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    Home»Property»The impoverished town where one in four are on housing benefits
    Property

    The impoverished town where one in four are on housing benefits

    August 25, 20244 Mins Read


    “It would have worked out a lot cheaper to have acquired or built the properties and charged a much lower rent for 50 years, than to have an escalating private sector rent to pay because we didn’t pay for the capital cost in the first place,” says Lord Best.

    Governments have also shot themselves in the foot by repeatedly attacking landlords.

    The Conservatives tried to ease housing pressure and free up homes for first-time buyers by squeezing private buy-to-let investors with a series of tax changes.

    These included introducing a three percentage point stamp duty surcharge on additional properties in 2016, and phasing out tax relief on buy-to-let mortgages between 2017 and 2020.

    But the measures have also damaged the state’s own social housing proxy. Tenants on housing benefits make up around 38pc of private rental sector households.

    When rents rise, this not only means that more people will need housing benefit support, but that the cost of providing it to each private rental sector tenant increases.

    Housing benefit payments are capped by Local Housing Allowance rates, which are designed to cover rents on the cheapest 30pc of homes in a given area.

    In an attempt to keep a lid on costs, the government froze these rates for four years during the pandemic. Over this time, the proportion of rental homes listed on Zoopla that had rents that could be covered by Local Housing Allowance plummeted from 23pc to 5pc.

    The rates were finally uprated in April to cover the cheapest 30pc of homes again. The Government expects the taxpayer’s spend on private rented sector support this tax year will be £1.2bn more than the year before.

    On top of this, when buy-to-let landlords sell up, their evicted tenants often cannot find anywhere else affordable to live, which in turn brings even bigger costs to councils, says Sanders.

    “Their tenants are now coming to councils like us and we have a duty to house them. So the temporary accommodation bill for councils is going up and up.

    “That means more public money is being spent on dealing with the consequences rather than actually looking at the causes.”

    In the decade to March 2023, the number of households living in temporary accommodation surged 89pc to a record high of 104,000, according to analysis by the Local Government Association. This cost councils at least £1.7bn in 2022-23.

    Sanders says the Government should reverse buy-to-let tax rises and actually give private landlords incentives to provide homes for low-income renters.

    Lord Best’s Affordable Housing Commission proposed a different solution. He says the Government should set up a fund to buy up private rental properties from landlords as they sell, and convert them back into social rent properties (which are typically let for 50pc of market rates).

    The commission estimated that with a sum of £3.8bn, the Government could acquire 45,000 buy-to-let properties.

    “If those homes were used in the first instance for moving people out of temporary accommodation, you would have immediate savings of some considerable significance,” says Lord Best.

    Shifting the dial

    Regardless of how the Government approaches the private rental sector, the bottom line is that we need to massively increase housing supply, and particularly the number of social rent homes.

    Angela Rayner knows it and Labour is pressing ahead with landmark planning reforms to deliver on the party’s pledge to build 1.5m homes over the next five years.

    A government spokesman said: “We have been clear that we need to build more genuinely affordable homes and boost social housing, so that fewer people need support towards expensive private rented accommodation.

    “Our plans will see the biggest increase in social and affordable housebuilding in a generation. Work is already underway with the reintroduction of housing targets and our plans to overhaul the planning system.”



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