Housing benefits and the Olympics

How housing benefit caps exacerbate the effects of the Olympics.

When the Government announced its cap on housing benefits, it dismissed critics who said that this would lead to increased social segregation and a displacement of the poor from inner city housing. Nothing of the sort would happen, but instead, the size of the welfare bill would go down and there would be lower rents for poor people renting from a private landlord. In reality, the critics were right: the poor are driven out of their communities, and rents continue to rise as fewer and fewer people can afford to buy. Nowhere can this be better observed than in the Olympic boroughs, where high-speed gentrification meets the benefit cap.

Hardly anyone expected that the Olympic Games would leave the population of Hackney, Newham and Tower Hamlets unchanged. The billions of pounds that poured into three of the most deprived boroughs in England led to upgraded infrastructure and housing stock and brought new shopping and leisure facilities. Many people on higher incomes will consider moving there where few would have done so before. Consequently, housing values and rents are on the up. Post-Olympics, the poor would have always found it hard to find affordable accommodation, and people on housing benefits would have struggled to find a private landlord willing to rent to them rather than a more affluent tenant.

But the housing benefit cap is massively exacerbating this development. Housing benefit is paid in the form of the Local Housing Allowance (LHA) to people on low incomes who rent from a private landlord (as opposed to a social landlord, such as a housing association).  Prior to the reform, the maximum amount was pegged at the median level of a given rental market area, meaning that private landlords would get a similar rent than if they let out their property to a more affluent tenant. The newly introduced cap limits the LHA to the 30th percentile, and also specifies an absolute cap, for example £250 per week for a one bedroom property. This may appear high – but in London, it is not an unusual price.

Since the introduction of the cap, landlords in East London quickly realised that they can charge the same or much higher rents in the open market rather than renting to LHA recipients. It is very tempting even for the most socially inclined of private landlords to do so, given that the system is fraught with complications: payments are made in arrears, and often arrive late. LHA recipients whose income level crosses and recrosses the eligibility threshold have their benefit payments stopped and restarted, making the system even more unreliable. The general demonisation of LHA recipients (or benefit recipients in general) does not help. The result: a shortage of housing for the poor. As a Guardian investigation has shown, there are hundreds of properties within the limits of the housing cap in Newham, but many of these are not available to people on LHA. Queue the exodus of LHA recipients. Newham Council has already asked a housing association in Stoke if they could take on 500 families for which the council has been unable to find properties. The legacy of the Games will be a homogenous island of wealth interspersed with remnants of social housing rather than the mix of rich and poor that is still the norm in most parts of London.

The developments here are a sign of the shape of things to come across the country – at different times, at different speeds, but it will happen elsewhere, as the rental market is rapidly overheating: people cannot afford to buy anymore and renting ceases to be the preserve of the poor. Landlords can chose who to let to, and unsurprisingly will chose richer tenants. It was always a complete folly to introduce price controls on a small segment of an overheating market – it simply means that this market segment will not be served. What is happening in the Olympic boroughs should act as a warning to the rest of the country: if we don't want ghettos of rich and poor, the cap has to be repealed. If we don't want to spend increasing amounts of money on housing the poor, we have to reform the whole of the housing market, not just that part that is meant to serve the vulnerable (and that serves them badly already). At the moment, it is barely working for most, and it isn't working for the poor at all.

Photograph: Getty Images

Veronika Thiel is a researcher and writer in the field of social economics and health policy. She tweets from @veronikathiel.

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Commons Confidential: When Corbyn met Obama

The Labour leader chatted socialism with the leader of the free world.

Child labour isn’t often a subject for small talk, and yet it proved an ice-breaker when Jeremy Corbyn met Barack Obama. The Labour leader presented the US president with a copy of What Would Keir Hardie Say? edited by Pauline Bryan and including a chapter penned by Comrade Corbyn himself.

The pair, I’m informed by a reliable snout, began their encounter by discussing exploitation and how Hardie started work at the tender age of seven, only to be toiling in a coal mine three years later.

The book explores Hardie’s relevance today. Boris Johnson will no doubt sniff a socialist conspiracy when he learns that the president knew, or at least appeared to know, far more about Hardie and the British left than many MPs, Labour as well as Tory.

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Make what you will of the following comment by a very senior Tory. During a private conversation with a Labour MP on the same select committee, this prominent Conservative, upon spotting Chuka Umunna, observed: “We were very relieved when he pulled out of your leadership race. Very capable. We feared him.” He then, in
a reference to Sajid Javid, went on: “We’ve got one of them.” What could he mean? I hope it’s that both are young, bald and ambitious . . .

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To Wales, where talk is emerging of who will succeed Carwyn Jones as First Minister and Welsh Labour leader. Jones hasn’t announced plans to quit the posts he has occupied since 2009, but that isn’t dampening speculation. The expectation is that he won’t serve a full term, should Labour remain in power after 5 May, either as a minority administration or in coalition in the Senedd.

Names being kicked about include two potential newcomers: the former MEP Eluned Morgan, now a baroness in the House of Cronies, and the Kevin Whately lookalike Huw Irranca-Davies, swapping his Westminster seat, Ogmore, for a place in the Welsh Assembly. Neither, muttered my informant, is standing to make up the numbers.

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No 10’s spinner-in-chief Craig “Crazy Olive” Oliver’s decision to place Barack Obama’s call for Britain to remain in Europe in the Daily Telegraph reflected, whispered my source, Downing Street’s hope that the Torygraph’s big-business advertisers and readers will keep away from the rest of the Tory press.

The PM has given up on the Europhobic Sun and Daily Mail. Both papers enjoy chucking their weight about, yet fear the implications for their editorial clout should they wind up on the losing side if the country votes to remain on 23 June.

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Asked if that Eurofan, Tony Blair, will play a prominent role in the referendum campaign, a senior Remainer replied: “No, he’s toxic. But with all that money, he could easily afford to bankroll it.”

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism