Whisper it, but the government’s current freeze on housing benefit may be losing popularity among some in the Conservative Party.
Yesterday, the Spectator and the Joseph Rowntree Foundation jointly held an event in Westminster called The Conservative route to fighting poverty. As Shelter’s new report highlights, one of the key things increasing poverty and homelessness is the failure of housing benefit to keep up with private rents. Shelter advisers tell us it is increasingly difficult for low-income families to secure even the cheapest housing within their budget – we believe this has contributed to rising homelessness.
A key government policy is stopping housing benefit in the private sector (Local Housing Allowance, LHA) from catching up with private rents. This is the current freeze on LHA. It was announced in 2015 and means levels in all but a few areas will remain at 2015/16 levels for four years.
At the Spectator event, Iain Duncan Smith, formerly the Work and Pensions Secretary, indicated that the government should soften its stance on LHA. He told the audience that it was time for LHA rates to be reviewed in light of the shortfalls. This was a surprising and positive step – it suggests that former members of government understand the need to stop squeezing housing benefit in some cases.
Mr Duncan Smith is not the only former minister at the Department for Work and Pensions to have encouraged a serious look at LHA rates.
Earlier this year, Lord David Freud, the former Minister for Welfare Reform, said although LHA rates are supposed to track the bottom third of the private rented market, this is no longer the case.
“It is now slightly all over the place because of the restrictions,” the Conservative peer said. He suggested the government should spend money on “getting the payment system back to some coherence”.
The problem illustrated
Lord Freud is right: the system is not coherent. Indeed, Shelter’s research shows that by 2019/20, private tenants will have a shortfall in their housing benefit in 83% of the country if the four-year LHA freeze continues.
Areas in England where by 2019/20 there will be a shortfall between two-bedroom LHA level and rents at the lowest quartile of the market
Meanwhile, at the cheapest quartile of the market, rent for a one-bedroom property in England has increased on average by 2% every year between 2011/12 and 2015/16.
The system is stretched to breaking point, which is why we are calling for the LHA freeze to be scrapped as soon as possible. We need to get back to a system where at least a proportion of the private rented market is available to people reliant on housing benefit.
Still work to do
Not all Conservatives are sold on fixing the LHA shortfall problem. Current Work and Pensions Secretary David Gauke still needs a bit of encouragement. However, he might be more persuadable in light of our research that shows one million households could be at risk of homelessness by 2019/20 if this issue is not addressed soon.
After all, the Conservative manifesto pledged to half rough sleeping over the course of this parliament.
Figures from some members of the Conservative Party are beginning to argue that we need to put more into our benefit system instead of imposing new restrictions. And recent attempts on additional limits, including proposals to remove winter fuel allowances for some pensioners, have ended in disaster.
The coming months will test how willing party members are to encourage investment in our welfare system to address homelessness.