Support for housing costs in the reformed welfare system - Work and Pensions Committee Contents

1  Introduction

In the text of this report our conclusions are set out in bold type and our recommendations, to which the Government is required to respond, are set out in bold italic type.

Changes to Housing Benefit

1. Housing Benefit is an income-related benefit for social and private sector tenants on low incomes (both in and out of work) which was introduced in 1982 in order to simplify a previously complex system including both subsidies and rent rebates. Housing Benefit is administered by local authorities. From 2008, tenants in receipt of Housing Benefit in the private rented sector have had their benefit calculated using the Local Housing Allowance (LHA), which assesses a household's eligible rate using a percentile of rents in a local "Broad Market Rental Area" (BMRA).[1]

2. The coalition Government announced a range of Housing Benefit reforms in the Budget of June 2010, both to LHA and HB in the social sector, as part of its aim to reduce benefit expenditure. Some of the reforms were implemented from 2011; others more recently. In 2012 the Government raised the upper age limit for the Shared Accommodation Rate for single people without dependent children from 25 to 35. From April 2013, the household Benefit Cap was introduced (under the provisions of the Welfare Reform Act 2012), which affects both private and social sector tenants. It limits the total income working-age households can receive from income-related benefits; the difference between a claimant's total benefit and the Cap level is subtracted from Housing Benefit, or from support for housing costs under Universal Credit.

3. There are a number of other changes affecting support for housing costs:

·  The way Housing Benefit is paid will change under Universal Credit: it will cease to exist as a separate benefit and instead will form the housing costs element of Universal Credit and will then be administered centrally by DWP, rather than by local authorities. Universal Credit will be paid monthly, in arrears, directly to claimants. This will be a change for Housing Benefit claimants in the social sector (and some in the private sector), whose housing costs support is currently paid directly to landlords.

·  In April 2013, Council Tax Benefit was replaced by Council Tax Reduction which is administered by local authorities, who are able to design their own schemes. The reform was accompanied by a 10% reduction in central funding.

About this inquiry

4. We reported on our assessment of the likely impact of some of the key LHA reforms in December 2010, before they were implemented.[2] It seemed timely to conduct another inquiry now that the impacts are becoming clearer. Our report on Universal Credit, published in 2012, and a subsequent oral evidence session in July 2013 with the Secretary of State for Work and Pensions, had also highlighted the need for further exploration of how support for housing costs will be dealt with under Universal Credit, and the interaction with other welfare reforms.[3]

5. We announced this inquiry in July 2013. It has considered new and innovative responses to the implemented and planned changes to housing support; and the implications of the reforms for social and private sector landlords, local authorities and claimants. We focussed particularly on the potential implications for vulnerable claimants such as people with disabilities, families with children, and those in supported and temporary accommodation.

6. We received over 80 written submissions from a range of organisations and individuals. We also took oral evidence from academics and experts in housing and benefits policy, social and private landlords, local authorities, claimant representatives, claimant advocates and welfare rights advisers. We visited Bedfordshire to discuss the social housing reforms with housing associations, tenants and local authorities. We are grateful to everyone who contributed to our inquiry.

7. Our specialist adviser for this inquiry was Professor Christine Whitehead.[4] We very much appreciate the advice and support she has provided.

8. A number of the reforms discussed in this report were implemented in 2013 and so only an initial assessment of their impact can be made at this stage. Even with the LHA reforms, some of which began in 2011, phased implementation and transitional protection offered to existing claimants mean that evidence of the full effect is only now becoming available. Some of our recommendations therefore focus on the need for the Government itself to monitor carefully the impact of the changes it has introduced and to take urgent remedial action where necessary to assist the hardest hit claimants, particularly given that a number of them will be affected by other welfare reforms, including reforms to disability and incapacity benefits.

1   LHA was piloted from 2003 and rolled out nationally from 2008 Back

2   Work and Pensions Committee, Second Report of Session 2010-12, Changes to Housing Benefit announced in the June 2010 Budget, HC 469 Back

3   Work and Pensions Committee, Third Report of Session 2012-13, Universal Credit implementation: meeting the needs of vulnerable claimants, HC 576; and oral evidence taken on 10July 2013 on Universal Credit: follow-up, HC 569-i Back

4   Relevant interests of the Specialist Adviser were made known to the Committee. The Committee formally noted that Prof Whitehead declared the following interests: adviser to the Board of the Housing Finance Corporation; Fellow of the Society of Property Researchers; Member, Royal Institution of Chartered Surveyors (RICS). Independent research for Shelter, Joseph Rowntree Foundation (JRF), RICS, the Housing Futures Network; Council for Europe Development Bank; and the European Investment Bank. Further independent research working with: the National Housing Federation; Department for Work and Pensions; the Welsh Government; Camden Borough Council; JRF; Realdania in Denmark; Berkeley Homes, Qatari Diar Delancey via the Young Group; and Homes for Scotland. Back

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Prepared 2 April 2014