Published: 8 Jul 2015 by Scott Dawes

What does the budget mean for the people Shelter helps every day?

Housing benefit has long been in the sights of the Treasury. Suspicious of its costs but reluctant to tackle the lack of affordable homes driving it, George Osborne has singled out support for housing costs for substantial cuts. There were welcome measures on reducing tax breaks for landlords and lower social rents for some, but overall the budget was pretty bleak.

Local Housing Allowance

The major housing announcement today that will be felt by hundreds of thousands of people is the freeze to Local Housing Allowance (LHA) rates for 4 years: twice as long as we expected. Many (39%) receiving LHA (housing benefit for those renting privately) already work but are still struggling. Most of the country will quickly become unaffordable and we expect it to become virtually impossible to find a private rented home in 60 local authorities by 2019 – meaning LHA won’t even cover 10% of properties in each area.

Thankfully there will be additional Discretionary Housing Payments (DHPs) and the hint of boosting the Targeted Affordability Fund that allows increases above the freeze in some areas.

However, this won’t offset the big freeze overall and those struggling to pay rising rents could face rent shortfalls, arrears and greater risk of eviction. The ending of an Assured Shorthold Tenancy is already the leading cause of homelessness; making it harder for people to keep or get a new tenancy will push thousands of households closer to homelessness.

Reducing Social Rents

The big surprise today was the reduction in social rents by 1% for four years. This is good news for those on low incomes in social housing whose rent will be reduced – something we welcome. And it brings massive savings for the DWP, at a time when we’ve long said the best way to reduce HB spending is to reduce the cost of housing.

However, it is likely to come at the cost of new affordable homes – which are desperately needed by those struggling private renters facing a cut in support. Housing associations will be particularly hit as their revenue drops, undermining their ability to borrow and build – even the OBR think this could mean as many as 14,000 fewer homes. The Government should ensure direct investment in building through an increase in the Affordable Homes Programme as soon as possible to offset this risk.

Increasing Social Rents

Whilst some in social housing will see their rents reduced, others will see the opposite – substantial hikes (get advice here). Those households earning over £40,000 in the capital and £30,000 elsewhere will now have to start paying market or near market level rates. These thresholds seem incredibly low at a time when rents are so high – so low in fact that households could now find they need housing benefit after years of paying their rent independently. Instead of bringing social renters in line with private tenants they should really focus on building affordable homes we desperately need.

There was also a worrying little nugget on reviewing life tenancies for social homes – much more detail will be needed but this risks losing one of the great benefits of social housing – the security its gives families. Without the necessary investment in new social homes, the risks forcing low income households into an unfair game of musical chairs chasing the few genuinely affordable social tenancies.

Housing Benefit for 18-21s

Something we’ve long opposed was sadly confirmed today; the long rumoured removal of housing benefit for 18-21 year olds. For some people – care leavers, people fleeing domestic abuse, or those estranged from their parents – living at home is simply not an option. The mention of exemptions is certainly welcome, these will need to include particularly vulnerable groups, care leavers, young adults in temporary accommodation, and those who simply cannot move in with parents. The government must come forward with further guarantees as soon as possible, but we remain concerned that too many will fall through the gaps and homelessness could increase.  You can back our 18-21s campaign here.

Reducing the Benefit Cap

And so to the Overall Benefit Cap. Lowering it from £26,000 to £23,000 a year in London and £20,000 outside of it will drag in an estimated 90,000 extra households. The type of households hit will also radically change; previously the Government sought to limit the benefits of large households in expensive areas. But now those to be capped will include families with 1 child living in Guildford, or 2 children living in Leeds or Plymouth – something a lot harder to characterise as gross excesses.

There’s little evidence to suggest most of these families can move in to work – the key aim of the cap. Most worrying of all – as with the previous cap – is that it hits housing benefit first – the very support that helps keep a roof over people’s heads is where people lose money. And we still haven’t had those much needed exemptions for homeless families who face being moved from pillar to post at great expense to councils. If you’re affected by the cap, see how we can help.

Buy to Let Mortgage Tax Breaks and the Wear and Tear Allowance

Reducing buy to let mortgage tax breaks was a very welcome announcement, as is the decision to clampdown on the landlord’s Wear and Tear allowance – something we’ve called to be reformed and that should generate millions of pounds. It is crucial these savings are reinvested in building more affordable homes and improving rented accommodation.

Summary

Overall, it’s a bad budget day for housing and those struggling with housing costs. By definition, people in receipt of support do so because they are unable to afford what the State has previously designated as the bare minimum to live.

It’s welcome that the government appears to have realised the impact of rising housing costs on the benefit bill. But they need to go much further, committing to the big, bold programme of affordable housing needed to reduce high housing costs and further ease pressure on the benefits bills. Until they get these under control, they will never meaningfully get on top of welfare spending.

Only if you invest in affordable homes by rebalancing investment and having a housing strategy that recognises house building, rents, benefits, and homelessness are part of the same problem, can you permanently bring down the welfare bill.

If you just slash and burn benefits in the hope people in genuine need will miraculously find well paid jobs, cheaper homes or fewer children, you’re unlikely to succeed in anything but making more people homeless.

We will always campaign to fight bad housing and homelessness, and with your support we can help more people.