Housing benefit: 56,000 families to be £91 a week worse off

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housing benefitAffordable housing shortages could affect almost half of England by 2017 due to government welfare reforms, a Whitehall spending watchdog has warned.

Whilst the government claim that increasing housing benefit allowances in line with inflation rather than local rents was “restoring fairness” to the system, the National Audit Office (NAO) said the move could cause “significant problems”.

One immediate problem is the sheer confusion the government’s reforms are causing – 87% of housing benefit claimants know little or nothing about housing benefit cuts.

The coalition’s benefit cap will also mean that 56,000 families are £91 a week worse off, with those living in expensive areas, or having multiple children being hit hardest, according to the NAO report.

The changes to housing benefit

A cap to housing benefit payments was introduced in January. The maximum housing benefit limits will be:

  • £400 a week on homes with four or more bedrooms
  • £340 for a three-bedroom home
  • £250 a week for a two-bedroom home

Allowances are also being scaled back by joining them to the bottom third of rents in each borough – with benefits due to rise more slowly than rents from next April.

This means in many places across the country, there simply won’t be enough affordable homes to rent for those on housing allowance.

Gavin Smart, director of policy at the Chartered Institute of Housing, said: “People will be forced to choose between buying food, paying rent or taking on unaffordable credit.”

With 1.4 million people expected to be directly affected by the change (and nearly 10,000 more working families every month relying on housing benefit to help pay the rent) it’s scary that most people have “limited awareness” of the impact it may have on them and their families.

Labour MP Margaret Hodge said the potential housing shortfalls were “deeply worrying” and has called on the Department of Work and Pensions (DWP) to do more.

So what do the DWP have to say about it all? A departmental spokesperson said: “Our reforms will ensure that people on benefits can no longer live in expensive areas that working families not on benefits couldn’t afford.

“Even with our reforms, housing benefit will meet rents of up to £21,000 a year. Apart from the most expensive areas in London, around a third of properties will still be available to rent.

“We are providing an additional discretionary fund of £190m to help families in difficult situations. Our reforms restore fairness to a system that was left to spiral out of control.”

Find out if you’re entitled to housing benefit and how the changes could affect you when housing benefit is replaced by Universal Credit in 2013.

Are you affected by benefit cap? What are your thoughts?