Benefit cuts leave hundreds of thousands exposed to rent increases

At least 500,000 households are already facing a shortfall between rent costs and their housing benefit entitlement.

New research by the Institute for Fiscal Studies (IFS) warns that draconian cuts to housing benefit have left hundreds of thousands of households dangerously exposed to rent increases, leaving many at risk of potentially losing their home.

200,000 households in the private sector (containing 600,000 people) and 300,000 households in social housing (containing 700,000 people) are already facing a shortfall between rent and housing benefit entitlement, directly due to welfare changes introduced since 2011.

The research, funded by the Joseph Rowntree Foundation and the Economic and Social Research Council, found that renters are spending far more of their income on keeping a roof over the head than 20 years ago.

Private rent in London was 53% higher in the mid 2010s than in the mid 1990s, while the rest of the UK saw an increase of 29%. The majority of rent hikes occurring in the late 1990s and early 2000s.

Social housing rents have also increased in real terms since the mid 1990s.

The poorest fifth of households spend an average 35% of their income on housing costs that aren’t covered by housing benefit, while the richest fifth spend just 19%.

Substantial cuts to housing benefit, believed to save the Exchequer around £3 billion per year, has resulted in low-income private renters spending 28% of their (non-HB) income on rent – up from 21% in the mid 1990s.

An estimated 1.9 million privately renting households (containing 4.8 million people) are receiving less in housing benefit than they would have received without the benefit changes introduced since 2011.

With housing benefit entitlements expected to continue falling, as other welfare changes gradually take effect, reduced support for housing costs is likely to leave an even greater number of renters exposed to potential rent increases… and possible homelessness.

If future reforms were fully implemented now, the IFS predicts an extra 150,000 people in the private-rented sector and 90,000 people in the social-rented sector would be left facing a shortfall between rent and housing benefit.

Agnes Norris Keiller, a Research Economist at IFS and an author of the report, said: “Wider problems in the housing market are pushing up housing costs and increasing the size of the rented sector.

“While these remain unaddressed there is likely to be an ever tougher choice: continue decoupling support for housing costs for those on low incomes from the rising cost of housing or change policy and accept further rises in the housing benefit bill.

“The current approach effectively places most of the risk of further rises in costs onto low-income tenants, and little on the housing benefit bill.

“While containing the cost to taxpayers, it leaves housing benefit vulnerable to becoming increasingly irrelevant with respect to its purpose – maintaining the affordability of adequate housing for those on low incomes.”

Brian Robson, acting head of policy and research at the Joseph Rowntree Foundation, called on the Government to uprate housing benefit in line with local rents at the Autumn Budget. He also called for an end to the freeze on working-age benefits and tax credits.

Mr Robson said: “These worrying figures show how families with children are being hit hard by the crippling cost of housing and cuts to Housing Benefit, leaving them struggling to make ends meet.

“Even with Housing Benefit, people on the lowest incomes are still seeing more than a third of their remaining income eaten up by their housing costs. It shows why the Government needs to lift the freeze on working-age benefits and tax credits so incomes keep up with the rising cost of essentials.

“Building more affordable homes will help fix the root cause of our broken housing market, but it’s clear families who are just about managing need help now.

“Uprating the Local Housing Allowance in line with local rents would help the 4.7million people living in the private rented sector who experience poverty after paying housing costs.”

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