Update: National Audit office – Housing benefit reforms

The National Audit Office has reported today on how the Department of Work and Pensions is placed to tackle the significant challenge of implementing the reforms to housing benefit.

As part of the measures announced in the emergency budget in June 2010 and the Spending Review of October 2010, the Government announced changes to housing benefit, including reductions to local housing allowance rates for private rented sector claimants and deductions in payments to social sector tenants in under-occupied homes.

Full report - Managing the impact of Housing Benefit reform

The Department is actively preparing for the implementation of housing benefit reform, using available data to assess the impact of the reforms on current entitlements. It has estimated that the reforms will result in around two million households receiving lower benefits, with a smaller number receiving substantially less. Claimants with large numbers of children and those living in areas of high rent such as London will be most affected.

The Government intends the reforms to improve incentives to work and lead to positive changes for claimants. Reforms could also lead to hardship or an increased risk of homelessness. How tenants and landlords will respond is highly uncertain at the moment and the Department has commissioned independent research to evaluate the impact of the reforms after implementation.

The Department is also working with local authorities to identify the extent to which the reforms will increase the administrative burden on the authorities. It clearly has further ground to cover. Many people know very little about the changes to housing support; and the extent to which claimants have been informed varies according to where they live. Surveys of private rented sector respondents found that 87 per cent knew little or nothing about the changes that would affect them.

Uprating local housing allowance by the consumer price index, rather than local rent inflation, could put pressure on the supply of affordable local housing. The speed and extent of shortfalls could be significant. Downward pressure on rents or increased employment would mitigate the impact but NAO analysis indicates that, on current trends, 48 per cent of local authority areas in England could face shortfalls by 2017.

The Department has put in place transitional support through increased funding for discretionary housing payments. It needs to work with other departments and local authorities to monitor emerging issues and manage risks for both private and social tenants.

By Amyas Morse
Head of the National Audit Office

Editorial Comment by Richard Pearson: Today Housing Benefit is paid directly to the landlord to help towards the cost of the rent of the property. However, the Housing Benefit reforms set out by the government calls for this payment to be given directly to the tenant, and the tenant is solely responsible for paying this to the Landlord along with the rent payment if any. Critics say that the elderly \ disabled will be left with the stark choice of using Housing benefit to pay for food & heating, and paying their rent. And that those people troubled with drugs misuse or alcoholism will spend the money on dugs or alcohol rather than paying their rent, leading to a significant rise in evictions when the reforms come into force.