mr Shapps has to make his deeds match his words. No housing economist I know thinks that the incentives Eric Pickles and Mr Shapps have announced will be sufficient. All think that they will lead to lower housing starts and, therefore, higher prices in the medium term. So the next question to Mr Shapps is this: how many housing starts do you estimate are needed to stabilise house prices? And what will you do if your incentives lead to fewer housing starts than are necessary?
Now back to work, everyone.
Tim Leunig is an academic in the department of economic history at the London School of Economics