Housing benefit cuts have had 'little impact' on PRS rents
Published by Max Salsbury for 24dash.com in Central Government and also in Housing, Regulation
Housing benefit cuts have had 'little impact' on PRS rentsImage: Rental agreement via Shutterstock
Government cuts to housing benefit (HB) for around 900,000 tenants in the private rented sector (PRS) have had little impact on average rents, a new study has revealed.
However, the Institute for Fiscal Studies' (IFS) research did find that the cuts have affected some tenants' housing choices.
Published this week by the Department for Work and Pensions as part of the independent evaluation of the coalition's welfare reforms, IFS's analysis looked at those claiming HB in January 2011 and followed them through to November 2013.
At the 11-month point after being rolled onto the reformed system, key findings include:
- The reforms reduced potential HB entitlements for the properties of those affected by an estimated average of £6.84 per week.
- The cash reduction was larger for groups with higher initial entitlements, such as claimants in London (£13.39 p/w) and lone parents (£8.43 p/w).
- If anything, the reforms reduced contractual rents for affected claimants, by an estimated £0.79 per week on average, implying that tenants' incomes, after rent, fell by £6.06 a week, rather than the full £6.84. (The research was not able to examine whether there was an increase in rent arrears.)
- Some claimants responded to the reforms by moving house. Before the reforms, 2.2% of recipients moved house per month. The reforms led to a sizeable increase in this rate, of 0.5 percentage points.
The research found that the certain elements of the reform package affected only a subset of claimants - who therefore tended to lose more HB than others. Researchers also found evidence of larger housing market adjustments in those cases.
- Most single childless individuals aged 25 to 34 are now eligible for HB amounts based only on local rent levels for shared accommodation (rather than one-bed self-contained accommodation). Of those not already in shared accommodation (6.9% of all recipients), about 13% moved into it in response to the reforms.
- Because they had large families, 0.8% of recipients were previously entitled to HB amounts based on local rent levels in five-bed properties, but are now entitled only to the four-bed rate. There is some evidence that these claimants responded by moving to cheaper properties with fewer bedrooms.
- For these two groups, which made up less than 8% of all recipients, about a third of the reduction in their HB was effectively passed on to their landlords via reduced rental values.
National HB caps were introduced which bind in parts of inner London, contributing to recipients in London losing more Housing Benefit as a proportion of initial entitlements. Examining only claimants likely to be affected by these caps (2.4% of all recipients), we find that the reforms increased the likelihood of them moving out of the affected areas.
Robert Joyce, a senior research economist and an author of the report, said: “Tenants don’t necessarily take the full impact of a cut to housing benefit: their landlords might end up sharing some of the pain via reduced rents.
"Nearly a year after entitlements were reduced, though, it seems that about 90% of that reduction was felt by tenants, on average. However, for some small groups where the reforms had a particularly sizeable effect, about a third of the reduction was felt by landlords via lower rents. The reforms also led some recipients to move house and many more 25 to 34 year olds ended up in shared accommodation.”