Spiralling rents and stagnant wages are fuelling an estimated £25 billion housing benefit bill for 2015-16, as workers struggle to find affordable homes, according to research from the Centre for Cities think-tank.
Welfare spending is surging in some parts of the South East, largely driven by the higher cost of housing benefit payments, says the study.
In a report, the Centre for Cities estimates that around one million jobs have been created in the UK’s cities since 2010. However, average annual wages have fallen by £1,300 per person, making it more difficult for workers to make ends meet.
Despite record levels of employment, spending on housing benefit payments in wealthier cities, such as London, Cambridge, Bournemouth and Milton Keynes, have increased by 50% more than in lower-wages cities, like Glasgow and Liverpool.
The data mirrors warnings from employers in the capital and the South East, who say it is becoming more difficult to recruit staff due to sky-high rent prices.
The average housing benefit claimant now receives £144 per month in London, £128 in Slough, £118 in Oxford, and £117 in Brighton. These figures compare with averages of £72 in Doncaster, £73 in Hull and £75 in Dundee.
The Chief Executive of Centre for Cities, Alexandra Jones, insists: “To support the long-term economic growth of these cities, while also reducing welfare spending, the Government and local authorities need to take urgent action to tackle housing shortages.”
She calls for more homes to be built, for better use of existing housing and improvements to local transport. She believes: “This will make it easier for more people to access jobs and for businesses to grow.”1
Jones praises an initiative in Cambridge that supports house building on parts of the greenbelt. She suggests that cities should be given greater incentives to tackle the housing crisis themselves, for example, by being allowed to retain Stamp Duty payments or keep some savings from any decreases in housing benefit bills.
In the Centre for Cities’ annual study of the UK’s 63 largest cities, it revealed that all but one of the cities with the highest wages are in the South East. The exemption is Aberdeen.
The top spot was unsurprisingly taken by London, with an average weekly wage of £675.
Seven of the ten cities with the lowest wages are in the North of England, with the lowest pay in Huddersfield, at £399 a week.
In last year’s Budget, Chancellor George Osborne detailed his determination to create a “higher-wage, lower-welfare economy”1. However, the think-tank concludes that half the nation’s cities are in fact the opposite – low-wage, high-welfare.
It urges city leaders to focus on supporting skilled jobs in “knowledge-intensive sectors”1, such as digital industries, to push up wages.
The Government has long been trying to find ways of reducing spending on housing benefits, mainly by limiting entitlement. However, about one quarter of private tenants claim the benefit – a third of which are in employment.
If you are a landlord with tenants on housing benefit, remember that they may already be, or will soon become, recipients of Universal Credit. The latest areas subject to the new system can be found on LandlordNews.co.uk and you are encouraged to discuss finances with your tenants to avoid them falling into rent arrears.
If your tenants do default on rent payments, rent guarantee insurance can ensure you still get paid.