ROOF Blog

The government has decided to push ahead with its housing benefit reforms despite advisers fearing they will discriminate against thousands of families and black and minority ethnic households. The changes will cap from next month the amount of local housing allowance payable for homes of six or more bedrooms, at the five-bedroom rate. A Work and Pensions advisory committee had strongly urged the government not to proceed with the change, saying up to 5,000 families could lose out as a result – of which 3,000 have children and live below the poverty line, and at least 40 per cent were from non-white communities.

Kitty Ussher the minister responsible for the reform of the housing benefit system yesterday ruled out making direct payment to social housing tenants. She said in a speech that the government had listened to the concerns over the impact the move may have on the sector’s ability to raise capital, and although there were advantages in direct payments, with the current economic climate now was not the right time to proceed.

The government’s new housing benefit system is creating poverty traps in the outer north eastern boroughs of London, research by Shelter found. The local housing allowance (LHA), which is replacing the housing benefit in the private rented sector will leave many tenants with a significant shortfall in rent, which they will either have to find themselves, or move into poorer areas where the benefit will cover their costs. The research also found that a majority of landlords are unwilling to let properties to LHA claimants in areas they can afford. Full details in the March/April issue of ROOF, out next week.

One in four councils across England have reported an increase in homelessness, and more than half have experienced a rise in housing benefit claims, the Local Government Association (LGA) claims. Almost all authorities believed the situation would get much worse in the next few months as people lose jobs and homes. Half the local authorities questioned have seen more requests for debt and welfare advice, and the LGA has predicted that the number of people on council house waiting lists will grow from four million to five million by the end of the year.

The government has changed the definition of the rental areas used to set housing benefit levels and sidestepped a House of Lord’s decision that would have forced it to redraw boundaries. The Department for Work and Pensions pushed through changes in rental areas, despite a Lord’s judgment that the areas covered were too large. The DWP argued that the judgment would disadvantage tenants in some areas by pushing down their housing benefit.

Reforms to housing benefits would push claimants into ghettos as tenants are forced to move to areas where housing is cheap but jobs scarce, Shelter warned. The local housing allowance (LHA), which replaces housing benefit, is not enough to cover private sector rent for many tenants and those who lose out will need to meet the shortfall themselves or move to cheaper areas.

Around 140,000 families are receiving more in benefits – £20,000 each year – than the average take home salary, according shadow work and pensions secretary, Chris Grayling. Employment minister Tony McNulty responded that the 140,000 families represented just 1 per cent of households with at least one person of working age receiving benefits, and that the majority of cases ‘include disability-related benefits and premiums’. Mr Grayling said the number was still ‘an awful lot’.

The government has been accused of creating a poverty trap with changes to the tax credit and benefit system for up to two million low earners. Those earning just above the minimum wage and receiving housing benefit are likely to face the highest penalty, as small increases in earnings could result in a loss of benefits and push up their tax rate to 90 per cent.

In a case highlighting the ‘perverse nature’ of the housing benefit which allows claimants to live in subsidised properties that most taxpayers could not afford, a family of five has been place by their council in a £2 million property, costing more than £91,000 a year in rent. Figures released under Freedom of Information show that there are five local authorities in the country paying rent totalling more than £50,000 a year. Most of the top paying councils are located in London, but include other areas such as Exeter and Slough. The councils with the highest proportion of people on housing benefit are also located in London – Hackney comes top with 38.9 per cent of the population receiving housing benefit, followed by Tower Hamlets with 38.1 per cent. Outside London, Manchester rates highest with 33.7 per cent claiming benefit.

The number of people seeking help after falling behind on their mortgages has increased by 5o per cent in the past year. In the three months to the end of September Citizens Advice saw a steep increase in the number of inquiries about mortgage arrears. There was also a 10 per cent increase in the number of people unable to keep up with their fuel payments. Most lenders started repossession action when people were on average four months in arrears, and almost half those seeking help were couples with children, including one in five who are single parents.

Meanwhile house repossession poses the biggest threat to people’s mental health, according to research by a mental health charity. Forty-six per cent of those questioned rate repossession as the event that would most damage their mental health. Even those who could hang on to their home would end up suffering the stress and worry of arrears building up which, according to Rethink, can trigger mental illness or make people who are already vulnerable, worse.

These figures are not deterring cash investors into the property market however. As investors run from the banking system, those with cash for a large deposit and looking for a ‘long term’ investment are hoping for bargains. Buyers have been negotiating reductions of as much as 20 per cent on asking prices if they have the cash. With the market downturn reducing house prices by 15 to 20 per cent on last year’s values, the average income from rents has moved up to around 8 per cent, according to research by estate agents Knight Frank.

The National Housing and Planning Advice Unit has warned regional planning authorities they must acknowledge the impact of second home ownership on the housing market, and should factor it in to regional spatial strategies. If they don’t, they risk creating further undersupply of homes. NPHAU suggests that, as the existing population gets richer and working patterns change, the demand for second homes will continue and is likely to grow.

A survey by a property website has found that city centre flats have seen the largest annual falls in price, with Birmingham Canal apartments topping the list after a 17.3 per cent drop in value. The price falls have not ‘discriminated’ according to how much a property cost in the first place or how desirable an area is. However, it is buy-to-let investors who are hardest hit.

And finally, a property developer is offering his £220,000 one-bedroom flat for sale, asking for a deposit of only 3 per cent. Brian Hughes is offering a rent now, buy later lease option, with the buyer and seller agreeing a price and a future purchase date. The buyer pays rent and additional monthly instalments and the initial deposit and cash built up from the instalments is then used as a deposit to buy the home with a mortgage, on a pre-agreed date. However, experts warn that the instalments are non-recoverable, and the terms of the contract are complicated requiring legal advice.