Housing Benefit (HB) Cuts: What does it mean for Private Landlords?

Bromsgrove & Redditch Landlords’ Meeting

March 2011

The LHA changes

Background to the cuts

• NEW Coalition Government focus on cost savings

• Emergency budget 22 June 2010 announced £11 billion of cuts from the welfare budget

• HB cuts amount to £1.8 billion of these cuts• Spending Review 20 Oct added a further £7

billion of cuts to welfare budget• Important to be realistic about impact

What are the HB cuts?

• CUT 1: Local Housing Allowance (LHA) CapsWhen: From 1st Apr 2011

LHA rates will be subject to the following caps:1 bed: £250.00 per week/£1083.33 per month2 bed: £290.00 per week/£1256.67 per month3 bed: £340.00 per week/£1473.33 per month4 bed: £400.00 per week/£1733.33 per month

What are the HB cuts?

Current Bromsgrove & Redditch LHA rates (March):

(Birmingham/ Black Country/ Solihull BRMAs)1 bed: Bir £103, BC £91, Sol £115 per wk (cap £250)2 bed: Bir £126, BC £109, Sol £150 per wk (cap £290)3 bed: Bir £137, BC £126, Sol £173 per wk (cap £340)4 bed: Bir £184, BC £160, Sol £276 per wk (cap £400)

RESULT: NO DIRECT EFFECT DUE TO THIS CUT ON ANY OF THE BRMAs IN BROMSGROVE

What are the HB cuts?

Current Bromsgrove & Redditch LHA rates (March):

(North Worcester/ South Worcester BRMAs)1 bed: NWor £98, SWor £103 per wk (cap £250)2 bed: NWor £120, SWor £131 per wk (cap £290)3 bed: NWor £135, SWor £155 per wk (cap £340)4 bed: NWor £190, SWor £296 per wk (cap £400)

RESULT: NO DIRECT EFFECT DUE TO THIS CUT ON ANY OF THE BRMAs IN REDDITCH

What are the HB cuts?

• CUT 2: Removal of £15 weekly excessWhen: From 1st Apr 2011

Prior to 1st April where their rent is less than their LHA entitlement, then a tenant was eligible to receive upto £15 a week paid to them

Announced by previous Gov’t, implementation was deferred until April 2011

What are the HB cuts?

• CUT 3: LHA to be set at the 30th percentileWhen: was from October 2011 (now changed to 1st April 2011)

At the moment LHA rates are set at the 50th percentile (median)

So, what does this mean? In simple terms?

What are the HB cuts?

• LHA rates are set according to the list of evidenced rents they hold according to property size for an area, from lowest rent to highest rent, so simply……..

What are the HB cuts?2 bed Example 1

2 bed Example 2

£610.00 £630.00

£620.00 £635.00

£630.00 30th percent: £630.00 £640.00 30th percentile: £640.00

£640.00 £640.00

£655.00 50th percent: £655.00 £640.00 50th percentile: £640.00

£655.00 £640.00

£665.00 £645.00

£675.00 £650.00

£680.00 £650.00

£685.00 £655.00

Current 50th & 30th percentile rates

Birmingham weekly

Black Countryweekly

Solihullweekly

50th 30th 50th 30th 50th 30th

Shared £60 £54 £60 £55 £74 £63

1-bed £103

£98 £91 £84 £115 £103

2-bed £126

£115 £109 £103 £150 £137

3-bed £137 £126 £126 £115 £173 £160

4-bed £184

£161 £160 £150 £276 £230

Current 50th & 30th percentile rates

North Worcester weekly

South Worcesterweekly

50th 30th 50th 30th

Shared £66 £53 £63 £57

1-bed £98 £91 £103 £94

2-bed £120 £112 £131 £121

3-bed £135 £126 £155 £144

4-bed £190 £171 £196 £183

What are the HB cuts?

• CUT 4: Non-dependent deductions (NDDs)When: From April 2011-2014

• A non dependent is someone who normally lives with the HB claimant such as an adult son or daughter. NDDs are the deductions made to a household’s HB when it contains a non dependent.

• There will be staged increases in NDDs to bring them up to a level they would have been had they been uprated since 2001

Give me the good news…

• Transitional Arrangements 9 months + for existing tenancies 9 months starts from date of anniversary HB claim Exception is the £15 excess

• Additional Bedroom for non-resident carer• Increased DHP funding• Changes to Direct Payment Provisions• Increased use of PRS likely in 2011 (Localism Bill)

National DHP Budget to rise

• When From: April 2011How much? Extra £10 million in 2011/2012Extra £40 million from 2012/2013 onwardsMaking a DHP budget of £60 million a year from April 2012Also a targeted extra £50 million over period April 2011 – March 2015

• Extra funds are relatively insignificant in comparison to the cuts (£1.8 billion)

Changes to Direct Payment Provisions

• When From: 1st April 2011Default position is still for HB to be paid to tenantSafeguards for Landlords still apply (both mandatory and discretionary)

• New expanded discretion to make payment direct to Landlord where LA considers that it will assist the tenant in securing or retaining a tenancy (evidence of reducing and sustainable rents required)

What are the future HB cuts?

• CUT 5: Change to the eligibility criteria for the 1 bed room allowanceWhen: From April 2012

• Shared Room Rate allowance only• Age limit extended to 35 years old and under• Affordability of 1 bed properties• Rise in the HMO / Shared Accommodation• Tenancy Relations issues

What are the future HB cuts?

• CUT 6: HB award reduced to 90% for claimants of Job Seekers Allowance (JSA)

When: Now Cancelled!!

Any claimant on JSA for more than 12 months will have their HB entitlement cut by 10% until they have ‘left the benefit system’ & been in work for a while

What are the future HB cuts?

• CUT 7: Index linking of LHAWhen: From 2013/14 needs primary legislation

LHA rates will be uprated on the basis of the Consumer Price Index (CPI)

Concerns: Rents generally rise faster than the CPI and no more link to ‘Housing market’

Universal Credit

• Universal Credit introduced over next 10 years• Combines all out of work income related

benefits (inc. HB) with tax credits• Claims to start in 2013 and be completed by

2017• Capped at 50% of median income• What will become of HB Depts? • Direct Payments to go?

How to prepare for the changes to LHA

What preparations should be made before the HB cuts are introduced?• What size properties do you currently let to

households in receipt of HB and in what BRMA?• What type of households? Do you let to anyone in

receipt of JSA? Ages of 1 bed single households?• Should you lower your rents?• Should you make improvements in the way you

manage your HB tenancies?• DHP fund to increase – can this be used if you are

working in partnership with the Council?

What could the Council do to help?

• Do you have any suggestions of things that the Council could do to alleviate concerns you may have over the upcoming LHA changes?

• Changes to direct payment provisions, how can you work with the LA to assist them in sustaining tenancies

Dealing with rent arrears effectively

• Households in receipt of Housing Benefit are often on very low incomes & by just falling a small amount in arrears can be a challenge to pay back

1. Keep an up to date rental account2. Contact the tenant to find out why the rent is late3. Follow the telephone call with a letter so that you

have a record(mindful of harassment)4. Try & be sympathetic, you want to create an

environment in which your tenant keeps you informed (text?)

Dealing with rent arrears effectively

5. Try to reach an agreement with them for paying off the rent arrears, either lump sum or weekly/monthly extra amounts

6. Consider lowering the rent temporarily if they are experiencing difficult circumstances

7. Keep a close check on whether repayments are being made8. Contact the Council if there are problems with the Housing

Benefit claim or for further advice9. If you are working with the Councils Rent Bond Scheme, can

you use their advice or contact line?

Options for Landlords

• Serve notice on all HB tenants!• Realistic Impact Assessment• Work with your tenant to discuss affordability

around the new changes• Work in partnership with the Council because

of the additional benefits that can be provided around tenancy sustainment and perhaps direct payments / use of DHP

Contact Details

Inside Housing Solutions LtdSouth Barn, Cowix Farm

Capel RoadRusper

West Sussex RH12 4PY(01293) 871107

info@insidehousingsolutions.commike@insidehousingsolutions.com