The advent of Thatcherism of course reversed this entire approach, and the current housing benefit (HB) system – created in 1988 through the 1986 Social Security Act – played a central role in the privatisation agenda. By re-directing public subsidy towards low-income ‘housing consumers’, rents in both social and private sectors were allowed to rise sharply, meaning that the state would now subsidise private landlords’ profit margins instead of directly providing affordable public housing as a tenure of choice.
Over time, the decline in social rented housing, the huge rise in the cost of private market housing, and the stagnation of real wages have forced more and more people on to HB in order to access and afford a roof over their heads – in 1981, around 1.5m households claimed compared to today’s figure of nearly 5m. While 70% of claimants are currently in social rented housing, recent and future growth will come from private renters due to rising rents and falling incomes, with government figures suggesting 600,000 working households in the private sector don’t claim their entitlement.
Concern at these trends and evidence that private landlords were milking the system by inflating rents to LHA levels persuaded the previous Labour government to reform the HB system for tenants in the deregulated private sector with the introduction in 2008 of Local Housing Allowance (LHA). LHA no longer paid HB based on tenants’ actual rents but instead in relation to broad local private rental market values for properties ranging from shared to five-bed accommodation with a ceiling set at the 50th percentile of private rents restricting claimants to properties in the bottom half of the market. The situation was even worse for single 16-24 year olds who only received a shared room rate, usually around half the one-bed rate, hugely restricting their choice of accommodation and placing many in severe hardship.
Prior to the May 2010 General Election, the Labour government had planned a number of reforms to LHA, including capping rates at £1,100 per week and ending tenants’ entitlement to keep up to £15 per week of any excess benefit over their contractual rent. The Conservatives, by contrast, had promised to reform ‘welfare’ but had said almost nothing about HB with future Prime Minister David Cameron assuring the country that he would “protect the poorest and most vulnerable in our society” from austerity. Just two months later, however, the Coalition’s June 2010 emergency budget revealed the Tories secret plans, announcing dramatic cuts and changes to HB, with more paraded in the October Comprehensive Spending review, totalling an estimated £3bn by 2015.
The government’s justification for these reforms shifts according to its intended audience, ranging from the need to reduce the ‘deficit’, bear down on private sector rents, restore ‘fairness’ to the benefits system in favour of ‘hard working families’, or force unemployed claimants to either get a job or find somewhere else to live.
Whatever story Ministers tell cannot hide the grim reality of what they are doing – these are devastating cuts affecting at least 1.7m tenants over the next few years, including all claimants in the private sector and around 1 in 5 households in the social rented sector. Official figures suggest that during 2012 the majority of private tenants will face a shortfall of up to £10 per week against their current rents, a lot of money for people officially living in poverty to consistently find in the context of mass unemployment and austerity.
But whereas these claimants at least have a chance of absorbing the losses or negotiating a lower rent, around 100,000 households will lose over £30 a week with many in London losing £100s and some over £1,000. The cuts will inevitably mean increased cases of arrears, homelessness and greater overcrowding with people being forced to move home or even borough in search of cheaper lower quality accommodation. London will by far and away be worst hit with the likelihood of ‘mass displacement’ from the inner to outer boroughs.
The implications of home loss, homelessness and forced relocation are serious and carry enormous potential social and economic consequences that have been downplayed by the government. Apart from the obvious increased costs and administrative burden placed on local authorities, social services and other public services, the impact on households and communities could be devastating. We are talking here about the breaking up of families and social networks, the disruption to a child’s education or school, the possible breakdown in care and support received from social and children’s services. The long-term sick are one of the largest groups affected and cuts to HB to disabled people have their own particular effects in that many properties will have been specially adapted for their needs or there will be a support package in place to help them stay.
The bad news is this is just the short-term picture – from April 2013, two fundamental changes will kick in that threaten to re-draw the population map of Britain. First, benefits to out-of-work households will be capped at £500 for couples and lone parents and £350 for singles, with HB the first to be cut once the cap is breached. Around 50,000 households will be affected by an average loss of £93 a week, with 15% losing more than £150 a week. Second, LHA rates will no longer be increased in line with actual market rents in a local area, but by the Consumer Price Index (CPI), which since 1991 has risen consistently less than rental costs. While both changes will have the most adverse affect on households living in London and the South East where housing costs are the highest, over time, the entire country will also be affected so that by 2030, 60% of local authorities in England will be very unaffordable to LHA claimants.
Overall and over time, HB cuts will create some of the worst patterns of social and spatial segregation Britain has ever known. Low income and poor households will find that the only housing they can afford to rent is that which falls below “basic common standards of decent housing”. This is the future – if we don’t act now, the long-term consequences will be hideous.
See Corporate Watch’s latest magazine Housing Crisis? for the full article with references and more analysis of different aspects of housing www.corporatewatch.org.uk
Original artwork Heygate Estate courtesy of Laura Oldfield Ford: http://lauraoldfieldford.blogspot.co.uk/