How housing traps people in unemployment

If we're to move away from using housing benefit to prop up a dysfunctional housing market, we desperately need to think much more carefully about rent levels and wages, writes Rebecca Tunstall.

Housing benefit is preventing poverty and homelessness, but propping up a dysfunctional system and hindering work incentives. We need lower housing costs to make work pay and close the unemployment trap.

The traditional role of housing policy has been to improve living conditions, but over the past 20 years policy-makers have tried to extend its impact. A report for the Joseph Rowntree Foundation shows that housing benefits, housing costs, location and options for mobility can affect job opportunities and incomes.

Housing benefit, claimed by four million households, has a positive impact on living conditions, and it is hard to see how millions of households could avoid homelessness or hardship without it. But cuts for private tenants have already meant people going without essentials, and there is widespread concern over the changes for social tenants from April.

But like many other benefits, and in combination with them, housing benefit creates an unemployment trap.

For each extra £1 in earnings, people lose 65p in Housing Benefit. Those claiming other benefits too can lose 90p in the pound or more, and the effect lasts nearly until earnings reach average levels. So unless good wages are in command, people receiving housing benefit may be no better off in than out of work.

There is a trade-off between support to prevent homelessness and deprivation on the one hand, and maintaining an incentive to work on the other. Universal Credit, to be introduced in phases from April at great organisational cost, will redesign the unemployment trap somewhat although the effects may be lost in other benefit changes.

There appears to be precious little by way out of this conundrum. That is unless you have more low-cost housing, such as that providing by councils and housing associations, which makes it markedly easier to make work pay.

For a typical household, for each £10 less rent they have to pay per week, they can escape the unemployment trap by at £50 less in gross earnings. However, over the past ten years increasing numbers of those with low skills and low income prospects have been housed in higher rent private tenancies. In 2010 the average private rent in England was £150 a week, compared to council rent at £67. This has introduced a new structural difficulty in making work pay.

If regional location is seen as an attribute, it is an important contributor to a 'housing effect' on employment, since different labour markets offer very different opportunities. Evidence suggests that the ability to move home does have effects on employment, but the effects are modest, because most moves are local, and because low-paid (and often insecure) jobs may not justify taking a whole household from one end of the country to another.

Policymakers have focused concern on perceived low mobility of social tenants, part of the inspiration behind benefit reforms. It's true that these reforms encourage affected tenants to move—but to do so in a specific direction: towards cheaper areas, which are likely to have worse job opportunities. Home owners are also trapped, and no more mobile than social tenants. Research has suggested that high rates of home ownership lead to higher structural unemployment rates by preventing mobility.

Wages rather than housing circumstances provide the main financial work incentive, and higher wages would help people jump any shape of the unemployment trap. The trouble is overall work incentives have been falling for a long time—since the 2000s due to stagnant real wages for people with lower skills.

Is it fair to ask the housing system to pick up the slack? Probably not. But if we're to move away from using housing benefit to prop up a dysfunctional housing market, we desperately need to think much more carefully about rent levels and wages.

Photograph: Getty Images

Rebecca Tunstall is Professor of Housing Policy at the University of York. She wrote the latest Joseph Rowntree Foundation report on housing and poverty.

Photo: Getty Images/AFP
Show Hide image

Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.