Monthly Archives: December 2015

Money, money, money

Sam Madge-Wyld considers the Autumn Statement and its implications for housing.

On 25 November 2015, the Chancellor published, and presented to Parliament, the Autumn Statement and 2015 spending review. The headline grabbing announcement was the Chancellor’s promise not to cut tax credits (or at least until universal credit abolishes them). As part of the way to pay for this, the Chancellor promised two important amendments to the Housing Benefit regulations, i.e. stopping housing benefit for claimants who have been away from the UK for more than four weeks and imposing the local housing allowance limits to tenants of local authorities and housing associations. It is unclear at the moment, however, what impact either of these changes will have, as the Autumn Statement is silent as to the amount that will be saved and does not cite any evidence for the number of tenants who will be affected.

Presently, tenants who leave the UK are only entitled to the payment of housing benefit for a period of 13 weeks. This change is therefore only going to affect the limited number of tenants in receipt of housing benefit who spend between 4 and 13 weeks out of the country. No evidence has been provided detailing how many of these tenants exist each year. One imagines that it is not very many.

Nor is it clear what the sums the Treasury expects to save by imposing the local housing allowance limits to tenants in the social rented sector. The local housing allowance is the deemed eligible rent (i.e. the maximum amount of housing benefit that a tenant can receive) for tenants of private landlords. The local housing allowance is determined by the rent officer of the authority responsible for administering housing benefit within its area. This determination is made by taking into account the range of rents which a landlord would be likely to obtain for letting an assured-shorthold tenancy, for a property with a particular number of bedrooms, which is in a good state of repair. There are various categories:

  • one bedroom shared accommodation;
  • one bedroom self-contained accommodation;
  • two, three or four bedroom self-contained accommodation (Schedule 3B, para.1 of the Rent Officers (Housing Benefit Functions) Order 1997).

The local housing allowance is then set at the amount of the 30th percentile, i.e. out of 100 potential rents the 30th highest or the local housing allowance as determined on 30 January 2015, whatever is lower (Schedule 3B, para.2(3), 1997 Order). On 30 January 2015, the 1997 Order, as then in force, provided that the local housing allowance could not exceed:

  • £260.64 per week for one bedroom accommodation (shared or self-contained);
  • £302.33 per week for two bedroom accommodation;
  • £354.46 per week for three bedroom accommodation;
  • £417.02 per week for four bedroom accommodation (Sch.3B, para.2(12) of the Rent Officers (Housing Benefit Functions) Order 1997 before its amendment on 2 November 2015).

In practice, in areas where there are generally higher rents, such as London, the local housing allowance is set at these capped limits.

According to the Chancellor, the imposition of the local housing allowance cap to the social rented sector will “ensure that Housing Benefit costs are better controlled and will help prevent social landlords from charging inflated rent for their properties.” This suggests that local authorities and housing associations have until now had free reign to set rents at whatever artificially high rates they deem fit and that it is the housing benefit paid to tenants in social housing that has caused the housing benefit bill to reach £21.4 billion in 2010/11.

Nothing could be further from the truth; anyone familiar with the sector will know rents set by local authorities and housing associations are often set far below those limits other than in two specific cases: affordable rent tenancies and tenancies let to homeless applicants under Part 7, Housing Act 1996 (although it is unclear whether the local housing allowance will apply to these tenancies as the rules governing housing benefit for these tenants is different to other local authority tenants and as yet there is insufficient detail in the autumn statement).

Moreover, both sectors are already required to have regard to detailed guidance issued by the Secretary of State or the Homes and Communities Agency in its Rent Standard as to the setting of rents. It is disingenuous in the extreme to suggest that it is the fault of local housing authorities and housing associations for the increased housing benefit bill; it is the spiralling cost of rent in the private rented sector that has resulted in the housing benefit bill increasing by 46% over a ten year period.

The Autumn Statement also fails to mention that it was only in the last Parliament, and a policy implemented by the same Government, that social landlords were encouraged to charge “affordable rents”, i.e 80% of the market rent, in respect of new properties. The rationale being that if the taxpayer was going to spend such a large sum of money on housing benefit it made sense if it could be directed to the sector that was actually going to build new homes to rent, i.e. the social housing sector. In practice, it is likely that it is going to be these very same properties, let at affordable rents that will be caught by the new caps. This is because, as mentioned previously, in the vast majority of cases, save for accommodation let by local authorities to homeless applicants, the application of the local housing allowance will not affect the rent charged by housing associations or local authorities.

Outside of London, the local housing allowance can be less than the caps imposed by the 1997 Order and it has been reported that in some areas the standard of accommodation in the private sector is so poor that rents in the social rented sector are actually higher than the local housing allowance. This is still, however, likely to be the exception rather than the norm, but where it does apply, as has been seen with the benefit cap and the bedroom tax, in the majority of cases tenants will struggle to pay the amount of their rent that is not covered by housing benefit.

Nor should it be forgotten that the Chancellor had already announced in the July budget that rents in the social rented sector will be cut by 1% every year in this Parliament. Nick Billingham, the current chair of the Social Housing Landlords Association, in his recent article for Journal Housing of Law, has already indicated that this cut will be likely to result in smaller associations being forced to merge or be consumed by other associations and result in less homes, certainly for rent, being built by all associations (J.H.L. 2015, 18(6)). Even some of the larger associations are likely to have find substantial savings. In such a climate, it therefore seems unlikely that housing associations will voluntarily reduce their rents and will instead look for more tenants who are able to pay the rent without housing benefit meaning that some families are priced out of social housing and forced to move into less secure private sector accommodation.

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