Housing benefit cap delayed for current claimants

Iain Duncan Smith Mr Duncan Smith said the delay would give claimants time to adjust

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Ministers have confirmed Housing Benefit caps will be delayed for people who already claim it, as a watchdog warns some reforms are "high risk".

The new £400-a-week limit was due to begin from April 2011, with another cut in benefit rates due in October.

But existing claimants are to be given until January 2012 to give them time to negotiate lower rents, or move.

The social security advisory committee warned some changes could have "far reaching adverse consequences".

The committee's annual report came out on the day Work and Pensions Secretary Iain Duncan Smith confirmed proposed changes to housing benefit - including new weekly caps of between £250 for a one-bedroom property and £400 for a four-bedroom property.

And there will be changes to the way the Local Housing Allowance - used to determine housing benefit payments - is calculated.

Rather than being based on the median of rents in the area - or the 50th percentile, it will instead be set at the 30th percentile. In other words it will be calculated on the basis of cheaper rents.

'Roll back gains'

In its report the committee said it was particularly concerned about the LHA changes for those renting in the private sector: "In our view this is a high-risk policy that may have far-reaching adverse consequences, affecting not only the ability of people on low incomes to find decent affordable housing, but the workings of local labour markets and public services."

While it said there was "much to commend" in the government's thinking on making benefits less complex and making "work pay", it added: "We are concerned that the resources and capacity to deliver major reform may not be available at a time of large cuts in public expenditure."

Weekly housing benefit cap

  • £250 for a one bedroom property
  • £290 for a two bedroom property
  • £340 for a three bedroom property
  • £400 for a four bedroom property

The report also said some welfare changes announced - in particular to housing benefit - that were "intended to make rapid savings to the social security budget may work against the grain of the proposed reforms and roll back some of gains we have seen in recent years in terms of lower rates of child and pensioner poverty".

The BBC's Political Correspondent Iain Watson said the government's own analysis suggested that while nearly a million households could lose out, only 4% would face a shortfall of more than £20 a week between their rent and the new lower housing benefit levels.

Mr Duncan Smith hopes to cut £2bn off the annual £21bn housing benefit bill by 2014-5, with a series of reforms to the payments.

The government says housing benefit payments have rocketed in the last few years and Mr Duncan Smith said they wanted to stop people on benefit claiming for homes that would be "out of reach of most people in work".

But news that housing benefit payments are going to be capped has prompted warnings from some - including the housing charity Shelter and former London mayor Ken Livingstone - about the effects on claimants in London, where rents are more expensive.

Adjustment

On Tuesday the government confirmed it would put back the introduction of housing benefit caps for people currently claiming housing benefit by nine months - but bring forward the new way of calculating housing benefit rates by six months for new claimants.

Explaining the decision to delay the caps on housing benefit, Mr Duncan Smith said: "Clearly it is essential that existing customers have sufficient time to adjust to their new circumstances."

The move was welcomed by London Councils' executive member for housing Sir Steve Bullock, who said it would "give councils some leeway to help these people find alternative accommodation elsewhere".

He also backed separate moves to temporarily give councils powers to make direct payments of housing benefit to landlords, in return for them reducing their rent, saying it was a "step in the right direction" but said the wider problem of housing supply in London remained.

The government also announced £50m over four years to help councils negotiate lower rents and help those who had to move.

Shadow Work and Pensions Secretary Douglas Alexander said: "Labour will maintain the pressure for further changes to this ill-thought through housing benefit package, not least their plans to punish people who have been unable, despite their best efforts, to find work for a year by cutting their housing benefit by 10%."

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