The least known housing benefit change is having the biggest impact
In 2013, following years of increase, the number of private rented housing benefit claims in Inner London fell whilst in Outer London it continued to grow. Many commentators have attributed this to the overall Local Housing Allowance (LHA) cap which only affects Inner London and is forcing low income households to move to Outer London. But a closer look at the data suggests that a different reform is having the biggest impact.
Before un-picking the data from the last year, it is helpful to look back further to understand why housing benefit claims in the private rented sector were increasing. The graph below shows the number of such claims in Inner and Outer London in February of each year since 2009.
Between 2009 and 2010 the increase in claims was substantial, in Inner London it went up by 22,000 to reach 94,000 and Outer London by 30,000 to reach 146,000. This coincided with a large rise in unemployment during the recession. Since then LHA claims have continued to increase, albeit at a slower pace.
But between 2012 and 2013 in Inner London the number of claims fell by 4,000 whilst the number in Outer London increased by 6,000. It initially seems that the reason for this is the overall LHA cap introduced in April 2011, a cap which exclusively affects Inner London. Comparing Inner and Outer London, this effect can certainly be inferred.
But there is another reform making a difference. Previously, the amount of LHA someone aged under 25 without children could claim was restricted to the value of a single room rather than covering the whole cost of someone living alone. From April, this restriction was extended to everyone aged under 35. So people aged 25 to 35 living alone would either have to move into shared accommodation, or make up the shortfall in the rent themselves.
The graph below shows the how the number of private rented housing benefit claimants changed between 2012 and 2013 for each family type and age group. The differences between each group are as stark as the differences between Inner and Outer London. The graph shows that among households headed by someone aged 35 to 64 and pensioners the number of housing benefit claimants in Inner London hardly changed while it increased in Outer London.
Meanwhile the number of single adult claimants under 35 fell, particularly for those without children; this was true in both Inner (falling by 3,700) and Outer London (falling by 3,100).
So there are two effects. The overall cap is restricting the growth in LHA claims in Inner London among the over 35s of all family types. We can see this by comparing Inner and Outer London. But the change in the single room rate has resulted in a fall in the number of under 35s claiming in inner and outer London. In Outer London, this fall is offset by rises among other groups. In Inner London it is not.
The change in the single room rate applies nationwide, and the effects can be seen across the country. The number of 25-34 year old single adults claiming LHA fell in 318 of 380 local authorities last year. But the effect was most pronounced in London – a fall of around 20% compared to 10% elsewhere.
The falling number of under-35s claiming LHA is the desired effect of the change. So this looks like a success. In our research for the upcoming London’s Poverty Profile 2013 we spoke to homeless charities in Inner London. They reported that the single-room rate had led to an increase in demand for their services and that it had become more difficult to find suitable shared accommodation for their most vulnerable clients.
Some vulnerable younger people are exempt from the single-room rate: the severely disabled, carers, prison leavers and the previously homeless (defined as people who have lived in hostels for homeless people, domestic violence refuges, or drug rehabilitation hostels for three months – which does not have to be continuous – and have also been offered and received resettlement support). But feedback from homeless charities suggests that there are other vulnerable people that do not fall into one of these categories.
This is the crux of it. If the changes we see above are driven by people moving to shared accommodation that meets their needs, or increasing the hours they work to cover a rent shortfall, then that is one thing. But forcing vulnerable people into shared accommodation does not seem to us like a sustainable way to reduce the housing benefit bill.