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.