LHA maxima £1bn cut – Its much more than that!

In yesterday’s budget Chancer Osborne revealed a £1 billion housing benefit cut to supported and sheltered housing tenants and, note well, this will have a major impact on ALL general needs social tenants that is the 95% + who do not live in supported or sheltered housing.

The scale of the cut and context

The estimate £1 billion HB cut (£990m nd assuming it is credible when its likely to be higher ) over 3 years is £330 million per year and is a 2.2% cut to to the total housing benefit that social landlords receive each year of £15.14 billion.

As 75.3% of all social tenants claim housing benefit this £330 million per year LHA maxima cut is equivalent to a 1.64% cut to all social housing rental income including those not on housing benefit.

From April 2016 all social landlords have an imposed 1.0% rent cut and that 1.0% is seeing social landlords cutting back staffing by 15% and many seeking 25% overall cuts / efficiency savings.  That sees all social tenants receiving a lower level of service with landlords cutting back or cutting out ‘non-essential’ services.

This LHA maxima cut adds a 1.64% cut on top and can only mean tenant services will be far more severely cut back.

We must assume that Osborne (and IDS) will not change the LHA maxima cap applying to supported and sheltered housing after the review this year as IF supported and sheltered housing is to be exempt it must mean that Osborne will be giving away this £1 billion ‘saving’ and will have to find that from somewhere else.

What yesterday’s budget figures revel is that the LHA maxima is a bigger threat to social landlords than the 1% imposed rent cut and by consequence a bigger threat to tenant service levels for All social tenants.

Moreover, the LHA maxima cut has additional significant costs to social landlords through hugely increased eviction costs as the LHA maxima cuts are not 1.64% across the board but are concentrated on a small percentage of social tenants in supported and social housing.

For every 100 social tenants about 88 will not be affected by the LHA maxima cut at all, yet the other 12 are hammered by it with massive cuts that mean eviction is inevitable.  As I have detailed before (see here, here, and here) some social tenants in sheltered housing even in a low rent area like Merseyside will face a £50 per week cut and some in hostels will face an average £112 per week cut and in DV refuges up to a £240 per week cut then arrears evictions are inevitable as those tenants will not be able to pay such shortfalls.

The National Housing Federation has stated that 156,000 social tenants in supported and sheltered housing face an average £68 per week cut (and note this too is a very cautious and low figure and only for HA’s and does not include council tenants affected.)

If just 1 in 4 of this 156,000 or 39,000 cannot pay this low estimate of £68 per week and after 4 months have run up arrears of £1,156 then that gives an eviction cost to social landlords of £4,156 for 39,000 tenants based on the typical all found eviction cost for a social landlord of [£3000 + arrears level] and becomes a further £162 million per year on top of the average £330 million.

The total cost of the LHA maxima cut can and probably will exceed £500 million per year and the 1% rent cut by comparison is around £215 million per year.

The LHA maxima cut is much more than the 1% social rent cut that is now seeing social landlords slash staff by 15% and seek even higher efficiency savings  and ‘efficiency savings’ here means cuts to ALL tenant services and for ALL social tenants.

Time that ALL social landlords looked properly at what the LHA maxima means and that obviously includes those landlords who went gung ho for the affordable (sic) rent model as those rents are often above the local LHA amount too (nationally average LHA is 60% of gross market rent and AR is mostly 80% of gross market rent) and the AR model is a financial risk way too far for landlords.

And you though the LHA maxima cap only affected supported and sheltered?!

Social tenant? You’re f*cked as usual and do I even need to say that? Surely it goes without saying with every housing, housing benefit and welfare benefit change!!

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9 thoughts on “LHA maxima £1bn cut – Its much more than that!

  1. is this current tenants too? Am I right, this would effect under occupiers worst? Would they have the LHA (reduction in my area) and bedroom tax? But then benefit cap will effect larger families more re hb? Oh dear got brain fog now 😦

    1. They wont apply btax and LHA reduction – they’ll go with whichever one is the bigger cut.
      Eg, if your rent on a 2 bed house was £100pw, and you underoccupy by 1 bed, that’s £14pw reduction from the bedroom tax. If the 1 bed rate on LHA was only £80pw, that would be a reduction of £20 so they’d go with that one, because it costs them less.

      1. Yes that was confirmed a few weeks ago that it will be the higher one of the two.

        Note that you can be hit by both the bedroom tax and benefit cap however (tiny few now but will increase significantly when benefit cap reduced to £20k in autumn)

        As only for existing, note well if existing circumstances change, eg move from a joint tenancy to a sole one after relationship breakdown, then that creates a new tenancy and so are affected and the same happens with a succession.

        The LHA maxima cap will also affect those not of pension age in sheltered housing and will also affect those with an AR tenancy of any age – and both of those will apply even if an exemption comes in for supported and sheltered housing – something the ‘great and good’ of housing are NOT lobbying for!!

    1. Yes I know, but isn’t it about time that choir sang at the top of its voice so that housing’s “great and good” finally realised that and they – once again – are looking to close the stable door after the horse has just won the 1963 Cheltenham Gold Cup!!

  2. You mention that the cut is 1%, but if the rest of the social landlords are anything like mine… they have negated this cut by simply putting up the service/management charges by much more than the actual cut. So the “rent” here in Erewash has gone up, not down – crafty gits!

    1. Crafty or unlawful? Your landlord cannot just increase existing service charge levels or create new ones, so ask them to explain in detail and where, in law, it allows them to do this

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