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Government housing benefit failures criticised for wasting millions in public money

The government has faced new criticism over failures in the housing benefit system which is costing the public purse millions in rents paid to vulnerable tenants not being passed on to landlords.

The failures are highlighted in report by the Parliamentary Select Committee for the Department for Work and Pensions (DWP). It says that Local Housing Allowance (LHA) “is falling short of its original intentions and is in need of urgent review”.

Property groups have warned that many landlords will remove properties from the system, upping the pressure on hard-pressed councils to find homes for those receiving housing benefit.

Ministers have systematically refused to act on concerns raised by the British Property Federation (BPF) and bodies such as Shelter, which has called for greater choice for tenants to be able to decide whether to have their LHA paid directly to landlords or to themselves. There is strong evidence that many recipients of LHA wish it to be paid directly to their landlord, and not to them as is the way now.

The committee’s report adds: “We acknowledge that the policy of direct payments to the tenant will only be working well when practical problems are addressed, safeguard procedures for vulnerable tenants strengthened and landlord confidence in the system is improved.”

However, the committee says the system should be maintained as is because paying LHA directly to tenants is an important element of ‘’work readiness’. The Conservatives have said that “the current system helps no-one”.

The report also dismisses proposals by the DWP that payments should only be made to homes meeting specific energy efficiency standards, which many feared would undermine the objectives of LHA.

Ian Fletcher, director of policy at the British Property Federation, said:

“Despite continual objection from landlords and tenants, the Government continues to be wedded to a principle that is failing in practice. In an environment where ever pound of public spending matters, it is scandalous to maintain a policy that wastes millions of pounds of public money simply because the government wants to try out the philosophical principle of ‘empowering people’.

While there are many positive recommendations in this report, they are too insignificant to reverse the fundamental mistrust landlords have in the system. Landlords should expect to get paid for what they provide, no ‘ifs’ or ‘buts’. Benefit tenants also have an uphill task to compete for housing in many areas, we should be making their task easier.”

“We are glad to see that the committee’s criticism of linking energy efficiency with direct payment and hopefully, with a good cross section of MPs now also panning the idea, that will be the end of it.”

For more info contact Andrew Teacher on 07968 124545 / ateacher@bpf.org.uik

Notes to editors

Tory opposition

• Conservative shadow housing minister Grant Shapps said: "The current situation helps no-one, landlords are losing out while there is increased pressure on the limited social housing supply. The Government needs to follow our lead and give people on Local Housing Allowance the choice to have their Housing Benefit paid direct to their landlord, destigmatising the system and increasing the amount of affordable homes available."

New report on LHA

• The report has been produced by the House of Commons Work and Pensions Committee. The report followed evidence sessions in January 2010 which landlords and other representatives were invited to attend. The report can be available here:
• http://www.publications.parliament.uk/pa/cm200910/cmselect/cmworpen/235/235.pdf

• The Local Housing Allowance system is currently being monitored by the Department for Work and Pensions as part of a two-year review. Though this report is not part of the review, it will be sent to the Department for their consideration.

• Local Housing Allowance is a way of calculating entitlement to Housing Benefit for customers living in private rented accommodation. It applies to individuals who have made a new claim for housing benefit or have moved address since 7th April 2008.

• The aim of LHA is to give customers more choice and responsibility over their housing. LHA rates are set locally for each property size according to the numbers of bedrooms. The advantage of LHA is that recipients can see in advance the rents they will receive.

• The primary objectives of LHA are: fairness, choice, transparency, improving personal responsibility and financial inclusion, reducing barriers to work and improving administration.

• A survey of 943 residential landlords in Autumn 2009 by the BPF found that as a result of the direct payment policy, landlords of LHA claimants in England have lost on average more than £2,100 in unpaid rent since the commencement of LHA in April 2008. This is as a direct result of tenants failing to pass on their LHA rent to the landlord. The survey results can be found here:
http://www.bpf.org.uk/topics/document/23883/work-and-pensions-select-committee-inquiry-into-local-housing-allowance-british-property-federation-evidence

Other major recommendations in the report include:

• Direct payment of LHA to the tenant should be maintained.
• The proposal to pay LHA to landlords only where basic conditions of energy efficiency have been met was rejected.
• The Government should do more to make it easier for claimants to receive LHA payments directly into their bank accounts.
• The first payment of LHA to the tenant should be made in cheque form, addressed to the landlord.
• The report recommended DWP review payment cycles of LHA to avoid any unnecessary burden on claimants.
• Local authorities should liaise with landlords and the third sector to identify those clients at an early stage who are likely to run into difficulty paying their LHA to the landlord.
• The Rent Service should ‘urgently identify and review’ the BRMAs where rents vary greatly. The definition of what constitutes a BRMA should also include access to low paid work.
• The £15 entitlement in LHA should be maintained.