Exporting homelessness cases from London boroughs to cheaper housing rent areas such as the Newham to Stoke case this week has attracted a huge amount of media attention. For once, some may say, housing news is national news, but more importantly this is the first impact and consequence of the welfare and housing reforms that has become evident to the general public and the general news media.
I develop the first impact issue below and argue that exporting homelessness:
(a) It doesn’t alleviate homelessness at all in fact it increases homelessness;
(b) It won’t save public money through reduced HB costs but will cost more, and
(c) It simply won’t work and can’t work.
Over the past few days much has been written and said about this ‘exporting’ of London’s homelessness which has mainly focused on the human interest element of homeless persons being uprooted and dumped over a hundred miles away. It holds a significant human interest of course but it’s much more than just another human interest story. It is a highly emotive issue so perhaps unsurprisingly the primacy of the human interest element is understandable. However, prior to the Newham letter asking for private landlords to accommodate their homeless cases, such matters were just projections or probable impacts in the minds of the housing sector but not known to the general public.
The first impact is therefore very significant as the general public now know what the social housing sector have been saying, that the welfare reforms and Housing Benefit caps cannot work. 74% of the general public asked a few months back whether the HB caps and the overall benefit caps were right to set a £400 limit on rent and a £500pw cap on all benefit was a good thing agreed. Now that the general public has seen the first impact of what a cap means in the widely reported Newham to Stoke issue, I would suggest that if a poll were conducted on whether they still thought caps were a good idea we would see a radically different figure in support of the caps. Yet before they are polled the public know a tiny fraction of the issue as because the media furore focuses upon the human interest angle it doesn’t discuss the simple question of will it work?
It can’t work, it increases homelessness as a direct consequence and it will cost more to the public purse in increased HB costs.
I state that very definitively and don’t simply argue or proffer an opinion on that because that is what WILL happen and has to happen and why it will happen.
The Newham Plan holds some cost and operational detail of the exporting homeless proposal. Newham plan to pay a private landlord in Stoke 90% of the (LHA) benefit level and an additional £60pw on top of this. This comes to £142pw / £615pcm for a 2 bedroom property in Stoke and this is considerably less than Newham pay to accommodate these homeless cases in Newham. So this is a cost saving to the benefit bill appears the economic rationale. However what impact will that have in Stoke or wherever else homeless cases are shipped out to?
Imagine you a private landlord in Stoke where a 2 bed property attracts a market rent of £400 pcm. Get rid of your existing tenant in Stoke, which is easily done in the unregulated private rented market, and replace your £400pcm income with a monthly income of £615. Such a 54% increase in income is a no-brainer and private landlords will be queuing up to accommodate London’s homeless families.
However, it means for every one of London’s homeless families imported into the PRS in Stoke creates one homeless case in Stoke.
This has many consequences or impacts:-
- It creates duties and costs upon Stoke to deal with the new found homeless case in Stoke.
- It creates increasing demand in Stoke for housing which sees the market rent level increase which always happens when supply remains the same and demand increases.
- The 8,000 or so HB claimants living in the private rented sector in Stoke face higher rent levels and increases the HB cost there.
- All other tenants living in private rented accommodation in Stoke, those who are working for example, are also hit with higher rent costs. This is likely to create even more homelessness in the local population as housing costs become more and more unaffordable (107% of new HB claimants are in work), arrears build up, and working in Stoke becomes less worthwhile as people are better off out of work.
Exporting London’s homeless CREATES homelessness.
All of the above will happen and of course Stoke will see increased costs and pressures on NHS, Police, Schools and all public services meaning council tax will need to increase in Stoke. Simple but obvious consequences of how exporting homelessness with see increases in cost for all Stoke residents, home owners as well as those who rent – or in lay terms London boroughs are exporting their high housing rent costs and high rent inflation to Stoke and other areas of the country.
Exporting London’s homeless CREATES homelessness and creates additional cost.
But wont London boroughs save a huge chunk of public money by moving people to cheaper rent areas?
The answer to that is no as well as they too will have increased costs. This is explained by what is happening in London boroughs when private landlords there evict existing tenants due to the caps. A classic case of this was reported in the Guardian yesterday. A 4 bedroom private property had a rent of £450pw yet the cap will only pay £400pw and so the private landlord reclaimed the property. The council found the existing tenants homeless and in priority need but can only accommodate them in 2 rooms of a B&B hotel (due to London’s chronic shortage of property) and is paying out £69 per night for each room for this unsuitable but only available accommodation. This is a cost of £966pw and £566 more per week than they were paying after the caps.
A direct impact of the cap is that in this one case a London council having to pay out £29,533 MORE per year in benefit. The irony is not lost that the HB cap is less than £21k per year and yet as a result of that cap the council is forced to pay out £50,404 per year in benefit in this one case.
The benefit cap CREATES more homelessness and INCREASES London boroughs cost as well as creating more homelessness in Stoke and increasing cost in Stoke.
The direct result of the benefit cap is that it increases public purse cost of Housing Benefit and so we the taxpayer pay out more.
This temporary alleviation plan of exporting homelessness that is going to create more homelessness and homeless and HB cost and is a solution that cannot work, is only permissible due to this Coalition changing homeless legislation and allowing councils to discharge their duties by accommodating homeless cases into the PRS.
While the real underlying problem of the chronic housing shortage cannot be blamed at this Coalition’s door, their policies in not regulating the PRS, in imposing HB caps, the other HB reforms such as the bedroom tax which also create arrears that lead to more homelessness and their policy of allowing councils to discharge their homelessness duties by shipping families to Stoke is correctly blamed at their door. DWP policy of the HB caps increases the DWP HB Bill. CLG policy of changing homeless legislation creates higher HB cost for the DWP. Such incompetence increases taxpayer cost for all.
While I have used the Newham to Stoke example here it’s not a matter of playing politics by Labour-run) Newham. Westminster which is a flagship Tory-run council is exporting homelessness to Luton or Walsall or Ramsgate and Croydon have been looking to do the same to Hull.
In summary, I return to the first impact point I started with. The Tory-led Coalition achieved widespread public support with the (superficial) idea of setting a cap on welfare and housing benefits. The superficiality of the cap policy is what the first impact of the cap policy, exporting homelessness and socially dumping vulnerable people, reveals to the general public or more correctly the electorate. Even more correctly the ignorant and gullible electorate who believed the Coalition spin that the caps were to prevent immigrant Somali families from claiming £100k per year in HB and other pithy but errant spin that the Coalition would ensure “work will always pay more!” As the brief consideration of the exporting homelessness above shows this first impact reveals will create homelessness as rents spiral out of control and make employment unaffordable in even the low rent areas such as Stoke and directly because the market is reacting to the conditions this Coalition has put in place.
Wait until Universal Credit comes in, that is a nightmare of Kafka proportions and again will cost more. Wait until the risibly misnamed ‘affordable rent’ model comes in and adds a further £1bn+ to the HB bill. Wait until this governments planned council house rent rises of 41% have their first impact revealed to the electorate.
First impressions count so says the old maxim. This coalition believe this means that the superficial spin of ‘work will always pay more’ will sway the ‘gullible’ public who now see that the cap policy sees displaced white-faced British people transported oop North.
Of course I don’t believe the general public will remember this government saying that the HB caps will only hit 14,303 of the then 4,751,530 HB claimants being affected by the HB caps. Extrapolate that and the government policy will only affect 0.3% of HB claimants and not affect 99.7% they claimed back in May 2010. If the general public is up in arms over just 500 families and 500 HB claims – just 0.01% of the current HB claimants – imagine how much worse the political fallout will be for the Coalition!
The Newham to Stoke 500 doesn’t affect 99.99% of HB claimants – it is one hell of a first impact though as the general public see this incompetent policy for what it really is!
UPDATE – Link for Guardian article explaining the £966pw HB cost is here