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Secret plans to constrain housing benefit

The small print of the pre-Budget report has revealed plans to constrain housing benefit as councils brace themselves for a surge in claims as unemployment and repossessions rise.

The government said it is “concerned that the costs of the LHA are greater than had been anticipated.”

It comes after the revelation that the Department for Work and Pensions (DWP) has posted a week-long consultation on how the boundaries in which housing benefit is calculated are drawn, a move that could see thousands out of pocket.

Consultations normally last three months, but this one has lasted just a week because the DWP claims the change ‘did not represent a change in policy’.

The BPF has said that this makes a mockery of the consultation process.

Many could be left worse off where areas are enlarged and swallow up places with cheaper rents, bringing down the average upon which the benefit is calculated. Conversely, others could be better off, but if private landlords cannot have confidence that areas are split up fairly, then many would not offer homes to benefit claimants.

This would deliberately overturn a House of Lords judgement passed in July, which ruled the extension of Sheffield resident Daniel Heffernan’s area to be illegal.

Three years ago, Hefferman took the Rent Service to court saying that a review had made the area used to calculate his housing benefit unfairly large.

The area they used extended from Heffernan’s city centre locality, with its high rents, to neighbourhoods with lower rents, reducing the amount he could claim.

In July this year, the House of Lords ruled that his benefit had been calculated illegally. As a result, the Rent Service has had to commit to re-reviewing localities across the country according to the Lords’ new interpretation of the law.

The draft statutory instrument posted by the DWP on its website would seek to change the law. However, they have limited the review to a week and not properly informed stakeholders.

The rents are listed at http://www.therentservice.gov.uk/

BPF residential director, Ian Fletcher, said:

“This makes a mockery of the word ‘consultation’. If DWP is going to consult, then it should do so meaningfully. At present, what we have is a government department trying to tick the box of consultation through sheer tokenism. When you meet landlords, many have a total disrespect for the DWP. That is a tremendous pity, but reflects a lack of transparency and engagement which is very unhealthy for good policymaking.”

Councils are calling for the consultation period to be extended.

John Frost, head of revenues and benefits at Cambridge Council, said authorities needed more time to examine the implications of the proposed changes.

The number of benefit claimants is likely to rise due to current economic conditions and if the system wants to attract private landlords to provide accommodation they need to make sure private landlords have confidence that the benefit areas, and therefore levels, are being defined fairly.

In further announcements this week, the government confirmed:

That it’s behind closed doors review of housing benefit was focusing on reducing the cost of the new local housing allowance.

That it would not be extending direct payment, an important element of the local housing allowance to social landlords, such as housing associations, for fear it would cripple their efforts to raise finance in the current climate.

Reacting, Ian Fletcher, added:

“The PBR confirmed this week what many of us have been suspicious of, that the Housing Benefit Review is seeking to cut costs substantially, and stakeholders are being kept in the dark, because the answers are ones we wouldn’t like. Many private landlords will also have been left incredulous at the Benefit Minister Kitty Usher’s remarks this week about the problems of direct payment for housing associations raising finance. Private sector landlords already face direct payment. How does the Minister think they raise finance?”

For more information please contact Andrew Teacher at the British Property Federation on 07968 12 45 45 / 020 7802 0113 / ateacher@bpf.org.uk or Maddie Williams on 020 7802 0364 / mwilliams@bpf.org.uk