Housing Benefit Changes: A Closer Look at the Impact on Claimants’ Income

A summary so far:


Announcements made in the Emergency Budget, 22nd June 2010.

  • Restriction of the bedroom entitlement to the 4-bedroom rate, from April 2011;
  • Capping of the LHA rates for shared room, 1-bedroom, 2-bedroom; 3-bedroom and 4-bedroom at £250, £250, £290, £340 and £400 per week respectively, from April 2011;
  • Calculating the LHA rates as the 30th percentile of PRS rents, from October 2011.
  • Removal of the £15 excess, from April 2011.
  • After 12 months on Jobseekers’ Allowance the amount of Housing Benefit awarded will be reduced to 90% of the initial award.

Announcement on 4th October 2010.

  • From 2013, total household benefit payments will be capped on the basis of median take-home pay for working households (estimated to be around £500 per week in 2013). All Disability Living Allowance claimants, War Widows, and working families claiming the working tax credit will be exempt from the cap.

The cap will be delivered by Local Authorities. Local Authorities will assess the total benefit income of all new and existing Housing Benefit (HB) claimants, and reduce HB to ensure that they do not receive more than the cap.

A Closer Look:


So far, so confusing. How will this actually impact on people who receive Housing Benefit/LHA?

Looking only at the impact on people from announcements in the Emergency Budget:

(excluding the 12 month rule for JSA)

  • 100% of people on Income Support, Employment and Support Allowance (ESA), Jobseekers’ Allowance or Pension Credit will lose a proportion of their Housing Benefit.
  • The average person on Income Support or ESA will lose £13 per week.
  • The average person on Jobseekers’ Allowance will lose £11 per week.
  • The average person on Pension Credit will lose £11 per week.
  • The average person with children will lose £14 per week
  • People who are unemployed on a long term basis, such as the disabled or long term sick will find themselves with a greatly reduced choice of houses available to rent.This is especially true in areas with higher rents, such as inner London.
  • If someone does not move house, maybe because they don’t want to move away from family, care services or a support network, they will have to find an average of £11-£14 a week from other benefits to pay for their housing. In some areas this may be much higher.
  • Almost half of LHA claimants are already making up shortfalls of almost £100 a month
  • Many people experience difficulties paying rent already, due to rents being due monthly and LHA being paid every 4 weeks. “For example if rent is £400/month and LHA is paid on a four-weekly cycle, then the tenant will receive an LHA payment of £369.24 every four weeks. Each month the tenant feels that they are paying a ‘shortfall’ of £30.76 from their own money. They have to wait a whole year until they get their 13th LHA payment to offset this misalignment.” (Loughborough Uni.)

The figures below are for an average person who remains in their current housing once the changes take place. This does not include any shortfall in LHA already being made up from a tenant’s other benefits.

  • A single person aged 24 on JSA only will have an effective income of £40.85pw

 

  • A single person aged 25+ on JSA only will have an effective income of £54.45pw

 

  • A single person aged 24 receiving the assessment phase of ESA only will have an effective income of £38.85pw

 

  • A single person aged 25+ receiving the assessment phase of ESA only will have an effective income of £52.45pw

 

  • A single person in the work related activity group of ESA will have an effective income of £78.40pw

 

  • A single person in the support group of ESA will have an effective income of £83.85pw

Table 1: Losses from some specific Local Authorities.

Estimated average loss per loser or notional loser, £ per week

Shared room 1-bed 2-bed 3-bed 4-bed 5-bed
Manchester -7 -12 -14 -13 -16 -32
Glasgow City -6 -9 -13 -17 -18 -33
Cardiff -12 -8 -13 -17 -40
Kingston Upon Thames -14 -25 -20 -32 -111
Tower Hamlets -19 -29 -27 -19 -55

Table 2:  Distribution of Losses by Government Office Region

Percentage (%) of LHA recipients Not losing Losses of £0-£5 Losses of £5-£10 Losses of £10-£15 Losses of £15-£20 Losses of £20-£30 Losses of £30-£40 Losses of over £40
East Midlands 1 18 33 41 6 0 0 0
East of England 0 12 36 48 2 2 0 0
London 0 2 19 53 4 11 6 6
North East 0 9 53 37 0 0 0 0
North West 0 13 33 50 2 0 0 0
Scotland 3 8 41 44 2 2 0 0
South East 0 3 30 60 5 1 0 0
South West 0 7 46 45 1 1 0 0
Wales 0 20 39 39 1 0 0 0
West Midlands 0 9 37 52 1 0 0 0
Yorkshire and the Humber 0 13 46 39 1 0 0 0

Table 3: The reduction in Housing Availibility to people on Housing Benefit by bedroom entitlement in London.

    Availability of accommodation: Current average estimate of availability of PRS accommodation Post-reform average availability of PRS accommodation
    Broad Rental Market Area
    Central London 52% 7%
    Inner North & West London 51% 25%
    Inner South West London 51% 29%

Table 4: The reduction in Housing Availibility to people on Housing Benefit by bedroom entitlement (GB)


Currently: Post-reform:
Bedroom entitlement avg availability of  accommodation avg availability of  accommodation
Shared rooms with rents at/below the shared room rate 55% 34%
1-bed properties with rents at/below the 1-bed rate 54% 33%
2-bed properties with rents at/below the 2-bed rate 54% 33%
3-bed properties with rents at/below the 3-bed rate 54% 34%
4-bed properties with rents at/below the 4-bed rate 53% 33%
5-bed properties with rents at/below the 5-bed rate 53% n/a
5-bed properties with rents at/below the 4-bed rate n/a 10%

Table 5: Impact of losses by amount of loss

Analysis based on an LHA caseload of:
Average maximum HB (March 2010), £/week
Estimate of number of losers
Estimate of percent of losers
Average loss per loser, £/week
0.Not losing 2,260 71
1.Losses of £0-£5 84,820 86 84,820 100 -4
2.Losses of £5-£10 329,260 107 329,260 100 -7
3.Losses of £10-£15 454,780 129 454,780 100 -13
4.Losses of £15-£20 23,780 172 23,780 100 -16
5.Losses of £20-£30 23,700 238 23,700 100 -25
6.Losses of £30-£40 9,910 290 9,910 100 -36
7.Losses over £40 10,720 416 10,720 100 -127

Some Background on Benefit Rates

Income-based Jobseeker’s Allowance Rates

The maximum weekly rates are:

Type of person Amount
Single people, aged under 25 £51.85
Single people, aged 25 or over £65.45
Couples and civil partnerships (both aged 18 or over) £102.75
Lone parent (aged under 18) £51.85
Lone parent (aged 18 or over) £65.45

Employment and Support Allowance Rates

Weekly rate during the assessment phase

The assessment phase rate is paid for the first 13 weeks of a claim while a decision is made on capability for work through the Work Capability Assessment.

Age of claimant Weekly amount
A single person aged under 25 up to £51.85
A single person aged 25 and over up to £65.45

Weekly rate during the main phase

The main phase starts from week 14 of the claim, if the Work Capability Assessment shows that illness or disability does limit ability to work.

Type of group Weekly amount
A single person in the Work Related Activity Group up to £91.40
A single person in the Support Group up to £96.85

Pension Credit Rates

For a pensioner living in Great Britain, in 2010-11, Pension Credit could top up the weekly income to a guaranteed minimum of:

  • £132.60 if  single
  • £202.40 for a couple
    A pensioner aged 65+ may also be able to get up to an additional:
  • £20.52 if single
  • £27.09 for a couple

Sources:

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One thought on “Housing Benefit Changes: A Closer Look at the Impact on Claimants’ Income

  1. Oh, hell. I just noticed something. If you’re lucky, your first award of Housing Benefit will have been for your full rent (it certainly wont have been for MORE). That means that after a year on JSA everyone will be subject to what is effectively a fine of 10% of their rent! I think I’m going to be sick.

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