Investing in 100,000 new social homes a year would save the country billions of pounds in housing benefit, according to major research published today.
And the report from Capital Economics says “the economic and fiscal case for building new social rent housing is unanswerable”.
Compiled on behalf of the housing campaign SHOUT and the National Federation of ALMOs, the ‘Building More Social Rent Homes’ report warns that, if left unchecked, current housing policies will see the cost of housing benefit soar to nearly £200 billion over the next few decades.
Currently hardly any social rent homes are being built. This means more and more low income households are living in expensive privately rented housing or ‘affordable rent’ housing association properties (where rents are up to 80% of market rents).
Despite cuts in entitlement, the cost of housing benefit has doubled in real terms over the last 10 years.
The report, to be published in full later today, shows:
- Unless more homes at a social rent are built the housing benefit bill, currently at £24.4 billion a year, will soar to £197.3 billion by 2065/66
- Although more investment would be needed in the short term, spending on building genuinely affordable homes would achieve a net surplus for government by 2034/35
- Borrowing in the short term to invest in assets that will reduce future public expenditure is not only efficient fiscally, it is likely to be welcomed by financial markets
- By 2065/66 savings of £0.9 trillion could be achieved through lower welfare payments and higher tax receipts from the building industry, lowering the deficit. Public sector debt would be over 5% lower as a proportion of gross domestic product
- The average housing benefit for people living in private tenancies is £110 per week, £21 a week more than In social rented housing
- More than eight out of 10 households in England currently receiving housing benefit in private rented housing would be better off in social rent housing and the cost to the state of benefits would be lower
- For every £1 invested in building new social housing, £2.84 of economic output would be stimulated – of which 56p would go straight to the exchequer.
Commenting on the report, SHOUT founder member Martin Wheatley, said: “This unimpeachable independent analysis tells us that starting to build social rent housing in high volumes again is a policy for our times.
“It will bring down public spending and the deficit, cut benefit bills and dependency on welfare, and make a huge contribution to tackling the massive shortfall in new housing development which is universally acknowledged to be a major economic weakness of the UK.”
National Federation of ALMOs policy director Chloe Fletcher added: “Our member organisations manage over 600,000 properties providing secure long term homes for families at rents they and the taxpayer can afford.
“They have the capability and appetite to build very many more, meeting the needs of the large numbers of households which cannot currently afford home ownership, and boost growth and jobs in the local economy in the process. We urge the government to consider carefully this unanswerable economic analysis.”
Tony Stacey, chief executive of South Yorkshire Housing Association, who sits on the SHOUT steering group, said: “For over 30 years successive governments have cut back on investment in social housing leaving the cost to rent – and housing benefit – to take the strain.
“The economic think tank, Capital Economics, has looked hard at the economic case for reversing this trend, and they have not pulled their punches, describing current policy as ‘fiscal myopia’. This is not about austerity politics; it is about economic common sense. We should ask ourselves why we are wasting money in this way.
“My starting point for setting rents for social housing would be this. If you are in work and earning the ‘living wage’ you should not, surely, have to resort to housing benefit to pay your rent. The government should not have been forced up rents in the way they have.
“We all get the principle of a living wage, now let’s start thinking about a living rent. This works for individuals – particularly hard working families who are hardest hit.
“This report shows us it works for our economy too. As the report states – ‘the fiscal case for building new social rented housing is unanswerable’.”