Homelessness is an increasing risk for poorer renters.

Increasingly shut out. For low-income families and renters, homelessness has become a much greater risk since the housing benefit freeze. The freeze was introduced in 2016.  The shortfall between housing benefit payments and the actual cost of private rents is increasing.

Leading cause of homelessness in England and a major cause in Scotland and Wales.

A report from housing charity Shelter reveals just how poorer renters are finding it increasingly difficult to afford privately rented properties. A shortage of social housing is forcing more people into the private renting sector. Coupled with more and more younger families unable to afford to buy their own homes until much later in life, the competition for homes means landlords often have a choice about which tenants they want. At the bottom of the pile are those who rely on housing benefit, many of whom are working but on lower incomes, to subsidise high rents.

Households are put at risk of homelessness by the housing benefit freeze.

Shelter say in their report that households are increasingly at risk of homelessness because of the housing benefit freeze.  They say: –

“The inability to find a new place to live, once a short-term tenancy ends is the leading cause of homelessness in England and a major cause of homelessness in Scotland and Wales.”

“Assured shorthold tenancies (the type of tenancy used in the private sector in England and Wales) are typically between six and twelve months in length. Sometimes landlords agree to renew tenancies each year. However, recent research by Shelter found that many households do have to find a new home every year.”

“Shelter has published a new report on why people are struggling to find a new private rented home.”

“It features new data analysis. Interviews with people who have become homeless in the last year and interviews with frontline workers. It identifies a number of reasons why people on low incomes are increasingly unable to find a home and secure a tenancy in the private rented sector.”

“The research finds that the most important reason is the shortfall between housing benefit and the cost of private renting. Sometimes this shortfall is only small. But any shortfall can have devastating effects on whether people can find a new home when their tenancy has ended. Due to current policy, these shortfalls are set to get worse.”

“Our analysis sets out how many people could be at risk of being affected by this by 2020, without government action.”

“The shortfall between rents and housing benefit means more than a million private renters in Great Britain have to claim housing benefit in order to help cover the cost of their rent. Many of these renters will be working, but their income won’t be sufficient to afford private rents in their local area.”

 “Most private renters claiming housing benefit are assessed through Local Housing Allowance (LHA)”

“LHA determines the maximum amount of support that a household is eligible for. The amount of support a household can claim will depend on where they live. The minimum number of bedrooms they need and their income. It assumes that someone claiming housing benefit will find a home to rent which is cheaper than average for their local area.”

“The maximum ‘LHA rate’ for each area is set at, or below, the cost of renting a home in the bottom third of the local private rental market. Since 2011 housing benefit levels have failed to rise in line with rising private rents. And since April 2016, all working-age benefits, including Local Housing Allowance (LHA) rates, have been frozen. The freeze is due to last for four years. This means that most LHA rates will stay the same until April 2020. Regardless of how much private rents have gone up by in each local area.”

“This means that many private renters who need their income topped up by housing benefit will face a monthly shortfall. A shortfall between the actual amount they need to pay rent, and the support available.”

“About four in ten households claiming LHA are in work.”

“Housing benefit is means-tested. Households that are working on a low income may be expected to contribute something towards the cost of their rent. Working households still experience the same shortfall as households who receive full housing benefit. This is because the means test for support looks at a household’s income and their ‘rent costs’. But when there is a shortfall between rents and LHA rates, a household’s ‘rent costs’ are actually based on the (lower) LHA rate.”

“This means that the shortfall between support needed and support received is the same for working households who do not receive full housing benefit, and for out of work households.”

“The effects of the shortfall.  If a household is required to move at the end of their tenancy and there is a shortfall between the cost of renting a new home and LHA where they live, they may struggle to find a new home.”

“People in this position Shut Out:”

 “Households put at risk of homelessness by the housing benefit freeze may also struggle to get help from their council to avoid homelessness. One of the key ways that councils try to prevent households from becoming homeless is by helping people into private renting, or by helping them to stay in their existing privately rented home.”

“The freeze on LHA rates makes this a much more difficult task for local council. They too struggle to find rented properties that are affordable for anyone needing housing benefit. They also struggle to persuade private landlords to house people. [as] the gap between housing benefit and market rents is set to grow wider every year and landlords want to charge market rents. This means that growing numbers of households are both becoming homeless. They are being trapped for months, or even years, in temporary accommodation, unable to find a new settled home.”

Many private tenants could become homeless if they cannot find the money to meet the shortfall

The Fabian Society, a left-wing think tank, said: –

“Hundreds of thousands of low-income households in Britain are facing a living standards crisis that by 2020 will see them struggling to meet a £100-a-month shortfall between rents and housing benefit payments.”

“Many private tenants could become homeless if they cannot find the money to meet the shortfall, while others will be forced to turn to food banks or “black market” cash-in-hand jobs to make ends meet.”

“The crisis will become more acute after 2020 unless ministers raise housing benefit levels. By 2025, nearly a quarter of households will rent privately and many working families will be unable to afford market rents without help from benefits.”

“The monthly gap between rent and housing benefit limits on a privately rented two-bedroom home in a mid-range housing market. Currently £35, this will rise to £108 in 2020, the report says. Unless benefit levels rise, the shortfall will rise to £283 by 2030.”

“The shortfall on a two-bed home in a more expensive rental area, currently £68 a month. This would increase to £187 by 2020 and £475 by 2030.”

Rents are currently going up by about 2.5% a year.

Andrew Harrop, Fabian Society general secretary and author of the study said: –

“The rising cost of rented housing could turn out to be the greatest social challenge of the 2020s. If rents rise faster than inflation, on current plans housing benefit will come nowhere near to meeting the costs of a modest home.”

He added: –

“For the next few years, as the housing benefit shortfall grows, people are likely to make ends meet by giving up on other essentials or by trading down into overcrowded, unfit housing. But sooner or later, something will have to give.”

“After 2020, either housing benefit for private tenants must be made significantly more generous, or large numbers of people will become homeless.”

Department for Works and Pensions defended the freeze.

A spokesman for the Department for Work and Pensions defended the freeze, saying:

“The reality is the housing benefit bill has been spiralling for decades. Since then, we have had to take difficult decisions to stabilise our economy. [And] build a welfare system that works for those who use it as well as those who pay for it.”

He said that some savings from the LHA freeze would be used to create more targeted financial support. [In] areas where rent increases were causing a shortage of affordable accommodation.

About 1.5m households currently receive housing benefit. With working families the fastest growing cohort of claimants. The biggest LHA shortfalls have been felt most acutely in high rent areas such as London. However, the freeze is likely to increase the shortfall in places such as Manchester, Birmingham and Bristol.

Homelessness could claim 1000s more families.

The chief executive of the housing charity Shelter, Campbell Robb supported the research, saying: –

“Even in these uncertain times, we can’t escape the simple fact that if the gap between expensive private rents and housing benefit continues to grow, thousands more families could be tipped into homelessness.”

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