Rent hikes won’t fix the housing crisis

The new Labour government has made big announcements on housing policy, but there’s very little there to benefit tenants. rs21 member Sam O looks critically at how the plans will affect council and housing association tenants.

In all of Rachel Reeves’ announcements on housing policy in recent weeks, the focus has mainly been on bulldozing planning regulations, to allow construction multinationals the freedom to build where they can make most profit. Council house building, which was such a central feature of Corbyn’s Labour – the 2019 manifesto promised 100,000 extra council houses every year – has been notably absent from Reeves’ target of 1.5 million new homes.

Now Labour have announced their plans for public or ‘social’ housing – as provided by councils and housing associations – and they are terrible.

For the next ten years, they want to raise rents for council and housing association tenants in England by the CPI measure of inflation plus one percent (housing is a devolved issue, so social housing rent levels are set by the devolved governments in Scotland, Wales and Northern Ireland). Strictly speaking, that figure is a maximum, and it is up to each agency to decide how big a rent increase to apply. In practice, however, any provider that puts up rents by less than that maximum will lose government funding, so it is a floor rather than a ceiling. The formula was introduced some years back, but was then capped by the Tories, so rent rises stayed below inflation. Reeves’ policy would remove the limited protection given by that cap.

Ironically, the current proposals for social rent rises are actually higher than the private rent caps recommended in a report commissioned by Lisa Nandy before the general election, a report which labour has ignored.

Around 70 percent of council and housing association tenants get most or all of their rent covered by benefits – Housing Benefit or Universal Credit. So much of the rise will come from the government paying extra benefits to housing associations and councils (which was why the Tories introduced the cap in the first place). However, the complex ways that benefits are calculated and administered mean that sharp rent rises may not be fully covered, which will increase the risk of homelessness for more tenants. And a significant proportion of those who pay part of or all or their rent directly are pensioners who have already been hit by the withdrawal of the Winter Fuel Allowance.

The theory is that councils and housing associations should spend that income on house building, but there is no guarantee that this will happen – and the sums involved are too small to fund any serious social housing building programme. Why not directly fund council and housing associations to build enough stock for local need, as well as carrying out all necessary repairs to their existing under-maintained stock?

The wider impact

Putting up social housing rents will also mean rent rises for private sector tenants because many private landlords at the bottom end of the market, especially outside the big cities, base their rents on council rents plus whatever extra they think they can get away with. This further increases the risk of driving tenants on low incomes who are not eligible for housing benefits into arrears and homelessness, as well as increasing the public subsidy of benefits paid directly to private landlords. Putting the money directly into council house building would have the opposite effect.

No plans have been announced to scrap Cameron’s Bedroom Tax, so people affected by this rule will be particularly hard hit by above inflation rises. Labour’s insistence on keeping the two-child benefit cap in place will also exacerbate the effect of this policy on poor households.

Disabled people will feel the burden of the rise particularly acutely; according to Mikey Erhardt of Disability Rights UK, a quarter of all disabled people live in social housing, and more than half of social rented households have a disabled household member. As he explained:

No other group of people is as reliant on the social housing sector as disabled people…  Across all tenure types, we experience inaccessible homes, huge levels of disrepair, hazardous homes and poor behaviour from landlords. If social housing rents are to be increased, then our new government’s first big decisions on housing, see them continuing the policies of the previous administration: making our living standards and living situations worse.

Tackling the crisis?

If Labour was serious about tackling the housing crisis, there are a number of steps they could quickly take to improve provision, rather than attacking workers and the poor through rent rises.

For instance, they could stop the practice of land banking, which allows developers to sit on over 900,000 plots of land with no intention to build houses on them anytime soon. This could be tackled through a change in the law to allow councils to use their compulsory purchase powers if the land has not been built on within 6 years, and to use the land for council house building.

There are currently over a million empty homes in Britain. Just 10 percent of those homes would be enough to house all of the 104,000 people currently living in temporary accommodation.

Labour could also reform the overly complicated process that councils have to go through in order to bring empty housing back into use, making it easier and quicker for councils to take over those homes.

In the private sector, Labour have committed to end no fault evictions – though of course the previous Tory government made the same promise, but never acted on it. However, they have said nothing about capping private sector rents, which soared by nine percent between February 2023 and February 2024, despite the explicit recommendation in the report that Lisa Nandy commissioned.

Most importantly, building new council housing would bring down rents overall, as well as starting to reduce chronic overcrowding in England, where over 3.4 million people live in overcrowded housing. One in six English children live in overcrowded households, half of which are social housing. This has proven effects on people’s mental and physical health, and can exacerbate problems like damp and mould. This overcrowding is heavily racialised. A three-year study published in 2023 found that out of all ethnic groups, the highest rates of overcrowding were in Bangladeshi (22.5 per cent), Arab (17.1 percent) and black African (16.3 percent) households, compared to a national average of just over three percent..

However, all of these would require seeing housing as a social necessity rather than as assets to be monetised – housing for people not for profit. There are so many things Labour could and should be doing, but as we have seen with winter fuel payments, the two-child benefit cap and now Starmer’s ‘things can only get worse’ speech, when it comes to tough choices they will always choose the interests of British capitalism over those of the working class. Taking on the banks and the landlords is too difficult for them, and taking from us is always seen as the easy option. We have to change that calculation by building working class organisation in our communities and workplaces if we don’t want to continue to be short changed by Starmer’s government.