A new report from the Chartered Institute of Housing (CIH) and the British Property Federation (BPF) demonstrates that, contrary to government claims that rises in the housing benefit bill are caused by landlords increasing rents in order to take advantage of pre-determined benefit levels, the more likely explanation is a change in the make up of claimants as more families are affected by the recession in expensive areas such as London and the South East.
The study of amounts payable for the local housing allowance (LHA) – a form of housing benefit for people in the private rented sector – during an eighteen month period following the start of the LHA scheme in 2008, shows that rates fell in 61 per cent of areas. This demonstrates that the LHA regime is being unfairly targeted for the rise in the welfare bill, while many private sector landlords have actually reduced their rents during the period studied.
This analysis runs contrary to the comments made by Welfare Reform Minister Lord Freud in his evidence to the Work and Pensions Inquiry on the Budget 2010 reforms. He quoted figures that showed housing benefit claimants’ payments went up 3 per cent while the property index declined by 5 per cent from November 2008 to February 2010. While the figures were accurate, his interpretation ignored other factors in the mix – especially the changing geographical spread of claimants - which were more likely to have contributed to the rising bill.
CIH Interim Chief Executive Grainia Long 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.”
She continued: “These reforms are already causing problems for households and this will continue for the next three years, by which time they will be embedded in our new permanent welfare system. We need a welfare system that provides adequate help with housing costs.”
Ms Long concluded: “It is imperative that the government does all it can to tackle the high and unaffordable rents currently seen in the private rented sector, but this is not the way to do it and will cause more hardship in the process.”
Ian Fletcher, director of policy at the British Property Federation, said: “This report clearly demonstrates that the LHA system reflects the overall rental market and is not distorted by concentrations of LHA lettings.
“When RPI inflation is factored into the equation the majority of LHA cases will have in fact seen a fall in real terms.”