Social Security and Welfare Reform

Moving people to Stoke won't be enough to cut the housing benefit bill

  • Published: Apr 26, 2012
  • Authors: Hannah Aldridge, Anushree Parekh
  • Category: Social Security and Welfare Reform

This week has seen a rash of news and comment pieces about the plans of some London boroughs to move housing benefit claimants to cheaper parts of the country. This has led to suggestions of “social cleansing” in Inner London, and are indicative of huge problems in the housing benefit system. 

The starting point was the news that the London borough of Newham had contacted housing associations in places as far afield as Stoke-on-Trent about leasing their homes to Newham residents. The borough argued that the recent rise in private rents coupled with the cap on Local Housing Allowance introduced by the government last year meant that it could no longer afford to house people locally. 

In response, the housing minister, Grant Shapps, said that rents were falling and had been rising more slowly than inflation for quite some time. In London, this does not appear to be the case. Homes for London say that rents in both Inner and Outer London have risen faster than inflation in the last year. Nationwide, though, the minister may be correct and Fullfact have examined if this in some detail . But they point out that the fall is based on data that is not seasonally adjusted and based on a change in the last 3 month, a time of year in which rents often fall anyway. More recent data shows that rents are currently 2.7% higher than last year, compared to overall inflation of 3.6%.

But really it is no solace to tenants that rents are going up more slowly than, say, food, when their own incomes are barely rising at all. Data from the Annual Population Survey show that between 2010 and 2011 the median gross pay of a full-time worker increased by 0.3%. A rise of 2.7% in rents nationwide mean that they becoming less affordable for most people.

There was another quote from the minister that really stood out. He said, “It can’t be right to have people able on housing benefit to live on streets and homes that hardworking people are unable to live in themselves.”

But this misrepresents what housing benefits are for – they are paid to those in work as well as those out of work. The reason that a household is entitled to housing benefit is because the housing is unaffordable, the benefit is provided to cover for the cost of housing and legally has to be paid to the landlord. This is as true for those in work as it is those out of work. 

This is important when understanding the rising total Housing Benefits bill. A recent report by BHSF found that working households account for 93% of the increase in housing benefit claimants between 2010 and 2011. Around one in six housing benefit claimants are in work, and one in four working households in rented accommodation claim housing benefit. 

The minister pointed to the huge rise in the HB bill over the last decade (from £16bn to £25bn as we pointed out here ), but misses one of the main reasons why it is rising. 

In the last year, the number of claimants of Local Housing Allowance (LHA, the housing benefit paid to tenants in private rented accommodation) rose by 6% nationwide. If we focus on London, the numbers of housing benefit claimants are rising there also. Our recent work on London’s Poverty Profile looked specifically at claims for LHA in London’s boroughs, and how they had changed in the last year. The expectation was that the introduction of the LHA cap would reduce claims in expensive areas and lead to increases in more affordable parts of the capital. 

And indeed this appears to have happened. The graph below shows the number of households receiving LHA in 2010 and the changes over the year from 2010 to 2011. They are ranked by the size of the increase, with the largest increases at the top of the graph. 

The graph shows that the number of households receiving LHA went up in all but five boroughs. Of the five boroughs that saw a decline, four – Kensington & Chelsea, Hammersmith & Fulham, Westminster and Camden, were in Inner West London, probably indicating families moving out of expensive boroughs to cheaper areas. 

Eight of the ten boroughs with the largest increases in LHA numbers are in Outer London. Even the other two boroughs – Haringey and Newham – are at the outer edges of Inner London. The rise in Inner London is below the national average. The rise in Outer London is above it. These changes are what we predicted in the last report, and will reinforce the long term trend of rising poverty in Outer London. 

But these areas seeing an influx of people already had high levels of LHA recipients to begin with - of the top ten boroughs which have seen the highest rises in LHA recipients in 2011; seven already had very high levels in 2010. 

Newham is one such borough. Around 14,000 households in Newham were receiving LHA in 2010, which rose to 15,000 in 2011. So if Newham is “displacing” benefit recipients it is also accepting a lot of new ones. What’s happening in Newham is not as simple as “social cleansing”.

As the minister has pointed out, the housing benefit bill has risen remarkably over the last decade. But capping individual amounts will not be sufficient to reduce the bill if rents keep rising faster than incomes and ever more people need help to pay for their accommodation. The thought of families being uprooted and moved hundreds of miles in search of cheap accommodation is a horrible one and the government may claim with some justification that such policies are not necessary. But they are simply extreme examples of a housing benefit system that is overwhelmed and a housing market that is utterly broken. 

The graph above is one of our new updates to the London's Poverty Profile site, which  has new analysis of homelessness, repossessions and overcrowding statistics in London. 

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