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Chancellor's Autumn Statement signals more difficulties for the housing sector

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Chancellor's Autumn Statement signals more difficulties for the housing sector

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Published by Max Salsbury for 24dash.com in Housing and also in Central Government, Finance

Council Housing Council Housing

Chancellor George Osborne has been roundly slammed for admitting in his Autumn Statement that the Government's deficit reduction plans are in tatters.

But here Rob Gilham, director of housing at Walsall Housing Group, asks what it all means for tenants:

'Damned whatever I do’ could well be the story. With the need to back away from targets for deficit reduction and a continuing sea of uncertainty across the economy one may have a little sympathy for the chancellor. However in housing the Autumn Statement sounds a signal of more difficulty for the housing sector.

Running against the grain of almost every other area of financial advice, the Universal Credit places housing as the last benefit. So for those at the benefit cap, the signal is already housing is the least important thing to pay. With caps on benefit increases likely to be around half of the Bank of England’s inflation forecasts that suggests growing pressure on rent arrears from these families.

Public spending is indisputably difficult and looks set to stay that way for the foreseeable future. It may well be that capping benefit rises is the most financially prudent policy for the Chancellor to follow. The problem for housing comes with the perfect storm of bedroom tax, Universal Credit, benefit caps and now the below inflation increase in payments.

Predictions are that tenants won’t miss paying their bedroom tax element but will, instead, simply not pay their rent. It may be that after a period of time the tenant reverts to direct payment but only after many weeks of non-payment, accrued arrears, court costs and staff time. The likelihood of recovery of this income is low at best. Few tenants refuse to pay their rent; many simply face choices that balance food on the table or gas for heating today against the possibility of eviction weeks or months into the future.

Energy prices are set to rise by over 10 per cent, food prices are similarly rising thanks to the poor summer. By our estimation if these amount to as little as £10 a month to someone on benefit, rent becomes seriously at risk for many customers, even those not subject to the bedroom tax. Aims of getting people into work and making the best of the opportunities available become pipedreams when a family finds itself unable to keep a roof over its head.

In any debt management programme the first advice is always make sure you pay your housing costs. There is a strong possibility that for benefit claimants the opposite is being signalled. With lower than inflation rises into the future the choices that tenants face become ever more stark and there is a risk that it is their landlord who gets paid last.

The financial prudence of lower than inflation rises may well be right. With the removal of direct payment to landlords the risk to registered providers may well become considerably worse as a consequence.

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