After all the estimates here’s the official verdict on the impact of the housing benefit cuts: all but a handful of the 939,000 local housing allowance (LHA) claimants in Britain will lose an average of £12 a week each.
Only a few thousand people in Scotland, Wales and the East Midlands will not lose out from the caps on payments by bedroom size and removing the £15 excess from April 2011 and calculating allowance rates on the 30th percentile from October 2011, according to my initial reading of an impact assessment by the Department for Work and Pensions. The average loss to claimants will range from £9 a week in the North East, Wales and Yorkshire and the Humber to £22 a week in London.
The DWP also expects the changes to severely restrict the availability of private rented accommodation in some areas. In Central London availability will fall from 52% of accommodation now to just 7% after the changes. Only 25% of accommodation in Inner North & West London and 29% in Inner South West London will be accessible.
However, availability will fall to less than a third of accommodation in about another 70 broad rental market areas throughout the country.
The assessment looks in great detail at the effect of the cuts made by Labour in March, the coalition in May and the comparison between the two - far more detail than I have time to go into this late on a Friday afternoon.
To pick out a few highlights:
- Almost a quarter of LHA claimants in London will lose more than £20 a week
- Weekly losses to claimants in high-profile Westminster will average £9 for a shared room, £73 for a one-bed home, £140 for two beds, £262 for three, £373 for four and £622 for five. Losses in Kensington and Chelsea are slightly higher than that.
- Newham will see the lowest losses in London, ranging from £7 for a shared room to £42 for five beds.
- Claimants also face losses of more than £100 a week on five-bed homes in areas of the South East including Slough and Woking.
- Almost all of the problems caused by the caps by bedroom size will be in Inner London with few losers elsewhere. Westminster and Kensington are again the big losers but Camden will also see 80% of claimants lose out in two-bed homes, 88% in three bed and 92% in four bed.
With the National Housing Federation warning earlier today that the caps put 750,000 people at risk of losing their homes in London and the South East, the debate about the impact of the cuts in general and the cuts in London in particular is bound to intensify.
However, even this assessment does not reflect the whole impact of the Budget. It does not assess the impact of other cuts such as the 10% penalty facing people unemployed for more than a year, the reduction facing people of working age who under-occupy in the social sector or basing future increases on a lower measure of inflation. And it does not look at the knock-on costs in areas like education that could be caused by a migration of claimants from more expensive to cheaper areas.
My back of an envelope says that the £12 a week loss for 936,000 LHA claimants will save the government about £600m a year. That’s only a third of the £1.8bn a year saving it is forecasting for the end of this parliament.
Have your say
You must sign in to make a comment
Readers' comments (14)
Chris | 25/07/2010 5:20 pm
But if rents were capped at social rent levels the government could save £2.4BN, and not leave any income to rent shortfall for tenants. This would then be both fairer and more cost effective.
Unsuitable or offensive? Report this comment
| 25/07/2010 6:33 pm
This idea has been dealt with by posters in previous posts. The PSL sector is not subsidised by the taxpayer and hence rents are more expensive as I, and other taxpayers, are not paying for them. Consequently PSL rents are higher as the sector is 100% risk capital funded with no recourse to the State. Clearly capping LHA for PSL rents in line with RSL rents is grossly unfair and would result in massive amounts of homelessness which the Government do not want. And you know this full well.
Unsuitable or offensive? Report this comment
Chris | 25/07/2010 6:44 pm
But you are paying for them and paying through the nose. It is your money that is funding the housing benefit.
The private housing product is overpriced and simply there as a device to milk the benifit system, as was admitted to by the previous Labour government.
Effectively some private lets are 100% taxpayer subsidised. It is these case that have so inflamed people, or do you believe that it is the social sector rents that have them up in arms.
Capping the benefit but not the rent is what has given rise to the homelessness fear. Capping rents reduces the benefits paid, but does not risk creating vast swathes of homeless.
Unsuitable or offensive? Report this comment
| 25/07/2010 6:51 pm
Capping PSL rents is a relic from the Soviet era and would inevitably lead to properties become abandoned by their owners as they would rapidly become uneconomic to maintain. The burden would then fall to local councils and the State to buy them up, with the taxpayer footing the bill again. This country has been there before in case you didn't know. Those who cannot remember the past are condemned to repeat it, as Santayana said...
Unsuitable or offensive? Report this comment
Chris | 25/07/2010 7:06 pm
A student of history too - were we separated at birth?
If the private landlords decide that they do not want to play unless they can make massive profits then that is fine, let them go, but I doubt they will abandon their tenements as they will want to take their investment with them. That will mean a massive amount of property coming onto the market and cause prices to reduce. That will mean more can afford to get into home ownership, reducing the demand for social rent. If this is met with a housebuilding programme to provide the much needs family sized social housing, then need to supply ratios will have improved such as to provide a more stable market. And we also get the double bonus of massivly reduced housing benefit, the removal of the benefits trap, social mobility and a moving housing market.
Yes history must be learned from, but learning teaches us what is worth trying again and which mistakes to avoid. In the case of housing the creation of an unregulated mass private housing sector was a repitition of failed history that has failed us again. its removal would not be a repitition but a correction, and not before time.
(Please do not spoil my growing admiration of you as my virtual alter-ego twin, by saying you drink lagar)
Unsuitable or offensive? Report this comment
Melvin Bone | 26/07/2010 10:46 am
'claimants in Britain will lose an average of £12 a week each'
'Only a few thousand people in Scotland, Wales and the East Midlands will not lose out'
Sounds ideal to me that the burden of the last governments LHA mess-ups are to be spread right across the board.
And the effect was bound to be bigger in London hwere they have the highest rents...doh.
Unsuitable or offensive? Report this comment
Anonymous | 26/07/2010 10:54 am
PSLs will be faced with simple economic choices as the HB cuts take effect.
They can either accept a lower margin or they can attempt to maintain their margins outside the public sector.
Either way the future doesn't look too rosy.
For the weekend landlords, mortgaged up to the hilt, the reduction of HB benefit will make it uneconomic and they will be tempted into the private sector, just at a time when every other PSL is attempting a similar move. That oversupply is likely to drive demand down and depress prices.
Good news potentially therefore for private sector renters ... unless they lose their job.
Just as a matter of interest, since councils will still have statutory duties to rehouse, I wonder how they will contract that responsbility.
Fulfilling that demand is the way to riches for PSLs.
Any housing finance officer in the house who could explain how a local authority with a statutory duty to rehouse could fulfill that duty if no landlords are willing to contract at the maxium HB levels?
Unsuitable or offensive? Report this comment
Jack Davies | 26/07/2010 11:08 am
Its the PSLs that have benefitted financially from the huge premiums they charge the HB system and its the tenants there who suffer the affordabiity trap.
This government is proposing to keep the tenants in the affordability dependency trap, make all other tenants subsidise this so the PSLs can still reap their large rewards in ripping off the publi purse so all taxpayers continue to pay.
What an absolute joke that is!
If LHA is capped (and why do so many say rents are capped they are not its just how much LHA will be paid) for PSLs at social landlord levels yes im sure PSLs will drop HB claimants like a hot potato and yes this will cause and increase in homeless applications.
Well they are forecast to almost treble anyway to 200,000 according to NHF. Councils then have a choice - build new properties, get social partners to develop or lease the glut of PSL properties at a much lower rate. The PSLs will not be able to find enough paying tenants for their new found glut of proprties and they require income so the dynamics of the supply and demand here change in favour of the public purse.
PSLs are only in the market because LHA levels are so high. Reduce those levels and they either sell, flee the market or lease to councils.
The seemingly radical step of pegging LHA to social housing levels is what is needed and is the only way to take control of the HB bill.
Unsuitable or offensive? Report this comment
Sidney Webb | 26/07/2010 11:14 am
PSLs are breaking the benefit bank and must be restrained. Capping rents is the only way to ensure that this is done fairly and completely. capping benefits just forces the poor to be squeezed even more than they are now.
PSLs have enjoyed 30-years of raiding the taxpayer's purse. Now its payback time.
Unsuitable or offensive? Report this comment
Melvin Bone | 26/07/2010 11:51 am
'Progressive Solutions Required | 26/07/2010 11:14 am
PSLs are breaking the benefit bank and must be restrained. Capping rents is the only way to ensure that this is done fairly and completely.'
If rents are not capped, be open minded here, what are your suggested alternatives?
Unsuitable or offensive? Report this comment
| 27/07/2010 0:20 am
"PSLs have enjoyed 30-years of raiding the taxpayer's purse. Now its payback time."
Err...in case you didn't notice, the Conservatives won the election. So no, it won't be payback time as they have no intention of capping rents. No more than NuLab did or would.
What year do you think you are living in? Does he take sugar?
Unsuitable or offensive? Report this comment
ProudSingle Under35 | 11/05/2011 9:12 pm
Most LHA claimants are taxpayers too you know. Only 1 in 8 approximately are unemployed/on JSA which is not subject to income tax, and does not require people to pay council tax. The rest are working people on low incomes, people on long term sick/disability, pensioners... These are people who all pay tax on their incomes, pay council tax and contribute to their housing costs.
ILAG the Conservatives did not win the election outright/in the normal manner or we would not have a hung parliament! They won by default! And, the only reason they are getting away with the crap they are trying to impose upon this country's most vulnerable now is because Nick Clegg is a spineless weakling who went back on his promises, has become Dave's bitch, and has disgraced his party colleagues all over the land.
Unsuitable or offensive? Report this comment
Apoica | 11/05/2011 9:34 pm
Is that ILAG's cat by any chance?
Well I never.
I guess a few inter-generational welfare dependent needs allocated multi=parent social tenant "families" may have to wait a bit longer for that 50" plasma screen upgrade. What a rotten bit of luck...
Unsuitable or offensive? Report this comment
Chris | 12/05/2011 0:00 am
The idea of reincarnation Apoica is to be better in the next life than in the last - is a wasp an advance?
Unsuitable or offensive? Report this comment