Written evidence submitted by Loughborough
University
The impact of reducing Housing Benefit Awards
to 90% of the initial award after 12 months for claimants receiving
Jobseeker's Allowance
1. Reducing the amount of Housing Benefit that JSA
claimants receive will cause a shortfall between their Housing
Benefit entitlement and their rent. The key question that needs
to be considered is to what extent claimants will be able to meet
this shortfall.
2. Our research has shown that most tenants in receipt
of LHA prioritise paying their rent above all other financial
activities and take this financial responsibility very seriously.
However, most are living on very low incomes and some are already
having difficulty in managing their finances. Living on a constrained
budget means that there is very little, if any, leeway in their
budgeting and even fairly small additional expenditure can cause
financial pressure. To make ends meet some tenants already have
to cut back on their spending, for example, by limiting their
use of heating, by not buying new clothes or buying treats for
their children. Paying a rent shortfall of 10% will put further
pressure on household budgets.
3. Some tenants already have rent shortfalls that
they are struggling to pay. In our recent research on the LHA
national rollout around half of the tenants interviewed had an
LHA shortfall. Some of these shortfalls were a result of under-occupancy,
or because a tenant was only entitled to a partial HB payment
(where one or more of the household was working). Others were
due to having deductions made from their LHA as a result of receiving
an HB overpayment due to administrative error. For example, one
interviewee had a deduction of £30 a fortnight taken from
his LHA payment due to a past Housing Benefit overpayment. A new
issue that arose in the LHA national rollout research was that
some tenants were experiencing a shortfall in the amount of LHA
they received as a result of their LHA entitlement falling, following
the annual review of their claim. For example, one tenant who
had been aware of their entitlement prior to their property search
and who had spent a long time finding a suitable property where
the rent equalled LHA, was now facing an unexpected shortfall
of £20 a week.
4. An important point to note is that managing rent
payments is made harder for tenants as a result of the way HB
is administered. The mismatch between HB payment cycles that are
made on a fortnightly or four weekly basis, and rents that are
charged by landlords on a monthly basis, makes budgeting and paying
rent more complicated for tenants. Thus, even where a tenant receives
an LHA entitlement that is equal to their rent, they can feel
like they are having to pay a "shortfall". Alignment
of HB payment cycles with monthly rent payments would help tenants
manage their rent. The following illustrates a hypothetical example
of how tenants can experience a "shortfall" when LHA
is received every four weeks, but rent is paid monthly:
If rent is £400/month and LHA is paid on a four-weekly
cycle, then the tenant will receive an LHA payment of £369.24
every four weeks. Each month the tenant feels that they are paying
a "shortfall" of £30.76 from their own money. They
have to wait a whole year until they get their 13th LHA payment
to offset this misalignment.
5. Most tenants in receipt of LHA are already under
financial pressure. In our view, reducing the amount of HB entitlement
to 90% of the initial award will cause additional financial pressure
that some tenants will be unable to cope with. This will result
in some tenants falling into rent arrears that they are unable
to repay, and which could lead to them losing their tenancy.
6. Looking at the alternative options available to
tenants who are unable to afford a rent shortfall, in our research
there have been some cases where tenants have been successful
in negotiating a reduced rent with their landlord, but this is
not very widespread. Moving to cheaper accommodation is not always
an option. Tenants' housing decisions are shaped by personal reasons
such as being close to family, proximity to schools, employment
opportunities and amenities. Tenants we have spoken to often feel
unable to move, with a lack of deposit money being a main barrier
to moving.
The impact of changes to Housing Benefit on work
incentives
7. Recent research on the national rollout of LHA
included Islington as one of the five case study areas. Local
authority advisors in this area felt that the significantly higher
rates under LHA were acting as work disincentive, whereby claimants
would not be able to afford their rent if they moved off LHA and
into work. Thus, reducing LHA rates may improve work disincentives
in areas such as Islington. This was not raised as an in issue
in any of the other case study areas.
8. More generally our research has found that there
is a lack of clarity and understanding of LHA as an in-work benefit.
Better provision of information to broaden claimants' understanding
about the relationship between HB and work could help to reduce
barriers.
Changes to Local Housing Allowance rates
9. Any changes made to how the LHA rates are set
will need to be communicated to claimants. Most tenants we have
interviewed do not understand how LHA entitlement is calculated
and many have not been aware of their entitlement prior to embarking
on their property search. Where tenants have not known what their
LHA entitlement is they have often assumed that it will be similar
to the amount of HB they received previously.
10. The risk of not fully publicising future changes
and explaining to tenants how the changes will impact on them,
is that tenants find themselves with unexpected rent shortfalls
that they cannot meet. Informing tenants of changes to LHA rates
by letter is unlikely to be sufficient. Furthermore, our research
has found that information given to tenants by Local Authority
staff is described as being "patchy" and sometimes conflicting.
This would need to be addressed.
6 September 2010
REFERENCES FOR
PUBLISHED REPORTS:
Hartfree, Y, Whitfield, G, Waring, A, Sandu, A and
Hill, K (forthcoming) Tenants and Advisors Early Experiences
of the Local Housing Allowance National Rollout, Department
for Work and Pensions.
Hill, K, Harvey, J, Phung, V-H, Sandu, A and Roberts,
S (2007), Local Housing Allowance Final Evaluation: the qualitative
evidence of claimants' experience in the nine Pathfinder areas.
Local Housing Allowance Evaluation Report 13, Department for Work
and Pensions, Corporate Document Services, Leeds. ISBN 1 978 1
84712 163 9
http://www.crsp.ac.uk/downloads/publications/lha/lha_quali_evidence_of_claimants_experience_13.pdf
| 
