Building social housing could end up paying for itself due to savings on benefit payments, a new report as found. Image: Mark Potterton / Unsplash
Building social homes for thousands of families living in temporary accommodation or on housing benefit could still cost less than the eye-watering amounts being paid into the private sector, the government has been told.
Chancellor Rishi Sunak could save almost £2bn a year by moving housing benefit and universal credit claimants out of costly private rentals, according to a new report from the Chartered Institute of Housing (CIH) and the Centre for Homelessness Impact (CHI).
The lack of social housing stock is a major factor in the housing crisis, but the report found the savings made could comfortably fund the building of more social homes.
Building 10,000 homes a year in the social rented sector would cost central government around £40m a year, but could save £44m a year in subsidising housing costs to cover private rents or temporary accommodation.
The findings come just weeks after the government removed the £20 universal credit increase introduced during the pandemic – despite widespread warnings of rising homelessness – and just over a week before Sunak is set to lay out his fiscal plans at the spending review.
“We should ask hard questions about whether the very large sums paid in benefits to subsidise the housing costs of people on low incomes are being used in the most effective way,” said Dr Ligia Teixeira, chief executive officer, Centre for Homelessness Impact.
“While evidence suggests this financial assistance constitutes an important part of the UK’s homelessness ‘safety net’, our report shows that it is possible to make limited resources go further: for instance, by redirecting some of this money into social housing which can be better value and more secure for tenants.”
Social rent homes are the most affordable type of housing and also the category of homes that have perhaps been most neglected by successive governments over the past few decades.
That’s why Shelter is asking the government to pledge to invest £12.8bn a year on building social rent homes over the next 10 years at the spending review. Last year the housing charity said 50,000 social homes were needed between 2020 and 2022 during the recovery from the pandemic.
The report released today shows that tackling the housing crisis by building new affordable homes might be costly but makes economic sense.
Local authorities faced a bill of £1.3bn to cover temporary accommodation before the pandemic but this could be almost halved if councils were able to use social rent homes for the 73,700 private rent lettings used for households at risk of homelessness
For every benefit claimant moved out of private rented accommodation there is a saving of £1,100 per year in benefit payments while moving a family out of temporary accommodation saves around £7,760 per year.
There are around 1.7 million tenants in private rented accommodation receiving housing subsidies through the benefits system which costs £7.9 billion a year.
The Department of Work and Pensions currently spends £30.6bn on housing benefit and the housing elements of universal credit but that spend is forecasted to rise to £31.3 bn by 2025/26.
Universal credit was a lifeline for many people hit by the pandemic, with around six million claiming the benefit as it was bolstered with a £20 increase. That uplift ended on October 6 with the government saving £6.6bn with the cut, according to Treasury estimates.
James Prestwich, director of policy and external affairs at CIH, said: “Councils currently house almost 75,000 households, at risk of homelessness, in private rented accommodation. If these households could be rehoused in social rented homes councils would save £572m a year.”
The Westminster government has pledged to build 32,000 social rent homes as part of the £11.5bn Affordable Homes Programme.
Meanwhile The Big Issue’s Stop Mass Homelessness campaign is also on a mission to prevent rising homelessness this autumn. Get up to speed with the campaign and sign the petition here.
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