CIH Member Briefing

Briefing Paper on the impact of changes to Housing Benefit and Local Housing Allowance in the budget

July 2010

Introduction

In the emergency budget on 22 June 2010 the government announced significant changes to housing benefit and local housing allowance. The changes will mean an annual reduction of £1,765 million of government help with housing costs.

The impact of the proposed changes to housing benefit and local housing allowance will affect social and private landlords, tenants, and strategic housing authorities in the UK.

This briefing is designed to help you to plan how to assess and mitigate the impact of the changes for your own business and local area. Since the budget announcement CIH has been carrying out modelling and analysis on the potential impacts on your business - here are the findings.

The CIH position

CIH has been making the case for housing benefit reform since the publication of the 2008 Welfare Reform Green Paper. Our focus has been on developing ideas for reform that could control rising expenditure and make housing benefit more effective in achieving its policy objectives. We published our proposals for short-term and long-term reform in response to the 2009 Housing Benefit Green Paper. Whilst we accept the need to control expenditure we do not support the proposals announced in the Emergency Budget as being the right approach because they will hit low income households hard during the recession precisely when they are most in need of support and when adverse consequences are likely to be most damaging.

We recognise the need to make savings across all departments but we believe that these particular budget proposals mean that low income households disproportionately shoulder the burden. Tens of thousands of households will be hit hard in the pocket or could be completely priced out of the communities where they are currently living and working. And all this is without consideration of the overall effect of these changes will have when combined with the sharp reductions in expenditure for social housing programmes across the UK.

The CIH is working with government, the media, and a variety of stakeholders to raise the awareness of the potential impact of the changes. We want housing benefit to be high on the agenda for politicians across the political spectrum as the regulations and laws to implement these changes are developed and debated. We want to ensure that any changes are fair to consumers, help support sustainable communities and are practicable and achievable.

Summary of the main changes

There are eight primary changes to housing benefit, identified in the two tables below. Six of the changes result in government savings (table 1) and two involve new expenditure (table 2). The saving proposals outweigh the expenditure proposals by a factor of 33.

Change Date introduced Directly affects Annual saving to government
Capping the maximum LHA payable for each property size, and applying a four-bed limit:
  • £250 for one-bed
  • £290 for two-bed
  • £340 for three-bed
  • £400 for four-bed and larger properties
April 2011 Private rented sector
DWP expects it to affect just over 14,000 households1. The vast majority of are expected to be within London
£65m by 2014/15
Increasing deductions for non-dependents: they will no longer be frozen at £7.40 per week for non-earners and will be linked to prices April 2011 Social and private rented sector £340m by 2014/15
Calculating Local Housing Allowance (LHA) rates using the 30th percentile of market rents rather than the 50th percentile October 2011 Private rented sector £425m by 2014/15
Linking LHA increases to the consumer prices index (CPI) which does not include housing costs rather than the higher retail prices index (RPI) April 2013 Private rented sector £390m by 2014/15
Time limiting full HB & LHA payable to people on Job Seekers' Allowance (JSA) so that after 12 months HB is reduced by 10% April 2013 Social and private rented sector £110m by 2014/15
Limiting housing benefit for working age tenants so that it only covers the size of property they are judged to need April 2013 Social rented sector £490m by 2014/15
  Total £1,820m by 2014/15

1 Hansard 28 June 2010 Col 389W

Change Date introduced Directly affects Annual expenditure to government
Increased discretionary housing payments October 2010 Social and private rented sector £40m by 2014/15
Additional bedroom for carers April 2011   £15m by 2014/15
  Total £55m by 2014/15

The Department's impact assessment for the first set of changes (i.e. those that can be implemented by regulations without the need for primary legislation) is expected to be published on the 23 July 2010. The impact assessment will be published on the Social Security Advisory Committee website http://www.ssac.org.uk/.

The likely implications of the changes

1. Caps on the maximum LHA payable by property size

What can you expect?

Local Authorities with a strategic housing role may see:

Social landlords may see:

2. Increasing non-dependent deductions

What can you expect?

Social landlords may see:

Local Authorities with a strategic housing role may see:

3. Change from 50th percentile to 30th percentile

What to expect?

Local Authorities with a strategic housing role may see:

Social landlords may see:

4. Change to using CPI to up-rate benefits rather than RPI

What can you expect?

Local Authorities with a strategic housing role may see:

Social landlords may see:

5. Reduction in housing benefit to tenants in receipt of Job Seekers' Allowance for more than a year

What can you expect?

Social landlords may see:

Local Authorities with a strategic housing role may see:

6. Limiting housing benefit payable to working age tenants, by property size

What can you expect?

Social landlords may see:

Hansard 6 July 2010 Col 214W

Local Authorities with a strategic housing role may see:

7. Increasing amounts available for discretionary housing payments

What can you expect?

Local Authorities with a strategic housing role may see:

Social landlords may see:

Next steps for social landlords

Think about how the reforms could impact on your business and your tenants, and plan accordingly

Next steps for strategic housing authorities

Think about how the reforms could impact on your business and your housing market, and plan accordingly

CIH - working for you

CIH will work with other partners in the sector, with government and politicians to continue to raise the profile of the impact of this change on tenants and housing organisations. There is potential to secure changes to these proposals as regulations and laws to enforce them are developed and debated. We will actively seek changes to mitigate the impact. We will also continue to seek better alignment of different strands of housing policy.

In the longer term we will seek to influence the direction of longer term reforms to housing benefit, through the review announced by Iain Duncan Smith. Our ideas for fundamental reform of housing benefit have been developed with members over several years and are available here.

CIH can help housing organisations and strategic housing authorities to model the detailed impact of the changes on their business and implement strategic planning.

We have been working to raise the profile of the impact of these changes in the media with coverage in the Times, the BBC Daily Politics Show, the Daily Telegraph and the London Evening Standard.

Since the budget we have been working closely with others who have an interest and concern about these reforms. We will continue to share our analysis with others who have an interest in highlighting the risks to poorer people of these changes.

CIH's briefing on the budget can be found here.

Get involved

We are keen to hear your thoughts. We are particularly interested in your views on longer term reform and would like you to share your observations on the impact of the changes in your area, on your tenants and your business. CIH members who have done their own modelling and calculations of the impact on housing businesses and tenants are invited to share this information with CIH in order to help us build up a fuller picture.

If you would like to comment please visit www.housingfutures.cih.co.uk or call the CIH Policy and Practice team on 02476 851777.