Shelter’s excellent new research last week reveals how unaffordable private renting is becoming for those unable to work and therefore dependent on Housing Benefit. It finds that, in one in four parts of the country, a small family living in a modest two-bedroom home, will have to come up with an extra £100 a month to make up the shortfall in their rent. That shortfall can only be paid from what would otherwise be spent on food or clothing for their children. The corresponding figure for single people or couples in a one-bedroom home is one in five. Deservedly, this research featured prominently in Sunday’s Observer.
We all know how badly the Benefit Cap hits private tenants. But in Z2K’s experience, the coalition Government’s caps on the Local Housing Allowance (LHA) rates of Housing Benefit are almost as bad. Between 2011 and 2013, our Next Door team advised nearly 300 families hit by those caps in Westminster alone. And the move from the median of local rents to the 30 percentile and subsequent “freeze” in those rates since 2015 have made that situation even worse. As Shelter’s research shows, this toxic cocktail of policies has ratcheted tighter and tighter on the finances of the nation’s poorest households.
When the initial freeze was first announced for 2014/15 and 2015/16, ministers extolled the introduction of a £140 million Targeted Affordability Fund (TAF) to mitigate its impact. The former Deputy Prime Minister laid claim to having won this concession from his Coalition partners. And following an unusually open-minded consultation, the Department for Work & Pensions (DWP) decided use the funding to increase LHA rates by up to three per cent in those parts of the country where rents were rising fastest. However, there was a caveat. The LHA rate wouldn’t go above the property-size caps.
This latest freeze in LHA rates has been accompanied by a similar Targeted Affordability Funding scheme. However, so far at least, it is much less generous. Answers to Parliamentary Questions tabled by Emily Thornberry MP a year ago disclosed that there would be no extra funding at all to increase any of the rates in 2016/17. And the answers to a further series of questions by David Lammy MP have just revealed that the total sum for TAF in 2017/18 is just £13.3 million. Another answer confirmed that only 48 or the 960 LHA rates were benefitting from the 3 per cent uplift.
It is no wonder then that LHA rates in London are falling so far behind actual rents. DWP’s own analysis shows that the 30 percentile of weekly rents in the Central London Broad Renal Market Area (BRMA) for one-bedroom, two-bedroom, three-bedroom and four-bedroom properties are £400, £550, £725 and £1000 – all well above the maximum LHA payable for any of those property sizes. TAF can’t therefore be used to increase those rates. Those rates are stuck at £260.64, £302.33, £354.46 and £417.02 respectively. No wonder Westminster City Council is shipping homeless families so far away.
Only for the Shared Accommodation Rate (SAR) for those under-35 years old, is TAF being used to enable an increase in the Central London BRMA from £136.52 a week to £140.62. Of course, Central London will always be a bit of an exceptional case – though that is not to say Z2K doesn’t think Housing Benefit should reflect the rents claimants have to pay to live there. But the picture is the same or even worse in other parts of inner-London too. The only LHA rate benefitting from a TAF uplift in any of the five inner-London BRMAs is the SAR in Inner North London, which goes up from £97.83 to £100.76. Again, there is no TAF uplift for those in family-sized homes.
Before any of us get too carried away with DWP’s generosity, it’s worth comparing these new rates of the Valuation Office’s data on the 30th percentile of rents for a room in a flat-share in those areas. In Central London it is £171.70 and in Inner North London it is £139.69. In other words, even those twenty and thirtysomething claimants able to find rooms in shared accommodation at the 30th percentile will be left facing rent shortfalls of £31 a week in Central London and a whopping £39 a week in Inner North London. Those shortfalls need to be made up from Job Seekers Allowance of just £75 a week, which clearly isn’t sustainable for any but the briefest periods of unemployment.
Unsurprisingly, the Chancellor ignored Shelter’s plea and so the Government’s freeze on LHA rates is currently scheduled to continue until 2020/21. With the shortfalls outlined above only likely to grow even steeper between now and then, it is difficult to imagine any Housing Benefit claimants actually being able to rent privately in inner-London long before the freeze actually comes to an end.