Housing Benefit for those on low incomes was introduced in the UK in 1983, replacing the rent element of Supplementary Benefit (the precursor to today's Income Support) paid by the then Department of Health and Social Security and the rent rebate systems operated by local councils; although this was an apparent act of rationalisation of the existing services, the impact of this change of paying agent on claimants was fairly catastrophic in the short term as the new local council systems buckled under the strain - coming as it did at the peak of unemployment during Margaret Thatcher's second term. The benefit can be paid to the claimant or more commonly directly to the landlord.

For unemployed people in rented accommodation, this meant that your unemployed status was checked by one body (the Department of Employment) who paid insurance-based unemployment benefit to those entitled to it, passing on the appropriate details to the DHSS for supplementary benefit if the unemployment benefit payable did not come up to a minimum subsistence level, and then further along to the local councils for housing benefit payments. Each step involved additional paperwork and delays in payment, creating a massive bureaucratic poverty trap which meant that the extra calculations required at each stage if you legitimately took temporary employment created such delays in benefit payments that you could end up starving and homeless whilst waiting to be paid: the result, of course, was that even for an upright citizen it was more attractive to take casual work on the black regardless of the risks. This problem has not to my knowledge improved much over the last 20 years.

In combination with the erosion of rent controls during the liberalising 1980s, the availability of fairly substantial sums (the level of payment being determined by the actual rent paid, without much in the way of limits) of this way led to considerable inflation of rents: although some landlords would not accept claimants as tenants (as had been the case before its introduction), others saw this as a means of racking up the rents on relatively cheap properties with payments made directly by the local authority, thus reducing the risks. This led to difficulties for people in work but on relatively low incomes who were unable to find affordable rented accommodation, particularly in London and the South-East but also in provincial cities, and allowed landlords to make dubious claims of the "market levels" for property which are used for determining the rents on rent-controlled property (mainly leases dating back before 1980, hence generally affecting old people on small fixed incomes, whose situation has been made still worse by the Spath Holme decision which ruled some rent controls illegal). Some caps were put on the size of housing benefit payments during the late 1990s, but the damage to the housing market had already been done.