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Welfare reform NOT reducing rents report

Released on 25 June 2013

Government reforms to the welfare system are failing in their aim to reduce rents and could even be driving price hikes, according to a report by London Councils.

Tracking Welfare Reform: The Impact of Housing Benefit Reform in London analyses the impact of changes to Local Housing Allowance (LHA), the main housing benefit. It finds that:

  • the changes have not led to reduced rents. Some boroughs have seen rents rise by over 20 per cent over recent months – which pushes up rents for all tenants, not just those receiving housing support
  • working households accounted for 90 per cent of the growth in housing benefit in outer London, where the rise in those claiming benefits is highest. This shows that low-income working families are disproportionately hit by the changes compared with other groups. This has wider effects on other public services: for example, exacerbating demand for school places
  • more than two-thirds of the growth in housing benefit receipts are in the private rented sector – which, being more expensive, increases costs for the taxpayer and directs money to private landlords, rather than being reinvested in affordable social housing.

 To address these problems, the report calls for: the welfare system to reflect London’s higher costs of living; a London exemption from below inflation rise in Local Housing Allowance; and for a full assessment of the financial burdens on local authorities arising from welfare reform.

Mayor Jules Pipe, Chair of London Councils, said: “Councils want to support families, but the double whammy of the scale of welfare changes alongside cuts to council budgets makes this a massive challenge.”

“The report shows that to avoid creating a chaotic system where the only beneficiaries are landlords and lettings agents, the government must ensure its reforms reflect London’s housing crisis.”

The report is the latest update on welfare reform by London Councils, the cross-party umbrella group for the capital’s local authorities, which is monitoring the impact of welfare reforms on the capital. The trends outlined in the report indicate that rents are continuing to rise in London for all private renters, despite – and possibly because of - the reforms.

If these trends continue, there is likely to be a considerable impact on the character of some inner London boroughs. In outer London boroughs, because 90 per cent of new claims are from working families with children, the shortage of school places in those boroughs could be exacerbated as more people move to less expensive areas.

Mayor Jules Pipe added: “Whatever the government’s intentions, we’re now starting to see real evidence that its reforms are having perverse side-effects. This is a wake-up call for the government to tailor its plans to London and so avoid hitting families, renters and taxpayers.”

ENDS



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