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Newham just the first in housing benefit bind

The story about Newham council seeking to house 500 families in Stoke and other parts of the country because of insufficient affordable housing in the borough has reignited the debate about the government’s housing benefit cuts, amid accusations of ‘social cleansing’. This is emotive and controversial stuff, cutting to the heart of how housing need is met and what the social impacts of deficit reduction might be.

Housing minister Grant Shapps didn’t really do justice to these issues in his response this morning, simply accusing Sir Robin Wales, the mayor of Newham, of ‘playing politics’ ahead of the local elections (there aren’t any local elections in Newham this year, as it happens).

In truth, it is very hard, from the outside, to know exactly what the circumstances of each family in this case are or what the dynamics of the local housing market, interacting with government policy, dictate. Assuming that the families concerned are entitled to support under homelessness legislation, they could argue that being offered a property in Stoke is not ‘suitable’, given the distance. But that would just end up in the courts. And it doesn’t get to the heart of the issue.

The core problem Robin Wales faces is that he has a duty to house local people but very few powers with which to do it. In a context where need and demand are rising faster than support and supply, his options are severely limited:

  • He is subject to significant economic and social forces acting on Newham as a result of the Olympics. This brings major benefits, but also population pressures and rising private rents, which he has no scope to keep broadly affordable (but which expose the taxpayer to rising costs through housing benefit).
  • He is subject to a housing benefit cap set in Whitehall for the whole country, with no control over the £265 million of the benefit that is spent in his borough.
  • He can’t shift any of that current spending into capital investment to build more affordable homes, the national budget for which has been slashed in the current spending review.
  • He manages a large stock of social housing, along with local housing associations, but doesn’t have any real freedom over how they are allocated nor the ability to borrow against this valuable asset base and secure rental incomes to invest in new homes that would generate a solid, long-term return and create local jobs.

In short, it is not obvious which way Sir Robin might turn. And many other local authorities will face the same bind in the months and years ahead as our housing supply problems intensify and we become increasingly unable to patch up the implications of that problem through a rapidly rising housing benefit bill.

There are no easy answers to this situation. Our country has limited resources of land and money plus an unbalanced housing market, neither of which will be quickly overcome. But we also have an incoherent approach to housing policy, bedevilled by initiatives and short-termism, which has been storing up the problems that are now beginning to surface. For the last 30 years we have systematically switched resources from building homes to subsidising rents, which has left us with not enough homes and a unsustainable benefits bill. In the current spending review period, we are set to spend £4.5 billion on building affordable homes and £94 billion on housing benefit.

To make matters worse we have tried to run a national housing policy from Whitehall despite massive local variation, while leaving local councils will responsibility but no power.

Beyond the political controversies that today’s story will provoke, the larger point is that the Coalition has talked the language of localism but advanced reforms in housing that are half-hearted at best – and totally inadequate to the scale of the strategic challenge. In the coming weeks, IPPR will be publishing a major new housing report which tries to fill this gap, arguing that we need to take a big step in a new direction.

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