House building versus Housing Benefit: what are we spending?

9 January 2014

"for every £4 that goes in housing benefit, only £1 is spent building homes"

Chris Williamson MP, 8 January 2014

England has a housing shortage. That much, at least, is agreed by both government and opposition. Labour's familiar claim that we're currently building the lowest number of new homes since the 1920s remains a key point of context (the Coalition has used it as well, although for different purposes).

Yesterday in parliament was another day for debating solutions to the issue. According to one MP, part of the problem boils down to what we're spending money on: four times as much is spent on Housing Benefit as on actually building homes.

We're waiting to hear back from Labour on where this figure comes from, but it's out of step with what the Labour leader has claimed previously: that £95 out of every £100 spent on housing goes into Housing Benefit.

However Ed Miliband at the time was referring to 'affordable housing' specifically.

There's a basis for this at least. At the moment the government - through the Homes and Communities Agency - spends about £1.13 billion directly on affordable housing in England through its flagship Affordable Homes Programme, lasting over a four-year period (totalling £4.5 billion for the spending round).

Comparing that to the annual Housing Benefit bill for England: £21.2 billion, gives a rough ratio of £1 spent on affordable housing for every £19 spent on Housing Benefit.

But there's a flaw to summing up the figures like this: it interprets spending on housing - even affordable housing - too narrowly.

While the Affordable Homes Programme provides direct funding for affordable homes, other government schemes, such as the New Homes Bonus, provide cash indirectly by giving councils incentives to provide homes. The New Homes Bonus alone is funded to the tune of another £550 million a year till 2015.

An alternative approach

It's possible, however, to take a wider picture, and that gets much closer to the £1 versus £4 mark. Total public spending on 'housing development' amounts to some £6.5 billion, which compares to the total spent on Housing Benefit across the UK - £24 billion.

But that perhaps suffers from the opposite problem: being too broad.

'Housing development' spending does include grants that support building more homes, but it includes other aspects such as administering housing development 'affairs', slum clearance, remodelling existing homes and producing information for the public.

Abbreviating this to 'house building' might therefore be a little too simple, though the Treasury statistics aren't detailed enough to show how much of £6.5 billion is not spent on house building as such.

From what we can tell, there seem to be grounds for thinking the claim is in the right ballpark when it comes to public spending specifically, but we'll have to wait to find out what was actually intended by the claim and where the figures come from.

Update (10 January 2014)

We've heard back from Chris Williamson's office who directed us Channel 4's Faisal Islam who's been tweeting the same figures this week. He's used spending statistics from the Treasury like we have to find the total spending on 'housing development' and highlighted some of the caveats as well.

For Housing Benefit, Mr Islam used social protection spending on housing via the Treasury rather than Housing Benefit spending from the DWP. The difference is that the Treasury figures include the costs of administration as well rather than the benefit payments alone. It's a fuller definition of what the government spends overall on Housing Benefit although not one that's as obvious to the casual reader.

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