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Should lottery winners continue to have subsidised rent?

Moss new If you are a Council tenant and win the Lottery, what happens? Regeneration expert John Moss says a return to meaningful incentives to buy could generate £75 billion to spend on new housing.

A recent article in the Daily Mail highlights one of the failures of the current system of Social Housing.  Mr & Mrs Cable won nearly £4 million on the Lottery, yet, they are still in receipt of a state welfare benefit in the form of a below-market rent on their Council home. Low rents are equivalent to a subsidy to social tenants of around £7 billion a year and every tenant gets them, whether they are Lottery winners or not. (The eponymous Hills Report, calculated this to be £6.6bn in 2004 - Ends and Means – The Future Role of Social Housing in England, John Hills, pg 79).

I am sure the Cables are happy in their home and I would not want them to be forced to leave it, but their circumstances are such that they really should not be in receipt of welfare. They are not getting Job Seekers Allowance or Pension Credit or any of the other 50+ schemes of welfare which exist in the UK today. So why should they get welfare in the form of a rent on their home which is below the market rent?

I know this is an extreme example, but how much of that £7 billion a year subsidy to tenants of Councils and Housing Associations is going to people who ought not to be getting welfare benefits?

The Audit Commission recently estimated that there were at least 50,000 social homes being illegally sub-let. That is out and out fraud which costs taxpayers £130 million a year. There may be other Lottery winners and there will be people who earn a sufficient wage to disqualify them from other benefits, especially when you consider that 30% of social homes are let to people with incomes which put them in the top 60% of all households. Yet, they still get a £30-£50 a week benefit bung from the rest of us through
their below-market rent.

So what should we do?

In Principles for Social Housing Reform Stephen Greenhalgh and I argued that rents should be allowed to rise to market levels and that the current capital subsidy regime should end, with the funding moving over to increased Housing Benefit for those who are genuinely in need of help. The Cables would then see their rent rise by £30 a week and I am sure they would be happy to pay it. But we also argued for a return to meaningful incentives for people to buy their social homes and release the cash tied up in the bricks and mortar back to Councils and Housing Associations to provide more homes.

We suggested three stages for this:

First, a tenant could earn a slice of equity through good behaviour.  After three years of paying your rent on time, not misbehaving, doing minor repairs etc, you would get a 2% share – and an equivalent reduction in your rent – and then you could earn another 2% a year for up to 4 years, giving you a 10% stake and rent reduction.

Second, they could buy up to 25% of further equity on a BOGOF basis. So they could get 60% of the equity for just 25% of the value of the home. We also suggested that as they did this, they would “buy out” the rest of their rent and take on all the repairs costs.

Finally, they could buy out the remaining 40% at market value.

We estimated that this could generate £75 billion of sales over ten years. However, the majority of that income, nearly £50 billion, would come from those 30% of social housing tenants who are in the upper 60% of household income, most of who do not currently claim any other benefits and many of whom really should not be benefitting from the implied welfare of low rents. Mr & Mrs Cable would stay in their home and the Council would have the cash to help build or buy another home.


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