Thursday, 24 July 2014

Research casts doubt on benefit cut claims

Housing bodies are demanding a rethink of housing benefit cuts after research cast doubt on the justification for the plans.

The Chartered Institute of Housing and British Property Federation claim government assumptions that cutting benefits will reduce private rents could be flawed.

Ministers have argued that housing benefit costs have risen while private rents have fallen because private landlords are cashing in on the benefit system by hiking up rents they know will covered by welfare payments.

To address this, the government has introduced caps on the maximum amount of local housing allowance that can be claimed for different sizes of property.

The CIH and BPF research suggests this will not achieve the desired result. The bodies argue benefit payments have risen at a time when rents are falling because of changes in the make up of claimants.

Their analysis shows benefit payments fell in 61 per cent of areas in the 18 months after the introduction of the LHA in 2008, and suggests the overall rise could be due to an increase in the number of claimants in expensive areas such as London and the south east.

Grainia Long, interim chief executive of the CIH, said: ‘We have shown that LHA does not push up rents and so it cannot be used to bring them down again.

‘These cuts are going to cause a great deal of hardship to a large number of households without either the tax payer or households reaping the benefit.’

Readers' comments (15)

  • Melvin Bone

    I know several people who administer HB and they have told me that as if by magic when LHA rates were announced landlords increased their rent to the EXACT amount of LHA to cash in...

    The truth is out there...

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  • Usual Suspect

    I agree Melvin, seems a pointless demand to me anyway, just reduces credability of organisation when "demands" are not met

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  • Melvin - Do you actually know how LHA works because you seem very happy to comment on it? Do you work for a Tory think tank or neoliberal PR firm by any chance?

    Of course rents tend to cluster around the 50th percentile - IT'S THE MEDIAN! There are as few mansions for £2000 a week as there are shoe boxes for £150 a month.

    You also assume that landlords are always aware that their tenants are claiming, thus confusing buy-to-let landlords with all of the others.

    You have also failed to understand or engage with the research which actually suggesting that the reason for the increased budget is largely due to the make up of claimants NOT landlords i.e. people moving to London looking for work, thus increasing demand at a time when supply is low.

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  • Alpha One

    I totally agree with IDS, why should people on benefits get paid more just because they're on benefits?

    I, as a worker, have to live within what I earn (and the small amount of credit I'm permitted). I can't look at a property that's £2,000 a week and think, well it has 7 bedrooms and that'll fit me, the family, have a spare room and somewhere for the kids to play. I have to see that all I can afford is £500 a week (perhaps) and therefore I'll need to find somewhere else to live.

    No matter how much people say that it is counterproductive or will increase homelessness, I can see how you can possibly argue that it is right for someone, who isn't working, to be allowed to pick their home based on what they need. The rest of us have to pick our homes based on what we can afford.

    Until we have the big revolution where housing becomes a basic requirement and holds no value as there is enough for everyone, there is no way you can justify giving people properties, which they don't have to pay for, based on their needs when everyone else has to settle with what they can afford.

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  • Melvin Bone

    Romin how do you explain where an area has an LHA rate of £103.56 pw and a Landlord charges that EXACT figure?

    Is it random? Is it chance? Is it heck...

    And the majority of Landlords usually DO know which tenants are on benefit. You need a reality check on that...

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  • Joe Halewood

    Yesterday it was revealed after a FOI request that there are 10 properties that currently attract £100k per year or over in LHA. Thats 10 out of 4.9m and is 0.000002%. So 99.99998% dont

    These 10 make up some of the 14303 properties that currently exceed the HB caps - thats 0.3% - So 99.7% dont exceed caps.

    Romin - I would argue that the number and TYPE of claimants is the issue. Since Nov 2008 (the furthest back the official current figures go back) reveals that private tenants have inceased from 1.04m to 1.55m and increase of 50% and as LHA claimants attract 60% or so more than social tenants it is the rise in the number of PSL claimants that is the issue - paying half a million more people £40 a week more than you pay social tenants is an obvious reason for the increase.

    On top of this the HB bill has increased £1.4bn since the coalition took office and is rising at £3.8m per day. On current trends it will be £2.27bn highe than when they took office by January 2012 when the first HB reforms come into effect. Therefore the government starts not from a position of zero to make its caimed savings but from a figure of minus £2.27bn and so needs to make an additional £2.27bn of cuts to meet their stated savings targets.

    Perhaps that is why IDS has stated today that benefit claims will now be paid monthly instead of fortnightly (see BBC website)

    As Twain said and very apt for IDS (and others) "Get your facts first, and then you can distort them as much as you please"

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  • Jono

    Interesting debate.

    What is the Government trying to achieve? I see two distinctions really. There are leasing schemes and managing agreements with private landlords, where homes are provided to homeless or other social tenants. I suspect this sort of hybrid market/social rent housing will see rents fall - as I know for a fact that providers set the rents close to the maximum allowed, and will reduce them as required by the changes being brought in.

    Other non-social rents where properties are let to private renters (some of whom might be claimants), your conventional market rent if you will, is less likely to be affected. Research I carried out across a portfolio of 1,000 geographically dispersed 1, 2 and 3 bed market rent properties, including in London, found that none were charging rents or had tenants living in them where the caps would put any of the households into additional hardship. Therefore, there was no need to set rents at any less than the market level.

    Affordable rent may help ease pressure on market rents in places like London - if those who would normally go into private rented at 100% only claim 80% and go into affordable instead. But given the demand in London, I doubt the additional supply will result in a reduction in market rent, or even in market rent claimants. Not unless providers use the 80% rents to increase social housing dwelling numbers. But will they?

    Let's see some research on what social housing providers plan to do with the rent windfalls from affordable...

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  • The way to control private rents is to set rent controls. This would be much simpler than tinkering with housing benefit with unknown outcomes and financial hardship.

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  • MBPB Rent controls simply lead to a shortage of rented properties when landlords exercise their right of choice and choose to sell a rental property.

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  • So then house prices tumble through supply and demand and our youngsters can buy - result!

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