An Assessment of the British Housing Benefit System

The British Housing Benefit system has become one of the central pillars of housing policy as well as a major element in the social security system. Housing Benefit has enabled government to switch housing subsidies away from ‘bricks and mortar’ subsidies and it has become the main housing subsidy. It has also underpinned other policies that have transformed the housing system, including the homelessness legislation, the liberalisation of the private rented sector, private finance for housing associations and the transfer of local authority housing to housing associations. Over time its objectives have narrowed with much more emphasis being placed on its income maintenance objective and rather less on a wider affordability objective. Nevertheless, it performs both objectives reasonably well in the social rented sector, but is increasingly failing in the private rented sector where restrictions aimed at controlling costs have become much more onerous. It is often suggested that design of Housing Benefit seems likely to lead to work disincentives and over-consumption of housing, but the evidence is weak. While the system is difficult to administer, it is cheap to administer (compared to many other benefits). Current policy development is aimed at extending choice by creating incentives for claimants to consume housing more efficiently, as well as removing some of the administrative deterrents to moving into work. Longer term it seems likely that the system will need to adapt to the growth of tax credits with which it is not well aligned.