The benefit cap: time for a rethink

A version of this blog first appeared on Inside Housing earlier this week.

The reduction to the benefit cap starts on Monday, putting more families at risk of losing their home. Ministers should re-think the cut if it is serious about tackling homelessness.

Next week, 319,000 children will begin to be affected by a new cap on their families’ benefit payments. With Christmas now less than two months away and many already living on a financial knife-edge, the prospect of an income cut will be alarming to thousands of families across Great Britain.

The new lower benefit cap reduces the maximum limit on household benefit payments from £26,000 to £23,000 in London and £20,000 outside the capital. It starts to come into force on Monday, and according to research published by the Chartered Institute of Housing (CIH) this week, 116,000 families with children will be affected.

Shelter is concerned about the ability of families to cope with this change, particularly because housing benefit is included in the cap. With housing costs so high and genuinely affordable homes in such short supply, many families have to rely on housing benefit to keep a roof over their heads. This reform means that thousands of families will struggle to meet their rent payments.

The CIH found that half of couples with three children living in privately rented homes would lose a staggering £100 a week. Even in council housing, 37% of couples with three children will lose more than £50 a week. For families on benefits these are difficult sums to have to find – and not amounts that many landlords can be expected to simply waive.

Previously, the cap hit mainly large families living in very expensive parts of the country. But the new cap is a game-changer: in the West Midlands, 12,031 families will have their benefits cut (compared with just 1,735 under the old cap). In the South East, the number rises from 2,081 to 17,676.

So what is likely to happen to families hit by this reform? Some will manage the income reduction. The policy’s aim – to encourage more people into work – is a laudable one, and in some cases has been successful. Take Greenwich Council’s ‘GOLD’ scheme, which has been offering people hit by benefit cuts the chance to work for the London Living Wage on a six-month placement. Some will be helped by Discretionary Housing Payments – though these are not guaranteed and are not designed as a long-term solution.

Some will cut back on expenditure, in some cases on food and heating. Some will borrow from friends and families, potentially being driven to payday lenders and loan sharks.

Others will simply be unable to keep up on their rent payments. But in case they were thinking of downsizing, Shelter’s research earlier this year found that in one third of areas, couples with two children will be unable to afford a one-bedroom flat through housing benefit. Our fear is that families can’t move their way out of the cap and will instead lose their home altogether.

Families that do end up losing their home and are made homeless will find that they remain capped even if they are given temporary accommodation. In a perverse twist, councils may then be forced to dip into their own funds to top up the temporary housing costs.

Last month, the government said it would support the Homelessness Reduction Bill, which gives councils new duties to prevent people losing their home. It does not make sense to endorse measures to prevent homelessness, while putting more families at risk of losing their home and restricting the tools councils have to help them. Government welfare policy is key when thinking about housing affordability for people on low incomes, and this new cap could threaten much of the government’s positive commitment to reduce homelessness.

If the government is serious about reducing homelessness, they should rethink the introduction of the lower benefit cap as this is likely to have the opposite effect.