It has been suggested that an expansion of the social housing stock could be the best solution for the housing shortage in the UK.
It has been suggested that an expansion of the social housing stock could be the best solution for the housing shortage in the UK. Observers have also suggested that this would simultaneously be the best way to contain soaring housing benefit costs. It is easy to see why these views have gained popular support: nearly 2 million people are currently on waiting lists for social housing and housing benefit is the single biggest cost for the UK taxpayer, totalling £23.8billion in 2013-14 - almost 30% of the entire welfare bill. So, that’s the problem fixed then! Let’s just build more social housing and kill two birds with one stone. Sadly, no. As ever with this issue, it just isn’t as simple as that:
Be careful what you wish for
Because those calling for an expansion of the social housing stock might however be careful what they wish for, as social housing brings with it some unwelcome guests. Dr Kristian Niemietz of The Institute of Economic Affairs takes up the story: ”A social housing tenant is only half as likely to be in employment as somebody with similar socio-economic characteristics living in a different tenure. Meanwhile, their children are twice as likely to drop out of school without a qualification, compared to children from otherwise similar backgrounds. Social housing has itself become part of the poverty trap, so proposals to extend this sector even further and use it as a surrogate for the regular housing market should be received with caution.”
The poverty trap?
Despite advocating an expansion of social housing, even supporters concede that social housing in its current form may well ‘entrench’ poverty. Dr Niemietz elaborates: “social housing has locked many residents into neighbourhoods with poor job prospects and limited educational opportunities. It contributes to long-term worklessness and educational underachievement, rather than just being a correlate.”
An implicit subsidy?
And where is Mrs Thatcher in all of this I hear you ask? Didn’t she ‘decimate’ the social housing stock in the 1980’s when she launched the Right to Buy scheme? Her critics claim that by ‘privatising’ 750,000 council homes she somehow magically removed these dwellings from the UK’s housing stock altogether. In reality of course, the effect of this was nothing quite so cut and dried. It simply functioned to transfer the properties from one form of state subsidy to another. Dr Niemietz explains: “Council house tenants receive an implicit subsidy in the form of the difference between the rent they pay and the market rent; council house buyers under the Right to Buy receive an implicit subsidy in the form of the difference between the price they paid and the market price.” So is this just an accounting issue? “In a sense this was not too different from converting a payment flow into a lump sum payment.” So far from ‘decimating’ the social housing stock, it looks like Mrs T did nothing more onerous to the market than adjust the accounting treatment of social housing.
So another potential culprit – a shortage of social housing – turns out to be another red herring in our search for the causes of our housing crisis. So the search goes on. Read next our next article to see if we can get further in our attempts to unpack the housing development conundrum.