Wednesday, August 04, 2010

I Don't Understand Housing Benefit 'Reform'

A Very British Dude and I have been debating housing benefit. The Dude and I often disagree, but he's a pleasure to debate with as he listens to the opinions of others, is willing to answer questions and, crucially, moderate his opinions if presented with evidence. Anyone who wants to join the debate here or over at The Dude's place please play by the same rules. 

The Dude directed me to his post and one by Wat Tyler at the Burning Our Money blog to support his beliefs that housing benefit is fundamentally distorting the price of housing in the UK. I agree with both bloggers that is the case, but don't share their faith that cutting housing benefit will automatically lead to cuts in the price of rental properties. I also agree with The Dude and BOM that the planning system is far too restrictive and needs to be altered. As The Dude details, this is a particular problem for people with disabilities as only a tiny proportion of available properties either in the private or social sector are actually accessible and most disabled people do not have the financial resources to build their own properties and battle with planning departments.

The rates of housing benefit and Local Housing Allowance* outside of London and limited inner city areas bear no relation to those quoted in the media. In my very pleasant, leafy and affluent Northern suburban area the maximum rate currently paid by LHA for a 5 bedroom property is £172.60 per week. That's a long way short of the maximum £400 a week limit Osborne is capping LHA to for four bedroom properties. Single claimants aged over 25, such as myself are already capped to a maximum of £90.90 a week for a 1 bedroom property. Despite the benefits of a grammar school education I can't add up past the number of fingers and toes I have, which is why I want to know what people who can do more complex sums, like, say long division think of the situation.  I'm wondering where the proposed savings of £4.2billion will actually come from if most of the country is not being provided with the kind of amounts of HB and LHA found in parts of London and beloved by The Daily Mail? That people should simply move to cheaper areas ignores the reality that moving is an expensive process, far beyond the means of most people on low incomes, and can overall be costlier to the state if, for example, I as a disabled person have to move to a different area I would lose all the informal support and care provided by various people within my community and be forced to turn to the local authority for a care package far more expensive than the potential savings in housing benefit. The same applies to working parents, particularly single parents who often rely on informal caring arrangements for their children and would be forced out of work and onto benefits should they move to new areas of cheaper housing.

The big problem from a tenant's perspective is that there are very few local authority owned properties available to rent. Even if changes are made to ensure LA housing is occupied by the appropriate number of tenants at the appropriate times the majority of tenants funded by the social sector will still be spending that funding in the private sector. Both The Dude and BOM are right in their assertions that the government should not be funding such high rental profits to private landlords, but I do not share their faith that cutting the rate of HB will alter that situation as dramatically or rapidly as will need to happen to keep private landlords renting to HB tenants. Whilst private landlords may well eventually come to understand they have to reduce their rents, it will only be after an initial period of evictions and homelessness, something which will ultimately cost the state more money as local authorities still have a duty to house those made homeless.

The majority of private landlords, especially those who use a third party such as an estate agent to manage their properties already refuse to rent to what they describe as DSS tenants. It's normal to see private rentals explicitly state No DSS when they are advertised, and the vast costs associated with renting through an estate agency mean it is prohibitive to the majority of HB claimants. In practice that discrimination doesn't always apply, I tend to find as a polite, well spoken disabled applicant a 'we didn't mean the likes of you' attitude from landlords. I'm not even going to comment upon the wrongs or rights of such attitudes as this debate about HB is focusing on the economics and practicalities, but it merits inclusion as such restrictions further skew the options of claimants to shop elsewhere for a better deal and drive down rental prices, which as I understand it is a fundamental part of the proposed reforms. 

Another issue I can't quite grasp is the desire to ensure tenants in receipt of housing benefit are all renting in particular areas. Whilst I agree that it is fundamentally unjust for those in receipt of HB to live in considerably more expensive housing than working people can afford, I don't understand how this fits with the desire to deal with the social problems already existing on large estates or in areas of cheap housing. Surely funneling more low income tenants into these areas will only add to the existing pressures and create a vicious cycle of slum dwelling and behaviour? 

I agree with The Dude that a move to simplify the benefits system and replace it with a universal benefit is a good one. I'd keep the existing system of Disability Living Allowance alongside any universal benefits as it's actually an excellent way of providing for the additional costs of disability, allowing those who can and want to to work and pay taxes whilst simultaenously protecting those who can't work. It is also vastly underclaimed with a fraud rate of below 0.5%, and overall rate of fraud AND error of only 1.9% so should not be an immediate priority for reform in the way that Housing Benefit with it's fraud rate of 1.5% and overall rate of fraud AND error of 4.9% should be. What I don't understand is how a system of universal benefits can be affordable. If an assumption is made that an adult over 25 receives approxinately £65 a week in Job Seekers Allowance and, for simplicity £100 a week in Housing Benefit and maybe £15 in Council Tax Benefit a universal benefit would need to be in the region of £180 per week, which would sound like a dramatic increase in benefits to the likes of The Daily Mail. 

But like I said...once I'm out of fingers and toes I can't add up any further, so what would I know?

*due I think to be scrapped under Osborne's reforms?


Jackart said...

"but don't share their faith that cutting housing benefit will automatically lead to cuts in the price of rental properties"

That depends on the level of benefit.

Is it possible ANYWHERE to rent a flat for less than the going HB rate for the area? No. Ergo that's the bottom.

You cut the bottom, everything's set off that.

BenefitScroungingScum said...

Jackart: Yes, my current flat is a little below the LHA level for the area. However, I've concluded to get a not damp, rapidly filling with mold flat it's only possible above the HB/LHA levels

Mary said...

To add another factor to the mix, house-sharing. If you have a friend who you can move in with (and you are certain that no busybody can accuse you of being a couple) then it's possible to skim in under the HB/LHA levels.

However if you can't join a house-share - if you work nights, or have a baby, or are too disabled to keep up your end of a housework rota, or lack the social skills to make the existing housemates like you - you're stuffed.

My personal experience when I became disabled was that I was added to an indefinite waiting list for an accessible council or housing association property. In the meantime, I had to scrape up my rent shortfall for my inaccessible bedsit from my Incapacity Benefit ("this is the amount of money the government says you need to live on," said the IB letter, but apparently the local authority disagreed).

That situation persisted for two years until I was fortunate enough to be offered the unofficial route out of the benefit trap - becoming romantically involved with someone who was not reliant on benefits. I suggest this is not a good route for Local Authorities to recommend.

Anonymous said...

You speak a lot of sense when it comes to things like DLA, HB etc etc, things which I have no knowledge of. The government should employ you as a consultant to advise them on these kinds of things, since they seem to have no idea of what actually goes on in the real world, especially where it concerns real people with disability, illness, living in poverty etc etc. I don't suppose they would listen though.

Arienette said...

I'm not really jumping in on the debate, but I'll share some thoughts on my experience of private renting and claiming HB as a married couple in London. For reference, in job 1, my husband earned about 12k p/a after tax, in job 2, he earned 9.6k p/a, and in job 3 we're back on a whopping 12k p/a (although our take-home is less) [this is all relevant, I promise. I'm not simply bragging about the over-abundance of riches we have at our disposal]

When we first tried looking for our own place as newlyweds of 19 and 20 yrs old, we were told by our estate agent that according to their credit checking company, Mr A didnt earn enough to sustain a household paying the sort of rent we were looking at paying for anything more than a room in someone's house. There was NOTHING in any of the area's we looked at (almost the whole of south-east london) that came in at the price which the checking company considered the most rent we could pay and stay afloat. However, we were also told that although HB would fix this problem, no one would take us on as tenants if we were on HB. In fact, the estate agent said they wouldn't even put us forward or show us properties unless we could pay the rent alone.
The situation was 'resolved' by taking me off the lease and submitting Mr A as a single person (leaving me vulnerable if the relationship had broken down) and getting his father to gauruntor for us (leaving us vulnerable to family politics which caused us untold problems and still do three years later)

Mr A lost his job while we were living at flat 1. As soon as we began claiming HB (for which we were awarded our full £700 rent) our landlord/E.A used this as justification to stop taking care of the flat, or us as tenants. We got ourself into debt to make sure rent was paid, and often we had no money for food or heat, but we wanted to be good tenants.

We moved after a year, and met the same problems, but this time I was pregnant and Mr A had job 2. Job 2 paid about £800pcm and together with that and my DLA, our total monthly income was just over 1kpcm. The cheapest appropriate housing we could find was the same rent as our old flat, £700. We could just make it work on our income, until we were told that my DLA didn't count as income. Once again, we had to ask my father-in-law to gauruntor for us. Once again, it caused a lot of tension between our two families.

Arienette said...

When Mr A lost job 2 and we started claiming HB again, our landlord/E.A's once again became exceptionally critical of us as tenants, and communications immediately became rude, hostile, and unhelpful. We were accused of all sorts of things and subjected to sudden 'quarterly inspections' (which we had never had before despite living there almost a year) the first being 4 WEEKS after I gave birth, because a contractor reported back on us and said the kitchen was messy (yeah, it was, sorry I was taking care of my sick newborn, asshole). Anything that went wrong with the house (which was in disrepair when we moved in) was blamed on us, and when it came time to renew our contracts, the agents pretty much flat-out told us that the landlord, despite never being late on rent or causing problems, didn't want us in there anymore. She didn't want unemployed people in her house. She would rather make a family with a 6 month old baby homeless than deal with the 'stress' of HB (???? you get your money, why do you care who pays your massively inflated rental prices???) LUCKILY for us, we were able to inform them that Mr A had JUST got a new job. Suddenly and since then? Their attitudes have changed completely.

Do we WANT to live in a hugely expensive craphole? No, we don't. At the time, it was the cheapest option that met our very reasonable criteria (accessible for me, enough space for a small family, in London because his job required him to live in london) and even then, our criteria were pushed to their limits (awkward stairase down an alley up to flat, JUST enough space for two adults and a baby, and just toeing the London Line)

Now that he's in a diferent job, we'll be moving when our lease is up. We don't WANT to take money from the govt and we don't want to take this much. We wouldn't live somewhere we couldnt afford because what if we weren't awarded HB? We'd still then have to pay rent somehow. But there's nothing that we can do when a credit check says we don't earn enough to live while paying huge rents, but won't accept HB applicants. There is nothing more than bedsits/rooms in our (not-so-nice) area in London that actually costs what the checks say we can afford. Moving out of London will make our lives more difficult, but the hope is that we can stop relying on the government, that we may actually start building savings rather than accumulating more debt. Not only are we sick of being 'scroungers', but we're absolutely SICK of being treated like scum because landlords charge so much and the job market sucks. We are so grateful for HB, but we would rather not claim it if we didn't have to.

(this has been long. SO LONG. But yeah, just throwing my experience into the ring to flesh the argument out a bit. We've never applied for council housing, as we were told it would be years before we'd even approach 'need', and we figured we didn't want to be another couple needlessly clogging up the list when really, we could live very frugally and try to pay our own way)

Big Mouth said...

I think a lot of the rhetoric about benefits is Cameron playing to the gallery. Traditional Tory voters were deeply unimpressed by his inability to win an election against a lame-duck incumbent. He's making up for lost ground. Last year he was the man of the people (but which people); this year he is the 'tough guy' who will not flinch from upsetting Pakistan, and is setting bounty hunters on all Benefit claimants.

In Cambridge they set the max level of Housing Benefit to the average rent across the county, which is quite a bit below the level of the average city rent.

Best of luck with you DLA application. Hard to have dignity and sanity during that process.