Housing Benefit

In the emergency budget on 22 June 2010 the government announced changes to Housing Benefit (HB) and Local Housing Allowance (LHA). The proposals will be implemented in two tranches, those that need secondary legislation will be implemented from April 2011 and October 2011 and those that need primary legislation from 2013:

From April 2011:

1. Remove the five bedroom LHA rate so that the maximum level is for a four bedroom property
2. Introduce absolute caps so that LHA rates cannot exceed:
   
   • £250 for a one bedroom property
   • £290 for a two bedroom property
   • £340 for a three bedroom property
   • £400 for a four bedroom property
3. The £15 weekly excess that some customers can receive under the LHA arrangements will be removed
4. Additional bedroom within the size criteria used to assess HB claims in the private rented sector where a disabled person or someone with a long term condition has a proven need for overnight care and this is provided by a non-resident carer(s)
5. Increasing deductions for non-dependents: they will no longer be frozen at £7.40 per week for non-earners and will be linked to prices

From October 2011:

• Set LHA rates at the 30th percentile of local market rents
• Increase the contribution to local authorities funding for Discretionary Housing Payments from £20m to £30m in 2011/12 and then to £60m a year from 2012/13

From 2013:

1. LHA rates will be up-rated by the Consumer Price Index (CPI)
2. HB for working age claimants on Job Seekers Allowance (JSA) for 12 months will see a decrease in their HB of 10%
3. HB restricted for working age claimants in the social rented sector who are occupying a larger property than their household size

What is Housing Benefit and Local Housing Allowance?

Housing Benefit (HB) is paid by local authorities to help people pay their rent. It is available to council, housing association or private landlord tenants and covers the rent and some service charges such as paying towards the upkeep of communal areas or for a caretaker. HB may be available to people on low income or people on welfare benefits. For Council tenants, HB is paid straight into tenant's rent account and for private or housing association tenants who do not come under the LHA rule, they can choose to either have the HB paid directly to their landlord or themselves.

Local Housing Allowance (LHA) was introduced from 7 April 2008 and now applies to most new claims by private tenants. LHA is based on a 'standard local rent' (eg the median (50%) rent levels for a Broad Rental Market Area (BRMA)) which is set according to the number of rooms needed (the number of people that need to live in the home) and how much rent private landlords charge for similar properties in the area. The maximum number of bedrooms that it is possible to make a claim for is five. This is the case regardless of the size of the household. LHA payments can cover the rent and some service charges which tenants have to pay in order to continue to live in the property.

Tenants receiving LHA can keep the difference (up to a maximum of £15 per week) between the actual rent and the local standard rent. LHAs are paid directly to the tenant but for some tenants they can also be paid directly to the landlord particularly if they are in rent arrears of eight weeks or more or they are getting deductions from their income support, jobseekers's allowance or employment support allowance to pay for rent arrears.

Welfare reform

The Government is planning to cap welfare payments on the basis of median earnings after tax for working households, estimated to be around £500 per week by 2013 (Working for couple and lone parent households and around £350 per week for single adult households (Tax Credit and War Widow Pension are exempted from the cap).

From April 2011, couples with children will have to work 24 hours between them with at least one working 16 hours to gain entitlement to the Working Tax Credit, rather than at least one working 16 hours as now.

From April 2011, the proportion of costs covered by the childcare element of the Working Tax Credit will be reduced from 80% to 70% of costs.

The Shared Room rate in LHA will be extended to all single claimants under 35. The Shared Room Rate currently applies to single people aged under 25 years living in the PRS who receive HB under the LHA rules.

Over the next two Parliaments the means-tested working-age benefits and tax credits will be replaced with a Universal Credit, an integrated payment with greater emphasis on increasing work incentives.