Thousands of vulnerable families will lose their homes under government reforms of the Housing Benefit system announced in yesterday’s Budget.
Chancellor George Osborne has said that maximum rates of Local Housing Allowance will be reduced to between £280 per week for a one-bedroomed property to £400 for a four or more bedroomed house.
There has been no indication of any local weighting given, so tenants in London and the south east will be hardest hit by the new cap. James Davis, Upad’s CEO, who also lets to tenants on Housing Benefit, explains what this will mean in practice:
“I have a property in north-west London on which I’d lose £500 a month under these proposals, and another in Westminster where I’d lose £1500. I believe in letting to social tenants – but not at the expense of my income, and not when I can earn a significantly higher amount from private tenants.”
Another landlord, Nick Parkin from Pimlico Flats, gives it to the Chancellor straight: “if you think that landlords are going to rent to DHSS tenants at less than they can rent to private tenants you haven’t got the hang of a market economy yet.”
James continues: “Landlords do at least have a choice how they’ll react to the Chancellor’s announcement. For many social tenants, this is going to mean a forced move away from home, family and schools. Tenants on benefits are going to be forced into ‘social housing ghettos’, in areas with cheaper housing that’s less well looked after.
Of necessity, social tenants will be housed at the bottom end of the market because fewer landlords will have any incentive to brave the benefits system. Families will be forced back into B&B accomodation and social housing will become not fit for purpose. Are we going to see people housed in tents in the Olympic stadium?!”
The changes come into force from April 2011. We’re calling on the government to reconsider the detail of Slasher Osborne’s polices here. There is already a massive shortage of social housing in the UK: 4.5 million people are on the waiting list to be housed, and current local authority stocks can house less than half of them.
With no money for new buildings, only the private sector can offer these people a home. Landlords cannot let at a loss, nor will they deal with the bureaucratic and slow benefits system without some kind of incentive. At the very least, the government needs to add local weighting back into the mix.
Mr Shapps, are you listening?
Landlords can’t let out at a loss? Yes, they can – just as any other business can go bust if they can’t sell their product at a high enough price to cover their costs. It’s striking that you say tenants will be hardest hit when it may well be landlords who will be hardest hit. Tenants don’t benefit from high levels of LHA, landlords do.
If you can rent all your properties out to employed tenants, fine. But the shift from LHA at the median rent to LHA at 30% is likely to push down rents generally.
Perhaps you should consider that Osborne is smarter than you think and he is signalling to landlords generally that the days of rents ratcheting upwards based on median rents, so LHA rises year in year out as rents are increased with LHA acting as a floor for private rents, are over.
Comment by Clare — 23/6/2010 #
Sorry, but I’m fed up as a tax payer funding better quality (more expensive) housing for those on benefits than the mortgage I can afford for myself. Landlords and their tenants will just have to get used to a different economic reality. By the way, it doesn’t ring true that so many landlords were being altruistic renting to claimants. More like a gravy train which has now hit the buffers – best of luck finding private tenants willing to cough up as much as the state has been!
Comment by Clive — 23/6/2010 #
We all have to cut back, after all it was the unsustainable housing boom that caused the economic mess in the first place.
The cuts are fair in todays economic climate.
Comment by Gavin — 23/6/2010 #
Having to compete with LHA rent allowances, and being a want to be first time buyer who just wants their own roof; I find it hard pay rent and put anything by for a deposit as working for the NHS, pay is nothing to talk about. I welcome this cap. If LHA won’t pay, lower or leave.
Comment by Seq — 23/6/2010 #
Of course social tenants should be at the bottom of the housing ladder. Taxpayers all over the country are paying for them to be in social housing. Why on earth should this housing be of a better standard than the taxpayers themselves can afford?
Comment by Blink Too Fast — 24/6/2010 #
This is a brilliant outcome for almost everyone – private tenants, the government/tax payers, house/flat buyers. Even the social housing tenants themselves wont really suffer much. The streets they live now are typically pretty grimey (though expensive) eg Camden. Personally I am grinning from ear to ear! Oh and landlords will suffer. Spare me!!!
Comment by Sheep — 24/6/2010 #
Landlords are not saviours and personally I would like to see the private sector stopped being used as a dumping ground. Maybe this will do it?
Miss Sharon Crossland AIRPM
Leasehold Life
Comment by Sharon — 24/6/2010 #
I would say they didn’t cut it enough – how many single working people can afford renting 1 bedroom flat for 1200£?
Comment by Lina — 24/6/2010 #
The LHA acts as the benchmark for rental prices, lower it and all prices drop.
My partners flat has just had the rent reduced by £450 per month, as the landlord could not find a private tenant stupid enough to pay the £1250 per month. Better some income than empty like a lot of the over priced flats in Upminster.
Shame Osbourne didnt reduce it to £100 a week, but then he does have to prop up BTL and their debts.
God I love renting, the prices keep dropping around here, just ask and they reduce the rent.
Comment by John — 24/6/2010 #
time to sell up then… oh, .. nobody is buying .. ha ha ha ha .. its over and you all know it!
Comment by phoenix — 24/6/2010 #
At LettingFocus.com we think that unless the proposals are altered there will be a move in people at the lower end of the scale to cheaper boroughs in London where they can get a property at under the new rates.
This will increase demand for rented property in those cheaper boroughs.
I have to say though, in some boroughs where a lot of people were dependent on LHA, setting the LHA at the median rent (as before) really meant that the govt ended up bidding up rents against themselves. Something needed to be done about this.
However, if they are changing this they really have to improve the admin of LHA at the local authorities. It’s just too poor in too many boroughs and no amount of incentives to landlords will overcome this.
Councils could drop all the landlord incentives and deposit guarantee schemes (and save lots of taxpayer £s) if they could only speed up the admin of LHA – it’s that what is puts many landlords off letting to LHA dependent tenants.
No amount of incentives to landlords could be better than just getting LHA admin working well.
David Lawrenson
Topic Expert
http://www.LettingFocus.com
Comment by David Lawrenson — 25/6/2010 #
oh well that means your house too.. ha ha ha. it don’t just affect landlords..
Comment by blogger — 27/6/2010 #
It will mean those in high value areas relocating to less expensive areas. However it does affect demand and therefore local rents downward, and fewer will move than thought. What’s wrong here is one minister says leave your security up north, but there will be less houses to rent anywhere in the SE, so you can’t take up a job.
Some families might move up north even further from hope. Social housing distorts the market, however housing supply is slow and inflexible. We need first to create tax and loan incentives and stiff penalties for services businesses and landlords to relocate out of the south east – spend money on British unemployed to build them and staff them, not tax inspectors, anyone remember the New Town and Garden City movement. That reduces social housing need and creates opportunity.
Comment by ebenzer howard — 30/6/2010 #
People on housing benefit live in Westminster and Pimlico? That’s ridiculous. If they are out of work, they should be in a cheaper area, and if they work, they should expect to travel for work like everyone else. This cap sounds like a great idea.
Comment by worker — 30/6/2010 #