Blog Post

HB: more heat than light

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

Yesterday’s marathon Commons debate on the proposed housing benefit changes produced more heat than light.  There were a lot of apparently conflicting statistics, especially about the number of people affected and the number of people likely to have to move home as a result.

The main government theme – sorry, but I can no longer distinguish between Tory and Liberal members of the government, I had thought the Minister, Steve Webb, was a Liberal Democrat until I heard his speech – was to attack Labour’s ‘scaremongering’.  But as the government has yet to publish any meaningful analysis of the proposals, or to demonstrate how the savings are calculated, the opposition has to rely on its own analysis and that of the housing organisations like the National Housing Federation and Shelter, and all have predicted dire outcomes.

There was an interesting debate about the impact the Local Housing Allowance has had on rent levels in the private rented sector.  In short, Labour argued that rent levels, especially in higher rent areas, have been dragged up by buoyant and growing demand from non-HB tenants, especially the growing group of people who would have become owner occupiers in previous times who now can’t or won’t take a risk on buying.  Therefore LHA, being linked to the median rent, follows the market rather than leads it.  Labour in office had decided to remove the highest rents from the calculation of the median to reduce the impact the top of the market was having on the measure that determined the going LHA rate.
The government benches took two slightly different views; on the backbenches several claimed that the LHA level was determining the rent levels, driving the market up, but the Minister relied on the more limited construction that, as the LHA supported 40% of rent payers in the sector, it must therefore have some effect on the price. 

This seems to me to be a proper debate about a fundamental issue.  How does state intervention impact on a market, especially one with inelastic supply, which caters for the very rich and the very poor and lots in between and has little consumer protection?   We will be more and more dependant on private renting in the future, and this is a question worthy of proper study and analysis.  One factor may be the differences between the market in high rent areas and those in areas where the gap between social and market rents is really quite small and where there are fewer richer people entering the market.

Another noteworthy feature of the debate was the number of speakers from places well away from London.  The government has been keen to keep the debate focused on the more extreme cases where the national cap will now apply, but there were speeches about Glasgow and Sheffield and Sunderland and elsewhere identifying the likely losers and the impact the losses might have on families.

The only real sign of dissent on the government side concerned the proposal to cut HB by 10% for anyone on job seekers allowance for more than a year, irrespective of how hard they had looked for a job, and LibDem Simon Hughes said he would oppose this – although the remainer of his interventions gave me the impression that he might end up supporting the rest of the package, making it much more likely that it will go through.