ANY reform that uses 'simplification' and 'housing benefit' in the same sentence sounds like a good idea in theory but rarely works out like that in practice. And it sounds like it is happening again with a government plan to cut the period for backdating claims from a year to three months.

In theory, as a DWP equality impact assessment [download PDF here] claims, the administration of housing benefit has been much improved since a similar plan was rejected by the Social Security Advisory Committee (SSAC) eight years ago. The average processing time for a claim has gone down from 56 to 33 days, streamlined claim processes have been introduced and complaints about housing benefit administration have gone down by 74%.

In practice, claims Citizens Advice in its repsonse to the SSAC consultation, the change could leave vulnerable people facing homelessness and the costs of that could exceed any savings made. It says backdating 12 months is vital in preventing eviction and homlessness because it enables tenants to pay off rent arrears that may well have been caused by housing benefit claim problems in the first place. Because claimants have to show 'good cause' for backdating, only the most vulnerable tenants qualify.

Citizens Advice cites the case of a widow struggling to cope after her husband died. This led to mental health problems and to her failing to complete housing benefit claim forms. She was eventually evicted for rent arrears.  The local authority referred her to the local CAB, who helped her claim seven months of backdated housing and council tax benefit and pension credit and persuaded her landlord to take her back if the arrears were cleared.

The government may have a point that the paperwork involved makes consideration of 12-month backdating complex for administrators and claimants alike and inefficient but Citizens Advice is surely right that the change is 'robbing Peter to pay Paul'.

The SSAC will be deliberating the change over the next two months.

Posted by Jules Birch, May 28 

Posted in Housing benefit

THE local housing allowance is introduced nationwide in the private rented sector today with ministers promising a fairer and more transparent system for tenants but making an explicit link with its welfare-to-work agenda.

Employment and welfare reform minister Stephen Timms said: 'The LHA is a central part of the government's wider programme of benefit reform. It's a radical change to the way housing benefit is paid in the private rented sector and will help people take action towards managing their own bank accounts, making it easier for them to move off benefits and in to work. Having a bank account means that people are job-ready and the LHA will help towards bringing increased responsibility to hundreds of thousands of people.'

Thanks to extensive piloting in 18 local authorities and to the decision to phase in the new allowance by only applying it to new claimants from today. Supporters of the new system have been able to point to evidence belying claims that landlords would stop letting to claimants once they stop getting benefit paid direct in most cases.

Concerns remain about how the system will operate nationwide, how well local authorities will run it without the extensive help and support that was available in the 18 pilot areas and how the system will operate with the new broad rental market areas. In particular, sceptics will be watching to see how well authorities interpret the legislation and identify vulnerable households who can still have their rent paid direct to their landlord. Meanwhile, some landlord organisations are worried that the pilots have not been as successful as the government has claimed.

However, with tenancy deposit protection celebrating its first anniversary last week, the latest reforms seem to be work for private tenants so far.

Posted by Jules Birch, Apr 7

Posted in Housing benefit, Private renting

MORE than ten years after 'thinking the unthinkable' and only weeks before the nationwide launch of the local housing allowance, the government is to conduct a 'fundamental review' of housing benefit.

The review will focus on its effects on work incentives and the announcement was accompanied by a concession of no longer considering child benefit as income that will be worth an extra £17 a week to a working family with one child. That and other action to tackle child poverty have been broadly welcomed.

High marginal deduction rates have long been a barrier in getting people off benefit and into work - the unemployment or poverty trap. This year's Budget report [download chapter here] reveals that before the 1998 Budget  almost 1.2m people faced a marginal rate of more than 70%. Reforms including Wednesdays will see that number reduce to 380,000. However, another 1.9m people will still face a deduction rate of between 60% and 70%. That's more than private equity fat cats - or even their cleaners.

But housing benefit experts say there is a more fundamental problem: claimants perceive there to be even more of a trap than there actually is. And even when they are aware that they will still get some housing benefit when they are in work the system is so complicated that they don't know how much.

So any fundamental reform needs to start by making the system easier to understand. That's why the move on child benefit is a good start. The key to taking reform further, says expert Steve Wilcox, is to realise that you can't do it by addressing housing benefit alone. Any reform has to look at the way housing benefit interacts with tax credits.

So far, so good. But how does reform, and the broader aspiration of a new contract under which low-income parents agree to seek work in return for housing benefit, fit with the more controversial idea raised by Caroline Flint of commitment contracts for social housing tenants? In the world of rights and responsibilities it would be surprising if there were carrots without sticks but how far is the government really prepared to go before it creates a trap for itself?

Posted by Jules Birch, March 14

Posted in Housing benefit, Poverty

YESTERDAY's Budget was certainly not short of housing measures. Chancellor Alistair Darling made a welter of announcements including an enhanced shared equity scheme for key workers, a cut in stamp duty for people in shared ownership, consultation on strengthening the mortgage market, a fundamental review of housing benefit for people in work to improve incentives, indentifying more public sector sites for new homes and an Office of Fair Trading inquiry into sale and leaseback schemes. Small wonder that the Budget was warmly welcomed by CLG ministers.

Yet the Budget was also notable for the things he did not do. He did not attempt to match the Conservatives by pledging more general cuts in stamp duty. He resisted pleas to cut VAT on refurbishment to bring more empty properties back into use.

Poor Mr Darling even got it in the neck for the CLG's Housing and Regeneration Bill, with the National Housing Federation warning that the legislation will result in housing assocaitions being reclassified as public bodies and their £47bn of borrowing becoming public debt. 

The revamp of open market homebuy will inevitably take many of the headlines. It would be hard to criticise 'a new shared equity mortgage to help an extra 20,000 people buy their own home' except for one thing: that was how the existing scheme was described when it was launched in October 2006 and it has been widely criticised for being too complex and inflexible. One of the four mortgage lenders that were involved has since pulled out of the market and the other three will not be involved.

Two new schemes will see 'thousands of first-time buyers and key workers could see their purchasing power boosted by up to 50 per cent with new home loan, according to the CLG.

The two schemes (more detail on the Housing Corporation website here) will offer higher equity loans of up to 50% of the value of a property. Ownhome will be provided by a partnership of Places for People and the Cooperative Bank and MyChoiceHomeBuy by a consortium of eight associations. In addition, shared owners will not now pay stamp duty until they own more than 80% of their homes.

All that is good news for the lucky key workers and first-time buyers who will benefit. However, it remains to be seen how the funding will work and whether key workers really find the new schemes easier to navigate than the old one. 

And the whole idea remains open to the fundamental criticism that subsidising homes for them merely increases prices for everyone else. That might be seen as a price worth paying but for the fact that another part of the Budget will be working directly against that aim. 

For, even as key workers attempt to use their increased spending power, they will be competing for property with second home owners and buy-to-let landlords who know that from April they will be paying less than half as much capital gains tax when they sell.

Posted by Jules Birch, March 13

Posted in Finance, Housing associations, Housing benefit, Mortgages, Politics , Stamp duty, Low-cost homeownership