There will be a huge shortage of affordable private rental accommodation for tenants on housing benefit if reforms go ahead next spring as currently suggested.
The warning has come from the Government’s spending watchdog, the National Audit Office and has been backed by the British Property Federation, which says ministers should take action to stop swathes of private tented sector housing becoming unaffordable to benefit claimants.
The National Audit Ofice says the danger comes from Local Housing Allowance – which is paid to benefit tenants in private rental accommodation – being calculated in line with the Consumer Price Index rather than local market rent inflation.
The National Audit Office says this could ‘lead to a divergence between local area rents and benefits’. The British Property Federation says that ministers are aligning rents with the price of sausages.
The National Audit Office warns that by 2017, nearly half of local authorities (48%) will have double the number of LHA applicants than now looking for two-bedroom homes – but which they will not be able to afford.
From April next year, the Government is going to change the way LHA increases are calculated, shifting its sums away from the 50th percentile of local market rents to either the Consumer Price Index or the 30th percentile of local market rents, whichever is the lower.
But knowledge among LHA recipients about the changes is minimal, warns the report. It says that surveys of those living in private rented accommodation show 87% know either nothing or very little of the changes.
The report, ‘Managing the impact of Housing Benefit reform’, underlines that the National Audit Policy only analyses policy impact, but makes no comment on the policy itself.
It has, however, made a series of recommendations, in particular that the Government should increase awareness of housing benefit changes, particularly among those living in the private rented sector.
The British Property Federation said the Government cannot ignore these. Policy director Ian Fletcher said: “Since the cap was announced, we have expressed concern that the measure will rapidly and relentlessly erode what Local Housing Allowance will be for.
“This is because market rents have historically risen with earnings, rather than the basket of goods such as sausages and net curtains.”
The full report is here: