Return to social housing preferable

 

The reform of the rent supplement system may do little for tenants, write Joe Finnerty and Cathal O'Connell

The recently proposed changes to the rent supplement scheme represent a laudable and overdue attempt at reform of this system of housing subsidy. However, significant questions remain about the readiness of landlords and local authorities to deliver better value for money and to improve housing conditions for these renters.

Over the past 15 years, the rent supplement scheme, originally envisaged as an emergency payment, has expanded in an unplanned manner to become a vital strand of Irish housing policy.

Eligibility for the supplement effectively depends on the person being in receipt of social welfare or a back-to-work allowance. Currently, two-thirds of claimants are single person households and one-fifth are lone parents. Without help many of these households would end up staying with family or friends in overcrowded or unsuitable conditions, and many would end up homeless.

Spending on rent supplement has spiralled as support for low-income households has shifted from investment in council housing to the use of subsidised private landlords. The scheme with 60,000 claimants cost around €330 million in 2003, of which approximately €310 million ended up as rent payments to landlords.

This spiralling expenditure does not result in any asset accruing to the State, and is directed at a sector where compliance with tenant protection measures is minimal (only one-fifth of rented accommodation is registered with the local authority).

Under the new proposals, households on rent supplement for more than 18 months (around one-third of claimants) are to become the responsibility of local authorities, who will be expected to develop new arrangements with the private rented sector involving existing and custom-built premises, public-private partnership schemes, and access to social housing. The refocusing of attention on these vulnerable households is to be welcomed. However, a number of concerns arise.

One relates to the willingness of landlords with rent supplement tenants to embrace the proposed changes. Many of these landlords are small operators, and some may decline to participate in long-term contractual arrangements with local authorities. What becomes then of existing tenants?

Another issue arises in relation to value for money. Currently the health board pays the tenant who passes on the subsidy to the landlord. The reformed scheme would involve a money transfer from the local authority to the landlord. This may effect savings by tying landlords into rents negotiated for a certain period subject only to increases tied to inflation.

However, there may also be transaction costs arising from implementing the new arrangements with landlords. Again these are difficult to quantify but would inevitably involve administrative and legal costs. Compounding this is the track record of local authorities in fulfilling their existing remit for private renting. This suggests that a major expansion of administrative capacity will be needed for the new arrangements to work effectively.

Questions also arise about wider rental reform. What will be the relationship between the new rent allowance arrangements and the Residential Tenancies Board (RTB)? The RTB is now responsible for registration of landlords, but it is unclear whether it will have jurisdiction over the variety of new arrangements between local authorities and landlords.

In the absence of detailed proposals about public-private partnerships, it is also unclear how the reforms will avoid the situation where spending under the scheme does not result in any asset accruing to the State. A decade ago one of the criticisms of incentive-driven urban renewal schemes was that such developments were destined to become the welfare housing of the future. Will these proposals bring this situation about, and see the State (and the taxpayer) yet again underwriting private investors but getting no tangible assets in return?

These proposed reforms to the rent supplement scheme are being proposed when eligibility to the existing scheme is being restricted, and the new Residential Tenancies Act is being introduced. It is vital that this policy turbulence does not add to the uncertainty or insecurity already faced by tens of thousands of tenants who regard their private rented dwelling as their home. Arguably a return to large-scale investment in permanent social housing would be the most desirable reform of all. That way the State acquires valuable housing stock, tenants are offered affordable, secure accommodation by accountable landlords, and citizens see their taxes invested in tangible public goods which benefit society at large.

Joe Finnerty and Dr Cathal O'Connell lecture in the Department of Applied Social Studies, UCC