The Budget and social housing and e.g. 752,704 children made homeless

The Summer Budget included a huge number of policies which tinker with the social and private rented tenant and here in very short overview I look at just 4 of these and in bullet point form.

  1. Benefit Freeze
  2. Benefit Cap
  3. Social Rent Cap
  4. Pay MORE to Stay

Benefit Freeze

  • With the exception of state pension and disability living allowance welfare benefit rates has been frozen and will not change until April 2021.
  • This is a huge saving for the government of over £4 billion per year by the end of the parliament and a cumulative saving of £11.25 billion alone
  • It is a huge cut for the benefit claimant and means Job Seekers Allowance will remain at £73.10 per week until April 2021. If not frozen it would have been £6.35 per week more at £79.45 in 2020 / 21.
  • This £6.35 per week does not seem much yet the JSA or ESA claimant will lose £920.43 by this time, the equivalent of 12.7 weeks or 3 months worth at today’s rates.
  • This applies to any benefit which is frozen and means the claimant loses the equivalent of 3 months of each benefit or tax credit received over this parliament.
  • This also includes LHA the private rent variant of housing benefit and as rent inflation is more than CPI this is a far larger cut than the 3 month equivalent figure that will likely see private landlords fleeing the benefit tenant market

Benefit Cap

  • The overall benefit cap of £500 per week for families and £350 per week for single people has been reduced with effect from April 2016.
    (Now to be “Autumn 2016 – yes as vague as that!)
  • In London to £23000 per year or £442.31 for families and £15,410 per year or £296.25 per week for single persons
  • Outside London to £20000 per year or £384.62 per week for families and £13400 per year or £257.69 per week for single persons
  • The single person’s amount used to be 70% of the families amount and has also been reduced to 67% as the figures show. This is an unannounced move and will mean that a single person renting privately in London who loses their job will lose their privately rented property
  • These new lower caps will affect at a best estimate 229,291 households and put 752,074 children at severe risk of homelessness together with 357,694 adults
  • The figures above are within a ± 10% range and will see a huge transfer of cost from central government to local councils in excess of £3 billion per year which dwarfs the projected £100 million saving rising to £495 million projected saving in 2020/21
  • The projected numbers may read as hyperbole or scaremongering yet they represent just 4.6% of all housing benefit claimants, that is social and private tenants, and with 62% affected being private tenants.
  • Put another way 20 out of every 21 households claiming housing benefit will not be hit by the reduction.

The table below shows the very precise maximum housing benefit entitlements each household will have and applies to social housing and privately rented housing

obcactualpostbudget

 

I have written extensively about the benefit cap reductions and their impact ahead of the Summer Budget and the table above can be used by all landlords and tenants and all commentators to see at a glance how a huge rise in evictions and children being made homeless is inevitable as well as truly offensive.

Social Rent Cap

  • This applies to council and housing association tenants in England only and does not apply to social landlords in Scotland and Wales
  • From April 2016 social sector rents will reduce by 1% per year and until the end of financial year 20/21
  • This to NOT apply to any form of shared ownership or part rent / part buy product
  • The revenue cut to English social landlords is a £9+ billion cumulative loss over the 5 year period and that figure needs to be seen in the context of the £11.25 billion cumulative saving to all working age welfare benefits with the freeze mentioned above
  • This undoubtedly means social landlord services will be cutting services over the period and reveals the housing regulator’s recent obsession with value-for-money could be seen as a political precursor to this monumental cut that is equivalent to a 8% yearly cut

Pay MORE to Stay

  • This begins in April 2017 and means that working tenants in social housing will have to pay more in rent and like the benefit cap the limits vary in London with household benefit units earning £40000 per year and elsewhere earning £30000 per year moved from a social rent to a market rent (now £31k not £30k in the regions)
  • A household benefit unit is both members of a couple but not any adult children who are a separate benefit unit
  • Social rent to market rent would see the working tenant paying £145 per week for a 3 bed council flat in London at a social rent having to pay £500 or more per week or whatever is the local market rent. In Liverpool for example this will see the rent increasing from circa £95 per week to £145 per week for a housing association 3 bed
  • The policy is called ‘pay to stay’ yet all tenants now have to pay to stay else an eviction for arrears happens and this is a policy of pay more to stay.
  • Critically, if you have a council landlord the increased rent goes to the Treasury and is not kept by your council landlord HOWEVER the additional rent collected by a housing association landlord is kept by the housing association.
  • Many apparent figures suggest this will only hit 34,000 social tenants and at an average of £70 per week yet such figures hold no credibility as the budget says it anticipates a £365 million per year saving from this measure. That £365 million saving to central government can only come from council tenants who make up 47% of all social tenants
  • Extrapolated this means a total of £776 million MORE will be charged to social tenants and means 212,000 or so social tenants will be hit by this policy not the 34,000 figure

Additional factors

  • Note well that when this policy begins in April 2017 the National Minimum Wage reinvented as ‘living wage’ is likely to be £7.70 per hour as that plans the £7.20 announced ‘living wage’ for April 2016 is to rise to £9.00 per hour by 2020 and with incremental steps on the way.
  • A couple – the household benefit unit – both working 39 hours per week on this ‘living wage’ of £7.70 per hour in Liverpool or Hull or Birmingham or anywhere outside the capital will have a household income of £31,232 per year and above the pay MORE to stay threshold
  • This strongly suggests that any social rented housing in which a couple are working full time will be hit by an increase in rent of at least £2500 per year in the lowest rent areas of the country and perhaps as much as £20000 per year increase in London and as such the pay MORE to stay policy is a truly perverse disincentive to take up employment

That’s a quick summary of just a few of the measures.

________________________

 

I also note that the DHP budgets which the first budget of 2015 before the election said were being halved has been changed and so in 2016/17 instead of a fall to £85 million they will increase to £150  million and then to £185 million before falling to £140 million in 2020.

That may appear as good news yet DHPs will need to cover  a ten-fold increase in the housing benefit shortfall in the benefit cap and a further need in the freezing of LHA until 2021 and means that the DHP for bedroom tax cases will massively decrease and in my view become obsolete by 2017 as councils concentrate on DHP in areas that will avoid higher and quicker costs of homelessness such as LHA and especially the benefit cap.

homless-child

On BBC Sunday Politics today Harriet Harman says the Labour party support the overall benefit cap.

Shameful, though it was in Labour’s manifesto so we shouldn’t be surprised

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9 thoughts on “The Budget and social housing and e.g. 752,704 children made homeless

  1. higher housing costs damage the local economy as people have less to spend on other things. If people are forced to move this often means borrowing money to cover the costs. It also means that people lose the value of any improvements they have made to their rented property.

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