Paul Swinney argues that unless we address the undersupply of housing in the UK, the Government's new benefit cap will not deliver.
Today sees the introduction of the cap that limits the total amount of benefit that people of working age can receive. The cap aims to reduce perceived unfairness in the welfare system. But it doesn’t address a key underlying reason why the benefits bill is so large, namely the size of the housing benefit bill, inflated by a shortage of housing in some parts of the country. Without addressing undersupply of housing, this cap could more difficult for people to live in the places where most jobs are being created.
Currently, as has been widely noted, by the IMF amongst others, instead of addressing the undersupply of housing, Government policy risks doing the opposite. In making it easier to buy a house, the Help to Buy programme is fuelling demand yet current policies are not doing enough to increase the supply of houses. This will push up house prices. And the knock on impact will be to push up rents, and so housing benefit. In turn the benefit cap will become even tighter.
The undersupply of housing does not affect every city to the same extent. As such the benefit cap will be felt much more keenly in some cities than others.
The table below shows where housing benefit makes up the greatest and lowest share of the overall benefit bill. In cities such as Barnsley and Mansfield the cap is likely to be relatively loose as housing is relatively cheap. It is likely to be exactly the opposite in London, where the £6 billion per year that is spent on housing benefit accounts for over half of all working age benefits in the city. Oxford and Brighton are not far behind.
Housing benefit as a share of the overall estimated benefit bill, 2011/12
As we have shown in the past, and the Resolution Foundation has highlighted today, the chronic undersupply of housing is pricing people out of some of our strongest performing cities.
To reduce their dependence on welfare, those out of work need to find employment, while those claimants in work need to find a better paying job. Our most successful cities offer the greatest opportunity for this group of people to do that. Pushing them out of our cities doesn’t solve the benefit problem. It risks compounding it.
We need more houses. And we need to start building them now.
Director of Policy and Researchp.firstname.lastname@example.org
Leave a comment
Be the first to add a comment.