Could you afford to live here?

Changes to help with housing costs for tenants in social housing could mean thousands of tenants may no longer be able to afford their homes.  Victoria Winckler outlines a new project to find some solutions.

In the summer 2015 budget, the then Chancellor, George Osborne, made some rather technical-sounding announcements about changes to Local Housing Allowance.  The hoo-ha about the new National Living Wage, increased personal tax allowances and 30 hours of free childcare overshadowed the fact that thousands of people in Wales may no longer be able to afford to rent their homes as a result of Osborne’s tweak.

What’s the change?

Local Housing Allowance (LHA) acts as a cap of the amount of help with housing costs a tenant in the private rented sector may claim. It is based on the cheapest 30% of private rents paid in a broad housing market area, and has been frozen since April 2016.

The summer 2015 budget extended LHA rates to tenants in social housing.  In effect, the change both limits and freezes the amount of housing benefit a tenant could receive. It also comes on top of other limits on housing benefit for social tenants e.g. because of the overall cap on benefits or the bedroom tax / loss of spare bedroom subsidy.

Why does it matter?

In many parts of the UK, social rents are well below those in the private sector, so even the cheapest privately-rented properties are more expensive than a socially-rented home. But not in Wales, and especially not in the south Wales valleys.

Here, privately-rented homes are relatively inexpensive. For example, one-bedroom accommodation in the cheapest quartile of properties costs £64.61 a week in Blaenau Gwent compared with £103.85 a week in Cardiff in 2016.

There is much less variation in social rents in different parts of Wales, plus the Welsh Government has been recommending that social rents rise by 2%. As a result, social rents in some parts of Wales are typically higher than the private-sector equivalent.

Applying the LHA, based on private sector rents, to social housing in these areas results in a shortfall in the amount of housing benefit that can be claimed compared with the rent to be paid.

Could you afford to live here?

The challenge is clearly illustrated in Merthyr Tydfil.  At the time of writing, eight properties were listed on the housing choices website.  Rent for a one-bedroom property was £75.43 a week while that for a two-bedroom property was £88.42.

But if you claim housing benefit, from April 2019 the maximum you will be able to receive – assuming your household is entitled to the number of bedrooms available – is the LHA rate of £67.76 a week for the one-bed property and £80.55 for the two-bedder.

Now, a shortfall of £7.76 a week might not seem like much for some, but it’s the cost of a day’s food for the average household.  So this apparently technical change is likely to hit social tenants in parts of Wales very hard.

If this is not bad enough, the impact is even worse for single, childless people aged under 35.

Help with housing costs for this group of people is restricted to the cost of shared accommodation, with rents for the cheapest bedsits and rooms in houses in multiple occupation being at rock bottom in some parts of Wales.  In Merthyr Tydfil, for example, the LHA rate for shared accommodation is just £48 a week, compared with the average social rent for a self-contained bedsit of £65.61.

Shelter Cymru estimate that nine out of ten single, childless under-35 year-old tenants will lose out, with half being £20 a week or more worse off as a result of the change.  As Shelter Cymru bluntly puts it, the options for social landlords are to:

“lower rents; step up provision of shared accommodation; or stop letting to unemployed single young people”.

All of these options are, at best, unpalatable and, at worst, simply impossible.

It is for this reason that the Bevan Foundation is working with the Joseph Rowntree Foundation and a team at Sheffield Hallam University to find some more acceptable solutions. To find out more, visit the project page or download the briefing. You can also sign up to receive our free e-newsletter for updates.

Victoria Winckler is director of the Bevan Foundation.