Impact of the changes to Housing Benefit announced in the June 2010 Budget

Written evidence submitted by Citizens Advice Northern Ireland

Executive Summary

· Local Housing Allowance needs to be maintained at the median market rent in order to prevent rent arrears or at worst homelessness

· Increasing non dependent deductions will exclude many households from housing benefit and provide a disincentive for sharing accommodation

· Penalising under occupation in the social rented sector will lead to tenants being unable to manage their rent and have to apply for smaller dwellings which are not readily available

· Cutting housing benefit for jobseekers allowance claimants will lead to further housing debt particularly in areas of high unemployment

· While discretionary payments will be increased this method of housing assistance is not sustainable long term

Response

From October 2011, Local Housing Allowance rates will be set at the 30th percentile of local rents (instead of the 50th percentile).

Currently this does not affect clients in Northern Ireland as the rent is worked on the basis of a median market value. This is a considerably fairer system as the Northern Ireland Housing Executive base the rent figures on the average private letting rate. If these proposals were extended to Northern Ireland they would be likely to cause problems with benefit shortfall across the private rented sector. Those in the sector claiming housing benefit are in many cases already having to pay shortfalls of rent from their own benefit. Tenants who continue to get into housing arrears because they cannot afford the balance of their rent are at risk of eviction and homelessness. To base local housing allowance on the bottom third of local rents will increase the number of housing benefit claimants having to claim discretionary payments and meet remaining shortfalls from their own benefits payments.

Deductions for non-dependants will be uprated in April 2011 on the basis of prices. This will reverse the freeze in these rates since 2001-02.

Citizens Advice recognises that the deductions for non dependents are necessary to ensure other householders make a contribution for their housing costs. However, it has not yet been detailed as to how the increases will work and if they are significantly increased many housing benefit claimants may be excluded from benefit altogether. This again will result in benefit claimants having to meet the shortfall in rent from their own income and could lead to a disincentive in sharing accommodation. This is also likely to lead to rent arrears and potential under occupation where non dependents vacate the property.

From 2013-14, Local Housing Allowance rates will be up-rated in line with the Consumer Price Index (CPI).

At present it is not known if these changes would be extended to Northern Ireland. However, if this was to be introduced it would likely result in a reduction in affordable private rented stock where LHA will be able to meet eligible housing costs. In turn this will inevitably lead to more arrears and applications for discretionary payments. It is not yet known how CPI uprating would work in conjunction with the 30th percentile of local rents. If the amount of LHA is calculated on the basis of CPI instead of local market rents then it will certainly lead to LHA rates not keeping pace with actual market rents. The effects on benefit claimants will be felt badly across the UK as a whole and will again result in housing arrears, shortfalls and homelessness. Landlords may in turn be unwilling to rent property to benefit claimants and many tenants will then struggle to find accommodation.

From April 2013, housing entitlements for working age people in the social sector will reflect family size

From our understanding, this will result in social tenants being penalised financially for under occupation. They will be faced with a reduction in benefit or having to move from their property to a smaller dwelling. Many social rented houses in Northern Ireland are standard three bedroom units with fewer dwellings of one or two bedrooms (many of which are restricted to older people or people with disabilities). According to the most recent House condition survey; 60% of properties in the social rented sector were under-occupied. The scale of this to working age tenants is likely to be less; however it is likely to lead to the same problems with arrears in rent, shortfalls in benefit and a greater need of allocation to smaller dwellings which simply are not there.

Housing Benefit awards will be reduced to 90% of the initial award after 12 months for claimants receiving Jobseeker’s Allowance. This will be introduced in April 2013.

Claimants receiving jobseekers allowance are already affected by shortfalls in housing benefit within the private rented sector. The situation is not likely to improve as a result of the current recession with Northern Ireland having a claimant count of 56,8001. It would be unreasonable to impose further cuts at a time where there are less job vacancies and there are likely to be more people claiming jobseekers allowance who are no longer eligible for ESA or incapacity benefit.

From April 2011, Housing Benefit claimants with a disability and a non-resident carer will be entitled to funding for an extra bedroom

This has been raised by numerous advisers throughout the CAB network and is a welcome addition to the Housing Benefit scheme.

From April 2011, Local Housing Allowance Rates will be capped at £250 per week for a one bedroom property, £290 per week for a two bedroom property, £340 per week for a three bedroom property and £400 per week for four bedrooms or more

While this will not impact Northern Ireland at this stage, any introduction of caps may have a long term effect on Local Housing Allowance in the UK as a whole.

The Government contribution to Discretionary Housing Payments will be increased by £10 million in 2011-12 and £40 million in each year from 2012-13.

Discretionary Housing Payments are seen as a shock absorber for many housing benefit claimants. They address housing arrears, debt and enable tenants to maintain their rent payments which then prevent eviction proceedings. Bureaux have reported that many claimants are not aware of their entitlement and only discover that they can apply for these payments when undertaking benefit entitlement checks. It is a welcome addition to have these payments increased. Nonetheless, will they not be used up with the shortfalls created by the other changes to housing benefit as highlighted above? The other point around discretionary payments is that this income is not reliable and is a limited and capped budget. These forms of payment are not sustainable in the long term as many claimants will not be able to cope should they cease. This leaves claimants and landlords with an uncertainty about how long payments will last.

6 September 2010