What does the cut in housing benefit mean for those who really need it?

By Lindsay Blair

The housing minister has called plans to move London tenants to other parts of the country because of a lack of affordable housing “outrageous”. The government has defended its housing benefit cap despite the recently emerged fact that London’s Newham council was looking to house tenants more than 160 miles away. But at the heart of this sensitive issue is the question about what the housing benefit changes will affect landlords and their tenants.

While Westminster has been accused of making it even more difficult for tenants to find affordable housing, landlords are voicing their concerns that the cutback of the benefit will leave them out of pocket and struggling to afford costs as well as see much rental yield.

David Salisbury, chairman of the National Landlords Association (NLA) said that it is concerning that so many buy-to-let landlords appear to be planning to withdraw from the Local Housing Allowance (LHA) market within three years because they cannot afford to let their properties to tenants at the reduced benefit rate.

“In view of the pressures on housing, the private rented sector will inevitably play an increasingly important role in providing housing to LHA tenants, particularly those aged 35 and under, who aren’t able to access other housing,” Mr Salisbury commented.

The incoming changes to the housing benefit system will mean that the maximum rent benefit payments reduced to the 30^th percentile of local average market rents instead of the previous 50^th percentile.

From this year, people aged under 35 have seen a reduction in the amount of housing benefit they are able to claim. Currently, people under 35 will be assessed under the “shared accommodation rule” whereby they will be entitled to the benefit at the same rate as someone renting a single room in a shared house, even if they are living in a self-contained property.

Due to this, many commentators have said that those under the age bracket will probably no longer be able to afford their current accommodation as a result and landlord will be put in an increasingly pressured position.

The NLA found that 53 per cent of landlords said they would struggle to rent to those receiving benefits due to the significant rate reduction.

Some 46.9 per cent questioned in a survey of 956 revealed that tenants aged under 35 will be worst hit and that by 2015 they will be reluctant to rent out to them.

London will be the worst affected by the changes, according to those in the property sector.

“At the heart of the crisis now being found in the private rental market in London is a chronic shortage of rental properties and a tax and regulatory environment which serves to dissuade investment in new properties and increase the cost borne by tenants,” Residential Landlords Association (RLA) policy director Richard Jones said.

“If rents are to be prevented from becoming completely unaffordable, the government must act to establish a more favourable environment in which to invest in new rental property.”

He added that according to RLA Professor Michael Ball of Reading University, an average of 17 per cent of a tenant’s total rent is the sum landlords need to pay the taxes associated with renting a property.

While Newham council has been accused of social cleansing by trying to ship LHA tenants far outside of the capital, does this highlight a problem between demand and supply of property that is affordable for even those on the lowest budget?

Grant Shapps, the housing minister, hit back at the council’s bid to re-house up to 500 tenants from its waiting list because of claims it can no longer afford to house them in private accommodation.

He told BBC Radio 4′s Today programme that is was “unfair” and “wrong” and that there were around 1,000 rental homes in Newham which fell within the cap of £250 for a one-bedroom flat or £400 for a four-bedroom property.

“It can’t be right to have people on housing benefit to live in streets and homes that hard-working people are unable to live in themselves. The system is still very generous and I think Newham are perhaps playing politics given that we are in election season,” Mr Shapps commented.

However, Newham’s mayor Sir Robin Wales said that government policies are pushing people out of the centre of London to poorer suburbs.

He added: “There just isn’t the capacity to deal with them and we end up chasing around the country trying to find new ways to deal with people who are in need.”

But what will the changes to housing benefits for those under 35 mean to tenants outside of the capital?

Amelia Stewart, 33, from Manchester said that cuts to housing benefits could potentially change the lives of her and her family.

“If the government cuts the amount of housing benefit I can have, I would have to move out of my family home where I have raised my child and been an active member of the community. This would be detrimental to both my son and myself in achieving both economic and mental wellbeing,” she said.

Photo by: Images_of_Money / Flickr