From the TUC

CPI and housing: The deeper implications of the Welfare Reform Bill

03 May 2011, by Guest in Society & Welfare

Hidden in Clause 68 of the Welfare Reform Bill are proposals that will have a profound impact on housing in this country.

The Clause itself is deliberately vague, talking of ‘liabilities’ and ‘rent officer determinations’. It is only by close examination of parliamentary questions and references in the emergency budget that it becomes clear that Clause 68 will be used to introduce the Consumer Price Index (CPI) as the means by which Local Housing Allowance (LHA) is adjusted from 2013.

Much has been made of the impact that switching to CPI will have on benefits such as disability living allowance and job seekers allowance, which until this month were calculated using the more relevant Retail Price Index. But less recognised is the unique impact that linking to CPI will have on Local Housing Allowance.

Currently supporting over a million households to live in the private rented sector, LHA is a specific benefit to cover a specific cost – the roof over people’s heads. For this reason, it is linked not to RPI or any other fixed measure of inflation, but to the cost of local rents to ensure that the housing support people receive is based on the housing costs they actually pay.

Removing this link means that from 2013 housing support will be adjusted based on the changing cost of a random basket of consumer goods like washing machines and the cost of an average meal out – pretty much everything apart from the real cost of rents.

Between 1997 and 2007, average rents increased by 70%, while the CPI rose by just 20%, illustrating just how quickly housing costs will outstrip LHA under the new system. Over time, the amount people receive will cover less and less of their housing costs.

Shelter joined up with the Chartered Institute of Housing to measure the impact this will have. Our research showed that by 2023, just ten years after the change comes in, 34% of local authorities outside of London will be unaffordable for people on LHA. Areas worst affected are concentrated in the East of England, East Midlands and the South West where rents have been rising fastest over recent years. In effect, claimants will find themselves priced out of huge swathes of the country.

What’s more, further analysis shows a pattern between the areas with the highest proportion of claimants in work and the highest rates of employment. Meanwhile, regions that will remain affordable in 2023 – the North East, North West and Yorkshire and Humber – are those with above average rates of economic inactivity and unemployment. In other words, people claiming LHA will be forced to live in places with fewer employment opportunities.

These findings are a serious challenge to the government’s key aim in reforming the welfare system – getting more people back into work – and are surely grounds for an urgent rethink before it’s too late. Shelter is urging MPs and Peers to support amendments to the Welfare Reform Bill that will ensure the rate of LHA remains linked to housing costs and accurately reflects rent rises.

But there is also a wider point to be made about the way these changes are being introduced. If Clause 68 is unclear on its intentions to reduce housing benefit, Clause 11 of the same Bill gives carte blanche to the Secretary of State to bring in further changes to the way housing support is calculated through secondary legislation. This opens the door for more cuts to housing benefit to be introduced without proper parliamentary scrutiny. This should be a serious cause for concern for anyone committed to accountability and the democratic process.

NOTE: Shelter has launched a campaign to “Save the Housing Safety Net”. You can add your own name to their petition at the Shelter website.
GUEST POST: Campbell Robb is Chief Executive of Shelter, the charity that works to alleviate the distress caused by homelessness and bad housing. He was formerly Director General of the Office of the Third Sector in the Cabinet Office – the lead civil servant on voluntary sector policy and practice. Prior to this, he led the campaigning and public policy department at the NCVO.

One Response to CPI and housing: The deeper implications of the Welfare Reform Bill

  1. Clare Fernyhough
    May 7th 2011, 12:25 pm

    The true consequences make you gasp in disbelief. It is not just high rental areas that are affected however; I live in Staffordshire and pay a reasonable rent, but I will lose my home eventually if these measures are implimented.

    I live in a housing association home (formerly council owned); a small semi detatched property I’ve lived in for 24 years. I’m chronically ill now. I can’t afford to move and set up home again since I have spent so much money on the property that I was told would be my home for life.

    I read the welfare reform paper thoroughly and soon realised the implications for me with regard to CPI. I then received notification that my rent would increase by 10% every year until 2025 to bring the rental in line with private rents. When the government bring in these rules I have worked out that within 5 years, due to the increase in rent (it will be £120 per week by 2018) and a decrease in Housing Benefit, I will not have enough income to cover my rent. If I don’t lose my disability payments, I may be able to stay for a little longer, but if I am migrated onto JSA, despite being a ‘secure tenant’, I will be forced to move.

    The question is, where do I move to? Already, the new LHA rate for my area bears no resemblence to actual rents. If I was on such a limited income like JSA, which many disabled people will be migrated onto, I would not be able to afford to make up the additional rent. There are few hostel places available in the area so I would have nowhere to go.

    I am already chronically ill and I would not survive sleeping rough. I know that many disabled people feel the same, that they are facing a ‘death sentence’. Apart from that, I love the home I live in; I can’t imagine living anywhere else. It is the primary stability I have in life. I feel thoroughly cheated. I obtained my home when ‘improvements’ didn’t exist, but as secure tenants we were allowed and encouraged to improve the properties; it was worth it because it would always be my home. I put in central heating, a kitchen, and made many other improvements. I have a beautiful garden.

    The thought of losing it last year threw me into a deep depression and I had to have therapy. I’m ok now, and I’m just trying not to think about it. I am determined to try to stay here, even if I have to live on rice to do so. If I am forced to leave however, there is no other option for me. I live in a semi rural area and have done so all my life. The only possible option is to move into the slum areas in the city where rents might just compare to the LHA levels. We are all aware of where these places exist around here. They are the places where prostitutes live and their pimps. I’d rather be dead than move there I’m afraid, and there are many like me who feel the same.

    These are the facts about this bill. It is a totally wicked and heartless move by the government. I can only hope that they are kicked out at the next election and the new government repeal the bill.