Blog 2023 Malcolm Blair-Robinson

Housing Benefit and House Prices

At first glance the Coalition’s proposals seem reasonable and fair, balancing need of claimant against charge on taxpayer. Delve a little and they fly close to a creating a social disaster. It is a complex issue.

The problem is that, rightly, unlimited benefit, or benefit at inflated rents, is grossly unfair to taxpayers paying the bill, who themselves cannot afford to live in similar accommodation. The emergence of the taxpayer as paymaster, rather than the vaguer government, is one of the most profound changes which has occurred in our democracy. People now  understand that they are paying and, though the agent is the government, it is their money. Thus benefit scroungers or those who seem to be living rather well off the State, are just as, maybe more, unpopular in poor areas as in rich locations. This will change the climate of government and its freedom to spend.

Next in the mix, and at the heart of the matter, is the excessive cost of housing everywhere. I have hammered this argument from before, during and after the crash. An economy built upon inflating the asset value and therefore the cost of an essential commodity, in this case housing, cannot sustain and will crash, as crash it did. The problem is that people cannot actually afford the cost, so the taxpayer has to step in (sometimes one and the same) and take up the slack. The problem started with the sale of council houses which on the one hand created the nostrum that to own was better (which it often is not) and on the other sucked cash out of the housing system nationally, because a greedy treasury took the takings from the sale, leaving councils unable to replace the dwindling stock of social housing.

This led to a rise in homelessness and families living in B&B accommodation, utterly unacceptable in a civilised society. It also created deprived estates in which people who could not afford to buy lived, leading to outbreaks of poverty, deprivation and benefit dependency, especially in areas of high unemployment because of industrial decline.

Homelessness has now been all but eliminated and few are housed in bed and breakfast except very temporarily. But the bill is astronomic, especially in London and the South East. Moreover the pouring of state funds into the coffers of private landlords allowed house prices to be pushed even higher with rents keeping pace. All this has to be brought under control and the measures announced to do it are perfectly reasonable.  Applying them to existing situations, we are talking about people, families and children, is another matter. To do this without causing a social crisis will require some transitional arrangements and, like the proposed Universal Benefit, will cost. The long term improvements will be considerable, but the immediate savings may not be a big as expected. 

Once again this emphasises the need to get house prices and rents back down to manageable levels. This is why the latest fall in house prices is, perversely, very good news.

This entry was posted on Thursday, October 28th, 2010 at 1:48 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.