Sunday, July 4, 2010

Always read the small print

Those Housing Benefit Reforms – it’s not just about unemployed Londoners

In the budget small print it has been announced that Local Housing Allowance (LHA) rates will now be set at the 30th percentile of local rents as opposed to the median (50th percentile). Also buried in the fine print of the budget document is the news that those who have been claiming Job Seeker’s Allowance (JSA) for 12 months will see their Housing Benefit cut by 10% from April 2013.

Posted by drewster @ 09:39 AM (3414 views)
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29 thoughts on “Always read the small print

  • Digging up the full text from the budget report:

    1.102 Housing Benefit is often criticised as making excessively generous payments that damage work incentives. To address this, the Government will remove payments that trap benefit claimants in poverty instead of providing incentives to work as well as being unfair to the millions of families on low income who do not depend on welfare. The Government will introduce a package of reforms to Housing Benefit from April 2011 onwards. This includes changing the percentile of market rents used to calculate Local Housing Allowance rates, and uprating these rates by CPI from 2013-14, capping the maximum Local Housing Allowance payable for each property size, time-limiting the receipt of full Housing Benefit for claimants who can be expected to look for work, and restricting Housing Benefit for working age claimants in the social rented sector who are occupying a larger property than their household size warrants.

    2.50 From October 2011, Local Housing Allowance rates will be set at the 30th percentile of local rents.
    2.51 Deductions for non-dependents will be uprated in April 2011 on the basis of prices. This will reverse the freeze in these rates since 2001-02.
    2.52 From 2013-14, Local Housing Allowance rates will be uprated in line with CPI.
    2.53 From April 2013, housing entitlements for working age people in the social sector will reflect family size.
    2.54 Housing Benefit awards will be reduced to 90 per cent of the initial award after 12 months for claimants receiving Jobseekers Allowance. This will be introduced in April 2013.
    2.55 From April 2011, Housing Benefit claimants with a disability and a non- resident carer will be entitled to funding for an extra bedroom.
    2.56 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.
    2.57 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.

    Source: Direct.gov.uk: Full budget report [PDF]

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  • yes drewster , this in the south east will have a major impact (IMO) : “then those expensive properties will find private renters” – will they why? I mean if that were the case why wouldnt they be being rented to private people now? If you any landlord they would prefer private renters over DHS…. nope it means rents must fall.

    based on an article last week this is what i said – the quotes are from the article:

    “The very real concern is that as a result of the new caps, some vulnerable people will be forced to move from their old homes in these expensive areas to other areas – one has horror visions of armies of old grandmothers with disabilities and young Mums being forcibly moved to cheaper boroughs further out.”

    cynical scaremongering rubbush.

    “So what will these landlords do? Well, they will have to 1) Accept reduced rents from their old LHA tenants but keep going or 2) Give notice to the LHA tenants and let to non LHA dependent tenants instead or 3) Sell up.”

    This choice depends on the economics of the arrangement for the landlord – i.e. his costs. Personally i think he just does 1 in most cases. However when new rentals come to market, these will be offered to private renters (with a knock on reduction).

    As for moving to less expensive boroughs…. well its pretty certain this law will come in, but its not yet finalised as to what it will look like. I would have thought the government would be aware of this, and would likely prorate the cap across boundraires.

    Friday, July 2, 2010 08:25AM”

    Infact what you have shown makes it even more draconian!

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  • 2.52… WHAT!? They’ll track housing benefit against CPI? Which doesn’t even include housing costs? That’s bizarre.It just codifies that it’s a payoff for landowners (the tenants don’t use it for consumer goods, the landlord who gets the money does though).

    Transparent pathetic politicians.

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  • Having looked into this in more depth, I found this quote from the chairman of Shelter:

    “The vast majority of housing benefit claimants are either pensioners, those with disabilities, people caring for a relative or hard-working people on low incomes, and only 1 in 8 people who receive housing benefit is unemployed.”

    Regardless of whether you’re retired, disabled, etc., I don’t see why hard-working taxpayers should fund a nicer lifestyle for claimants than for themselves. This applies in particular to people on the margins – people who earn too much to claim benefits but not enough to afford a median home.

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  • “The vast majority of housing benefit claimants are … hard-working people on low incomes, and only 1 in 8 people who receive housing benefit is unemployed.”

    Hmmm… not that bloody hard working if they can’t afford to pay their own rent.

    Bring on the cuts.

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  • powerofnow says:

    @ alan_540: Hmmm… not that bloody hard working if they can’t afford to pay their own rent

    Many of the people I know work really hard in the tourist industry (St Ives Cornwall) for little over minimum wage; the jobs end after October half term and don’t start again until just before Easter, so they need support with housing as their jobs only last for part of the year. Local housing is over priced due to non local ‘investors’ over inflating the local property market and either charging higher rents (supported by HB) or removing the property from the housing market into the holiday let market.

    So the slur about the poor not being hard working is uninformed rubbish. The hard working locals pay twice, they pay the investors mortgage and suffer the prospect of a life on low wages on a rolling 6 month tenancy.

    Why don’t the employers pay them more then? Well many of the independent traders who don’t own the land under the shop/cafe/restaurant will be paying over inflated annual rental based on the same over inflated land price that stings the lazy renters. Most of the seasonal businesses can’t afford to pay more to staff or they would be; many only trade for 7-8 months as the towns’ winter population is not enough to sustain them through the winter. The lions share of income goes to the owner of the title deeds, the chancellor, the local authority….

    Please inform yourself before making such stupid comments.

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  • Alan,

    Only 1 in 8 might be 100% unemployed, but many more only work part-time. If you work part-time on a low wage you can still be eligible for housing benefit. You can also claim a range of other benefits, including:
    – council tax benefit
    – income support
    – working tax credit
    – working tax credit childcare element
    – income-based Jobseeker’s Allowance
    – income-related Employment and Support Allowance
    – Contributory Employment and Support Allowance
    (I don’t claim to know what all those are – but it goes to show just how complicated the system is)

    Power of now,

    Look at it the other way. The government is using the benefits system to effectively subsidise cheap labour in tourist areas. If it weren’t for housing benefit, those workers would have left Cornwall years ago to seek work elsewhere in the country (or even overseas). In other parts of the world it’s quite normal for tourist towns to receive an influx of temporary seasonal workers rather than rely on year-round staff.

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  • @drewster I’m approximatey 80% unemployed (IE, I’m in fairly typical full-time employment). The best thing the government can do is give employers incentives to increase head count. Most people could go from 80% to 85% unemployed, and still earn all they really need – and unemployment figures could shrink dramatically.

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  • techie,

    I don’t think landlords prefer private tenants any more. They know that benefit claimants will be stable long-term tenants, whereas workers are more likely to up sticks after a year or two. If you get a new mother as tenant, chances are she’ll stay in that property for at least 5-10 years. If there’s one thing landlords hate it’s churn and turnover. DSS tenants churn less.

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  • maihem,

    They tried that in France. Reduce the maximum working week to 35 hours, and there will be x% more jobs available. Funnily enough it didn’t work. There isn’t some magical fixed amount of work in the economy. In Britain we’ve had an influx of 1.5million eastern European workers, yet the unemployment rate barely budged. New jobs opened to soak up the new workers.

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  • I didn’t propose a statutory limit on working hours, I’m no statist but as long as you’re taxing people for trading with capital owners for food, fuel, shelter, etc you can create an incentive (not merely move incentives around) to offer short hours to the higher skilled to get them to tend to demand entertainment services with the wealth they create.

    Thus they’ll share the capital resources they’ve earned from capital owners with people that would otherwise have no opportunities because the capital owners don’t want said entertainment services. But as long as they feel no incentive to specifically work less people will work as much as they’re comfortable which is the typical full-time work week.

    Ultimately, to live (eat, remain warm, be sheltered) one must offer the services that capital owners want or the services that those who do offer then demand themselves. But if those who offer the capital owners services directly have no time to demand other services then one section of society loses wealth by default, even if willing to work effectively.

    This is the unbalanced welfare problem that we see today. machines replace manual labour and a few capital owners cannot demand all the butlering, cleaning, dance, music, stage, etc services that could be available and which could easily be demanded if only the skilled would work a little less.

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  • hi drewster. I know some guys that rent out to DHSS – and they really only do it for the money. I cant go into the reasons without being labelled right wing but i have seen the kind of things these people get up to first hand. So in my experience that is just wrong. But maybe my experience is atypical.

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  • “Please inform yourself before making such stupid comments.” a bit of a harsh generalisation isnt it? I mean you have put forward an example in the west country using your own experiences only, but maybe there are other examples the other way, that you dont appreciate?!?

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  • powerofnow says:

    @ techieman: a bit of a harsh generalisation isnt it? I mean you have put forward an example in the west country using your own experiences only, but maybe there are other examples the other way, that you dont appreciate?!?

    Eh? Of course I appreciate that not all people or situations are the same, but that was my challenge to alan_540’s crass generalisation; people who can’t afford to pay rent are not necessarily sitting around not working hard enough. A specific example to disprove a generalisation seems okay to me; yes it is my local observation, but so what? What about alan_540’s generalisation? Did you agree with it?

    @ drewster: Look at it the other way. The government is using the benefits system to effectively subsidise cheap labour in tourist areas.

    Yes but who is this really subsidising? Not those struggling on minimum wage. The government is using the benefits system and the TAX system to effectively subsidise LANDLORDS by ensuring a low paid local labour to service the BTL investors tax efficient furnished holiday lets

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  • The question in my mind is, is this likely to improve or worsen our society? I’ve been on housing benefit, the last time more than 10 years ago. (In case you’re wondering it only lasted a few months and I had another job. Virtuous me!!) Although the median rent sounds generous, it wasn’t, because as a then single male I was judged not to need an apartment, just one single room in shared accommodation – the LA capped the benefit at more than £150 per month less than the rent.
    OK, now transfer this to a situation in which you get 30% of whatever they arbitrarily decide your housing “needs” are (depends how much cash they have in the till). C’mon guys, what is the most likely outcome? Unless you invoke some rather convoluted reasoning, I rather suspect that it means people are going to be thrown into poverty, homelessness and so on. Even if all rents decrease, you won;t be able to afford the same property, since each percentile of a left-shifted distribution shifts to the left.
    In my experience the tabloidal picture of easy lifers scrounging a comfortable living off benefits is just that – a tabloid myth. If you know any number of people on benefits you will know they are having a torrid time of it. Things are going to get very vicious very quickly under the Con-Dems, it seems.
    Nick

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  • power of now,

    Yes I agree, that’s what I was getting at.

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  • nickb,

    Careful with the maths. It’s not 30% of anything, it’s the 30th percentile. If there are ten houses for rent, costing £210, £220, £230, £240, £250, £260, £270, £280, £290, £300 per week, then the 30th percentile is the £230 house. The previous value was the 50th percentile, or the £250 house.

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  • @drewster
    OK, you are right – but the point still stands.
    If I had a £500 per month bedsit which was at the median and the changes implied I had to get a £480 besit, someone might think that rents would fall, so I might be OK. But no, if all rents fell by x% then so will my benefits, ensuring I can’t get the same percentile property I currently inhabit.
    So careful yourself!
    Nick

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  • The point was that the HB weas calculated on the basis of an average, which itself meant that the values would be increased and then underpinned by the cost of HB – i have argued that badly but if you look at how HB is calculated (and we did this to death a few months ago you will see what i mean).

    “Eh? Of course I appreciate that not all people or situations are the same, but that was my challenge to alan_540’s crass generalisation; people who can’t afford to pay rent are not necessarily sitting around not working hard enough. A specific example to disprove a generalisation seems okay to me; yes it is my local observation, but so what? What about alan_540’s generalisation? Did you agree with it?”

    No i dont agree that ALL who can’t afford to pay rent are not necessarily sitting around not working hard enough, but some ARE. And yes i KNOW some are. Do i find fault with them? Nope not if they can get away with it.

    How many fall into each group – well we are necessarily prejudiced by experience. Obviously its somewhere between the two. I would like to believe its closer to your end than Alans, but in truth my view (right or wrong and no one knows) is its about 35-40 the lazies and 60-65 the poor.

    I know of a few people who are on incapacity benefit…. and none of them are… infact one of them has a place he rents out worth about 480k!!!! Maybe hes not allowed to do that – god knows!

    I suppose my point is that there is inequality throughout, and its difficult to get the money to the right people let alone the right amount!!!

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  • Sorry should say “No i dont agree that ALL who can’t afford to pay rent are necessarily sitting around not working hard enough, but some ARE. And yes i KNOW some are. Do i find fault with them? Nope not if they can get away with it.” i would just add its the system’s fault if they can get away with it.

    Recaptcha : in slothful [how do they do that?]

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  • @techie
    If on your estimate it’s 35-40 the lazies and 60-65 the poor, what follows? Are these reforms likely to make Britain a better or worse place to live? It looks ugly to me.
    Nick

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  • Anyway – i am not specifically arguing the point – just the way you have said to Alan “Please inform yourself before making such stupid comments.” Its not stupid if supported by his experiences (which it may or may not be) , as your comment is similarly not stupid if supported by your own. To be fair how many people work six months in the tourist industry in St Ives? Its not really a representatively compelling argument.

    There might be a compelling argument…. its just that aint it! :-).,

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  • nick

    My view is simple in terms of HB – the landlords will adjust the price down. I know a couple and they are really pissed off, because for one thing the councils have said that if the properties are not on the ground floor they dont want em. Really it used to be a licence to print money for the LLs particularly B&B. But both LLs have said realistically they arent going to turf people out as its too much hassle and they might not get replacements. That is the reality.

    Unless I have missed somethign – and i might have – i am laden with an afternoon of pimms swilling…

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  • @Techie,
    Maybe you are right and the rents will come down, when their tenants start pleading. In time. But the housing allowance cut will be immediate and non-negotiable. There’s the rub.
    Nick

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  • @techy
    But barring the complication about CPI etc., it won’t help the tenant in the long run, since if the link to the 30th percentile is maintained, their benefit will be falling over time too.
    Nick

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  • “But the housing allowance cut will be immediate and non-negotiable. There’s the rub.” – well its not coming in tomorrow is it? So i think there will be time to renegotiate the ASTs between now and then. I am not sure actually how people with lots of property supply the councils. In these cases the negotiations may be done with the councils themselves.

    25 is a fair comment.

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  • it_is_going_with_a_bang says:

    It should be obvious that all that will happen is that there will be a more distinct line drawn between 2 types of tenant.

    The renter that pays for themselves and the renter that has HB.

    The tenant using HB will have housing which is is lower price areas / more run down areas etc. This already happens in practice in many places. All I see this change doing is forcing it into an even lower bracket. Yes landlords will have to change their prices at the medium/lower end of the market or see their property empty.

    There will be less choice for HB tenants and a lower standard of housing.
    What this government is saying is that it is not willing to pay for that slightly higher standard of housing.

    I am not sure it would be legal/acceptable to change payments that have already been agreed so I would think it likely that it will apply to new HB claims – at least to start with.

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  • You only need to visit Liverpool to see the shear number of unemployed people living the life of riley with out money, big 50 inch TVs, the latest phone, sat nav in bangers, designer clothes, bling bling, etc etc

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  • mistake should have read “with OUR money”

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