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Viewpoint with Phil Morgan

New Housing and Housing Benefit – the tectonic plates shift?

Currently many housing association boards, including my own, are considering the best way to take advantage of the current bidding opportunity for building new homes to the Homes and Community Agency. In doing so we are taking into account a wide range of issues: demand, partnership working, how we see our future and the impact on future tenants and our financial models. Core to these considerations are the future relationship of benefits and rents – with CLG assuring all that affordable rents will remain eligible for housing benefit.

One of the early signs of disharmony in Government policy on housing and benefits was the 10 per cent cut in housing benefit for those on Jobseekers Allowance for more than 12 months. A policy of staggering ineptitude (why cut housing benefit – why not the Allowance?) it managed to garner no supporters even within the Coalition and was eventually buried deep in the dustbin of history.

However it also exposed a fault line in thinking within Government with Work and Pensions wanting to cut housing benefit and CLG wanting them to get lost. This fault line is not exactly new – as the Housing Benefit bill has risen over the past few years Work and Pensions has wanted more ‘say’ in housing policy such as introducing its own ideas on removing housing benefit from tenants committing anti-social behaviour.

Core to the Affordable Rents model is higher rents – in effect converting extra rent into more new homes. However given the proportion of tenants on housing benefit, and the temptation to social
landlords to utilise housing benefit for affordable rents then it should be obvious that someone in Government should have calculated the costs in terms of housing benefit. Except they didn’t. Steve Webb, Work and Pensions Minister, admitted no such calculation has been done. To make matters worse there are incentives in the bidding process where social landlords are reletting homes to convert these too at affordable rents – ensuring more income and a more competitive grant rate. Thus the impact on the housing benefit bill will grow over time. Pretending, as CLG Minister Andrew Stunnell did, that the impact will be ‘really small’ is really stupid. Unless the impact is really big then the extra new homes won’t get built. And elsewhere on flexible tenancies CLG has been more than willing to weasel out of its earlier pronouncements to ensure nothing gets in the way of maximising the number of new homes.

In its early days the Coalition used the rising Housing Benefit bill as a club to beat up the housing sector. It now proposes to use the same rises to build more homes.

There are three scenarios – firstly that DWP will give way to housing benefit being used in this way and face a substantial increase in the housing benefit bill and vaguely hope that Universal Credit will sort out the mess. Secondly that CLG will give way and restrict affordable rents to those not eligible for housing benefit. I don’t think either scenario is plausible – the coalition literally can’t afford the benefit bill to rise unchecked and CLG , the HCA and Shapps would destroy the bidding process and lose all credibility if they back down now.

Instead I wonder if we are heading for a period of grinding attrition between two tectonic plates of Government policy that are fundamentally in conflict with each other. At some unspecified point this conflict will erupt in a seismic shift of Government policy. And when it does the impact will be profound – for landlords, tenants and funders.

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