Full Impact of Housing Benefit Reforms Yet to Come

  • A report shows that the effects of the housing benefit reforms will continue to worsen for private sector claimants.

    London has been hardest hit so far for private tenants who claim the benefit, but other areas are still yet to feel the effect.

    Research released by the Department for Work and Pensions (DWP) shows the effect that the reforms to housing benefits have had across the United Kingdom.

    The research has looked at the impact of changes to local housing allowance (LHA) in the private rented sector, and has shown that the impact has been "geographically limited" and has hit the capital the hardest so far.

    Analysis of the reduction of LHA shows that 94% of the gap falls to tenants to meet through increased shortfalls, while 6% of the gap is met by landlords (through reducing rents).

    However, the early effects of LHA reforms, which began in April 2011, had also been fairly limited in terms of displacement, additional evictions or more cases of homelessness.

    The report showed that:

    • The anticipated displacement of LHA households has not yet happened
    • It is falling to tenants to fill the benefit gap in the majority of cases (94%) rather than landlords through reducing rents (6%)
    • In 120 council areas, reductions to housing benefit have been £5 or less
    • The extra £130 million of support from DWP to councils to help tenants has "blunted the impacts in London and tighter PRS markets elsewhere.

    The main conclusion of the report is that there may be informal arrangements whereby landlords ‘turn a blind eye' to tenants who fail to meet the full rent payment, at least for the remainder of their current tenancy, and it may take time for market rents to adjust to the changes. This is also swayed by other changes to the housing sector that would encourage landlords to find ways to keep their tenants.

    Further research in to the development of changes will show the full effect, which is likely to have more changes as current tenancy contracts expire.

    Minister for Welfare Reform Lord Freud, said:

    Reform of housing benefit in the private sector was absolutely necessary to control a system that saw spending double over a decade to more than £20 billion a year.

    However, it is also necessary to monitor and follow the reforms to help us build and learn for future reforms.

     

     


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