Subsidies should be paid directly to tenants, says Peter King in the Yorkshire Post.
Local authorities and housing associations provide housing for those who cannot afford to buy, or who are vulnerable. Accordingly, central government spends more than £600m-a-year on social housing in Yorkshire alone.
Yet this social housing is still so expensive that 77 per cent of all tenants need to claim housing benefit in order to live in it. This accounts for another £700m of Government funding each year for tenants in Yorkshire.
Why, we might ask, does the Government, or rather the taxpayer, have to pay for this housing twice – once to build it and then again to pay the rent?
This crazy situation has come about not because social-housing tenants are lazy, or because they are cheating the system, but because of the actions of the Government.
Social-housing landlords cannot charge the rents they want but have to set them according to a national system controlled by central government.
Landlords cannot make their own decisions about maintaining their own dwellings, but again have to meet the Government’s Decent Homes Standard. The Government tells social-housing landlords what income they are going to have and what they have to spend it on.
All this is maintained by an expensive bureaucracy with bodies such as the Housing Corporation and Regional Housing Boards, who insist that landlords develop policies and strategies for everything from investment to public relations.
In the face of these demands, social-housing landlords know that the best way to guarantee their income is by taking tenants whose income is so low that they can claim housing benefit.
This is why the number of housing-association tenants in receipt of benefit has risen from just over 50 per cent a decade ago to the present level of nearly four out of five. What makes this situation worse is that the vast majority of this housing benefit is paid direct to the landlord and the tenant never sees it.
But the folly does not stop there. While most people argue that there is a chronic shortage of affordable housing, the Government is actually insisting that perfectly good housing in cities like Hull, Barnsley and Doncaster is pulled down.
An organisation set up in South Yorkshire, called Transform South Yorkshire, has so far been allocated more than £160m of Government money, and in the name of “housing-market renewal” has already demolished more than 1,700 dwellings without replacing them with any new housing whatsoever.
The Government claims that many of the houses demolished are unwanted, but most are still lived in and have been compulsorily purchased in the face of opposition from the local community. So the Government deals with a housing shortage by demolishing perfectly good housing and then spends money to subsidise both landlords and tenants so that they can afford the high rents set by the Government itself. Is this really a sane system?
In a new book published by the Institute of Economic Affairs, Choice and the End of Social Housing, I argue that there is an alternative to this madness.
Instead of funding landlords who then encourage benefit dependency, the sole criteria for subsidising housing should be household income.
We should abolish all subsidies to social-housing landlords and treat them in exactly the same way as private landlords. They should compete for their tenants on the basis of the quality of their management and maintenance, not because they have special privileges from the Government.
This would allow us to abolish the expensive and wasteful bureaucracy that ties down housing. Instead of responding to the demands of government, landlords should react to the needs of tenants.
The way to achieve this is not through central-government regulation but through healthy competition with other local landlords. Instead of making policies and strategies, landlords should concentrate on their core tasks of managing and maintaining housing.
If households are on low income, then they should get the financial support that helps them to access and sustain good-quality housing regardless of who their landlord is.
The most straightforward way to make housing more affordable is to increase household income. Any subsidy should be paid to tenants and not to their landlord. We should assume that tenants are competent and that, if they do not pay their rent, they should pay the consequences.
On the outskirts of Bradford there is a housing development that is considered so good it has been designated a World Heritage Site by the United Nations.
This means that, along with places like the Taj Mahal and the Great Wall of China, it is considered a unique environment and a testament to human ingenuity.
This development is Saltaire, built in the 19th century by Titus Salt to ensure that his workers had a decent place to live.
What motivated Salt was not government regulation or subsidy, but what Adam Smith termed “enlightened self-interest”. Salt realised that a healthy workforce was an effective and efficient one and that this was the best way to make his company succeed in the face of competition from other manufacturers.
We can learn a lot from this example. In housing policy, we should seek to rely again on enlightened self-interest and to follow the market.
See also Peter King’s
Choice and the End of Social Housing.