Housing shortage costs taxpayers £9.3 billion in Housing Benefit

August 22, 2016 / Isla MacFarlane
Housing shortage costs taxpayers £9.3 billion in Housing Benefit

Last year £9.3 billion of taxpayers’ money was spent on Housing Benefit which could have been invested in building more affordable housing.

Private landlords pocketed £9.3 billion Housing Benefit in 2015, twice that of 10 years ago, according to a new analysis by the National Housing Federation. “It is madness to spend £9 billion of taxpayers’ money lining the pockets of private landlords, rather than investing in affordable homes,” David Orr, chief executive of the National Housing Federation.

The NHF claims the reasons for this growth are two-fold. First, there has been a 42% rise in the overall number of private renters receiving Housing Benefit since 2008. Second, Housing Benefit claims in the private rented sector (PRS) are much higher than in the non-profit housing association sector:

  • It costs £21 a week more to house a family in a PRS home than in a social home – £110 overall in comparison to £89;
  • Over a year this is an additional £1,000 per family being spent (£5,705 in the PRS compared to £4,638 in the social rented sector);
  • In London, the contrast is even starker with PRS payments at £64 per week more than to those in social homes – £3300 more each year.

The lack of affordable housing available means that a wider group of people need Housing Benefit. Today, nearly half (47%) of all families claiming Housing Benefit in the Private Rented Sector are in work – this is nearly double the proportion it was six years ago (26%). Similarly, Housing Benefit recipients renting privately now earned an average £4,000 more than on six years ago.

However, landlords have hit back at the report. “The NHF is clearly still reeling from the news that its members have been ordered by government to reduce spending over the next four years, so it comes as no surprise that they are looking to shift the emphasis and point the finger elsewhere,” said Richard Lambert, chief executive officer of the National Landlords Association, said. “The private rented sector plays a significant role in providing much-needed homes for tenants so there seems no real benefit in the NHF taking a cheap shot at landlords.”

However, both parties agree that the money would be better spent on building more houses. “What we should all be talking about is the failure of successive governments to adequately allocate its housing budget and to incentivise the building of new homes.  In the long term, that would be the best use of taxpayers’ money,” said Lambert.

If all those housed in the PRS lived in affordable housing, the nation would save £1.5 billion a year – which, over the last seven years amounts to £15.6 billion. Homes in the PRS are not only costly, but they are of lower quality too with 1 in 3 failing to meet the English Housing Survey’s decent homes standard.

“Housing associations want to build the homes nation needs,” said Orr. “By loosening restrictions on existing funding, the Government can free up housing associations to build more affordable housing at better value to the taxpayer and directly address the housing crisis.”

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