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Landlords urge government to keep pre-election promise on housing benefit

Landlords today warned that the Government was in danger of breaking a pre-election promise to pay housing benefit directly to landlords after it spurned a golden opportunity to clarify its policy with the publication of important housing benefit legislation.

Responding to reforms of the housing benefit system announced today, the British Property Federation welcomed plans for a limited return to direct payment, where rent is paid direct to landlords rather than their tenants, but urged ministers not to backtrack on pre-election pledges to restore direct payment in full – a move that would save taxpayers millions of pounds.

Lord Freud, the minister for Welfare Reform, today unveiled plans to give local authorities the power to re-introduce direct payment, but only in exceptional circumstances, for a limited time, and only if landlords lower their rents.

However, the BPF argued that this assumes that housing benefit keeps rents artificially high, when in fact many areas have such high demand for housing that benefit cuts will make little difference to what landlords charge.

Landlord groups, alongside homeless charities, have campaigned for the return of direct payment since it was removed in 2008. It is now clear that this has lead to increased rent arrears and evictions, and has caused money intended to be spent on welfare to leak out of the benefits system, costing taxpayers hundreds of millions of pounds. Conservative Party ministers had pledged to restore full direct payment before May’s General Election.

Ian Fletcher, Director of Policy, said: “Restoring direct payment to all private landlords was an unequivocal Conservative Party pre-election promise, which should be honoured. Without payment to landlords, taxpayers might well ask why politicians are not protecting them from hundreds of millions of pounds in squandered housing benefit, and why Government is not doing more to keep people in their homes during tough times. We urge local authorities to ignore the small print and apply these new rules broadly so that landlords are offered the support to keep renting to claimants.

“There is a strong body of evidence that shows that the Government’s policy of paying Local Housing Allowance to tenants leads to rent arrears and evictions. And as the Government’s reductions in LHA take effect, it is likely that more tenancies will be under pressure as tenants struggle to pay the rent.”

ENDS

Notes to editors

Key changes to note from the announcement today:

• The absolute weekly caps to Local Housing Allowance will come into force in April 2011

• Setting LHA rates at the 30^th percentile for new claims will happen from April 2011 (originally due to be introduced in October).

• Existing customers affected by the changes will continue at their current rate of benefit until their claim is reviewed; they will then have a further period of transitional protection based on their Local Housing Allowance rate of up to nine months

• The £15 weekly excess provision will no longer be available once a claim has been reviewed

• Temporarily widening the discretion of Housing Benefit departments to make direct payments to the landlord in some circumstances where it will support tenants in retaining or securing a tenancy.  This provision is intended for use only in very specific circumstances where landlords are reducing rents to a level that is affordable for customers (which will generally be on or around the Local Housing Allowance rate).  It is by no means an intention to revert to direct payments to landlords as a matter of course.    

For information contact Ian Fletcher, Director of Policy, on 020 7802 0112, or at ifletcher@bpf.org.uk, or Patrick Clift, Media and Public Affairs Manager, on 020 7802 0128, or at pclift@bpf.org.uk.

DWP Press Release:

30 November 2010 – Housing Benefit reforms will restore fairness to broken system

Ministers today reaffirmed their determination to drive private sector rents for Housing Benefit recipients down, and stop taxpayers paying over the odds by announcing discretionary powers for local authorities to make direct payments to landlords in return for reducing their rents. The announcement comes as Housing Benefit Regulations are laid in Parliament today.

The Government is taking necessary steps to manage Housing Benefit costs and are implementing all Local Authority Housing Allowance measures announced in the emergency Budget in June 2010.

To avoid families being disrupted twice, first by the Caps in April 2011 and then by the reduction in Local Housing Allowance to the 30th percentile in October 2011, they will now both come into force in April 2011 for new customers.

However, existing customers will be exempt for up to 9 months from the date their claim is reviewed by their local authority. This will allow them time to adjust to any reduction in Housing Benefit entitlement and in practice means many existing customers will not be affected until after January 2012.

Ministers have also announced today a further £50 million has been allocated over the Spending Review period to support these measures, such as helping local authorities to negotiate lower rents and helping those that do need to move.

In addition, from April 2011, claimants who meet the criteria will immediately become entitled to an additional bedroom space for a non residential carer.

Minister for Welfare Reform, Lord Freud said:

"We are looking to private landlords to respond to the need for lower rents and in return we are prepared to permit direct payments from the state.

"This incentive will bring an overall downward pressure on rents in the private sector. As these rents come down, more properties will become available to claimants and landlords will have certainty that their income will be protected."

However, Ministers are clear this is likely to be a temporary agreement to provide an incentive to landlords to lower their rents and is by no means a return to direct payments being made to landlords as a matter of course.

Notes to Editors:

The published Housing Benefit Regulations can be found at www.dwp.gov.uk/local-authority-staff/housing-benefit/claims-processing/local-housing-allowance/regulations/

Other measures being introduced through the Housing Benefit Regulations laid in Parliament today include:

Withdrawal of Local Housing Allowance so that it will no longer be paid for 5 bedroom plus homes.

Local Housing Allowance will be capped at £400 for a 4 bed home, £340 for a three bed home, £290 for a two bed home and £250 for a one bed home.

Removal of the £15 weekly Housing Benefit excess which some customers can receive under the Local Housing Allowance arrangements.

In addition to the £50 million announced today we have already made a £130 million available over the next 5 years through the Discretionary Payment Scheme to help with the transition. A further £10 million has been made available immediately to ensure people can access advice and support.

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