Monday, 8 November 2010

Boris defender of the poor?

The row between David Cameron and Boris Johnston about the cap on housing benefits dramatically illustrates the problems that many English cities face if these measures go through unchanged. It is predicted a large migration from city to suburbs and to areas even further afield will take place.
Now its unlikely that Boris has become a bleeding heart liberal over night and has started to wear his heart on his sleeve. No, his concern is likely to be more about the economic effect of losing those very low paid workers  doing the essential but menial tasks from the capital city. It is a no brainer, high rents and low wages means an exodus  from the capital. It was only housing benefits that kept those on low incomes literally in their city homes. And those homes were mainly provided by social landlords - councils and housing associations.
It was not always thus. Rents in the social sector historically were kept low. Why, because, instead of subsidising the individual, the capital cost of building the houses were kept low with a government grant. Housing Associations were given a grant to cover the remaining capital cost of the property after the rent officer had determined what a fair rent for the property in question would be.
All this was to change under Mrs Thatcher. In her second term of office, she embarked on a round of  public sector cuts. One of the casualties of that round was public sector housing - local authority house building ground to a virtual halt. Also her housing ministers were told in no uncertain terms that the grants to housing associations were to be reduced dramatically and the cost of building new social housing was to be  finance from the private sector.
Raising money from the private sector is expensive, banks and building societies want a healthy return for their loans - as many an owner occupiers is aware.
This change of policy saw a gradual upward spiral in rents. No matter, government argued,  housing benefit would take the strain. So those poor people who could not afford to pay their rents would be bailed out by housing benefit payments.
But there are always consequences to such changes. What this move  brought about was a sea change in the nature of social housing tenants. What was previously a relatively healthy mix of tenants changed over time to more and more tenants being out of work and locked into the benefits culture.
Why was this? Well those that were in work exercised the right to buy their homes at a subsidy. More and more of the tenants left behind were without jobs and not able to raise even the small mortgages required to buy their council or housing association flats. So we see the development of ghetto estates with large numbers of the population unable to break out. Taking a job would mean losing the housing benefit and  would either lead them to look for inferior housing in the private rented sector or eventually lead to their eviction for non-payment of rent.
So far from leading to a healthier society the latest move is likely to see a large migration from our cities and more rather than less people with housing problems.


  1. The law of unintended consequences!

    Once this proposal is enacted, then London will cease to be viable! Without its low paid workers, who will iron the bankers' shirts, or clean their streets? -Or the Mayor's for that matter!

  2. Quite so! Not the first time that politicians have not thought through their policies!