The Chancellor of the Exchequer, George Osborne, announced a number of welfare measures as part of yesterday’s Summer Budget. The measures will be phased in and will not affect any claimants until April 2016 at the earliest, with many changes affecting only new claimants.
The main changes include:
· A four-year freeze to “working age” benefits, whilst still protecting pensioners, and benefits related to the extra costs of disability.
· Lowering the Benefit Cap to £23,000 in London and £20,000 elsewhere.
· A package of reforms to Tax Credits and Universal Credit, including reducing some entitlements, designed to ensure claimants are always better off in work.
· As a result, the DWP will now expect parents with a youngest child aged 3, including lone parents, to look for work if they want to claim Universal Credit.
· Reform to housing and housing support, including removing the entitlement to housing support in Universal Credit for those aged 21 or under; lowering rents in the social rented sector by 1% per annum for next 4 years; a four-year freeze to Local Housing Allowance rates.
· Changing Support for Mortgage Interest into a loan.
· From 1 April 2017, new claimants of Employment and Support Allowance (ESA) who are placed in the Work-Related Activity Group will receive the same rate as those claiming Jobseeker’s Allowance and the equivalent in Universal Credit. Existing ESA claimants will be unaffected
· Confirmation that free childcare entitlement will be doubled from 15 hours to 30 hours a week for working parents of 3 and 4 year olds.
Although there are some positives in the pack, including increases to the minimum wage and improvements to personal Tax Allowances, some of the key issues, mentioned above, are likely to be very damaging to both tenants and landlords.
We obviously need to wait for a fuller DWP explanation of how and when these changes will impact, but social & private landlords will certainly be justifiably concerned by some or all of these measures and worrying just how badly they’re likely to impact on their tenants, income streams and business in general. LHA landlords will well recall the impact of the April 2008 change to paying LHA to the tenant – a disaster, only remedied in 2011 by relaxing the “payment safeguards”.
Withdrawing automatic right to Housing Benefit for 18-21 year-olds is really not that surprising given earlier leaked statements. Nevertheless, this could have serious problems, especially for those associations and charitable bodies, who specialise in providing accommodation and/or support, to young single homeless people.
No doubt the DWP will be quick to emphasise that those currently claiming housing costs will be transitionally protected (TP) from the new measures. Whilst that may be true, TP can often be lost quite easily, if, for example, the tenant makes a move or has a change in their family circumstances. Losing TP and, as a consequence, being denied Housing Benefit or the “housing element” of Universal Credit could be absolutely disastrous as it would hamper or prevent these tenants from meeting their liability to pay rent and their landlords ability to recover the debt. We already know, from earlier research on the subject, young people, especially those in some form of work or training, are the most likely to default on payment and walk away from their tenancy.
The combination of “freezing working age” benefits for 4 years; reducing the benefits cap to £20,000; and applying an annual 1% cut to the rents charged by RSLs creates a triple whammy for tenants and landlords alike. Some of my RSL clients will recall, during the training sessions, how I flagged up the possibility of DWP freezing and/or capping rent levels, in similar fashion to curbs applied to Local Housing Allowance, since 2010/11. However, never did I expect the axe to fall so quickly or deeply!
Add the fact, Discretionary Housing Payments were also significantly restricted in 2015/16 would suggest, tenants already struggling to meet their liabilities for rent and council tax, will be even more disadvantaged, with little or no safety net to call on, especially in England. It remains to be seen whether the Scottish and Welsh Governments will be willing and able to plunder other budgets to offset, at least, some of these losses?
None of the above makes good reading for tenants, their landlords (PRS and Social on this occasion) developers or the financial institutions they currently depend on and are obligated to.
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