21 July 2010
Cutting Housing Benefit will not only affect those families that rely on it, but could widen the poverty gap and affect the recovery, says Campbell Robb
Four weeks after the Budget, the extreme examples of proposed welfare cuts continue to dominate some elements of the media. The reality is that Housing Benefit cuts will strike at some of the most vulnerable in our society and have far reaching effects on our wider economy. And, with unemployed people constituting only one in eight of those that receive Housing Benefit, the rhetoric of tackling worklessness is just a red herring.
From next October, more than 1 million households face a devastating blow to their household finances when the rate of Local Housing Allowance is cut. Over half of these households already make up a shortfall of at least £100 a month to pay their rent. After the changes come in, pensioners, carers, disabled people and those on low incomes who make up the majority of LHA claimants will face an even greater challenge.
On top of this, the National Housing Federation has warned that the proposals to reduce Housing Benefit for those on Jobseeker's Allowance by 10% after a year could put a further 200,000 at risk of eviction.
The government says its cuts to Housing Benefit will save £1.8bn at a time when we desperately need to bring the welfare bill down. But all the signs point to an even bigger social and economic in future. Shelter has warned of the social upheaval when people are forced to leave the areas they grew up in and migrate to the edges of our cities in search of cheaper accommodation. Long term, this could create clusters of poverty and inequality, creating an even bigger gap between rich and poor.
And even more children will be pushed in to overcrowding as larger families on Local Housing Allowance downsize into smaller, cheaper properties. This leads to greater ill health and adverse effects on education and social development.
All this is set to get even worse in 2013 when LHA rates will be pegged to the consumer price index, a national measure of inflation that monitors the cost of items such as toothpaste and cereal, rather than rental costs in the local area. Over the last decade, rents have risen by 65% while the CPI rose by only 17%, showing just how far rents are going to outstrip LHA payments in years to come.
So, what alternatives are available? The truth is that there are no quick fixes. The Housing Benefit bill has sky rocketed from £11bn to £17.3bn in the last ten years. At the same time, investment in social housing has halved, which has forced councils to house families in the private rented sector, where rents are almost double those in the social sector. The savings could be significant if all LHA claimants were moved into social rented housing. Ministers must ring-fence investment in more affordable, particularly social, housing.
Housebuilding makes good economic sense. Recent research by Shelter showed that every £1 invested in housing returns at least £3.50 to the wider economy, and that every home built creates one and a half jobs. Meanwhile, public sector capital investment in housing is playing a crucial role in supporting the housebuilding industry as it recovers from the recession.
Pulling public investment therefore means less jobs and less growth at a time when our economic recovery is still fragile. As well as this, there is the loss of housebuilding skills, which took a decade to recover from the last recession.
The housing minister has announced a further £220m of cuts to the Homes and Communities Agency this year, on top of £150m already cut from the National Affordable Housing Programme in May. This could mean a reduction in housing capital investment of up to £370m in 2010/11, which Shelter estimates will lead to 6,150 fewer homes built, 9,200 job losses and a cost of £1.3bn to the economy.
Grant Shapps has said he wants Britain to become ‘a nation of housebuilders’. He must ask himself whether this can ever be achieved with any further cuts to investment in new homes. The government must also ask itself whether it’s really fair to make the most vulnerable in our society pay the price for our failure to build enough affordable homes.
Campbell Robb is chief executive of Shelter
