Housing benefit reforms create risks for most vulnerable
George Osborne’s emergency budget has brought some clarity along with significant challenges for tenants and the housing sector.
Mr Osborne yesterday announced reforms to reduce the cost of the housing benefit bill, pointing out that it is currently equal to the money spent on police and education. For social housing, tenants’ ability to claim full rent for a home bigger than their needs will be ended. For private rented housing, caps to benefit payable will be introduced - £400 for a four bedroom property and £250 for two bedrooms. Housing benefit will also be linked to employment for people receiving job seekers allowance, with housing benefit cut to 90 per cent after 12 months of looking for work. Support for mortgage interest, which supports homeowners with difficulty meeting mortgage payments, will also be altered.
No further cuts to capital expenditure were announced beyond those set out on 24 May, although the chancellor announced that government departments will see average real terms cuts of 25 per cent over five years. The budget offered some optimism for public investment in housing as the Treasury confirmed it will give priority to projects that deliver a significant economic return to the country.
Howard Farrand, President of the Chartered Institute of Housing (CIH), said,
“Yesterday’s announcements have put housing benefit at the heart of the welfare cuts. The housing profession welcomes the prospect of reforms to housing benefit but believes some measures in the budget provide real cause for concern and could cause real hardship for some of the most vulnerable in our communities.
“The changes to housing benefit are significant: they will impact on the ability of worse off families to live in more affluent areas, possibly forcing people to leave communities where they have lived for years and increasing pressure on social housing registers. They could also see landlords avoiding letting their properties to people who are in receipt of housing benefit due to the risk of housing benefit being cut.
“In the social housing sector, with over 50 per cent of tenants of working age not in employment or training, this could place landlords in an untenable position – being asked to house the most vulnerable but facing the prospect of large scale arrears if someone's housing benefit is cut because they can't find work.
“Linking housing benefit to the size of homes occupied could provide a spur to freeing up larger under-occupied social homes but will only succeed if there are wider changes in supply of housing otherwise it could be detrimental in particular for older people.
“Finally, we also need to remember that today’s announcements only look at cutting costs, and that we can expect more fundamental reforms to come in future.”