Perverse disincentives of the overall benefit cap?

Is it in social landlords best interests NOT to ensure their tenants receive all their welfare benefits?

Yes that does seem a bizarre question but it may hold a lot of validity.  Here’s why:

a) The (OBC) overall benefit cap of £350pw / £500pw for singles and families includes HB

b) The Universal Credit we are informed will work by deducting all welfare benefits and reliefs from the OBC figure and the remaining amount will be the maximum that can be paid in HB.

Hence by social landlords working to ensure their tenants receive the welfare benefits they are entitled to is by doing that reducing the amount that can be paid in HB.

The government plans for rent inflation contained in the draft impact assessment published with RTB consultation see council rents rising by 41% by 2015 and HA rents rising by 24%.  This is set against RPI inflation of around 16% in that time.

So as social rent levels rise by these staggering amounts then more  tenants will see their residual amount of OBC not covering 100% of the rent. Add in to this mix that direct payments will go to tenants and not to landlords and the impact on arrears will likely be very significant. Add in that we expect the OBC to rise by CPI which is forecast to be 10.2% by 2015 in the same draft impact assessment and this further impacts on the likelihood of arrears.

In figures average social rent (using HB in-payment figures) is now 15.2% of the OBC at £500pw.  Using the rent inflation plans above average social rent (excluding the higher AR model) will by 18.1% of the OBC figure of £551 by 2015. That is a 19% increase by 2015.

Food for thought

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