Tuesday, 2 November 2010

The 'free' market is responsible for our housing benefit problems

The UK has a housing benefit bill of £21 billion. This is a huge sum. But how did it come about? The seeds were sown in 1979 when the incoming Thatcher government introduced the right to buy for social housing. This pledge gave a boost to the Tories in the polls but some of us were aware that it was storing up problems for the future. The Tories believed the benefits would be more than electoral. They believed that it would turn working class Labour voters into people who perceived themselves to be middle class, and that it would reduce working class militancy because mortgage holders would be less likely to go on strike. They were almost certainly right about that.

Councils were also prevented from building new homes to replace those lost. Of course, the inevitable result was that over the years the social housing stock became depleted. Subsequent governments failed to reverse either of these policies, relying on the private sector to build houses. But the private sector doesn't want to build social housing because it's not as profitable as building executive homes.The consequence of all this has been the housing crisis we now have in the UK. There are now 4.5 million people on the waiting list for social housing.

The government claim that the victims here are taxpayers who are having to pay for the unemployed to live in luxurious apartments that they could not afford themselves. But most of the people who will be hit by the housing benefit cap, at £400p.w., and made homeless, are not unemployed but the working poor or pensioners, and lot of these people live in London where rents are exorbitant. It has been estimated that more than 135,000 people could be made homeless. As far as the current debate about housing benefit is concerned most commentators seem to be missing the key point.

It's the working people on housing benefit who are the real victims because they are being screwed from two directions. One - pitifully low wages from employers and the second exorbitant rents from private landlords. Housing benefit is not a subsidy for them, it is actually subsidising the corporations who employ them and the private sector landlords. Just like tax credits for the working poor It is really a form of corporate welfarism which allows companies to pay wages that people cannot live on. By paying low wages they pocket the profits whist dumping the costs onto the rest of us. This is such a typical feature of how the free market works that hardly anyone notices or mentions it. This kind of cost dumping is taken for granted.

So what is the answer? Clearly we need a lot more social housing but this isn't going to happen overnight. Nor can we rely on the market to provide that housing. We need a new programme of council housebuilding funded by government. We also need to legislate to make companies to pay a living wage to the people they employ, and we need to re-inroduce rent controls to prevent landlords robbing their tenants and the taxpayer. Instead of blaming the victims its time we took some real action to force the culprits to change their ways.

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