Why housing in London will blow the lid off the benefit cap

Published by 24publishing for 24dash.com in Housing and also in Communities, Local Government

A housing association chief’s warning that it faces ending 700 tenancies because of the household benefit cap next April is deeply concerning and shows why London needs a different plan of action that drives the same Government objectives – reducing dependency and getting those out of work back into work.

The household benefit cap doesn’t work because housing costs are so much higher in London – which virtually has a different economy to the rest of the country - yet it is the housing costs element that "controls" the cap.

That is, when a household’s total benefit entitlement exceeds the cap, the council will reduce the level of housing benefit by the excess amount.

The average rent in the capital is around £1,200 a month compared to £650 around the rest of the country. That is now impacting on social rents – housing for those most in need – which can be charged at 80% of the market rate. And they're averages. One doesn't need figures to imagine the difference between renting a three-bed home in Islington compared to one in a former mining village in Country Durham where a house is up for sale at £2,500. At the same time, as the DWP points out, not all areas in London are as expensive as Kensington.

However, was a blanket cap on financial support to live in the home ever going to work in London like it will for Hull? That’s before we get into the cost of larger family accommodation which is really worrying housing associations.

Yes, there are people receiving in excess of £30,000, £40,000 and £50,000 in housing benefit – but those figures are already on their way down.

Figures released in Parliament last month reveal that families claiming in excess of £30,000 dropped from 2,170 to 1,380 in the last year. In addition, there were drops in families claiming in excess of £40,000 and £50,000 from 450 and 160 to 360 and 110 respectively.  

This is, presumably, down to the first wave of housing benefit cuts and possibly people improving their circumstances because they know what’s ahead.

However, the Government and certain parts of the media – the Sun was outraged that nearly 1,400 families still receive in excess of £50,000 in housing benefit, but didn’t report the drop in numbers – have done so much to toxify housing benefit that the public thinks everyone’s a scrounger. Not the case. Working households have accounted for over 90% of the increase in the number of housing benefit claimants in the last two years.

However, more pertinently, looking at the DWP figures, the number of affected claimants – which stand to lose £93 a week on average – is so much higher in London compared to anywhere else that it warrants a discussion about regional caps.

DWP figures show that of the 67,000 affected by the cap, 49% of affected households are in Greater London. This compares to just 9% in the South East; 7% in the North West and West Midlands; 4% in Scotland and 3% in Wales. In short, a national cap is a blunt instrument to use.

Another point to make is about ways of reducing the impact for tenants. DWP analysis shows 46% of those affected are in the social sector – which puts a huge onus on providers to carry out the good work some are doing in up-skilling tenants, offering employment support and providing opportunities for work within the organisation and in their supply chains. However, analysis by The Centre for Economic and Social Inclusion (CESI) and housing charity HACT revealed in May that only 42% of providers know the employment status of their tenants or residents.

Getting tenants into work for 16 hours a week will see them exempt from the benefit cap.

According to the DWP – and this is to be taken with the largest pinch of salt possible – some 1,700 claimants who may have been affected by next April's household benefit cap moved into work between May 4 and July 6. However, the figures were quickly seized upon by experts who said this was consistent with normal employment flows.

Other areas of support housing associations and local authorities should look at is childcare. London borough Lambeth, which has 700 people in the borough affected by next April’s cap, has launched a working group to look at ways of supporting tenants and softening the impact of welfare reform.

Councillor Lib Peck said that 80% of those affected by the cap are single parent households. “That’s where we need to be putting some of our preventative resource,” she said.

According to the DWP’s impact analysis, half of those affected by the cap are lone parents. It also points out that more families will be paid childcare support than ever before through Universal Credit because it's making it available to all claimants, not just those working 16 hours a week.

And just as a not-so-cheap shot – the Government estimates £290m savings in 2013/14 and £330m in 2014/15 from the benefit cap.

But if it hadn’t flogged of council housing on the cheap, we wouldn’t be spending an estimated £2bn a year subsidising people in those homes which are now in the private rented sector.

The system is clearly not working when there are people receiving huge amounts of housing benefit to live in expensive homes.

But it’s not their fault house prices and rents are so bloody high! We need to regionalise the cap, increase support to help people into work and build more homes. The risk is that London will shut down, key workers won't be able to afford to live there and rich people won't be able to find anyone to make their Mochaccinos.

Ross Macmillan is the deputy editor of 24housing magazine.