Housing benefit 'should be extended to home owners'

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HOME OWNERS on low incomes should be given housing benefit, although it could cost more than pounds 500m, the Government was advised yesterday in a report by its independent watchdog on social security.

Ministers were urged to consider extending housing benefit for the first time to home owners in a research paper for the Social Security Advisory Committee by Peter Kemp, professor of housing at the University of York.

With mortgage defaulters continuing to cause concern, the report is certain to increase pressure on ministers to find new ways of helping mortgage-payers on low incomes. But the Treasury will resist any additional public expenditure commitments.

Professor Kemp said although housing benefit was reformed twice during the 1980s, there was a case for considering further changes. He said the Government should consider making the housing benefit 'taper' - the rate of withdrawal of benefit as income rises - more generous at an extra cost of pounds 330m, and improving the appeals system.

Although the reforms could add more than pounds 1bn to the social security budget, Professor Kemp found that an estimated pounds 600m in housing benefit remained unclaimed each year, equivalent to pounds 6.10 a week for those who could have claimed.

The extension of housing benefit to home owners was recommended by the Duke of Edinburgh's inquiry into British housing in 1991 but it was part of a package including the phasing out of mortgage interest relief, which was too radical and never acted upon. Estimates of the cost vary from pounds 400m to pounds 800m, but if it was done without no cut-off on allowable mortgage interest, it would cost pounds 1.1bn. Professor Kemp said the estimates did not take account of any changes in people's behaviour which might result from the reforms, and which might increase the cost.

One proposed scheme, which he studied, was designed to prevent claimants unreasonably increasing the size of their mortgage by reducing the proportion of mortgage interest that was eligible for benefit.

Professor Kemp said the mortgage benefits scheme could be administered by local authorities. 'It would then make sense to transfer the mortgage interest component of income support over to local authority administration. This would in turn allow a further simplification of income support administration.'

Housing benefit payments cost pounds 4.8bn, about 2 per cent of public expenditure, but it is currently available only to tenants. Low-income home owners are excluded from it, although they may receive other help with mortgage interest.

Housing Benefit: An Appraisal; Social Security Advisory Committee research paper four. HMSO; pounds 8.70.