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Housing benefit reform is working

    On Friday, research carried out by the BBC estimated that 6% of the approximately 500,000 social housing tenants subject to the under-occupancy charge have moved house. Let’s be totally clear what this means; social housing tenants of working age with a spare bedroom beyond their requirements face a 14% reduction in their housing benefit or a 25% reduction if there are 2 or more spare bedrooms. This is a reduction in welfare spending, not a tax and about 30,000 social housing tenants have moved house.

    Labour of course was very keen to argue that the research showed the policy had been a failure; although for what reason was slightly unclear. On the one hand, it argued that 6% was an insignificant number but as Esther McVey, the Employment Minister pointed out, this is actually pretty much on target. On the other hand, it argued that the policy is abominable because it has forced 30,000 families to move. However, whilst so many families still live in overcrowded conditions and are struggling to find even 1 or 2 bedroom houses, it is neither fair nor efficient to increase benefit payments to households with more bedrooms than people. Approximately 300,000 families are living in overcrowded conditions and 1.7 million are stuck on the social housing waiting list.

    Labour has often argued that the policy targets the vulnerable but that is clearly untrue when pensioners are exempt, disabled tenants with overnight carers are exempt, approved foster carers are exempt, families with adult children in the armed forces are exempt and bereaved families amongst others are exempt. The truth is that for some households it will be difficult to adjust quickly but it must also be very difficult for the family with both parents working and two children to be told that they are 36th on the waiting list and more than a decade away from a house.

    Moreover, the Government has provided a £165 million Discretionary Fund for local authorities to help in the minority of cases where adjustments need to be made. However, as the BBC research highlighted, local authorities have barely distributed these funds to the detriment of some tenants. Given that this reduction in housing benefit affects those of working age, it is also quite likely to have boosted work incentives as well as correcting an inherent unfairness by bringing the system into line with private housing tenants.

    We should also remember that this is no short term fix because house builders will continue to build 3 and 4 bedroom houses as long as we keep on subsidising them. Obviously, some houses are better than none but if the houses which are built are more closely aligned with the needs of families then that would surely be preferable. Ending the anomaly of paying the same housing benefit irrespective of spare rooms will help get rid of some distorted incentives for house builders. 

    In an interview on Friday, Esther McVey argued that the under-occupancy charge was about far more than saving money. Bizarrely, Chris Bryant MP, Labour’s Shadow Welfare Reform Minister, who I debated on Radio 5 Live, seemed to think that this meant the policy saved no money at all. Of course it’s not just about saving money. It’s also about making better use of the social housing stock through better matching of family and house size, improving work incentives and encouraging builders to respond to the demand for 1 and 2 bedroom houses. However, the policy DOES also save money; about £1.3 million a day apparently and without it, 30,000 families and counting would not have moved into bigger or smaller houses.

    Unfortunately, Labour’s reaction just highlights the fact that by intending to reverse the reform, it is not only making another big unfunded spending commitment but also accepting that it has nothing to say on how to improve the use of the social housing stock.

    Is Labour seriously saying that in spite of the £108 billion deficit, its flagship welfare policy is to increase spending by half a billion pounds a year on households with more people than bedrooms at the expense of people in overcrowded houses and those languishing on the waiting lists? Can that really be its policy? If so, not only is it stunningly inefficient but manifestly unjust.

    Adam joined the Centre for Policy Studies as Head of Economic Research in January 2014. 

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