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.

Julia Rampen
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Donald Trump's inauguration marks the start of the progressive fightback

Opponents to Donald Trump and Brexit are reaching across the Atlantic. But can they catch up with the alt-right? 

In the icy lemon sunshine of 20 January 2017, a group of protestors lined London’s Millennium Bridge, drumming. Two scarf-clad organisers held placards that spelt “Open Hearts”. 

Protesting the inauguration of Donald Trump as the 45th US President might seem like a waste of time when you could spend the day under the covers instead. But the protestors were upbeat. Sophie Dyer, a part-time student and graphic designer I met on the bridge, told me her group were “trying to avoid mentioning his name”. 

When I asked her what had catalysed her interest in political activism, she said: “Everything. 2016.”

One of the trademarks of the times is the way the alt-right learnt from each other, from Donald Trump crowning himself “Mr Brexit”, to France’s Marine Le Pen sipping coffee at Trump Towers. Now, progressives are trying to do the same. 

The protestors were part of the Bridges Not Walls protests. Ten hours before I stepped onto the Millennium Bridge, New Zealand activists had already got started. As the sun rose over Europe, banners unfurled from bridges in Dubai, France, Spain, Sweden and Norway. In the UK, there were also protests in other cities including Edinburgh and Oxford.

The demonstrations are about Trump – the name is a direct rebuke to his pledge to build a wall on the southern border – but they are no less about Brexit, or, as environmental campaigner Annabelle Acton-Boyd put it, “right-wing populist movements”. 

Acton-Boyd said she had come to show solidarity with American friends who opposed Trump.

But she added: “It is about coming together supporting each other geographically, and across different [political and social] movements.” 

In the election post-mortem, one of the questions confronting progressives is whether voters and activists were too focused on their own issues to see the bigger picture. This varies from controversial debates over the role of identity politics, to the simpler fact that thousands of voters in the rustbelt who might have otherwise helped Clinton opted for the Green candidate Jill Stein.

But while Bridges Not Walls paid homage to different causes - LGBTQ rights were represented on one bridge, climate change on an other - each  remained part of the whole. The UK Green Party used the event to launch a “Citizens of the World” campaign aimed at resettling more child refugees. 

Meanwhile, Trump and his European allies are moving fast to redefine normal. Already, media critics are being blocked from presidential press conferences, divisive appointments have been made and the intelligence authorities undermined. 

As US opponents of Trump can learn from those in the UK resisting a hard Brexit, resisting this kind of right-wing populism comes at a cost, whether that is personal infamy a la Gina Miller, or the many hours spent dusting off books on constitutional law. 

The question for transatlantic progressives, though, is whether they are prepared to leave the morning sunshine for the less glamorous elbow grease of opposition – the late night email exchanges, the unpaid blog posts, the ability to compromise - that will be needed to bend the arc of history back towards justice. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.