Housing Benefit Reform Will Cause More Hardship.

by Mark Johnston

Housing Benefit Reform Will Cause More Hardship.

Rents have soared over the last year as many would be buyers have struggled to raise the 20 per cent deposit regularly demanded by lenders or meet their toughened borrowing criteria in the weak economy. As more tenants have remained in the sector for longer, this has increased demand, pushing rents up further.

However the cost of renting a home fell last month for the first time since March, dropping by 0.4 per cent to £741 a month.

Campbell Robb, Shelter’s chief executive, said that rents are still “far higher” than they were a year ago, With stagnating wages and rising living costs, people are facing a relentless stream of pressure to pay their rent and keep a roof over their head.”

Current figures from LSL Property Services, shows that rents are still 3.4 per cent higher than they were a year ago and four in ten landlords are expected to increase rents next year.

The government has annouced a housing benefit reform, which begin to come into effect from April 2013, these  include a total household benefit cap of £500 a week and the controversial introduction of under occupancy penalties for social tenants deemed to have spare bedrooms.

Another controversial  change will see housing benefit rolled into the universal credit, which will be paid directly to tenants as opposed to landlords. The governement believe that this will encourage people to manage their own budget in the same way as other households.

The Act has been created as fairer approach to Housing Benefit to bring stability to the market and improve incentives to work.

Lord Freud, the welfare reform minister, said: “We have capped housing benefit so that people can no longer claim over £100,000 a year to live in large houses in expensive areas”.

However, the Public Accounts Committee has warned that the governments new housing benefit reform policy will inevitably cause a rise in private rents.

Landlords have also warned that the reforms will lead to displacement of tenants, increase homelessness and rent arrears, and reduce lenders’ confidence in the sector.

A report by the National Audit Office (NAO) also highlighted how caps to housing benefit are likely to severely deepen the country’s housing crisis in the years to come. In many towns and cities, there will not be enough affordable homes to rent for those claiming local housing allowance, the benefit paid to tenants of private landlords.

Gavin Smart, of the Chartered Institute of Housing, added: “In a few years, our cities could become very strange places where in many parts of them you will only find the very rich and well-paid.”

A spokesperson for the Department for Work and Pensions said it was working with the Chartered Institute of Housing and the Communities and Local Government department on the implications of the changes for local authorities and housing associations.

In conclusion the full impact of this particular policy is currently uncertain and depends on how households and the housing market react, locally as well as nationally.

 

 



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