Blog Post

Godzilla versus King Kong: the new Affordable Rent model versus the new Housing Benefit regime

<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.

On 28 February, in answer to a Parliamentary Question, the Minister of State at Work and Pensions, Steve Webb, admitted that his department “has not estimated the proportion of tenants in social housing likely to claim housing benefit if rents for new tenants are let at 80% of market rates”.

This would seem a crucial piece of information and illustrates how much prejudice and how little evidence was used to determine the many changes to Housing Benefit the government is committed to introducing. 

Fortunately others in the real world have been doing some background.  At pretty much the same time as Mr Webb was making his admission, Family Mosaic Housing Association was publishing research based on real life calculations for a sample of their properties and tenants.  This showed, in their words, that “setting rents at 80% of market rent would increase our clients’ requirement for housing benefit by 151%”. 

Like a lot of housing associations, Family Mosaic does not seem to be hostile to the government’s proposals to introduce flexible tenancies or to put rents up to some extent to fund new development.  It appears that quite a lot of landlords think that they should have more ‘freedoms’ and that their tenants should enjoy fewer rights (this is the long-term character flaw in my view).  But at least FM deserve a little credit for digging into the issue and publishing the results.

The report states that “the impact on tenants will vary by location, with those living in inner London the hardest hit: for most of those in Essex, social rents are already at 60-80% market rates” and concludes that “for those tenants receiving benefits, the proposed new affordable housing model creates, or worsens, the poverty trap, acting as an additional disincentive to gain employment.”  Rents for their properties in London would increase by over £100 per week and in some cases by over £200 per week.  The worst affected people will be those on benefits facing large increases in rent but who are also likely to be caught by the overall benefits cap of £26,000, as Tony has pointed out in previous Red Brick posts.  

If (when) the new rent regime comes in, income to FM to support their development programme would indeed increase, but this would be significant only in London.  The cost would be shared by the new tenants paying higher rents and by Housing Benefit.  If the increased cost in HB terms is anything like the figures published by FM, there will be a head-on collision between Godzilla – Eric Pickles’ policy of moving towards market rents as a way of funding development – and King Kong – Iain Duncan-Smith’s policy of cutting housing benefit to the bone.