Forced to move
New housing benefit rules mean tenants could be priced out of their homes, especially in high-value London and the south east. Lydia Stockdale examines the consequences.
Moving house is often said to be one of life’s most stressful experiences - and that’s when you’ve made the happy decision to relocate. From 1 April onwards though, thousands of households across the UK will be left with no option but to pack up their belongings and move to more affordable accommodation, sometimes miles away from family and friends.
Next month sees the introduction of caps on local housing allowance which is paid to housing benefit claimants living in private rented accommodation. The way in which LHA rates are calculated will also change. They’ll be worked out using the 30th percentile instead of the median average of local market rents.
New claimants will find the reduced rates of entitlement affect them immediately. Current recipients, however, will start to be affected from 1 January 2012. The government has given existing claimants nine months from their next annual review - after 1 April - as a period of grace.
To cap it all off
Despite facing the highest average housing costs in the country, tenants in London and the south east are subject to exactly the same LHA caps as everywhere else: weekly rates in any area cannot exceed £250 for a one-bed property, £290 for a two-bed property, £340 for a three-bed property, and £400 for a four-bed property.
The impact of the coalition’s full programme of changes to benefits is, therefore, likely to be most visible in the capital and its surrounding counties as people whose LHA will not cover their rent are forced to find somewhere else to live.
Paying the price
The number of evictions that take place as a result of the changes to LHA will depend upon whether or not private landlords are willing to drop their rents to meet the new rates. Local authorities, particularly those that traditionally have low-cost accommodation such as Barking and Dagenham, Redbridge and Waltham Forest in east London, are already concerned that rather than reducing rents, property owners will hike them up in response to increased demand for relatively affordable homes.
Research conducted in January by the National Landlords’ Association, a membership body for private landlords, shows that these councils have good reason to be anxious. It found that 84 per cent of the 556 landlords polled say that they are unable to cut their rents. ‘More worryingly for London, councils will be the 40 per cent of London landlords who say that they are looking to reduce the number of LHA properties they let within the next three months,’ says Vincenzo Rampulla, spokesperson for the association.
Eventually, affordable housing in the capital is likely to become so scarce that individual households and local authorities, looking to house people in temporary accommodation will have to look beyond the M25. A spokesperson for London Councils, a lobby group representing all 33 of the capital’s local authorities, says he expects the exodus to the Home Counties to come to a head towards the end of next year ‘when the changes are impacting on current claimants and local authorities begin to struggle to find affordable accommodation to house people left homeless as a result of the culmination of changes to the welfare system’.
So what are local authorities across the capital doing to prepare?
In the short-term the most pressing concern for London Councils is encouraging its members to work together to protect tenants from inflated rents. ‘The issue for us at the moment is movement around London and trying to make sure that increased competition in lower rental areas does not lead to spiralling rents which are unaffordable,’ the spokesperson adds.
Over the coming months, London boroughs need to work together and with private landlords so that the ‘competition for lower rents’ is minimised, he says.
The organisation is working on an inter-borough temporary accommodation agreement. This will be a set of principals under which local authorities will share information and agree not to outbid each other in order to secure properties.
Westminster, in west London, has the largest discrepancy between current LHA rates and the maximum LHA available once the caps are in place, says Philippa Roe, cabinet member for housing at Westminster Council. Around 5,117 households in the borough currently receive housing benefit above capped levels. Westminster, therefore, is home to the largest number of people living in properties with rental costs above the new capped rate, she explains. For example there are 1,270 households living in two-bedroom properties with an average shortfall of £149 per week.
Ms Roe, a Conservative councillor, follows the government line in saying she is ‘pretty convinced that [private sector rents in Westminister] will come down’ when the changes to LHA start to impact claimants. She argues that some landlords in the borough have inflated rents knowing that the current ‘absurd system’ allows LHA recipients to claim the necessary amount from the local authority. ‘A one-bedroom flat on our most deprived estate can cost the same as an on-street flat in Pimlico’, she says, giving an example of how illogical rents in the borough can be.
‘Some landlords increased rents to take maximum advantage of the current rules, so logically, some of these will reduce the rents again,’ agrees a spokesperson for neighbouring Conservative-controlled Kensington and Chelsea, which expects around 2,000 residents to experience reductions to their benefits next year.
However, both west London boroughs concede that it’s inevitable that people will need to move out. ‘Particularly larger families,’ expands Westminster’s Ms Roe.
A new arrangement
West London Housing Partnership, an umbrella body for seven local authorities, is working with its members to try to encourage private landlords to continue to house LHA claimants. Ieuan ap Rees, homelessness coordinator for the partnership suggests that boroughs offer ‘services to landlords, such as ensuring LHA is paid promptly, arranging direct payments and offering bonds or guarantees against rent arrears or damage’.
Two weeks ago, Inside Housing reported that one of the partnership’s member boroughs, Hammersmith & Fulham is already in discussions with some landlords about reducing rents to meet the LHA caps. It is offering to make direct payments on a case-by-case basis as an incentive to continue to house claimants and estimates that 55 per cent of landlords will agree partly as a result of its proposal.
This still leaves 45 per cent of landlords that are expected to seek tenants who can afford to pay more. ‘Many landlords will decide not to let to LHA claimants as they will be able to get higher rents elsewhere,’ states Mr ap Rees.
Following the trend
In trendy Islington, Patrick Odling-Smee, director of housing at the north London authority, is also anticipating around 2,000 residents will be affected by next month’s changes to LHA. The problem here, along with other desirable areas of the capital, is that landlords know they can attract private renters in place of benefit claimants.
‘Lots of people want to rent privately in Islington because they can’t afford to buy,’ says Mr Odling-Smee, whose team is trying to persuade landlords to allow LHA tenants to stay after their benefits are capped.
‘The difference between the cap and current LHA rates ranges between £10 and several hundreds of pounds. If the difference is £10 per week they may take the hit, but if they’re losing £100 per week that will obviously be different,’ he says.
‘Individual circumstances will be played out in every case. Some owners will be heavily mortgaged and they’re not going to be able to manage to support the rent. They might make the decision that it’s better to evict.’
When LHA claimants are forced to look for another place to live, it’s ‘likely not to be in Islington’ admits
Mr Odling-Smee. In order to be ready to assist, he and his colleagues are already talking to property agents and individual landlords in nearby boroughs Waltham Forest, Enfield, Haringey and Barnet, all of which are towards the northern fringe of the capital. ‘We’re talking to those boroughs to make sure we’re not competing with them over [private rented properties],’ Mr Odling-Smee adds.
In south east London, Southwark Council, the largest public sector landlord in the capital, not only has its own LHA claimants to think about. It is also bracing itself for an influx of LHA claimants from pricier areas, including the aforementioned Westminster and Kensington and Chelsea, seeking somewhere more affordable to live.
Ian Wingfield, cabinet member for housing management at the council, says Southwark is working with other south east London boroughs - Lewisham, Greenwich, Croydon, Bromley and Bexley - to prepare themselves for the flood of people looking for housing. He does not yet know how many people to expect, but he is sure these boroughs ‘are going to be swamped’. ‘Without making too many bones about it, there’s going to be an increase in homelessness as a result,’ he warns.
Boroughs throughout the east of London are expected to take in the largest numbers of displaced people from across the capital. But in Newham, for example, LHA claimants looking for affordable property are likely to be disappointed to discover how little they can afford. ‘The private rented sector is already under pressure and it’s likely to get worse as fewer people are able to buy their own home and more people move into the borough looking for cheap rents,’ says a council spokesperson.
‘It, therefore, seems unlikely that landlords would lower rents because it is conceivable that they may be able to find plenty of non-LHA tenants,’ he says. Although landlords who currently rent to reliable LHA tenants may want them to stay, he adds.
Priced out of the market
Private landlords across London are already facing big decisions about whether they’re willing to drop their rents to accommodate LHA tenants or effectively kick them out. Next month’s changes to the amounts of housing help those who rent privately can claim is only the start. There’s a real possibility that increased demand for the very cheapest accommodation will leave the poorest with nowhere to live in London.
Marie Pye, chair of the East London Housing Partnership, says the councils it represents are becoming ‘increasingly concerned’ about welfare reforms planned further down the line. Most notably, they’re trying to come to terms with how to deal with ‘the impact of the proposed total cap to benefits for working households of £26,000 [which comes into force in 2013 and] will effectively be a second LHA cap to thousands of London households’.
Affordable housing in London is starting to sound like a thing of the past. For many families this could mean having to load up their possessions and wave goodbye to the capital and the lives they’ve built there. Others could well decide to stay in London, but without a place to call home.
Across the south east
Last October Inside Housing broke the story that London local authorities were securing accommodation outside the capital in areas including Luton, Watford, Slough, Reading and Hastings to house people forced out of their homes as a result of changes to local housing allowance.
At a government work and pensions select committee meeting that month, Nigel Minto, head of sustainable communities at London Councils, gave evidence that local authorities in the capital had ‘been procuring private rented stock outside London because they cannot procure it in London’.
Inside Housing approached councils across the south east to see if, in the four-and-a-half months since that meeting, they have been made aware of London boroughs securing accommodation in their areas. They said they don’t know of any such activity. ‘Our housing department doesn’t have any evidence of London boroughs block booking accommodation,’ says a spokesperson for Watford Council in Hertfordshire.
The evidence given by London Councils at the select committee meeting last autumn reflected the discussion between local authorities and property owners at that time, says a spokesperson for the organisation. It’s possible that the coalition’s decision, made in November, to allow existing claimants nine months from the date of their annual review before the changes to local housing allowance begin to affect them, slowed the urgency for London boroughs to start sourcing accommodation, he suggests.
Housing departments wouldn’t necessarily know if other local authorities were in discussions with landlords in their areas anyway, points out the spokesperson from Watford Council. ‘We would only become aware that people had relocated if they subsequently came to our advice services for assistance,’ she says.
Local authorities only have a statutory requirement to let other boroughs know after they’ve housed people, explains Phill Warren, housing needs manager for Southend-on-Sea Council in Essex.
Meanwhile, local authorities outside the capital are making their own preparations for the fallout of the changes to LHA. Brighton in East Sussex, for example, has been identified by homelessness charity Crisis as one of areas that will be hardest hit with around 12,550 claimants likely to be affected.