Attempts to rein in the soaring housing benefit bill could jeopardise landlords’ finances
TSA issues benefit bill warning
Social landlords have been warned that plans to slash the UK’s huge housing benefit bill could undermine their financial stability.
The stark warning, in a Tenant Services Authority report, came as councils across England united to ask the government for more powers over the way the local housing allowance is paid out in order to save money without damaging services.
Housing benefit is of huge importance to council and housing association finances, accounting for roughly £10.54 billion of the overall £17 billion housing benefit bill.
The Department for Work and Pensions is working up plans to reduce the soaring HB budget - expected to jump to £20 billion next year. But the TSA warned that housing associations’ financial stability could be damaged by attempts to combat the recession.
‘Reductions in HB could undermine this [low-risk foundation] as the balance would presumably have to be paid by tenants, increasing the risk of bad debt,’ it says in the report.
The report underlines the importance of housing benefit stating that at present, 65 per cent of housing associations’ core rental income is government-funded through housing benefit.
The DWP’s long-term vision for housing benefit includes amalgamating HB within a single system that would be simpler for claimants, and encourage people into work. The Chartered Institute of Housing believes this would mean a shift in social landlords’ income from HB to rent payments from tenants themselves.
Sam Lister, policy and practice officer at the Chartered Institute of Housing, said changes ‘could mean a shake-up in the amount of money social landlords receive in housing benefit as ministers try to stop the bill from going up faster in the future’.
This week the Local Government Association and London Councils gave their backing, in principle, to calls for councils to get the power to decide where private sector LHA recipients can live, and to overhaul the broad rental market areas system which calculates how much benefit is payable.
Six councils - Westminster, Enfield, Croydon, Hounslow, Wandsworth and Hammersmith & Fulham - have written to work and pensions secretary Yvette Cooper to ask for the powers.
Philippa Roe, cabinet member for housing at Westminster, said: ‘If you leave it to the local authorities to decide how they spend the LHA money, and what restrictions they place on recipients, then you could either allow them to keep any savings that they make, or split it with central government and spend the money on building social housing.’
A DWP spokesperson said no immediate cuts to HB were yet planned.
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Readers' comments (9)
simon stokes | 26/02/2010 8:26 am
""The report underlines the importance of housing benefit stating that at present, 65 per cent of housing associations’ core rental income is government-funded through housing benefit.""
I think you mean that 65% is funded by the taxpayer! If the cost of HB doesn't come down, taxes will do doubt go up to cover it. We need to ensure that claiming benefit is a safety net and not a lifestyle choice as it is for millions at present. The adminstration of HB should be made simpler, but the entitlement to claim it should be made harder.
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stephen west | 26/02/2010 9:44 am
Now perhaps Local authorities and RSLs might look more favorably at those tenants who do not at present qualify for social housing for life and are penalised because they are responsible for their own actions, and do not have half a dozen kids by assorted fathers or are dependent on drink and drugs . They have to work for a living on meager salaries, low credit ratings, have no children, might be single but dont qualify for social housing cant afford mortgages and are forced to pay to live in the private sector paying rents that are more than double that of the social sector.
Stephen West
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Bob Lowland | 26/02/2010 3:31 pm
The HB system has been growing to unsupportable size for some time. As long as benefits are capable of supplying a better living than the low paid jobs it will stay that way. These cuts would no doubt hurt HA's, and they still aren't tackling the problem of benefits. Not only are people reliant on them, but now social landlords are becoming more so too. Unless the benefit and job systems are altered to make working more appealing this trend will continue, and with an election so close there is little change in that.
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Peter | 26/02/2010 5:18 pm
Is there any actual comparison (like for like) of how much LHA/HB is paid to the private sector against HAs and Local authorities?
I have just come across a case where the tenant is paying £1600 pcm for three bedroom house to a private landlord and they are claiming LHA for the full amount. Is this possible?
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john bull | 27/02/2010 0:18 am
the days of wine and roses are over. when reality bites either the benefit gravy train will be slashed or the currency will fall like a stone.
my guess:
1. retirement will start at 70 or 75. no early retirement.
2.pensions will then be calculated on 50 or 60ths of actual contributions instead of the ludicrous 30ths now.
3. all other benefits will be slashed if not by the government then by the continuing fall in the pound. i.e. within a couple of years your income will be the same but petrol will be £50.00 a gallon bread £15.00 a loaf. dont say i'm pushing it, look what has happened in other countries.
Buying votes by benefits is bankrupting the UK.
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Dave Hollins | 27/02/2010 9:41 am
I thought I'd stumbled onto the Daily Mail site by mistake. Anybody who thinks HB is an easy regime should try applying, it isn't. The vast majority of people who get HB are elderly or disabled and not able to look for work, perhaps your correspondents would have them starve. The rise in HB is a direct consequence of the rise in rents. It's not just available to social tenants - private tenants get housng allowance and home owners get income support for their mortgage - a scheme that the government has expanded hugely during the recession. So no matter what tenure you're in you get houisng support if you're unemployed.
People also seem to forget that HB and HA are in-work benefits as well - so that people on low incomes can afford their housing. Stephen West might qualify if he can't afford his rent, then he can be a scrounger too!!
HB and the other schemes struggle to deal with modern emplloyment conditions - people whose income is variable week by week or who are employed casually. This is where the reform is needed - to enable people to take casual jobs without being penalised if their income drops.
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Marg Goodwin | 02/03/2010 1:58 pm
Oh thank goodness! A little well informed information! Thanks Dave Hollins.....like you I was beginning to wonder what I had clicked onto. HB is a vital lifeline to us Oldies I couldn't imagine many of the residents in my block of flats getting even a p/t job. We would not be able to afford to pay the rent here as we are all state pensioners. The block is owned by a HA, which is a registered charity, not a greedy private landlord.
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Jenny Taylor | 03/03/2010 11:26 am
If I might play devil`s advocate for a moment.......
public spending is to be slashed in a manner that no-one alive in Britain has yet seen;yet I get the feeling that many in the public and social housing sector have utterly failed to take this onboard.
Regardless of the outcome of the general election this will occur. Given that there is already a chronic shortage of family homes this shortage will soar; as further building will suffer in line with other cuts.
Before we demand further regulation of the private rented market should we ask ourselves this -- in the very near future are we going to need the private
sectormore than the private sector need us & what if landlords refuse to let to LHA claiments,as they increasingly do.
So, what`s our get out plan?? More funding-- no way;more regulation-- no doubt popular but utterly counterproductive.
Still, not not a problem for some of us as we will be too busy looking for a job.
Hands up those who still subscribe to the `I love my job syndrome`.
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john bull | 03/03/2010 2:00 pm
Hi Marg,
I too am a state pension as was my mother untill recently. The state pensions in the UK are VERY very generous ( in the USA and many countries there are no state pensions) If you are claiming your full entitlement, you should have no difficulty in paying a HA rent. what else are you spending it on? My mother could never manager to spend all hers.
The pension was intended to cover basics like rent ,food and estentials, for those who had paid in for all their lives. not luxuries like fags and booze!
As Jenny points out public expenditure will have to be slashed whoever gets in.
HB will hopfully be stopped and pensions based on 40 years of contribution at least and start at 70 for men and 75 for women.
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