Cuts in wages cause surge in demand for HB

It’s amazing how many people think that only those who are economically inactive can claim housing benefit.  But then again all the rhetoric about cuts to HB and to Local Housing Allowance (HB for private tenants) has been about tenants living in something called ‘benefit dependency’, being feather bedded and given so much money that they can afford to live in places that ‘hard working families’ couldn’t afford to live.

The fact that HB/LHA is also an in-work benefit and that working people are subject to the same caps comes as a surprise to many.  The myth is the mirror image of the reality, as a new report from the Building and Social Housing Foundation on the growth of In-work HB claimants demonstrates all too well.

The report shows that:

  • Over the 3 years to December 2011 the number of HB claimants rose by 780,000 to 4.95 million – an increase of 19% – a far greater increase than predicted by DWP.
  • Each additional 100,000 claimants is estimated to increase overall HB spending by £460 million.
  • The majority of new claimants in the two year to December 2011 were in the private rented sector – 213,000 compared to 87,000 in the social rented sector – and made much higher claims – £109 per week for private tenants compared to £77 per week for social tenants.
  • Over the 2 years to December 2011 households with at least one member in employment comprised 93% of the overall increase in HB claimants.

The analysis also throws up a few other myth-busters.  For example, only 3.5% of all HB claimants are single under 25 with children.

In January 2010, 15% of households in work who rented their accommodation claimed HB; this had risen to over 22% two years later.  So why has there been this explosion in the number of in-work claimants against all previous tends?  The report identifies the general deterioration in the finances of low income households: the number of workers facing a cut or a freeze in their income at a time of relatively high inflation; an increase in the number of involuntary part-time workers; and increases in rents in some parts of the country, especially London.

The rising trend of HB claims, especially the surge in households in work, is seriously undermining the Government’s plans to cut spending.  It is hard to imagine they will tolerate a growing bill without taking further action.  One specific concern is the statement in the Budget that extra spending needed to introduce Universal Credit will be capped, which now reads like an announcement of a further round of cuts.  As BSHF say: ‘if Universal Credit does not deal effectively with housing it will fail to achieve its objectives’.

The broader implications for housing policy are severe as rapidly escalating rents in the private rented sector and the switch from social rents to (lol) ‘affordable rents’ mean that many more renting households will face rising housing costs with diminishing resources – and will look to HB to fill the gap.

In their measured tones, BSHF conclude:

The growth of in-work claimants represents households who are in employment but cannot afford to pay their housing costs. The rapid increase in the number of households in this position highlights the vulnerability of their financial situation. If rental accommodation is no longer affordable for many low-income working households it would have serious implications for households, for housing policy and for the wider economy.

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