Departments told to explore how benefits cash can fund new homes

MPs tell DCLG and DWP to commission research on leveraging housing benefit payments to ease the housing crisis


By Jim.Dunton

28 Apr 2017

The Department for Communities and Local Government and the Department for Work and Pensions have been instructed to look into ways England’s £21bn a year housing benefit bill can be used to drive the delivery of new homes.

In the latest of a raft of reports published before the dissolution of parliament, members of the Public Accounts Committee said the government did not appear to know what impact the cash – paid to people who are unable to afford the rent of their homes – had on the supply of housing.

MPs gave DCLG and DWP 12 months to identify metrics that can be used to establish the full impact of housing benefit on construction of new homes and examine the scope for this financing to be used more innovatively to increase housing supply and home ownership.

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The report said around  £8.4bn of the housing benefit spending identified went to housing associations, which use rental income to borrow to invest. However it said neither DCLG nor DWP was able to quantify the impact of this funding on the construction of new homes.

The report added that £8bn of housing benefit went to tenants renting in the private sector, where it did not contribute to the financing of new social housing, but could potentially be used to leverage upgrade work on properties that failed to meet the Decent Homes Standard, which covers.

The departments were urged to compile better data on the proportion of homes that failed to meet the standard that were being subsidised through housing benefit, and what could be done to improve the situation.

More generally, MPs said they were concerned by the “lack of urgency” displayed by DCLG toward meeting the nation’s housing crisis.

The most recent housing statistics show that 140,660 new homes were completed in the year to December 2016, but ministers now accept that 225,000-275,000 new homes a year are needed to keep up with demand.

MPs said that DCLG’s ambition of overseeing the construction of 1m additional homes over the five years of the current parliament equated to an average of only 200,000 new homes a year. 

“In the absence of any clear plans for raising supply further, the department conceded that the fundamental flaws in the housing system could persist for decades to come,” they said. 

“We are highly concerned by this lack of urgency and ambition, most of all in view of the rising costs, both human and financial, of homelessness. 

“Not only does becoming homeless represent a terrible blight on people’s lives, it also places additional strain on public spending: councils’ spending on temporary accommodation amounted to £840m in 2015–16, a real-terms rise of nearly half in just five years.”

MPs said DCLG should publish an annually updated “housing gap” figure in its Single Departmental Plan that showed the difference between the latest rate of net additional housebuilding and estimates of the rate required to meet demand as identified in the recent Fixing Our Broken Housing Market white paper.

They said the figures should show the cumulative total of net additions since the beginning of the ambition to build 1 million home, identifying how many homes need to be completed in future years and how its individual programmes and spending were contributing to it.

Separately, a joint report from the Work and Pensions Select Committee and the Communities and Local Government Select Committee has called on the government to scrap proposals to base rent allowances for tenants in supported housing on rates used for claimants in the private sector.

They said the proposed reform could lead to a “serious shortfall in the availability of supported housing”, which is currently used by around 700,000 vulnerable people – including those with learning and physical disabilities and survivors of domestic violence.

Inquiry co-chair Richard Graham said that while MPs supported the government’s aims to reform funding for the sector to ensure quality and value for money, the proposals were “unlikely to achieve these objectives”.

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