By Dan Bailey Over the last six years, a broad consensus in Westminster has coalesced around the need for deficit reduction. This ...
By Dan Bailey
Over the
last six years, a broad consensus in Westminster has coalesced around the need
for deficit reduction. This consensus has proved to be extremely controversial
– even more so because the means by which deficit reduction is to be achieved
is through severe cuts to state spending and welfare provision. One component
of the UK welfare bill, Housing Support, has escalated in recent decades and
will therefore be subject to serious scrutiny in this parliament. It is thus
critical that we examine the drivers of this category of welfare expenditure
and the means by which it could be controlled in a way that protects rather
than harms the poorest and most vulnerable in society.
The
housing budget of the welfare bill has grown rapidly in recent years – from £11
billion in 2000/01 to £24 billion in 2014. Escalating housing benefit is a
particularly pronounced problem in London, where average rental prices now
stand at £26,592 per annum. In 2011, the 3.3 million claimants living in the
social rented sector made up approximately 68 per cent of all Housing Benefit
claimants, yet the growth in this category of expenditure has come from the
private rented sector, where over half of Housing Support payment are now being
allocated (as the Department of Work and Pensions figures demonstrate). This
is, of course, reflective of the escalation in average monthly rental costs,
which between 2010 and 2014 rose from £689 to £768 – an increase of 11.5 per
cent over four years. Although the housing benefit attributable to the social
sector has risen, the growth in the number of social renters claiming housing
benefit has been only 0.3 million (9 per cent) since 2002.
Although
it is no longer paid directly to landlords, the escalating cost of housing
benefit is strongly related to the rising costs of rent demanded by private
landlords aware of the state’s commitment to footing the bill for their
tenants. As a parliamentary report produced by the MPs on the Welsh Affairs
Committee acknowledged, ‘one of the main reasons for recent increases in the
housing benefit bill and projected further increases is inflation in private
housing sector rents. Efforts to control housing benefit increases therefore
have to include strategies to manage spiralling rents in the private rented
sector, including direct rent controls.’ The Communities and Local Government
Select Committee’s investigation into the private rented sector in July 2013
went still further, claiming that there exists a ‘vicious circle whereby rents
and housing benefit drive each other up’ which demands ‘a full review of local
housing allowance’ to bring this to an end.
It is an
irony, given policy-makers’ broad discursive commitment to free market
principles, that the state’s obligation to subsidise housing for the poorest is
a clear incentive for private landlords to push up the costs of rent and thus
push up the cost of Housing Support. It is policy-makers’ acquiescence in this
‘vicious circle’ that is facilitating the escalating costs of Housing Benefit.
The
former Housing Minister, Mark Prisk, recently put in place a range of measures
to create ‘a bigger and better private-rented sector,’ including the £1 billion
Build-to-Rent fund and £10 billion in loan guarantees to build new homes
specifically for private rental. The stated hope is that facilitating greater
competition in this way may, in the long term, help temper rising rent
increases and the growth of the housing benefit bill.
At the
same time, incentivisation of the free market has been accompanied by a number
of punitive measures being imposed upon welfare recipients. These have included
the attempted integration of housing support into the Universal Credit scheme as
well as the controversial and extremely regressive policy, which has
colloquially become known as the ‘the bedroom tax’ or ‘spare room subsidy,’
which states that under-occupied homes in the social rented sector will have
their benefit cut to an amount that reflects the size of their household rather
than the size of their home – effectively de-linking the benefit from the cost
of rent and forcing tenants to either downsize (even if living in areas where
housing is limited) or switch to private sector accommodation (which tends to
be more expensive). In addition, the Coalition Government in 2012 attempted to
make those 35 or under exempt from housing benefit in an attempt to save up to
£2 billion per annum. In a sign of things to come, the recent Conservative
Party manifesto pledged to ensure that 18-21 year olds on jobseekers allowance
would ‘no longer have an automatic entitlement to Housing Benefit.’
These
cuts by the previous Coalition Government were undoubtedly regressive in their
overall impact. Yet curbing the Housing Benefit bill does not necessarily have
to be so. Locally-stipulated rent controls, as well as the implementation of a
living wage allowing citizens to pay for their own accommodation without state
assistance, could both offer ways of reining in the bill for Housing Support
consistent with social justice. Although an unfashionable idea amongst
policy-makers in an age in which the state is regarded as needing to acquiesce
in the price fluctuations of the ‘free market,’ rent controls are still capable
of placing limits on the amounts rentiers are able to demand. Rent controls are
still capable of mediating the vicious cycle created by the duality of
excessive deference towards the free market and the state’s commitment to
supporting the most vulnerable.
Despite
the downturn the rental market seems buoyant and immune from the weaknesses of
the wider economy. The dynamics of supply and demand for housing, particularly
in London, have remained insulated from the socioeconomic trends of unemployment
and wage stagnation. But the social importance of housing as a collective
public good demands state intervention to mediate and temper market forces when
it is necessary to do so. In this respect, the housing market can be seen as a
market failure in its inability to deliver these essential public goods.
Rent
controls were abolished by the 1980 Housing Act, when Conservatives blamed them
for the collapse of the rental market in the 1960s after the landlords of the
period strangled supply and allowed housing stock to fall into dilapidation.
The very same logic, however, was used to oppose the introduction of the UK
minimum wage in 1998. Regulations on rent increases already exist in Ireland,
Germany and – on a trial basis at present – Paris. The fear that landlords will
drastically increase rental prices in the weeks before the introduction of rent
control policies is belied by the experience in such places. They could serve
as useful policy tools in future years to control the cost of housing support to
the much-valorised taxpayer without inflicting pain on the poorest or most
vulnerable.
Rent
controls may also be effective in managing the growth of housing bubbles and
helping people onto the housing ladder through incentivising landlords to sell,
even if that means simultaneously stymieing the strategy of asset-based
welfarism and the dynamics of Anglo-liberal growth. The central point, though,
is that rent controls could serve as a mechanism for controlling escalating
welfare costs in a non-regressive manner. Accordingly, they remain a viable
policy tool worthy of serious political consideration.
The
electoral victory of the Conservative Party means a renewed and intensive
political focus on cutting welfare expenditure. Not all reductions in state
spending, however, need to be regressive. The recent escalation of Housing
Support is being driven by the duality of deference to free market principles
and a commitment to social justice manifested in housing support; and it does
appear as if the introduction of rent controls would significantly restrain the
pressure upon this budget. Certainly, it would appear to be a more fruitful
direction than the existing (and failing) ideological free market approach
centred upon facilitating competition and privatisation. If deficit reduction
remains a prominent goal of David Cameron’s government (and this remains a big
caveat) then surely it is imperative that parliament first evaluates the modes
of doing so which impose less of a burden upon society’s poorest and most
vulnerable?
This article was first published at New Left Project Website
About The Author:
Dan
Bailey is a doctoral researcher at the University of Sheffield, working on
issues of welfare state sustainability. Christopher Kirkland is a doctoral
researcher at the University of Sheffield, working on British politics.
