Written evidence submission by London
Borough of Islington
This paper outlines the London borough of Islington's
response to the Housing Benefit changes announced by the Government
in the June 2010 budget.
1. INCENTIVES TO
WORK AND
ACCESS TO
LOW PAID
WORK
The proposed housing benefit (HB) caps of £400,
£340, £290, £250 for resp. 4-, 3-, 2- and 1 bedroomed
properties would potentially force low income households to move
out to supposedly "cheaper" areas of outer London and
having to commute back into the area for their jobs. This would
impact on travel costs, child care arrangements etc.
We are also concerned that many people with close
links to the communities would be forced out by these changes.
We do not wish to see the Borough become the preserve of just
the affluent.
1.1 Re the 10% reduction in HB after 12 months'
receipt of Job Seekers Allowance (JSA):
We believe that there are many reasons for people
being in receipt of JSA, including lack of (suitable) jobs, being
inadequately skilled/trained, inter-generational worklessness,
being vulnerable, etc. We do not believe that reducing HB entitlement
by 10% would have the desired effect of getting more people into
work. On the contrary, we believe it will lead to an increase
in: evictions for rent arrears; homelessness; and an exacerbation
of the factors why people find themselves out of work in the first
place.
In Islington, we currently have 1298 HB claims from
people in receipt in JSA.
A 10% cut in HB after 12 months would amount to a
reduction in HB of £14,675 per week or £763k per year.
2. LEVELS OF
RENT, INCLUDING
REGIONAL VARIATIONS
Islington is a high demand area, with some of the
highest private sector market rents in London. With over 8,000
people on its housing register, and demand for social housing
far outstripping its supply, the borough relies heavily on the
private rented sector to help house its residents.
Whilst it is possible average rent levels may drop,
we do not feel they would do so sufficiently to allow many affected
households to retain their accommodation without other subsidy.
We recognise LHA rates have increased above pre LHA
(2008) Housing Benefit levels, in particular for high demand properties
i.e. larger properties. There is some anecdotal evidence of landlords
raising their asking rents to the maximum LHA level which in turn
incrementally raises the LHA rate. However, the proposed national
caps of £250, £290, £340 and £400 for respectively
one, two, three and four/four+ properties take no account of the
traditionally higher rents charged in Islington.
These higher rent levels are a result of the scarcity
of affordable housing in London and the cost of land and property
in the capital, rather than a product of the benefit system as
evidenced by the relative rises since LHA started.
The DWP analysis clearly shows the inherently unfair
impact of the proposed cap, with London being the only area within
Britain affected by the level of the national caps at one to four
bed level. 15,530 households in London are affected by the cap
in one to four bed properties compared to none elsewhere[68].
London also has a further 1,910, five bedroom households affected
by the restriction to a four bed property and the £400 cap
ie over half of the numbers affected.
Islington is divided into four Broad Rental Market
Areas (BRMAs).
The table below shows current (August 2010) LHA rates
for each BRMA in the borough, by bedroom category:
Table 1
AUGUST 2010 LHA RATES IN LB ISLINGTON
| 1-bed | 2-bed
| 3-bed | 4-bed |
5-bed |
| Inner East London | £235
| £300 | £350 | £436.13
| £560 |
| Central London | £350 |
£500 | £730 | £1,000
| £2,000 |
| Outer North London | £178
| £230 | £287.67 |
£375 | £520 |
| Inner North London | £250
| £329.10 | £425 |
£578.46 | £700 |
The table below illustrates the potential impact of the caps,
showing the maximum weekly HB loss per bedroom category by BRMA
(based on August 2010 LHA rates):
Table 2
POTENTIAL WEEKLY HB REDUCTIONS UNDER NEW CAPS
| 1-bed | 1-bed
| 3-bed | 4-bed |
5-bed |
| Inner East London | - | £10
| £10 | £36.13 | £160
|
| Central London | £100 |
£210 | £390 | £600
| £1,600 |
| Outer North London | - | -
| - | - | £120
|
| Inner North London | - | £39.10
| £85 | £178.46 |
£300 |
The private rented sector in the Central BRMA will become a "no
go" area for benefit claimants for one, two, three and four/four+
properties with the Inner North BRMA becoming increasingly restrictive
from the two bed size upwards. Current claimants in these areas
will be forced to move as the likelihood of them finding alternative
accommodation at the cap levels in these areas are practically
non existent.
A London Councils survey revealed
that Islington is one of the seven most affected boroughs in London.
August 2010 figures provided by our Housing Benefit
service confirm that of the total number of 2,042 private sector
claims for self-contained accommodation, 629 (31%) would be adversely
affected by the cap. Of those, 582 would have their benefit cut
by more than £10 per week.
The table below shows the number of private sector
households affected by the caps by property size:
Table 3
NUMBER OF HOUSEHOLDS AFFECTED BY THE CAPS,
BY PROPERTY SIZE
| No of bedrooms |
1-bed | 2-bed | 3-bed
| 4+-bed | Total
|
| No of households affected | 50
| 415 | 108 | 56
| 629 |
| Total no of PRS HB households | 1187
| 655 | 139 | 61
| 2042 |
| % affected | 4 | 63
| 78 | 92 | 31 |
Table 3: Number of households affected by the caps, by property
size
3. SHORTFALLS IN
RENT
Given the high demand in the borough for private rented accommodation
(which has increased by some 20% over the last 10 years) we believe
it is highly unlikely that landlords will accept the huge shortfalls
and tenants will face eviction. Many landlords have mortgages
to finance, and the drop in LHA rates will simply not provide
sufficient funds to meet mortgage repayments.
Not only will this have an impact on the "ethos" of
stable mixed communities, but will cause further hardship to low
income households with extra costs for removal, interrupted schooling,
loss of support groups and possibly making the commute to work
unaffordable as they are forced to relocate to outer boroughs.
The impact will be that it will no longer be possible for households
on benefits to access the private rented sector in many parts
of the borough.
3.1 Re: The impact of setting LHA rates at the 30th
percentile
DWP's figures in their impact assessment show that, if all rents
remain the same and no-one moves, the average loss in London will
be £17 per week, compared to £9 per week nationally.
The average expected losses in three out of four Islington BRMAs
are substantially higher.
The table below shows the potential reduction in HB if LHA rates
are reduced to the 30th percentile of market rents:
Table 4
REDUCTION IN HB, WITH LHA RATES REDUCED TO 30TH PERCENTILE,
COMPARED TO JUNE 2010 LHA RATES
| 1-bed | 2-bed
| 3-bed | 4-bed
|
| Inner East London | £25.00
| £35.00 | £35.00 |
£30.00 |
| Central London | £40.00
| £65.37 | £100.00
| £200.00 |
| Outer North London | £ 8.36
| £11.37 | £11.97 |
£34.47 |
| Inner North London | £30.00
| £40.00 | £55.00 |
£97.00 |
4. LEVELS OF
EVICTIONS AND
THE IMPACT
ON HOMELESSNESS
SERVICES
Due to tenants' inability to meet HB shortfalls and subsequently
falling into rent arrears, there will inevitably be an increase
in evictions and homelessness, and an increased need for temporary
accommodation. The borough will have to pick up the additional
costs of procuring and managing temporary accommodation and ultimately,
permanent housing. All this will do is transfer the cost from
one part of the public sector to another. There is already a shortage
of temporary accommodation available in the Borough. In order
to accommodate any increase in households, more temporary housing
will have to be sought in the cheaper areas of London and outside
London, particularly large accommodation with four or five bedrooms.
Islington has been very successful in reducing the number of households
in temporary accommodation, which, over the past five years, has
decreased by 45%.
One of the main ways in which we have managed this is by placing
clients directly with a private sector landlord, through our Rent
Deposit Scheme.
However, the successful continuation of the scheme will be jeopardised
by the introduction of the caps, with landlords being unwilling
or unable to offer properties to the council at the much reduced
LHA rates. Furthermore, people currently housed under the scheme
will be facing shortfalls in HB and potentially loose their tenancies.
An analysis of clients placed under the Rent Deposit Scheme over
the past 18 months shows that 228 out of 422 (ie 54%) will be
adversely affected by the caps.
The chart below shows the extend to which people placed by LB
Islington under its Rent Deposit Scheme over the past 18 months
will be affected by the caps:
The table below shows the shortfalls faced by clients placed by
the council under its Rent Deposit Scheme, by property size.
Table 5
HB SHORTFALLS FOR CLIENTS PLACED UNDER RENT DEPOSIT SCHEME
| | 1 Bed
| 2 Bed | 3 Bed |
4 Bed | 5 Bed |
|
| Shortfall Range | |
| |
| | |
| £0-£20 | 7 | 27
| 3 | 0 | 0 |
|
| £20-£40 | 0 | 5
| 2 | 0 | 0 |
|
| £40-£50 | 0 | 74
| 0 | 0 | 0 |
|
| £50-£60 | 0 | 65
| 1 | 0 | 0 |
|
| £80-£100 | 0 | 0
| 15 | 1 | 1 |
|
| £100-£120 | 0 |
0 | 11 | 1 | 2
| |
| £135-£140 | 0 |
0 | 10 | 0 | 0
| |
| Over-£150 | 0 | 0
| 0 | 2 | 1 |
|
| | |
| | |
| Total |
| Placements affected | 7 |
171 | 42 | 4 | 4
| 228 |
| Total placements | 165 | 195
| 52 | 6 | 4 |
422 |
| % affected | 0.50% | 88%
| 81% | 67% | 100%
| 54% |
5. LANDLORD CONFIDENCE
The proposed changes will lead to a reduction in the amount of
private sector properties available to claimants of housing benefit.
Landlords are unlikely to reduce their rents if their property
costs are high when there is a buoyant market. This will cause
evictions and unwillingness of landlords to rent to people on
benefits. Many landlords will either sell their properties or
seek to rent to people not on benefits.
The uncertainty around the actual value of the drop to the 30
percentile value, (depending as it does on the range and spread
of properties available for rent) creates a challenge to landlords
and their business plans, in particular their decision to let
to claimants on benefit unless they wish to specialise in low
cost accommodation.
The changes to temporary accommodation subsidy, which have been
taking place on an annual basis, have already made it difficult
for landlords working with councils to manage and plan their portfolios.
Many landlords offer the council a mixed portfolio of properties
for use as either temporary accommodation or the Rent deposit
Scheme. The proposed changes would make it even less attractive
for landlords to offer properties to the council, and may well
be the final nail in the coffin for many landlords.
There is also an expectation that the standard of properties will
deteriorate, due to landlords being unable or unwilling to fund
repairs and maintenance, with a much reduced rental income.
Furthermore, in order to maximise rental income, landlords may
attempt to convert properties into a number of smaller units with
possible disregard to planning regulations and guidance.
6. COMMUNITY COHESION
Trying to create sustainable communities would seem a pointless
policy aim if families are forced to move out of the borough.
The resultant decrease in the availability of the private rented
sector for households on benefits will increase the demand for
and pressure on social rented housing.
This is likely to lead to further increases in the concentration
of people on benefits on social housing estates thereby increasing
concentrations of areas of deprivation.
7. DISABLED PEOPLE,
CARERS AND
SPECIALIST HOUSING
The proposal for LHA to cover the cost of an extra bedroom for
carers will be positive for those disabled people and carers who
benefit from this, as long as their rents are fully covered by
LHA.
8. OLDER PEOPLE,
LARGE FAMILIES
AND OVERCROWDING
The proposals will inevitably increase overcrowding as, in some
cases, particularly for large families, the only way to afford
private sector housing in Islington will be to live in smaller
accommodation than the household requires.
9. CONCLUSION
Islington council acknowledges the government is attempting to
address the budget deficit and to reduce the housing benefit bill.
However, we do not believe that the proposed changes will achieve
a fair welfare system which will assist those in the most need,
help to reduce poverty or get people back into employment.
On the contrary we believe that the changes will lead to increased
poverty, overcrowding, unemployment, the displacement of people
and the break up of communities, people being driven away from
inner city boroughs, and a potentially much reduced (but much
needed) private rented sector.
The subsequent costs of increased overcrowding, homelessness,
enforcement action against poorly maintained or converted properties,
will have to be met by local authorities, as they try to improve
and find alternative accommodation and meet the needs of their
residents.
3 September 2010
68
ttp://www.dwp.gov.uk/docs/impacts-of-hb-proposals-tables.xls Table
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