Last night a news story broke on the BBC website that Chancellor Osborne is cutting the link between inflation and benefit payments.
The BBC article starts: -
“The government is considering breaking the link between inflation and the automatic annual increase in benefits, the BBC understands. Many benefits – excluding the state pension – would be frozen for two years, with future increases pegged to average earnings rather than prices”
As any social tenant should know social rent levels increase each April by a formula which is (RPI+0.5% then plus or minus £2 pw.) That looks complicated but it is not. If your rent is now £100.00 per week this increases by 3.4% (RPI of 2.9% + 0.5%) to make £103.40 and then £2 can be added to make £105.40 per week.
Social landlords will undoubtedly increase rents next April by this maximum amount for a number of reasons. The bedroom tax, HB being paid directly to tenants and not direct to landlords for example are two obvious reasons why social landlords believe more arrears will happen. The only way for social landlords to mitigate this is to increase rents by the maximum amount permissible. In one way it is obvious and good business sense.
Social tenants are used to above inflation rent increases and will moan about this with some justification. Yet that aside social tenants are used to Housing Benefit paying all of the rent charged and so, financially, there is little difference.
However this is set to change. Taking the above example of a £100.00pw rent the social landlord will increase rent to £105.40 BUT HB will still pay just £100pw meaning the tenant will have to find the £5.40pw difference from savings or from welfare benefits (and note welfare benefits will not increase either and in real terms will fall.)
The official HB figures reveal 3,382,870 social tenants claiming HB at an average of £80.85pw. The rent increase formula will see this rise by £4.75 yet the HB bill will stay the same.
So next year 3,382,870 social tenants will have to each find an additional £4.75 per week to pay towards their social rent – a national figure of social tenants paying £838,438,288 (£838 million) more next year.
This is before and additional to any impact the overall benefit cap, the bedroom tax and all the other housing reforms planned for next year will have.
Lets be clear while Osborne and Prisk will say we are all in this together and tenants are privileged to live in scarce and subsidised social housing – that is all the usual superficial nonsense – this is nothing more than yet another attack on social tenants and social landlords. I have no doubt that if this goes ahead Prisk will be told to argue this is simply creating a level playing field with the private rented sector (PRS) as they do not get full housing benefit and on average only get 65% of the market rent paid by benefit – £107pw against £163pw – so why should privileged social housing tenants get all 100% of their rent paid?
Similar argument was used after all for the bedroom tax. Yet a true level playing field would see PRS landlords being regulated, having to offer more security of tenure, more tenant rights to involvement and inclusion and better housing conditions – all of which and more the social tenant enjoys as a given.
The principle of not paying full 100% Housing Benefit to social tenants becomes a slippery slope and perhaps we will see an aspiring Tory MP out to make a name for him or herself make an argument for social housing HB to be converged down to PRS levels – from 100% to 65% over time?
That of course is political spin of the highest order as social housing rents are on average less than half the cost of PRS rent levels at £80.85pw compared to £163.05 pw and the low comparative level of social rent levels to PRS ones acts as an incentive to employment whereas the high level of PRS rents are the biggest constraint and the biggest dependency a tenant has to taking up employment.
What needs to be factored in to the above is that this financial year 2012/13 the coalition has frozen LHA – the HB variant it pays to PRS landlords – and so will the coalition argue this is another way of creating a level playing field?
Of course, if Osborne does freeze housing benefit payments then social landlords will have to increase rents even higher in subsequent years as their income will fall due to increasing arrears which when added to frozen HB payments (and other welfare benefit payments) means HB will only pay a lower and lower percentage of the rent each year, which in turn will see arrears increase and social landlords having to increase rents more highly each year and then evict more (possibly using Ground 8 more) – in short a vicious circle.
Still – wont be long before the coalition blames ‘bleating’ tenants even more will it? Get off your lazy backside and get a job then privileged social tenant! Which of course is what Joe Public thinks social tenants are – lazy, workshy etc, and they also believe that HB is an out-of-work benefit too. Yet since the last election the official HB figures show an increase of 89,000 social tenants claiming HB and an increase of 253,000 working tenants claiming HB! In total 280,000 new tenants claim HB (190,000 new in PRS) and 253,000 or over 90% are working!
Even before this latest knee-jerk proposal the bedroom tax with 14% or 25% cuts to HB for social tenants was a problem for social landlords. Tenants caught by the bedroom tax rightly are up in arms of such cuts as to what it means to them. Yet whether a social tenant is ‘underoccupying’ or not ALL social tenants must realise that rents will increase because of this potential loss to of income to social landlords. It is inevitable that social rent levels will increase to the maximum permissible because of the bedroom tax and the overall benefit cap and UC being paid monthly and HB being paid direct to tenants and other reforms.
Yet this proposal makes this much more of a vicious circle as this will create an ever-increasing gap between social rent levels and the amount of HB that will be paid. Social tenants ALL need to get together and get together with social landlords to grasp the agenda and defeat this proposal before it ever gets off the ground. The LGA also needs to get on board too as this proposal will see a huge transfer of cost in homeless terms to local government. PRS lobbies such as the NLA and RLA should lobby for it of course as it makes their members ridiculously high rents look better and they will make even more of a killing from bringing temporary B&Bs online for their huge increase in homelessness and be able to charge local government whatever they like for these unregulated and unsuitable properties.
Soon there will be no such thing as an ‘affordable’ property if you are unfortunate enough to be on benefits or even working full-time on national minimum wage. That is what these knee-jerk proposals mean – the death of true affordable housing…which this government will seek erroneously to blame on social landlords!!
For once, it would be good if social housing (landlord and tenant) grabbed the agenda and acted proactively. They wont of course. The coalition will take first move advantage as I describe above and win the war of spin with more blame and castigation heaped onto scrounging workshy feckless privileged social tenants that Joe Public will lap up.