Shift subsidy to supply to bring down housing benefit spend, says CIH

Spending money on new affordable housing is the “obvious and necessary” solution to the government’s ever-rising housing benefit bill, according to the Chartered Institute of Housing (CIH).

However, the professional body also concluded that the fiscal upside for the government would not be felt for years, assuming benefit levels were maintained.

The CIH’s 2024 UK Housing Review Autumn Briefing Paper included the statistic that government spending on housing was now at its highest level ever.

The figure in 2021/22 stood at £30.5bn, compared with £22.3bn in 1975/76, in real terms. But while in the 1970s, 95% of this was spent on building or improving homes, now only 12% does, with much of the rest ending up in the pockets of private landlords in the form of housing benefit.

The research paper, the fifteenth in the series, concluded that the only way to reverse this was to shift subsidy back towards supply.

“Unfortunately, the social and affordable supply has to increase before the pressure on housing benefits is eased,” it said.

Author Ralph Mould, an economist with ChamberlainWalker, argued that “to keep overall housing subsidies in the UK stable – or to reduce them – supply subsidies will need to be increased in order to achieve long-term savings on the demand side.” 

The report noted that the government’s commitment to “the biggest increase in social and affordable housebuilding in a generation” was backed with only “limited promises of additional funding” and said that, even if it was achieved, “its effect in easing pressure on housing benefit will not be seen for some years”.

“This brings into focus what the Labour government’s approach to housing benefits will be,” it said.

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“Given the condemnation of the cuts to housing support that were clearly articulated by Labour when they were being introduced, it is disappointing that its manifesto was devoid of any reference to LHA, the bedroom tax, or the benefits cap. 

“The chancellor’s refusal to budge on the two-child limit in the early weeks of the new government and the removal of the whip from MPs who voted for its immediate abolition, signalled a tough stance on benefits. 

“This is an area where pressure for change will mount and demand the kind of energy already being devoted to achieving Labour’s housebuilding targets.”