The claim
“If you are prepared to pay, as we are, £20,000 in housing benefit, there is no reason why anyone should be left without a home.”
David Cameron, Prime Minister’s Questions, 27 October 2010
The background
For years, headlines about housing benefit claimants have conjured up images of scroungers living in mansions that we all pay for. It’s an image that wasn’t far from the Prime Minister’s lips when he defended the coalition’s changes to the benefit.
“Are we happy to go on paying housing benefit of £30,000, £40,000, £50,000? Are constituents working hard to give benefits so people can live in homes they couldn’t even dream of?” he said.
What about the 82,000 people who will lose their homes in London under the proposals?, Ed Miliband shot back.
Capping housing benefit at £20,000 doesn’t mean anyone will be left without a home, Cameron replied. So who is right?
The analysis
Listening to David Cameron, you might be forgiven for thinking that the cap on housing benefit was the only change the government has brought in. In fact, the changes are much bigger than just the cap – and the true picture is much more complicated.
The cap will be brought in from April next year – and it affects those who rent in the private sector and then claim the rent back under the Local Housing Allowance (LHA). The change means LHA will be limited to £290 a week for a two-bed flat and £400 a week for a four-bed house. It’s one of the key policies that the coalition use to bang on about fairness, but in terms of the government coffers it will only save £65m, according to the emergency budget.
The more lucrative change is how LHA will be calculated – and it’s actually this change that will affect far more people. At the moment the amount you claim in housing allowance is based on the 50th percentile (the median average) of rents from the area you live in (or a group of areas, called the Broad Market Rental Areas). But from October next year, that entitlement will fall significantly – you will only be given a housing allowance calculated against the 30th percentile. That will claw back £425m by 2014/15.
Another big change is that the annual inflationary increase in housing allowance will be linked to Consumer Price Index, which is a lower figure than the Retail Price Index, which is currently used. That will pull in £390m by 2014/15. And the final change is that after a year on Jobseekers Allowance, claimants will be able to claim less housing benefits – which will save another £110m 2014/15.
It is the combined effect of these changes that opponents of the policy are warning about, particularly for those currently living in more expensive parts of the country.
Around 89 per cent of housing benefit claimants who get over £20,000 a year live in London, and all 139 households who get over £50,000 are in the capital, according to figures from the Department for Work and Pensions. So it’s no surprise that London Councils, and London Tory and Lib Dem MPs are calling for changes.
The London Councils have warned London would be hit hard because of a shortage of housing in the capital. A survey of landlords suggested that 82,000 households – or more than 200,000 people – would be at risk of losing their home as a result of the changes, with 60 per cent of landlords saying that they would not lower rents to mitigate for the lower benefit.
So, that’s where Ed Miliband got his figure from today – although he did get confused and said 82,000 people who would lose their homes, whereas this survey suggest that’s actually the number of households at risk.
The verdict
In the end all of this is estimates and warnings, at this stage. David Cameron may still be right that no one will be left without a home, but the research suggests there is a considerable risk some might.
