Official attempts to boost the private rented sector have led to a pounds 3bn increase in the housing benefit bill, Mr Straw said. Since 1989, when rent controls were lifted, public subsidy to private landlords through rent allowances has shot up by pounds 2.8bn to pounds 3.83bn - an increase of 280 per cent. Over the same period the number claiming the allowances has risen by only 45 per cent.
The 'extraordinary explosion' in cost was mostly caused by huge rent rises that were a 'a wholly gratuitous waste of taxpayers' money' Mr Straw said. Citing the example of an estate in Loughton, Essex, where he grew up, Mr Straw said that tenants of a former two- bed council maisonette, bought under the right-to-buy and then sold to a private landlord, were paying just under pounds 112 a week rent for their unimproved property. Housing benefit was meeting almost pounds 99 of that bill. For an identical property next door, but now double-glazed by the council and with central heating installed, the rent and housing benefit paid was pounds 47.64 - less than half the rent and housing benefit for the privately-owned maisonette. 'Those who have benefited from this have not been people in housing need but their landlords, who have been making a rich killing out of the taxpayer,' Mr Straw said.
In 1989 the Department of the Environment deregulated private rents and started forcing up council and housing association rents in a deliberate attempt to revive the market in private rented housing. Subsidies were switched from bricks and mortar to people by cutting council house subsidies and expecting more people to claim housing benefit.
The result, however, has been a virtual doubling in the housing benefit bill to the point where it has been singled out by Peter Lilley, Secretary of State for Social Security, for the next stage in the Government's review of benefits. The great bulk of the increase has come in rent allowances, paid to private landlord and housing association tenants, for which the bill has been rising at more than 20 per cent a year, rather than in rent rebates for council housing where the annual rise has been 7 per cent. On the Government's own projections, its housing policy is expected to add another pounds 4.5bn to this year's estimated pounds 8.8bn housing benefit by 1999.
The bill was 'spiralling out of control' because of the higher rents Mr Straw said, but the Government's experiment in reviving the private rented sector had failed. Between 1989 and last December, the private rented sector had increased by only 0.7 per cent from 9.5 per cent to 10.2 per cent of total dwellings.
Mr Straw said private landlords could virtually set any rent they wished and have it paid by the state. The solution was not just to cut housing benefit, as that would simply leave more poor people living in worse conditions but to reimpose rent regulation and give councils more powers to lease empty private homes.
The DoE denied private landlords were making vast profits at the taxpayers' expense. 'They are only charging open market rents which provide a modest but fair return,' a spokesman said. The switch from indiscriminate subsidies to all tenants to benefits targeted on individual households had saved money.
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