Benefit tenants priced out of all private homes
Private tenants on local housing allowance face being unable to afford to rent a property within a decade, the Chartered Insitute of Housing has warned.
The government announced in the emergency Budget that local housing allowance, which is only paid to claimants in the private rented sector, will no longer be tied to the retail prices index, which includes housing costs. Instead it will be linked to the consumer prices index, which does not reflect rents and house prices.
CPI is almost always lower than RPI and is currently about 1.7 per cent behind it. The CIH says the change will mean benefit increases lag behind inflation in rents so that, by about 2020, there could be no rents cheap enough to be paid for by the benefit.
The warning came as figures from London revealed that the majority of larger families in the capital will struggle to pay their rent under plans to cap the LHA rate.
Figures from council lobby group London Councils found that claimants living in homes with two or more bedrooms in seven London boroughs would be unable to afford their rent when new caps come for local housing allowance.
The cap, which limits LHA payments to between £280 and £400 a week depending on house size from April 2011, is lower than current local housing allowance rates for homes of two or more bedrooms in Camden, the City of London, Hackney, Hammersmith & Fulham, Westminster, Kensington and Chelsea, and Tower Hamlets. Large families will be hardest hit with five-bedroom homes unaffordable everywhere in the capital apart from one area within Waltham Forest.
Theo Blackwell, cabinet member for resources at Camden Council, said 1,000 people in the borough would be hit by caps on LHA while 200 would lose between £100 and £200 of benefit per week. He said demand for cheap property and social housing would be further increased by work and pensions secretary Iain Duncan Smith’s idea to encourage jobless social housing tenants to move to find work.
Meanwhile Valuation Office Agency figures show tenants in parts of central London would lose an average of £200 a week in benefit on a four-bedroom home, while those in Ashford, Kent, would lose £4.37 a week on the same size of property.
A spokesperson for the Department for Work and Pensions said benefits could be increased in future to ensure tenants could still afford the cheapest 30 per cent of properties. She added: ‘Many areas of London will still be accessible to people claiming housing benefit’.
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Readers' comments (27)
Harry Lime | 02/07/2010 9:31 am
Looks like the moral of this story is start buying up B&B's. The temporary emergency accommodation market will be even more of a licence to print money than it currently is......
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Sidney Webb | 02/07/2010 9:36 am
Good - the mass subsidy paid to privateering landlords over the past 30-years has verged on the criminal. The Billions in taxes paid to these Tory friends is without need nor reason.
I feel sorry for the families immediately affected, but their sacrifice will either be met with new socially rented homes or the pegging of private rents. The long term gain potential for all, except the privateers, is therefore good.
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Anonymous | 02/07/2010 10:08 am
Temporary accommodation should be the next ridiculous expense to be capped!!!
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Anonymous | 02/07/2010 11:21 am
If you allow the market to dictate the price and the state is prepared to pay that price, you will inevitably get the situation you are getting now. It is rather strange you regulate public sector rents but you allow the private sector charge what they like. Therein lies your problem.
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Mike D | 02/07/2010 11:51 am
While it's clear this will create a huge influx on emergency accomodation, the issue of high rents needs to be addressed.
While capping rents is possible for council and social rents (which are kept relatively low already) this would have been a much more difficult task to cap private rents. Seems capping HB was the easier task.
While this is bound to cause problems for some of the poorest, you also have to look on the flip side, that it's preventing the state feeding money direct to the rich who have been recieving all of this money in the end.
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Harry Lime | 02/07/2010 1:10 pm
Everything's cyclical isn't it? Can't be long before registered rent officers are employed in their droves to check up on private rents, although it hardly fits in with the tories love of the free market, does it? - Hmmmmm..........
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Anonymous | 02/07/2010 2:20 pm
There are some pretty cavalier comments on this topic. Sacrifice families for the greater good? Supposing it's somebody else's family, presumably!
It's not just families that are affected. I share a house with a friend, when we were both working it was easy to share the rent. She had an accident on her way to work one morning, when she was knocked off her bike by a van pulling out of a side street and turning at speed the wrong way down a one-way street. After several months' treatment it was finally decided that she was no longer able to do her old job [Housing Officer] and she was medically retired.
She now receives ESA, at the assessment rate still after 15 months when she should have been on the higher rate for a year. Her entire income, including LHA, ESA and DLA Mobility, doesn't even cover her half of the rent, let alone cover utilities, food, etc.
So what do we do? Do I say 'well, it's been a blast, see ya' or do we carry on with what we're doing, which is that I cover everything and she gives me her LHA for her rent and bills
Was the LHA really meant for this? I am subsidising her and by extension the State, but if I didn't what else could we do? If we were councill tenants she would get her full 50% paid, no matter what the cost. But she wouldn't qualify for council housing anyway so that's a non-runner.
I'd really like someone to tell me where she could find a one-bed flat in Surrey for £90 a week.
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Only One | 02/07/2010 3:10 pm
There are going to be tales of woe out there, however we need to get real. I work full time, and to be fair I have a good salary - well lucky me. However, I would not consider paying a rent of £400+ per week = £1740 per calender month. Unfortunately the private rented sector is market driven, and rents are not restricted. I guarantee that if a tenant moves out because of the LHA kicking in, then (provided the property is in good condition) they will be able to rent it out at the same level within days. Market forces and all that.
Unfortunately it's like most things in life - if you can't afford it, you can't have it!!
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Michael Read | 02/07/2010 6:27 pm
So there's all these BTL landlords making pots of it renting stuff to grateful HB applicants.
Now the HB applicants have gotta go elsewhere. Good news for some.
But is it really going to be so easy for those BTL landlords making pots of it finding a non-HB tenant.
Not many at all, cos there all regular guys like Only One.
Expect prices to drop. Expect a proper property market to develop once dumbstruck LAs and HAs stop pumping up the market by being wiling to pay for anything because they're paying for it with the taxpayers' money.
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| 02/07/2010 7:47 pm
Spot on. Why are rents, especially in London, so high? Yes it's demand, and this has been driven by unprecedented levels of immigration. However the State sets the benchmark. If the State was willing to pay £1600 for week for the now famous 7 bedroom mansion in Westminster for the Somalis who they moved in, then the price for the market price for 7 bedroom mansions in Westminster is £1600 per week. However once the State moves the bar, then the rest of the market will follow. Rents will fall as they will no longer be artificially inflated by the State funding the benefit claimants. This can only be good for normal working people.
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