Housing Benefit Briefing

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The government claims that the Bill for housing benefit is out of control and is introducing major cuts. Eileen Short examines the myths that surround housing benefit and looks at the impact that the cuts will have.

What is housing benefit?
Housing benefit is a benefit for people who can't afford their rent and it is means-tested according to income. It is called housing benefit for council and housing association tenants and is paid directly to the landlord. For private tenants it is calculated according to the Local Housing Allowance (LHA) and may be paid to the landlord or to the tenant.

Who claims housing benefit?
There has been a systematic government and media campaign to present tenants who claim housing benefit as subsidised "scroungers" for whom it is an incentive to avoid paid work. In fact around one in four private sector tenants who claim LHA are in low-paid employment, one in five are on Jobseeker's Allowance and four out of ten are disabled, pensioners, lone parents and other carers who are unable to work.

Why has the cost of housing benefit risen?
The increase in housing benefit spending is a direct consequence of government policy. Up to the 1990s regulation controlled many private sector rents. In 1991 the then Tory housing minister, George Young, was asked in parliament what the government would do about unaffordable rents. He replied, "Housing benefit will underpin market rents... If people cannot afford to pay that market rent, housing benefit will take the strain."

How is the government cutting housing benefit?
Cuts (or "caps") to housing benefit are being phased in and the worst is still to come. The government has imposed an absolute cap on the total amount of housing benefit paid, fixed according to the number of bedrooms. This immediately hits people living in the most expensive areas, largely in London.

But people all over England are already hit by the move to cap the level of LHA to the level of the lowest 30 percent of rents in a defined local area. So the 40 percent of private renters who claim LHA are being forced to compete for the cheapest 30 percent of private rented homes.

Single people under 35 can claim even less. They will only get the "shared room rate" for a room in a shared house (this has applied to those under 25 up till now). The rate of deduction from housing benefit where adults other than a partner live in a household will increase, particularly affecting extended families with adult children at home. A new "bedroom tax" will reduce the level of housing benefit for anyone of working age judged to have one or more spare bedrooms.

The government has also introduced a £500 a week cap on the total benefits for families (£350 for single people). This will apply to anyone of working age from October 2013. It takes no account of family size or housing costs and will apply to housing benefit. It will have a devastating effect on the unemployed and on larger families.

How are cuts to housing benefits hitting tenants?
Leaked figures from the Department for Work and Pensions (DWP) show 100,000 children will be pushed into poverty by the caps on housing benefit, while the National Housing Federation predicts 250,000 families are at risk of losing their homes. Over time one third of England will become unaffordable for low income households according to housing charity Shelter and the Chartered Institute of Housing.

As people are forced out of higher-rent areas it will mean taking children out of school, losing healthcare arrangements and breaking up families. Black and Asian people and other minority ethnic groups will be disproportionately affected.

For example, an estimated 30 percent of households affected by the capping of LHA payments to a maximum of four bedrooms include someone from a Black and Minority Ethnic (BME) background. Around half of all Bangladeshi and Pakistani children and around a third of black African children belong to families of three or more children, according to DWP research.

Are housing benefit cuts forcing rents down?
The government claims that reducing housing benefit levels will force rents down. But the shortage of housing is so acute that landlords in most places are not reducing rents. Many are instead refusing to let to anyone who is claiming housing benefit.

A survey in February 2012 of 204 local authorities showed just 36 reporting any rent reductions, with a minuscule number of landlords in each area reducing rents in return for direct payment of LHA. The total amount of housing benefit being paid to landlords is rising fast as more people are forced into poverty. It has gone up by £2.5 million a day since 2010 to £22.4 billion per year.

What is the solution?
We need a return to investment in bricks and mortar. Building council housing is the fastest, most cost-effective and efficient way to create the homes we need where we need them, now. In addition we need the regulation of private rent levels.