The tide of destruction

TUC General Secretary Brendan Barber has been busy recently, what with the huge march and rally for the alternative on Saturday.

So it was good to see him taking time today to comment on the government’s decision to bring forward to January 2012 the new rule that single adults up to the age of 34 will be eligible only for the single room rate of local housing allowance. 

Brendan focused on the risk of homelessness.  He said: ‘This reform runs the risk of increasing homelessness among young people as many will have their benefit entitlement significantly reduced.  There is almost no chance that all of these people will be able to find alternative accommodation at affordable rents.  With unemployment still rising and the housing crisis deepening, the government seems intent on piling on the financial pain for young adults.’

The government has been happy to keep the debate about housing benefit/local housing allowance changes focused on the largest families receiving the highest amounts of benefit in the highest value areas, especially in central London.  But the changes will hit hard at all kinds of tenants all over the country, as the tables produced by the Valuation Office Agency (VOA) show clearly, and they will hit single young people between the ages of 25 and 34 severely.  You can see figures for your local area here. 

The tables show for each area (Broad Rental Market Area in the jargon) what the difference is between the current 1 bed rate and the single room rate and also how the rates will be affected by the switch from being assessed on the 50th percentile – ie the median rent in an area – and the new rule that they will be based on the 30th percentile.

So a single person aged between 25 and 34 would currently be eligible for the 1 bed rate at up to the 50th percentile rent; in future (ie over the next year) they would be entitled to the single room rent at the 30th percentile.  The figures will change as market rents change, but on current calculations a single person age 25-34 living on Tyneside would be entitled to a 1 bed rate of £97 a week and after the changes would only be entitled to a single room rate of £58 a week.  In southern Greater Manchester the drop will be from £103 to £56.  In Leicester from £91 to £56.  In north west London from £178 to £80.

In theory the 30th percentile rule means that 30% of properties in an area will be ‘affordable’ for claimants.  In practice the cheapest 30% are already occupied and people having to leave their existing accommodation will have to compete for vacancies as they arise.  Not only is this likely to force rents at the lower end up (not down as the government ridiculously claims) but there will be a flood of 25-34 year olds seeking to move and it is extremely unlikely, as Brendan comments, that there will be enough accommodation to go round.  The risk of homelessness is great, and even if there is a scramble amongst landlords to convert larger houses into shared accommodation there will then be knock-on effect on families. 

As Brendan said at the rally at the weekend, ‘We’ve come together not just to oppose the cuts, but to call for a new approach to rebuilding our economy rooted in social justice, in place of this tide of economic destruction.’  Quite.

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One Response to The tide of destruction

  1. Dan Filson says:

    The purpose of the reductions – part from simply saving money – is to drive down rents on which claims are made, the latter being – presumably* – a desirable objective. However, I find it very hard to believe that these changes will achieve that intended result, and would be interested to know if any economist, with knowledge both of landlord behaviour in housing benefit scenarios and the operations of housing supply in an inelastic supply market, has any view on the matter.

    *I say presumably but it may be that the changes will drive out good landlords, if such there be in this sector, leaving only those who will cheapskate on property maintenance etc to ensure they continue to make or maintain a profit.

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