A cut in the benefit cap from £26,000 to £23,000 could have a drastic affect on some landlords with housing benefit assisted tenants, mainly those landlords with families who are not working.
Especially in London, where rents have risen most, a reduction of £3,000 in benefits to a family renting and not working could mean a rapid increase in rent arrears followed by evictions.
Prime Minister David Cameron in the Queen’s speech confirmed the Conservative’s manifesto pledge of introducing a more punitive Benefits Cap. Before the election, Mr Cameron said he was determined to ensure benefits are not seen as a “lifestyle choice”.
The Government has also stated its intention to curb payment of housing Benefit for 18 to 21 year-olds and could freeze benefits of “working age” claimants for 2 years, starting April 2016.
Whilst there appears to be considerable public support for the policies, with a slim majority the government has still to get them through Parliament, though they could get some cross party support for the measures.
The change is likely to affect social housing providers such as housing associations the most, but some private landlords operating in this sector of the lettings market may find themselves having to re-think their business strategies.
Households whose total income from benefits is more than the new cap level will see reductions in their Housing Benefit.
Those affected families will be expected to contribute the shortfall of their rental bill themselves (from savings, other benefits, or other income). Unlike the Bedroom Tax (or Social Sector Size Criteria), this part of Welfare Reform will affect tenants in the Private Rented Sector (PRS). It is therefore anticipated that it will have an impact on private landlords rent arrears and as a result, in some cases it could lead to evictions.
The Benefit Cap won’t be universally applied as there are some exemptions for claimants who are disabled or who have disabled children, plus the cap won’t apply to pensioners.
The only way to avoid having their Housing Benefit capped is for benefit recipients to work more hours. If they work enough hours to qualify for Working Tax Credit, they’ll be exempted from the cap.
This will equate to working a minimum of 16 hours a week for single parents, and 24 hours a week for couples. Single individuals over 25 must work at least 30 hours a week to be exempt.
For claimants that have worked for a year, but lose their job through no fault of their own, they will be protected for 9 months (39 weeks) before the benefit cap starts.
Landlords will be faced with choices. For example, if the shortfall is small some landlords may prefer to offer a small rent reduction rather than lose the tenant and have to re-let the property. If the shortfall in rent is large, they may be faced with liaising with their tenants about their options and to help them find work. Ultimately some landlords may have no choice but to evict and find new tenants who are able to afford an appropriate level of rent.
As it stands at present (June 2015), a working-age family can claim up to £500 a week. This is set to drop to £440 following the emergency budget in July 2015. The new cap applies to anyone receiving an out-of-work benefit, including jobseeker’s allowance and employment and support allowance, which is paid to people with disabilities.