Inclusion or Exclusion? The Role of Housing Subsidies and Benefits

Abstract

This paper explores the reasons why the UK has ended up with such an extensive system of intervention in the housing market, particularly through providing subsidised council and housing association housing, and through Housing Benefit. The most important justification which remains valid is to enable those who would not otherwise be able to do so to afford to live in housing of acceptable quality, and to do so while avoiding the area polarisation which would result from the operation of the free market. However, the way in which social housing and subsidies operate in Britain today often reinforces rather than counters social polarisation and divisions. Looking ahead, as society becomes more affluent, including in an optimistic scenario those with low incomes, these problems may become even more acute as housing quality and consumer choice become more important. Systems of rationed provision with little tenant choice or control and no trade-off between cost and quality or location will look increasingly outmoded. The paper explores what could be done to reinvent the way in which we subsidise housing.