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DEBATE: Is rent capping the way to reduce council’s housing benefit bills?
Is rent capping the way to reduce the City of York Council’s soaring housing benefit bills? Council leader JAMES ALEXANDER and opposition leader CHRIS STEWARD debate the issue.
YORK’S housing benefit bill has almost doubled in ten years.
In 2003/4, it stood at £23.4 million. Last year, the bill topped £45 million – a rise of 93 per cent.
There are more people today claiming housing benefit: 11,200 last year, compared to 8,400 in 2005/6, the most recent year for which data on claimant numbers is available.
But a large part of the increase in the city’s housing benefit bills is down to the soaring cost of rents in the private sector, according to James Alexander, the leader of City of York Council.
He said the bulk of the £45 million the council is paying out in housing benefit is taxpayer’s money being given over to landlords to pay for high rents.
Mr Alexander called recently for a debate on whether rent capping should be introduced, to make rented accommodation more affordable – and bring down the housing benefit bill.
Coun Chris Steward, leader of the Conservative opposition group, said he would be happy to take part in such a debate – but said he believed rent capping would not work.
The Press invited the pair to set out the case for and against. Here is what they had to say...
YES, says council leader James Alexander
Hugh Bayley MP recently asked the Liberal Democrat Minister for Pensions at Parliamentary question time about the cost of English housing benefit over the last ten years.
The answer was very revealing. The cost to the taxpayer has increased from £11 billion a year to £21 billion – an increase of 95 per cent.
My own research shows in York the cost over the same period has increased from £23.4m year to £45.3m – an increase of 93 per cent.
Housing benefit is now claimed by 11,269 York residents – the majority of whom are in work. So why have we had this large increase?
If demand rises and there is not an increase in supply, the price rises. In York the lack of significant new homes being built, exacerbated by student housing becoming more lucrative for landlords, means the price of homes to both rent and buy has grown astronomically.
The housing charity Shelter has published a report indicating that York has the least affordable rents in Yorkshire & Humber, more on a par with the south east of England.
In the last eight years, York’s housing benefit cost in the private rented sector has increased by 135.7 per cent. This is largely taxpayers’ money being given to landlords to pay for high rents.
The largest increase in proportion of York residents claiming housing benefit has been in the private rented sector – 100.6 per cent or 1,501 people.
There are now more residents claiming housing benefit in the private rented sector than in housing association and this has been the case since the last general election.
York’s average rents are £75.35 a week for council tenants, £90 for Housing Association and £177.46 in private rented.
The UK housing market is broken and people in cities such as York are being priced out of their own city.
This is unacceptable. Surely it is about time we had a sensible debate in this country about introducing rent capping to get this benefit bill down, rather than attacking the recipients of housing benefit?
The financial saving could be used to pump prime the construction of new homes and I know some house builders would welcome this.
For some residents, rent caps may even put money back in their pockets – helping the economic recovery.
Other cities across Europe have rent caps and the UK could introduce them based on median average income of residents in council areas.
This could be set by an independent body or by the Government using a nationally set formula.
The Conservative and Liberal Democrat answer to the rising housing benefit bill is to instead target the most vulnerable in our society with the bedroom tax – this allegedly saves £320 million a year out of an annual cost of £21 billion and rising.
Locally, the Conservatives and Liberal Democrats both oppose significant home building which would repair the housing market by increasing supply.
They are on the side of the privileged few whilst York Labour is on the side of the hardworking who want to own or rent their own home.
NO says Chris Steward, leader of the Conservative opposition
Rent controls are unworkable and it is not difficult to argue the case against.
What makes this article harder is the refusal to date of the council leader to say what rent control level he supports, and how it would operate.
It is like not wanting the motorway speed limit to increase, but having no idea whether my opponent wishes it to increase to 71mph in daylight or 150mph all the time.
However, what is more disappointing is the reality that once again the council leader evidently wants a cheap headline rather than to change something for the better for York’s residents.
Rent controls have been tried and have failed and when introduced are rarely permanent, but still quickly become unpopular with the majority. They distort the market and do not address the problem of a lack of housing supply.
If rent is capped, landlords will have less incentive for proper maintenance or to respond to tenants’ wishes. They will also turn away more people – for example those who cannot pay large bonds. There will be extra charges, or deposits will be more readily retained.
In the longer term, if landlords cannot achieve an economic return they will sell their properties, further decreasing rental supply, and properties built for rent will be of lesser quality given the capped rents available. The situation will therefore worsen.
One problem rent controls may address is how the previous government let the housing benefit bill soar, with some families receiving over £1,000,000 pounds a year.
This meant parts of the country became exclusive to the very richest and poorest, with people on ordinary incomes squeezed out.
However this is not best addressed by rent control, it should be controlled by the fair concept that people on benefits should not be better off than those in work.
The housing problems we face are due to the flaws of too much political verbal and legal intervention in the housing market, rather than enough practical help.
For example, in York the council’s disastrous affordable housing policies have seen a private building slump. It is wrong that highly paid individuals such as trade union bosses continue to live in council houses for their entire lives. This has a knock on effect throughout the market.
It is also unfair that families are denied social housing because many live in houses too big for their needs.
Rent controls would actually lessen housing supply and thereby worsen the situation.
Affordability of property is key, but rent controls will not help this. Having a market that is fair to all will, and a workable housing benefit system and better prioritisation of social housing will.
York needs more homes which people can afford to rent and buy, but that is done by having a housing market fair to all and meets the needs of households rather than the ideological aspirations and wishes for publicity of Labour politicians.