From the TUC

Housing Benefit cuts will make people homeless and drive them away from jobs

02 Jul 2010, by in Society & Welfare

As specialist organisations have time to evaluate the likely effect of the Housing Benefit cuts, it is becoming clear that families will be forced into homelessness and child poverty will be exacerbated. The changes will force families to move away from the areas where jobs are most likely to be found.

As Nicola has reported, the Budget introduced a number of severe cuts in HB and each of these will increase the number of families unable to pay their rent. The Chartered Institute of Housing has taken up the issue of uprating Housing Benefit in line with the Consumer Price Index.

From 2013, instead of being increased in line with the actual level of rents locally, HB will be uprated by the increase in the CPI. Everyone commenting on the change was worried that the link to how much families actually have to pay was being broken, but even so it was hard to believe that uprating would be in line with the CPI, not the RPI. The main difference between the two is that CPI does not consider housing costs, so many people assumed that the government had made a mistake, and uprating would actually use the RPI.

As I reported on Budget Day, CPI is normally lower than RPI. CPI can be higher – when mortgage interest rates are coming down – but now that interest rates are at historically low levels, they can only go up, and the RPI has already overtaken the CPI again. The gap is at present 1.7 percentage points. Each year this gap will mean that the gap between rents and HB will probably grow. The Chartered Institute of Housing estimates that, by 2020, every tenant’s Housing Benefit will be too low to cover the whole of their rent.

An obvious consequence is likely to be an increase in homelessness. Another expert organisation, the Building and Social Housing Foundation, has published their response to the Emergency Budget; in it, they look at the effects of another change – benefit rates will be set in relation to the 30th per centile of local rents (at present they are set at the 50th). The BSHF point out that this policy will have short-term and long-term effects. In the short-term, it is inevitable that some people will be unable to find rents that will be covered by HB – in some areas more than 30 per cent of tenants claim HB, in those areas it will be impossible for everyone to get enough HB to pay their rent. In the longer-term they point to the risk of the “total exclusion of the poor from large areas”, with their concentration in “Parisian-style banlieues”.

A story in today’s Times (p. 11, not on their website) reveals that another of the Budget’s changes to HB will cut 600,000 families’ benefit by an average of £1,000 a year. From next year, HB will be ‘capped’ at £250 per week for a one bedroom property, £290 for 2 bedrooms, £340 for 3 bedrooms and £400 for 4 or more.

The Times reports an analysis – again by the CIH – showing that the biggest losses will be faced by the largest families, who tend to need more bedrooms. As the Joseph Rowntree Foundation has pointed out, large families are one of the groups most likely to face poverty – children in families with 4 or more children account for 19 per cent of all children in poverty.

According to CIH, the worst impact will be in London (where rents are highest) but other areas will lose out as well:

  • Families with a 3 bedroom house will lose more than £1,000 a year in Ashford, Bath, Brighton, Cambridge, Canterbury, Exeter, Guildford, Winchester and Welwyn and Hatfield.
  • Families with a 5 bedroom house will lose more than £3,000 a year in Bedford, Bournemouth, Chichester, East Cheshire, Exeter, Leeds, Solihull, Southern Greater Manchester and York.

Presumably, the Coalition wants to send a message to unemployed people in these areas: that they should move away to places where housing is cheaper.

That is one half of a two-faced policy. At the weekend we saw the other half – Iain Duncan Smith (same minister, same Department) telling unemployed people he wants them to be more mobile and move to the areas that have got jobs. And we have IDS cheer leaders telling us that “there is plenty of scope for committed people to find jobs”.

But the Coalition doesn’t seem to have noticed that the places with jobs tend to be the same places that have got high and rising rents.

What makes these proposals particularly dispiriting is the fact that, at the end of it all, the Housing Benefit cuts may not even achieve the savings the Coalition is aiming at. The Building and Social Housing Foundation hints that these changes lead to increases in other areas of spending, including discretionary housing payment (paid to help families at risk of homelessness) and knock on effects in health, education and criminal justice. The BSHF report cautiously recommends that these areas should be “closely monitored to ensure that the changes to housing benefit are not leading to increased expenditure in these areas.”

So we have: yet another instance of the Budget for fairness increasing poverty, cuts that lead to increased spending, a housing policy that will increase homelessness and a policy on mobility that is directly contradicted by another from the same Department just days later.

Not terribly impressive.

4 Responses to Housing Benefit cuts will make people homeless and drive them away from jobs

  1. Tweets that mention Housing Benefit cuts will make people homeless and drive them away from jobs | ToUChstone blog: A public policy blog from the TUC — Topsy.com
    Jul 2nd 2010, 6:09 pm

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  2. The Squeeze
    Jul 5th 2010, 11:38 am

    So from April 2011 the rents the state pay to private landlords will be set at the 30th percentile, for 2 years, before being annually adjusted with CPI from that level.

    Excellent news! The subsidy paid by young working class people to private landowners will be driven down using the massive purchasing power of local authorities.

    Hopefully, once rents are driven down working class people will no longer be as priced out of decent rental accommodation by workshy benefit junkies.

    Using CPI will stop any tail-chasing and help dampen inflation in housing costs and hopefully house price bubbles.

    Good news for everyone (except BTL landlords and big workless families).

  3. Robert
    Jul 19th 2010, 5:58 pm

    If you take too much from people who already have nothing you don’t improve society. All tories are blind to the realities of what makes for a better society. The poverty trap is not cured by turning the clock back to good old ‘get on your bike’ and ‘pay your own way in life’ sort of Torie retoric. We need to use the carrot and not the big stick.
    I fear these policies will send more young people to drink and drugs or a life of crime. We need to create jobs for them. Not to allienate them further.
    Remove unemployment benefits and relace them with work but don’t threaten the already vulnerable with the very roof over their heads.

  4. Welfare reforms in the UK: whose pain? « Our Economy
    Aug 2nd 2010, 8:48 pm

    […] of the welfare reform are made available later in the autumn. Reductions in housing benefits are sure to hit the most vulnerable. For instance, check out how a single mother will struggle to make ends meet […]