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Axe to fall on Housing Benefit Bill of £17bn

The Housing Benefit bill is a staggering £17bn, and rising. This is a jaw-dropping, eye-watering amount of “benefits” being paid out at the expense of the taxpayer!! Seeing that figure in print makes me wince in mental pain. It is the second largest bill for the department next to the state pension.

So, Iain Duncan Smith MP, the newly appointed Work and Pensions Secretary is considering radical changes to the way housing benefit is calculated to cut the soaring bill.

According to Inside Housing, a source close to Iain Duncan Smith, the former Conservative leader, said he is interested in pursuing the policies devised by his centre-right think tank, the Centre for Social Justice (CSJ) when reforming housing benefit.

Mr Duncan Smith has appointed the CSJ’s director Philippa Stroud as his special advisor, suggesting he could pick up recommendations made by the think-tank such as streamlining the complex benefits system so that there are only two main benefits. These would be a universal work credit and a universal life credit, which would merge housing benefit and disability living allowance.

The new secretary of state also hinted that he is keen to create more incentives for people on housing benefit to negotiate lower rents.

Housing benefit should be withdrawn more slowly than it currently is when people get a job ‘so that people get into the work habit’.

It is understood that Mr Duncan Smith plans to pursue the policy of capping the highest rents in an area, first mooted by his Labour predecessors, or lowering rent payments entirely.

Personally, I’m not sure that I like the tone of some of these pronouncements. When the rent for a property has been set according to market demands, and someone on housing benefit comes along and offers less, and I know that the very fact that they are on housing benefit will increase my tenant management workload, why would I want to rent the property to them if I could rent same to a working person? I’d be stark raving loony.

Has Mr Duncan Smith investigated how the benefits system actually works (or not, as the case may be) and how frustrating landlords and tenants find it? Is he aware of the pain that Landlords are put through by the red-tape that goes with the Local Housing Allowance scheme? Has he actually talked to any Landlords or Landlord groups or organisations?? Have you done this yet Mr Duncan-Smith? If you haven’t, may I urge you to do so, before plunging headlong into “radical” reforms that cause more problems than they solve. I do applaud you for wanting to reduce the bill and save me the taxpayer some money, but please do so sensibly. Landlords cannot rent properties at below market rates to tenants who will end up being problems (and unfortunately, a lot of them are problems in more ways than one, sometimes through no fault of their own).

There have been reactions from the sector already.

Private landlords warned that reducing local housing allowance rates would increase homelessness. Vincenzo Rampulla, public affairs officer at the National Landlords’ Association (NLA), said: ‘Cutting rates might cause more problems than it solves. It might lead to an increase in homelessness.’

As a Landlord, I will add to that by saying that “it will lead to homelessness as those who are on housing benefit will find it difficult to rent properties”. Its just another hurdle for them to jump over, and private landlords run businesses, not charities. Please bear that in mind when you carry out your reforms. Private landlords who rent out properties, do so as businesses, not charities. We have bills to pay including maintenance of said properties, our bills and mouths to feed, salaries to pay, and taxes to pay. We know that all businesses carry risks, and are ok with that. But don’t legislate more risk into it please.

By all means, please review the system, streamline it so its not so complex. Those  who receive it find it difficult to understand, and those of us that are third parties to the matter find it even more so. You will need to do a heck of lot to get the mental shift away from benefits and into work.

I wish you well, Mr Duncan-Smith, take the bull by the horns and tame it, if you can.

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    5 Responses

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    1. Alan Murdie says

      I am a lawyer with Zacchaeus 2000 Trust, a charity which helps vulnerable debtors and people who are victims of mistakes by state bureacracies. The huge cost of housing benefit is a concern to us, as is the problems that the system causes in practice for all concerned.

      As stated,housing benefit is the second biggest welfare benefit payment in budgetary terms though we put the figures nearer £20 billion, second only to old age pensions and well ahead of JSA and incapacity benefit.

      Housing benefit has mushroomed out of control since the abolition of rent control on January 15th 1989 achieved by the Housing Act 1988. At the time it was argued
      that scrapping rent control would bring rents down; in fact the reverse happened and HB has escalated to its current level.

      It is a terribly complex system to adminster, and all kinds of errors arise in its calculation and delivery, compounded by local authority housing policies in certain areas.

      Regarding whether cutting housing benefit will cause homelessness, in our experience it already is; one may also compare the numbers of homeless in 2010 in London compared with the smaller numbers of homeless back in 1987 the year HB was intoduced and the year before rent control was scrapped.

      From one perspective, housing benefit provides a welfare state for landlords, with low income tenants or benefit claimants. However, landlords themselves can become a victim of the system .In two recent cases, Zacchaeus 2000 Trust has found rent arrears escalating to over £12 000 and in one case in excess of £18 000 from
      a combination of errors, failures in paying benefit, local authority policies (refusing to assist tenants in private temporary homes move because of arrears) and the delays in the justice system.This money will never be recoverable.

      In another case where a council failed to pay housing benefit for 10 months, the tenant and her child were evicted and the benefit was only paid after she had been forced to leave the property. The council then re-housed mother and son in another property two streets away, but costing £300 more per month in HB.

      Money saved on housing benefit could be re-invested in social housing.

      A further problem is absentee landlords, representing a drain on the UK housing budget with the HB money ending up being paid to landlords abroad.

      Alan Murdie, LL.B, Barrister
      Zacchaeus 2000 Trust

    2. GrumpyLandord says

      Thank you so much for your response, which gives more insight into the issues arising out of the workings (or not) of the housing benefit system. As a landlord who still takes tenants on housing benefit, I have experienced the errors and financial losses caused by the its complexity and the delivery of it, as you will have seen from some of my previous posts. There is a lot of waste in the system which needs curbing drastically. The guidelines given to local authorities in dealing with moving tenants in arrears also needs urgent review/revising. Balancing the need to keep vulnerable people housed, whilst trying to build up the level of social housing will be a huge task for the new government. Thank you for bringing Z2k to my attention. A brief look at your website shows what a fantastic job you are doing helping those in need. I would be very interested in discussing these issues further with you, and will contact you directly.

    3. clare price says

      As a landlord I have much sympathy for those landlords who end up with troublesome benefit tenants, fortunately, at the time of writing, I have two single mothers who are a pleasure to have as tenants. My concern is the lack of relationship the council have with landlords. I have just moved on some social tenants as my two bed flat was overcrowded, ended up having 3 children!. Not a word from the council about whether my flat would be available for future social housing claimnants. It’s all so ‘unjoined’ up. The council need private landlords but do not nurture us in any way. They expect us to be satisifed with rent in arrears, which is paid to the claimnant not to the landlord!! Complete opposite to what you ask for with professional tenants. I agree with previous blogger and you that they are very generous with rent allowances. I also act as agent to landlords and just recently a landlord stated they’d be better off finding tenants from the Council as they were promising them a higher rent than I’d suggested for studio apartment. !! She agreed it was madness. I’m following you on twitter by the way, interesting site.

    4. Steve says

      Thank you so much for your response, which gives more insight into the issues arising out of the workings (or not) of the housing benefit system. As a landlord who still takes tenants on housing benefit, I have experienced the errors and financial losses caused by the its complexity and the delivery of it, as you will have seen from some of my previous posts. There is a lot of waste in the system which needs curbing drastically. The guidelines given to local authorities in dealing with moving tenants in arrears also needs urgent review/revising. Balancing the need to keep vulnerable people housed, whilst trying to build up the level of social housing will be a huge task for the new government. Thank you for bringing Z2k to my attention. A brief look at your website shows what a fantastic job you are doing helping those in need. I would be very interested in discussing these issues further with you, and will contact you directly.

    5. A J Richard says

      With a rising population crammed into a tiny land-mass and with little space,money or skill to bring about a house building revival, it is obvious that we are heading at full speed toward a housing catastrophy. Now more than ever we need a Private Rented Sector which is unfetered and able to respond to the new reality of national housing need. The PRS delivers the best value for money anywhere in housing provision, we have no ivory towers or empire of servants, no triple AAA pensions or government handouts. We compete and win on a mixed and often uphill playing field against ‘Social’ Landlords, who ceaselessly squander very vast sums of tax-payers money on all manor of hoplessly flawed housing schemes.
      If there is a message anywhere in this for government surely it must be that the PRS is the only viable way to deliver on housing.
      What we need now is practical support and business recognition, for the good business models we have already created, and to be left unincumbered by inept and illconsidered regulation. Then perhaps, we will be able to build on what has been achieved.



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