Complexity of the UK housing crisis baffles politicians

Reposted from Hannah Fearn at the Guardian Society 

Welfare Minister Lord (David) Freud

Lord Freud: he trumpets that more people rent privately, ignoring that this is because not enough houses are being built. Photograph: Peter Macdiarmid/Getty Images

I was recently briefing a fellow journalist with a potted history of housing policy when he put his pen down, paused and said: “It’s just so complicated. Every single issue leads into another set of issues.” One wonders if Lord Freud and his team at the Department for Work and Pensions might be having the same epiphany now. Why it has taken so long to get there we can only guess.

For at the final work and pensions select committee hearing into housing costs, held on Wednesday, the line of questioning by all members of the cross-party group exposed the coalition’s housing and welfare reform policies as fragmented, fragile efforts drawn together with little consideration of the bigger picture. With housing, though, the bigger picture just keeps creeping back in.

Welfare minister Lord Freud appeared tired and insufficiently briefed.Housing minister Kris Hopkins gave a poor account of himself, too, fighting for airtime and parroting statistics which the committee itself (having received hours of evidence by dozens of advisers and analysts) did not recognise. Perhaps the facts are getting in the way of the message?

Freud was challenged first on the unintended consequences of the overall cap on welfare spending. Had he intended this to have a disproportionate impact on those already in temporary accommodation? “The impact assessment did go through the groups, so I don’t think there’s been any surprises,” he said, but he admitted that discretionary housing payment would have to pick up the slack, potentially for a long period of time.

With any government policy, Freud explained, it’s hard to make exemptions that target the right people without letting a whole load of others off the hook, and anyway they must be working because fewer people are now making high welfare claims. “We have done a piece of work on the reduction of people capped which went down by 8,000; 40% of them were people going into work at the level at which they’d get working tax credit,” he explained.

But that isn’t saving money from the public purse; it may in fact be costing the state more: anyone working 16 hours a week and qualifying for tax credits would be retaining their benefits (plus, there’s all the vast expenditure on managing welfare reform). Freud doesn’t seem to mind because they’re “contributing to the economy”, but it doesn’t help deal with the cost of housing to government.

The DWP predicts savings of £84m from welfare reform for 2013-14. But the increase in temporary accommodation use puts more people above the level of the cap and relying on expensive local government services. So how is this £84m calculated? There wasn’t a clear and definite answer.

Tenants end up in temporary accommodation because of a housing crisis that is fuelled by a lack of supply. And yet the DWP hoped welfare reform – in particular, the benefit cap – would drive down private rent, reducing the housing benefit bill. This hasn’t happened and rents are rising fast.

Lord Freud cites the figure of a 1.5% rise nationally, but Londoners face an 8% rise while wages are stagnant. Agencies warn they are losing landlords willing to take formerly homeless people into their properties because of the low rate of housing benefit compared to market rates, and the London Assembly committee on housing this week heard that the capital’s local authorities are now gazumping each other for access to scarce temporary accommodation.

Meanwhile Hopkins and Freud proudly trumpet the rising number of people living in private rent. It’s a growing sector, they say. Yes, it is. But that’s an unintended consequence of another government housing policy: the failure to build, meaning rising house prices under demand. It’s complicated.

The bedroom tax deserves coverage in its own right, but it’s worth adding one other flashpoint. The government says it wants to help people stay in their homes and also release spare rooms throughout the private and social sectors. “We are putting into universal credit a disregard for lodging income,” Freud confirmed. Yet tax threshold for rent from lodgers remains at £4,250 – unchanged since 1997 despite housing costs spiralling in the intervening years. There’s no incentive for many to release those spare rooms, and there’s nothing the DWP can do about it.

Housing is complicated. Few politicians have been able to grasp how policies on seemingly disparate issues such as homelessness, low-paid work and expensive holiday homes all fit together. When Freud accepted his helplessness on tax rates (that’s the job of the Treasury, and he can’t get involved) perhaps it started to dawn.

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