Homelessness and the Total Benefit Cap

As the Welfare Reform Bill returns to the House of Lords, it is becoming ever more obvious that the Tories and LibDems have no idea what they are doing and the damage they will cause.

We have covered the Bill before on Red Brick, for example here and here, but it is emerging that the total Household Benefit Cap will possibly be the most damaging change of all.  And it is the least well understood.

In theory the cap is, according to DWP’s impact assessment: ‘a cap on the total amount of benefit that working-age people can receive so that households on out of work benefits will no longer receive more in benefit than the average weekly wage earned by working households.’  The limit, expected to be around £350 a week for a single person and £500 a week for families with children, not only includes out-of-work benefits like Jobseekers Allowance but also benefits which are available in and out of work like housing benefit and benefits that are available universally like Child Benefit.

The comparison with ‘the average weekly wage’ immediately falls down because in-work benefits are excluded from the calculation.  It is not a like for like comparison of household income.  It’s a crude and vindictive policy that can only have been invented by drunkards after a bad night on the ale, which makes it all the more regrettable that Liam Byrne has supported the principle.  The only defence of his position is that the line that people on benefits shouldn’t get more than people in work spins well.

However the real disgrace is that Iain Duncan Smith and his Department are not able to say what impact the policy will have and on whom.  Their estimate is that around 50,000 families will receive less benefit because of the cap (it only applies to those of working age).  They admit, as with many of their tax and spending cuts policies, that the biggest impact will be on the larger families – over 80% of those affected will have 3 or more children.  On average, household losses are expected to average £93 per week.  35% will lose more than £100 per week.

DWP estimated, in response to Parliamentary Questions, that 70% of those affected would be social tenants leaving 30% (around 15,000) as private tenants.  These estimates are counter-intuitive and extraordinary given the importance of housing benefit in the calculation of the cap and the huge difference between private and social rents, and they led frontbencher Karen Buck MP on a voyage of discovery about the statistics and the relationship between the new cap rule and other statutory duties.  Well, given the lack of answers, it has been more of a voyage of non-discovery.

Eric Pickles has already accepted that the cap will cause about 20,000 extra homelessness acceptances on top of the 20,000 extra expected due to the other housing benefit changes.  That’s a lot.  Homeless households placed in temporary accommodation in the private sector by their local authority are subject to the cap.  Their rents are high and they are often unable to work because of the disruption caused by homelessness.  Previously they may have been waiting for a social rented flat, now more likely they will be waiting for their local authority to discharge its duty by finding them a suitable letting in the private sector.  There are 49,000 households in TA in England, nearly 36,000 in London.  Many of these are likely to come up against the cap.  However DWP cannot even say if such households have been counted in the 70% (social tenants) or the 30% (private tenants). If it is the latter, the figures just do not add up, given how many ‘ordinary’ private tenants in inner London will also come up against the cap – after all, unemployed people living in mansions in posh bits of London are supposedly the primary target of the policy.

My understanding of the homelessness legislation is that any shortfall between housing benefit receivable and the cost of temporary accommodation is met by the council concerned.  So any existing homeless household in TA that falls foul of the cap would have the excess charged to the council’s General Fund rather than to the housing benefit budget, not something that councils will welcome.  And when the council is seeking suitable accommodation for the family, it will only be able to discharge its duty if the accommodation is affordable.  If the family is subject to the cap, the council might have real difficulty in making such accommodation available.

Similarly complicated considerations will apply for any private tenant falling foul of the cap.  If they can no longer pay their rent, they are threatened with homelessness for arrears.  If the reason for the arrears is the withdrawal of housing benefit, the council would seem unlikely to me to be able to argue intentionality.  The household will have to be accepted as homeless and the same complicated arrangements for TA and for the discharge of the council’s duty will ensue.

The Government does not yet seem to have decided, if a household is subject to the cap, which benefit they will actually lose.  Until Universal Credit comes in, the cap system will be administered as part of the housing benefit system.  But could they decide that, to make up the average £93 loss, the family is effectively losing its Child Benefit, thereby protecting its housing benefit?  That would effectively end Child Benefit as a universal allowance.  Or will housing benefit always be the variable sum? In which case how will councils discharge their homelessness duties where they have to secure accommodation that is affordable?  The Government’s belief that ‘affordable rent’ properties will be offered to the same profile of people as ‘social rent’ properties is now even more questionable.

The implications of all of this seem to be lost on the Government, at least in their public pronouncements.  There would seem to me to be new incentives for households to seek the limited protection offered by the homelessness legislation and, for example, always insist on making a formal application under the legislation rather than accepting an informal arrangement though the prevention and relief of homelessness duties.

Finally, it will come down to money.  There seems a risk that the impact of the cap will bear down only on housing.  For households in TA this would seem to imply a transfer of cost from the national HB budget to the local General Fund – not welcome.  There will be many more people moving through the homelessness system and councils will find it exceptionally difficult to secure accommodation for families subject to the cap.  For some  families with children facing the cap there will be strong pressure to resort to s17 Childrens Act payments to maintain the family in their accommodation rather than face the prospect of taking children into care.  Many councils will face the possibility that the only way to find affordable housing for a family subject to the cap will be to move them a long way away.  And that will pile costs on to the receiving councils.

I can find no evidence that any of these complexities have been considered by Ministers, at least in public, and they divert any attempt to pin them down because statistics aren’t available.  As they pursue the little ideological tantrum that produced the idea of the cap in the first place, they have a responsibility to do some research and explain who will be affected and what will happen to them.

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4 Responses to Homelessness and the Total Benefit Cap

  1. Will they be including Disability Allowance in this cap? I have always always worked and paid my taxes and now have to stay at home with my disabled child and two other siblings, I am now worried how this is going to affect us all.

  2. Pingback: Pinocchio hits the airwaves | Red Brick

  3. To put some figures on the above comment by ‘housingjusticedirector’ which states the cap removes the welfare safety net for any family with 3 or more children.

    The CIH and NHF produced figures, which were never contested, in 2010 that said a family with 3 children gets £317pw in benefits and reliefs (CTax) not including HB.

    Universal Credit works we are informed by totting up all benefits and reliefs and the residual amount from the cap is then used as the maximum ‘housing contribution’ that replaces HB.

    On current terms this leaves £183pw / £793 pcm as the maximum HB equivalent that can be paid whereas the caps are set at £340pw / £1473 pcm for a 3-bed property that would accommodate a family with 3 children.

    So if a family with 3 children with one wage earner in PRS accommodation suddenly loses their job (hardly an unlikely scenario!!) then they face having to find almost £700 per month out of their benefit to pay as a top-up to their rent.

  4. It’s not just about people who are in the system now – the cap effectively removes the welfare safety net for any family with three or more children. Temporary unemployment or illness will become even more devastatign and life splintering post the cap!

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