In-work households push Housing Benefit claimants past 5 million
In recent weeks the number of Housing Benefit claimants reached five million for the first time. Despite recent interest in welfare reform this landmark passed almost without comment. It means that around one in five households in Great Britain are now claiming Housing Benefit to help cover their housing costs. At BSHF we have been taking a detailed look at this trend and recently published our analysis as The Growth of In-work Housing Benefit Claimants: Evidence and policy implications.
Housing Benefit has been the subject of renewed attention since the last general election. The Welfare Reform Act, which recently gained Royal Assent, contained a variety of measures designed to limit Housing Benefit expenditure. These include the ‘bedroom tax’ for under occupation, changes to the calculation of inflation and tighter limits on claims by younger tenants.
What the measures had in common was the intention of limiting the amount of Housing Benefit that each household can claim. However, it is the growth of claimant numbers which has been the major driver of increases in Housing Benefit expenditure since the start of the global financial crisis.
Since 2007/08 the number of Housing Benefit claimants has increased by one million households. Unsurprisingly this has had a big impact on overall Housing Benefit expenditure. For example, adding 100,000 claimants increases overall Housing Benefit expenditure by £460 million each year at 2011/12 prices.
Analysis of this increase in Housing Benefit claimants has been almost entirely absent from discussions about welfare reform. We need a much better understanding of who is claiming Housing Benefit in order to assess why claimant numbers are increasing.
A close reading of figures from the Department for Work and Pensions indicates that almost all of the increase in Housing Benefit claimants in the last two years came from households that were in work. Between January 2010 and December 2011 the total number of Housing Benefit claimants increased by 301,000. During the same period the number of non-passported claims, in employment, increased by 279,000. Therefore households in employment account for 92.8 per cent of the overall increase in Housing Benefit claimant numbers.
Over previous economic cycles the number of Housing Benefit claimants has traditionally increased as unemployment has risen and then fallen as unemployment has decreased. The recent growth of in-work households claiming Housing Benefit appears to be a departure from this historic trend. It appears that there has been a considerable change in the financial situation of these households who are now claiming Housing Benefit and we need to better understand why this change has occurred.
A number of factors such as wage freezes and high inflation could have contributed to this trend. One possible contributing factor has recently been highlighted by the TUC and is worthy of particular attention. It is the increase in the number of ‘involuntary’ part-time workers who were seeking full-time employment but were unable to find it. TUC analysis suggests that the number of people in this situation has grown rapidly since 2007 and now stands at 1.38 million. Is growth in the number of Housing Benefit claimants one of the costs of this increase in involuntary part-time working?
The growth of in-work claimants represents households who are in employment but cannot afford to pay their housing costs. The rapid increase in the number of households in this position highlights the vulnerability of their financial situation. If rental accommodation is no longer affordable for many low-income working households it would have serious implications for households, for housing policy and for the wider economy. This is not an issue we can afford to ignore any longer.