Plans to reduce housing benefit spend now look optimistic

At the Building and Social Housing Foundation (BSHF), we have been watching one of the more obscure pieces of government data with interest in recent months. The monthly release of housing benefit claimant numbers doesn’t get many headlines but we think it is really important.

The government is making a well publicised attempt to reduce housing benefit expenditure. Much attention has been paid to proposals which seek to control the amount paid to each household, such as linking rent increases to the Consumer Prices Index.

However, the plan to reduce expenditure is also based on a gradual, but significant decrease in the number of housing benefit claimants. That decrease in claimant numbers is now looking optimistic. The number of housing benefit claimants has just hit a twenty year high and the government is revising its unemployment predictions upwards.

Our new research highlights just how sensitive housing benefit expenditure is to changes in the labour market, because of the strong link between the number of people unemployed or economically inactive, and the number of claimants.

If the strong historic link between the labour market and housing benefit claimant numbers continues there will be almost 250,000 more recipients than current government estimates by the middle of next year.

This would make housing benefit expenditure £400m higher than government forecasts in 2011/12 rising to £1.2bn higher than forecast for 2012/13.

It is clear that a higher level of unemployment could seriously undermine the government’s efforts to reduce housing benefit expenditure. There is no room for complacency with the number of housing benefit claimants even if they fall for the next few months. Changes in the labour market last year suggest that claimant numbers may fall in the coming months but increase again later this year.

This research shows that unemployment and housing benefit claimant numbers go hand in hand. Controlling the amount of housing benefit paid to each household will not be enough to limit expenditure. The government needs to place a greater emphasis on reducing the number of people who need to claim housing benefit to obtain decent accommodation – particularly through reducing levels of unemployment.