The Welfare Reform Act may cut the housing benefit bill, but at what cost, asks Lord Best
Counting the cost
So the Welfare Reform Bill has now finished in parliament. It will simplify the benefits regime by introducing the universal credit arrangements and it will try to make sure ‘work pays’. But it is also about cutting public expenditure, with a special emphasis on cutting the housing benefit bill. That means cutting the incomes of poor tenants. And, in turn, that has consequences for landlords.
At one extreme - which usually means ‘in London’ - caps on rents to be covered by HB and caps on total benefits paid to tenants, will require some families to move to cheaper areas. 50,000 households could be on the move. Mostly these will be families with children in the private rented sector (whose homes will be relet to non-benefit tenants). But some social housing tenants will also be priced out. A lot of disruption and upset lies ahead.
Other constraints - the ‘30th decile rule’ - on local housing allowances may persuade landlords to lower rents in areas of low demand. But mostly PRS tenants will simply have to make up shortfalls from their other benefits.
On a much greater scale, and with particular impact in the north, the ‘bedroom tax’ will affect 670,000 social housing tenants from April 2013. With landlords seldom able to offer down-sizing opportunities, these tenants will have to find the tax - the HB cut - out of their very low incomes from other sources. Alongside the hazards of ‘rent direct’, arrears seem inevitable. And there’s also cuts to the non-dependants’ allowances, reducing HB where a young person is living at home.
Concessions during the bill’s progress have not been dramatic. There is the pot of cash for discretionary housing payments, enabling local authorities in a limited to way to bail out some of those who are hard hit. In particular £30 million per annum was found - by increasing the bedroom tax for everyone else by £1 per week - to help some 40,000 households (one in sixteen) stay put where the home has had extensive adaptations or where the family is fostering children. And - possibly of some considerable significance - the minister, Lord Freud, has committed to proper evaluation of the impact of the HB changes on families, poverty, disabled people, and on arrears, homelessness and related matters.
The bottom line is that government hopes these changes will save some £2 billion a year on the HB/LHA bill - nearly a quarter of this from the under-occupation penalty. That’s a lot of money. And it means a lot less for social housing, for local communities, for deprived areas, for poorer people.
We all recognise that deficit reduction is the government’s number one priority. But what the House of Lords has been asking is ‘Is this really the most humane, the most sensible, way to cut the deficit?’ I fear we have had very modest success in persuading government - and our colleagues in the House of Commons - to change tack and I am sorry about that. But evidence from independent, thorough-going research could yet provide the basis for a change of heart as this story unfolds.
Lord Best is a crossbench peer, and opposed many of the Welfare Reform Act reforms during its passage through parliament