Kate Webb
Kate Webb

By Kate Webb

Myth busting round two: Is the cap hurting or working?

Yesterday I went to the DWP to hear the first findings [PDF] from the project monitoring the impact of changes to the Local Housing Allowance – the housing benefit for private renters.

It was interesting but ultimately inconclusive.  The researchers summarised very clearly ‘the results of the two surveys do not lend themselves to a concise or straightforward summary of the main effect so far’.

The report itself warns the results are an indication of ‘emerging trends and early signs of impact only’ and we shouldn’t draw any definitive conclusion from it.

This morning I assumed I must have dozed off during a crucial piece of the presentation, as the Telegraph’s take on the very same research was ‘benefits cap is driving the poor back to work’.

The first thing the article fails to mention is that the research is based on surveys of claimants and landlords in 19 case study areas only. Crucially these interviews took place in autumn 2011 before the majority of claimants had experienced any cut. Only 30% of those interviewed were on the ‘new’ regime i.e. incorporating the cuts set out in the Emergency Budget.

The newspaper report claims the cap ‘has not driven poorer people out of areas like London’. This is an odd claim to make because it’s not what the research was actually looking at – research into whether claimants are moving, and where to, won’t be available until the end of the year.

The research did find that very few households said their previous move had been due to benefits, but again this isn’t surprising because it took place under the pre-cuts regime.

The same over-claiming is apparent with the assertion the cuts have ‘helped bring down the cost of renting’: very few households successfully negotiated a rent reduction, and again most negotiations took place under the old scheme.

What comes through strongly in the report is that people do not want to move from their current home or area.  Only a third would consider moving to a cheaper property if they could not afford their rent, and less than a quarter would willingly contemplate moving to another area. People say they are strongly attached to their local communities, either because of friends or family, schools, job or because it just feels like home.

Instead people intend to budget, borrow or increase their earnings. The problem is of course there is only so much scrimping and borrowing you can do, and better paid jobs are hard to find.

Not only are households worryingly unaware of the forthcoming cuts, it’s possible that many are being over-optimistic about their ability to meet rent shortfalls. Many will try to stay put until they hit breaking point. Then overcrowding or accepting poor conditions are more likely than a long-distance move.

What about the claim that the LHA cuts are ‘driving the poor back to work’? The research is essentially a baseline of working habits before the LHA cuts start to bite. Unsurprisingly it found that a lot of LHA households are in work: 29% of all claimants are in employment, rising to 37% in London.

It’s important we don’t underestimate the pressures people’s finances are already under. What the report does make clear is that a lot of LHA households are already balancing a shortfall between their LHA and rent before the cuts even kick in, and that this is affecting their working behaviour: 34% of London households not yet affected by the changes had looked for a job to meet a shortfall, and another 34% had either looked for a better paid job or increased their hours.

At the least, this undermines the assertion that benefit claimants are somehow protected from the choices and stresses of the real world. But – and I know I’m repeating myself here – this all occurred under the old benefit regime – the real tests are still to come.

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