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Changes to Housing Benefit since 2010 18/08/2016

The House of Commons Library has published a briefing paper bringing together the main changes in Housing Benefit announced since 2010.  

 

Read Housing Benefit measures announced since 2010.

 

After coming into power in 2010, as part of its deficit reduction programme the Coalition Government announced a package of welfare reforms aimed at reducing public expenditure. Housing Benefit was targeted as a key area for reform due to the increasing expenditure in this area (forecast to be £23.5 billion in 2016-17 - around 11% of total welfare expenditure).

 

This latest briefing paper details changes to Housing Benefit announced since 2010, including the under-occupation penalty ("bedroom tax"), limiting Housing Benefit paid to private tenants via changes to Local Housing Allowances and reducing social sector rents by 1% a year for four years from 2016-17.

 

Taken together, in 2016/17 the changes are expected to make net savings to the Exchequer of around £2.7 billion, equivalent to around 10% of what total Housing Benefit expenditure might otherwise have been.

 

June 2010 announcements: The June 2010 Budget announced several measures aimed at reducing Housing Benefit expenditure. The package of reforms was aimed at saving £1,765m by 2014/15 (7% of total expenditure) and included: 

 

  • Basing Local Housing Allowance (LHA) rates on the 30th percentile of market rents rather than the median figure.
  • National caps for LHA rates from April 2011 of between £250pw for a 1 bedroom property to £400pw for 4 or more bedrooms. These caps have subsequently been uprated and the five room LHA rate was abolished. 
  • Caps on LHA uprating - limiting up-rates on the LHA rates by the Consumer Price Index (CPI) from April 2013. Measures were included in theWelfare Reform Act 2012to allow for this. 
  • Keeping the difference - implementing (in April 2011) the previous Labour Government's plan to remove a provision that had allowed LHA claimants to keep up to £15 of the difference between the LHA rate and their actual rent level.
  • Non-dependent deductions - increasing non-dependent deductions to the level at which they would have been had they not been frozen since 2001/02. 
  • Deductions for under-occupation in social rented housing (the so-called Bedroom Tax) under which Housing Benefit for social housing tenants of working-age occupying a larger property than their family size warrants would face deductions from 1 April 2013. 
  • Amendments to the size criteria applied to private rented housing to allow an additional bedroom for disabled claimants with a non-resident carer from April 2011. (This was not a savings measure). 

 

October 2010 announcements: As part of the October 2010 Spending Review two further Housing Benefit measures were announced. These measures were aimed at ensuring "Housing Benefit rules reflect the housing expectations of people of a similar age not on benefits" and "ensuring that no family can receive more in welfare than median after tax earnings for working households." 

 

  • Shared Accommodation Rate (SAR) - extended age range The October 2010 Spending Review announced that the age at which the SAR applies would be increased from 25 to 35 from January 2012 for new claimants and to existing claimants on their first review after January 2012. 
  • Capping household benefits at £500 per week for a family (£350 for single person) from 2013. In the event, the measure was phased in and has applied nationwide since September 2013. 

 

July 2015 announcements: During the July 2015 Budget, the Chancellor announced additional measures to reduce Housing Benefit expenditure, not all of which have been implemented at this point. These measures formed part of the Chancellor's programme to reduce welfare spending by £12 billion by 2019-20. 

 

  • Freezing working-age benefit rates - The government announced that most working-age benefits would be frozen for four years from 2016, including applicable amounts for Housing Benefit and Local Housing Allowance rates, with some separate provision for high rent areas. Measures to allow for the suspension of annual uprating were included in theWelfare Reform and Work Act 2016. Regulations (SI 2015/1753) provides that LHA rates will remain at their April 2015 levels (or be set at the 30th percentile point for local market rents, if this is lower). 
  • Limiting support to two children - The Chancellor announced that support provided to families through tax credits would be limited to 2 children. Statutory Instrument 2015/1857 abolished the family premium for all new Housing Benefit claims after 30 April 2016 and for those who cease to have responsibility for any children or young people after 30 April 2016. 
  • Limiting backdating of HB claims - The Chancellor announced that, from April 2016, Housing Benefit claims would be backdated for a maximum of 4 weeks. This represents a reduction on the previous backdating period of 6 months.
  • Severe disability premium (SDP) Regulations -
  • (SI 2015/1754) have amended the Housing Benefit Regulations so that, if a Universal Credit carer element is awarded to a Universal Credit claimant who is caring for an HB claimant, that person may not receive an SDP. 
  • Restricting HB claims for young people - The Chancellor announced that new restrictions would be placed on claimants aged 18 to 21. Measures to give effect to this have not yet been introduced.
  • Lowering the household benefit cap - The Chancellor announced an intention to reduce the cap and vary the threshold between Greater London and elsewhere. Measures to achieve this were included in the Welfare Reform and Work Act 2016. It is expected that this change will be introduced over 2016/17.
  • Reducing social housing rent levels - Rents in social housing would be reduced by 1% a year for four years resulting in a 12% reduction in average rents by 2020-21. Although this is not a Housing Benefit measure, the aim is to reduce Housing Benefit expenditure by securing a fall in social sector rent levels as 54% of social housing tenants had their rent fully covered by HB over 2014/15.

  

November 2015 announcements: In the 2015 Spending Review and Autumn Statement the government announced that they would take further steps to ensure fairness between those receiving Housing Benefit and those paying for the system. 

 

  • Capping HB for social housing tenants at Local Housing Allowance rates announcement of the intention to apply LHA rates to claimants living in the social rented sector. In 2014/15 in most areas of the country average rents for council properties are lower than the LHA rates, however in 39% of local authority areas the average affordable rent for housing association properties was higher than at least one of the LHA rates. Legislation to implement this measure has not been introduced at this point. 
  • Limiting HB payments for persons outside of Great Britain to 4 weeks for claimants who spend time outside of Great Britain. This was implemented on 28 July 2016. 

 

Discretionary housing payments: One option for HB claimants who experience a shortfall between the rent due and their Housing Benefit entitlement is to apply to their local authority for a Discretionary Housing Payment (DHP). Government funding for DHPs has increased - it was £60m in 2012/13 and is £150m in 2016/17.

 

To qualify for a DHP the only requirement is that there must be a shortfall between HB entitlement and the rent. Local authorities are not under any duty to make a DHP and they are generally not paid in perpetuity. DHP funding is one of the main ways in which the Coalition and current Government have sought to mitigate against the impact of reductions in HB entitlement since 2010.

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