Documents to download

A drive to reduce Housing Benefit expenditure

After coming into power in 2010 the Coalition Government announced a package of welfare reforms aimed at reducing public expenditure as part of its deficit reduction programme. Housing Benefit was targeted as a key area for reform due to ‘ballooning’ expenditure in this area (forecast to be £23.5 billion in 2016-17, around 11% of total welfare expenditure). 

The focus on reducing Housing Benefit expenditure has continued since 2015.

The various measures announced since 2010 are briefly summarised below and explained in detail in the linked briefing paper.

June 2010 Budget

The June 2010 Budget announced changes to the way in which Local Housing Allowance (LHA) rates are calculated for Housing Benefit claimants in the private rented sector (PRS) and also the under-occupation deduction for working age claimants living in social rented housing with spare bedrooms (also referred to as the bedroom tax/Removal of the Spare Room Subsidy).  The Government said that the measures would “provide a fairer and more sustainable Housing Benefit scheme by taking steps to ensure that people on benefit are not living in accommodation that would be out of the reach of most people in work, creating a fairer system for low-income working families and for the taxpayer.”

October 2010 Spending Review

Further measures were announced as part of the October 2010 Spending Review, including the household benefit cap and the extension of the Shared Accommodation Rate (SAR) to most single Housing Benefit claimants in the private rented sector under the age of 35 – previously the SAR had applied to claimants under the age of 25.

These measures were aimed at ensuring “Housing Benefit rules reflect the housing expectations of people of a similar age not on benefits” and “ensuring that no family can receive more in welfare than median after tax earnings for working households.” 

July 2015 Budget

Following the 2015 General Election the new elected Conservative Government announced further Housing Benefit changes as part of the July 2015 Budget. These changes included the freezing of LHA rates from April 2016 for four years, the removal (with some exceptions) of entitlement to Housing Benefit from people aged 18 to 21 from April 2017, and a reduction in the household benefit cap from £26,000 to £23,000 in London and £20,000 elsewhere. The household benefit cap is not strictly a Housing Benefit measure but it does result in reduced HB entitlement where a household has a benefit income above the threshold.

These measures formed part of the Chancellor’s programme to reduce welfare spending by £12 billion by 2019-20. 

November 2015 Autumn Statement and Spending Review

The Autumn Statement and Spending Review 2015 brought the announcement that LHA rates would be applied to new claimants entering into social rented tenancies after April 2016 with their Housing Benefit entitlement affected in April 2018 (implementation has now been delayed to April 2019). The Government said that these steps would, with those announced in July 2015: “ensure fairness between those receiving Housing Benefit and those paying for the system.”

Discretionary housing payments

The main way in which the Government has sought to mitigate the impacts of these changes for claimants is by increasing funding for Discretionary Housing Payments (DHPs). Local authorities can use DHPs to assist claimants experiencing a shortfall between the rent due and their HB entitlement.

Controversial measures

Some of the Housing Benefit reforms have proved to be highly controversial, particularly the under-occupation deduction applicable to working age claimants in the social rented sector. Commentators argued that claimants would face hardship and possible eviction if they could not meet the shortfall between the rent due and their Housing Benefit entitlement. Social landlords said that they did not have sufficient smaller accommodation to offer to tenants affected by the change who wanted to move. In regard to the private rented sector (PRS), both landlord organisations and commentators such as Shelter and Crisis argued that restricting LHA and extending SAR would make it difficult for claimants to access the PRS, particularly in areas of high housing demand.

The difficulties HB claimants are experiencing in accessing private rented housing in areas of high housing demand are well documented. The Residential Landlords Association surveyed over 1,000 landlords earlier in 2016 and found that 76% “will be reluctant to rent accommodation to this age group [18-21] because they fear that they may not have enough money to pay the rent.”

Just under two-thirds (63%) of social renting households were in receipt of Housing Benefit in 2014/15, according to the English Housing Survey. Around 54% of all social sector tenants had their rent entirely covered by their Housing Benefit, compared to around 64% in 2008-09. This means that HB forms a significant proportion of social landlords’ revenue stream which, in turn, funds the day-to-day management of the stock and reinvestment in the development of new-build housing. The various HB changes, together with wider welfare reforms, have been flagged up as a risk to the sector, it may become harder to raise private finance if lenders believe that landlords’ revenue stream is unstable. The National Housing Federation reacted to the announcement of further restrictions in the Autumn Statement and Spending Review 2015 by saying “Our belief remains that the best way to tackle the housing benefit bill is to build homes for social and affordable rent.”

Documents to download

Related posts