A new study by the Chartered Institute of Housing (CIH) and the Centre for Homelessness estimates that Local Authorities could save £572m each year by moving all households at risk of homelessness out of the costly private rental sector and into social housing.

If Local Authorities went further, and moved all recipients of housing benefit, or the housing element of Universal Credit, from private to social rented homes, the saving is even more significant – in the region of £1.9bn each year.

Even better, as well as the very significant potential savings, the move to social tenancies would also make low-income households much less vulnerable to homelessness.

The Status Quo

In the UK, the Government subsidises the housing costs of those on low incomes in two distinct ways: by supporting their rents through the benefits system, and by providing – usually via a housing association – low cost rented homes.

Because the latter are in very short supply, more and more low-income households are living in private rented accommodation where rents are much higher. The same goes for households at risk of homelessness: nearly four-fifths of temporary accommodation for homeless households is met by using the private rented sector, very often in wholly inadequate settings like hotels and B&Bs. As a result, these households need more support from benefits, which equals a hefty welfare bill to the UK Treasury.

Every year, the Department for Work and Pensions spends £30.6bn on housing benefit and the housing element of Universal Credit, equivalent to around 15% of the benefits budget. This is forecast to increase to £31.3bn by 2025-26 as more people switch over to Universal Credit. Around £7.9bn of the current total is paid to subsidise the rents of 1.7 million tenants in the private rented sector.

The Key Findings

The key findings of the Chartered Institute of Housing (CIH) and the Centre for Homelessness report included the following points:

  • If all recipients of housing benefit or Universal Credit in the private sector could switch to social rented units, it would achieve considerable savings to the UK Exchequer, as well as making low-income households less vulnerable to homelessness.
  • The crude saving is estimated at £3.9 billion annually, although once the assessment is weighted to take account of factors such as job seekers and claimaints in paid employment being likely to hage short claims, the saving falls to £1.9 billion.
  • Nearly four-fifths of temporary accommodation for homeless households is met by using the private rented sector, especially in high-cost areas such as London. Before the pandemic, temporary accommodation was costing local authorities £1.2 billion. Almost half of this sum could be saved each year if councils were able to substitute social rented accommodation for the 73,700 private rented sector lettings currently used for temporary accommodation.
  • An additional 10,000 new homes a year in the social rented sector could save central Government £44m a year in subsidising housing costs to cover costly private rents or temporary accommodation.

That we need more high-quality social housing is abundantly clear, especially if we want to reduce social inequality, as per the Government’s ‘levelling up’ agenda. How we will deliver it is less obvious, though it will necessarily require the deployment of significant financial investment by both the public and private sector.

You can download the full 16-page report – Housing for people on low incomes – how do we make the best use of government subsidies in England? – from the Chartered Institute of Housing website, here.