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29 October 2010

Another housing headache for the coalition

New warning that coalition’s housing policy will increase welfare dependency.

By George Eaton

After coming under fire from all sides over its housing benefit cap, the coalition is consoling itself with the thought that most voters support the policy. The government has calculated that Ed Miliband’s decision to side with so-called “benefit scroungers” will cost him in the long run.

But regardless of the rights or wrongs of the policy itself, it’s the pragmatic objections that are coming to the fore. Particularly troubling for the coalition should be today’s warning from the National Housing Federation that its decision to increase rent simultaneously for new tenants to 80 per cent of the market rate will lead to a higher benefits bill and sap work incentives.

As the body’s chief executive, David Orr, explains: “Because it is based on near-market rents, the new funding model will trap thousands of tenants in welfare dependency because they will simply not be able to earn enough money to pay for their homes without the support of housing benefit – which means the benefit bill for new low-cost housing will go through the roof.”

Like so much else, the coalition’s housing reforms are premised on the belief that the private sector will generate sufficient jobs for the unemployed. But with PricewaterhouseCoopers already warning that the sector will generate 600,000 fewer jobs than originally forecast by the OBR, that’s increasingly looking like an unsafe bet. The greatest risk for the coalition is that their welfare reforms come to be seen as not just unfair, but unwise, too.

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