Safety nets are vital when 3 in 10 are on the edge

Amid declining incomes, precarious employment and rising living costs, it’s not surprising that Britons are not terribly financially resilient. New research by Shelter finds that one in five (18%) Britons couldn’t meet their housing costs at all if they lost their job and were unable to secure a new one immediately.

Private renters seem to be in the most precarious position – nearly three in 10 (29%) wouldn’t be able to pay their rent at all if they lost their employment.

It’s a bleak prospect – and underscores why a safety net is required if people are unexpectedly hit with a drop in income, for example because of redundancy or relationship breakdown.

Housing benefit has been subject to intense scrutiny in recent years, with the past couple of weeks feeling particularly torrid. Shelter, like many organisations, has long raised concerns at some of the negative features [PDF] of housing benefit, specifically its complex bureaucracy and poor work incentives.

But these flaws do not mean that housing benefit is any less vital: today’s reminder of how close to the financial edge many families are should prompt a brief pause to recognise the essential role that housing benefit plays.

The safety net housing benefit provides is precisely why job loss hasn’t inevitably meant homelessness. Families will undoubtedly struggle when their income unexpectedly drops, but in recent decades, housing benefit has done a lot to prevent this setback spiralling into the loss of a home.

In this respect housing benefit has a lot to recommend it as a safety net:

  • households can access it quickly, a vital protection for those without savings
  • by topping up incomes it enables families to stay in their own home, preventing further disruption at an already precarious time
  • because the budget is not cash-limited or rationed in other ways it can expand to meet need, for example rising unemployment trends.

And until the recent wave of cuts and caps it could expand to meet rising rents too.

Unfortunately, this is now under threat. People’s inability to find or keep private rented accommodation is now the leading trigger for homelessness, and it’s no surprise that this trend has occurred at the same time as Local Housing Allowance rates have been cut back.

Forthcoming reforms will undermine housing benefit further. Currently, people who have been able to afford their rent without a benefit top-up are not subject to housing benefit restrictions (such as LHA caps or the bedroom tax) for the first 13 weeks of their claim.

This protection was there to prevent people having to move immediately after a drop in income, allowing people enough time to get back on their feet or to make a planned move to cheaper accommodation.

But this protection is being abolished under Universal Credit, creating the risk that those without savings will quickly build up rent arrears and debt after redundancy.

Most worrying is the Chancellor’s intention to cap Annually Managed Expenditure spending [PDF] – including parts of the social security budget – floated in last month’s Budget. Details are still sketchy, but it hints at a more radical attempt to restrict overall housing benefit expenditure. This could include breaking housing benefit’s essential responsiveness to increases in need.

The Chancellor’s recent comments on welfare reform have done little to acknowledge the value of housing benefit – not least for the three in ten renters who would face the immediate loss of their home if housing benefit wasn’t there as a safety net. Shelter’s concern is that, as cuts bite further, few will be able to ignore the vital role this support provides in preventing homelessness.

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