Housing Benefit Changes April 2011 onwards Mick Lear Benefit Service

Why reform benefits?  Cost of welfare state projected at £164.7b, total amount of income tax collected £140.0b  Housing benefit increased dramatically, £10.5b in 2000, increasing to £22b in 2011  4.5 million people are receiving HB, of which 3 million are of working age, need to improve work incentives.

Headline changes – For HB From April 2011 LHA levels capped to the 4 bedroom rate Caps for all other bedrooms by size (1, 2 and 3) DHP fund increased nationally but allocation not known Extra bedroom for a carer where claimant needs overnight care Non-dependant deductions increased for 3 years From October 2011 LHA levels set at 30 th percentile (ie 30th cheapest rental value out of a hundred properties, rather than the 50 th ) From April 2013 From 2013 LHA levels up-rated on the consumer price index (not RPI) Extending “single room rent restrictions” to all single claimants under 35

National Picture - Savings Exchequer impact GB (£million) Savings Remove £15 excess Remove 5 bedroom rate51015 Cap LHA Rates Set LHA at 30th percentile Costs Extra room for carer-15 Increase Discretionary Housing Payments Total Estimated savings from HB changes in the UK DWP Memorandum for the Social Security Advisory Committee, July 2010

National Picture - Impact Percentage of LHA recipients Not losing Losses £0-£5 Losses £5-£10 Losses £10-£15 Losses £15-£20 Losses £20-£30 Losses £30-£40 Losses over £40 London East of England Scotland South East South West East Midlands North East North West Wales West Midlands Yorkshire and the Humber Impact of setting LHA rates at the 30th percentile in 2010/ 2011 Source: DWP (July 2010)

April CAPs Impact for SELHP? BRMA Local Housing Allowance Rate Council 1 bed2 bed3 bed4 bed Bexley Outer SE inner SE Bromley Outer SE inner SE Greenwich Outer SE inner SE Lewisham Outer SE Southwark inner SE LHA rate above Proposed cap level A new upper limit will be introduced for each for each property size 1 bed£250 2 bed £290 3 bed £340 4 bed£400

30 th percentile, Impact for SELHP CouncilBRMA1 bed30th PDiff2 bed30th PDiff3 bed30th PDiff4 bed30th PDiff BexleyOuter Inner BromleyOuter Inner GreenwichOuter Inner LewishamOuter SouthwarkInner

Impact in Lewisham - 30 th percentile Table 3: Outer London South East BRMA – Room Rate Shortfall Bedroom(s)LHA June th PercentileShortfallClaimsWeekly LossAnnual Loss Single Room£79.40£69.53-£ £2,197.18£114,253 1 Bed Rate£149.59£ £ £3,899.73£202,786 2 Bed Rate£184.11£ £ £10,702.98£556,554 3 Bed Rate£218.63£ £ £5,867.95£305,133 4 Bed Rate£293.42£ £ £3,195.15£166, Rate £ £ £ £786.35£177,704 1,489£26,649.34£1,522,577 Table 4: Inner London South East BRMA – Room Rate Shortfall Bedroom(s)LHA June th PercentileShortfallClaimsWeekly LossAnnual Loss Single Room£89.75£82.50-£ £15,310.27£796,133 1 Bed Rate£184.11£ £ £35,535.63£1,847,852 2 Bed Rate£240.00£ £ £60,851.30£3,164,267 3 Bed Rate£299.18£ £ £20,244.98£1,052,738 4 Bed Rate£402.74£ £ £7,331.30£381, Rate £ £ £ £23,818£1,238,533 8,271£163,091.48£8,480,754

Impact for Lewisham Proposed changeImpact for LewishamDate LHA rates restricted to four bedroom rate89 families with a total annual reduction in benefit of £242k April 2011 onwards Additional bedroom for a non-resident carer where claimant needs overnight care Not known, we will be reliant on the claimant confirming where this applies April 2011 onwards Non-dependant deductions increased by a higher amount for three years 530 claimants, average weekly cost ranging from £ £6.80, estimated annual loss of £103,000 April 2011 onwards LHA levels set at 30th percentile ie changing from setting LHA rates from the 50 th cheapest rental value to the 30 th 9,600 private-rented sector residents, an average loss of £17 p/w, an overall reduction of around £9 million per year October 2011 onwards HB for working age people on JSA will be reduced by 10% after 12 months 4,837 claimants, HB to reduce by average of £11.72 p/w, total estimated at £2.8m pa October 2011 onwards LHA rates up-rated by The Consumer Price Index (from RPI) removing link between local rents and LHA rates Details of the impact will only be available once revised LHA rates are known April 2013 onwards Extending “single room rent” restrictions to all single claimants under 35, HB restricted to shared room rate as opposed to self-contained 1 bedroom property 796 single residents aged between 25 and 34, annual reduction of £3.8m April 2013 onwards Restricting HB for public sector residents (Council and RSL) under occupying their properties Ie occupying properties that are larger than they need 2,138 Council properties are under-occupied but it has not yet been possible to estimate the effect of this yet April 2014 onwards

What are we doing? Speak to landlords and claimants –1 st December for those affected by April caps, forum in February, mail-outs to all in advance of changes Review options for use of DHP funding Publicise details of changes Dedicated information and contact points Reviewing options for direct payment Targeting 150 empty homes in Lewisham Joint approach across Lewisham Council to support affected tenants But, we need to understand more about how landlords and claimants will react to the changes …..

What do we know? Not a great deal locally! London-wide survey, inconsistent but …. –40% of landlords would agree to reducing the rental charged –For larger properties 10% of landlords would agree to reducing the rent if the reduction exceeded £50 –90% would accept a reduction of up to £20 –46% may reduce rent charged if paid directly So, potentially, on a caseload of 9,600, if 90% of landlords accepted a reduction of up to £20, if 40% of landlords reduced the charge to the new LHA rate and 46% of landlords reduced the rent charge as a result of our paying directly, there would only be about 10% of cases affected by the change …..

What we need to understand?  Landlord behaviour  Tenant behaviour  Numbers affected  What we can do to secure tenancies