Posts with tag: benefit cap

153% increase in households hit by the benefit cap

Published On: June 24, 2021 at 9:38 am


Categories: Tenant News

Tags: ,,,

The Department for Work and Pensions (DWP) has released the latest experimental statistics on how many households have had their benefits capped between April 2013 and February 2021.

The key findings from the release are:

  • 200,000 households had their benefit capped at February 2021, compared to 79,000 at February 2020 – a 153% rise.
  • It represents a 13% increase in newly capped households on the last quarter.
  • Some people receive a nine-month grace period which protects them from being hit by the cap after losing their job. For people who lost their jobs at the beginning of the pandemic, this quarter’s data reflects the first time that they have been hit by the benefit cap.
  • Households had their benefits capped by an average of £55 a week, at February 2021. That works out at £238.15 a month.

Jon Sparkes, chief executive of Crisis, comments on the statistics: “Behind these figures are hundreds of thousands of people battling to keep roofs over their heads. Many will have lost jobs in the pandemic or are living day-to-day on insecure, zero-hour contracts.

“For so many, renting has become unaffordable. Rents continue to rise but Local Housing Allowance is frozen, creating a real-terms cut to housing benefit.

“We desperately need a strategy to provide the genuinely affordable homes needed to end homelessness, as well as more financial support for the hundreds of thousands of renters in arrears, to help them back from the brink.

“The UK government must also make people who are rough sleeping or stuck in temporary accommodation permanently exempt from the benefit cap, to give them a chance to end their homelessness for good.”

Benefit Cuts Could Affect Landlords’ Income

Buy-to-let landlords in expensive areas could see their income affected by the new Government’s welfare reform.

Parts of outer London and the South Coast will feel the force of the £23,000 annual benefit cap, which the Government pledges to introduce in this session of Parliament.

These are relatively affordable areas for the capital’s commuters, but many households receive housing benefit because of their low incomes. One in four private sector tenants in England now claim housing benefit, an increase of almost 90% in the last six years.

The Government has rolled housing benefit and other payments into one, called Universal Credit, which is being introduced in stages around the country. This will be capped for out-of-work households, so that people in work are always better off. However, reducing the maximum benefit will make it more difficult for some tenants to afford their rent.

Paul Shamplina, founder of Landlord Action – which helps landlords with rent arrears and other tenancy issues – says he has seen “a lot of landlords in London and the South East exiting the

Benefit Cuts Could Affect Landlords' Income

Benefit Cuts Could Affect Landlords’ Income

market” in the past 18 months, as benefit cuts, including a cap introduced in the last government, make it harder to find tenants who can afford the rent.

Landlords are also seeing growing problems with tenants subletting rooms in their rental properties to benefit claimants who cannot afford their own home, Shamplina has found.

“Especially in London, because rents are so high, tenants are being evicted and [moving to] places like Birmingham and Slough,” he explains. “It is only going to get tougher for landlords.”1

Chief Executive of the National Landlords Association (NLA), Richard Lambert, says that fewer landlords will rent to people on benefits due to the reductions. As a consequence, Lambert is worried about “the practicalities for people who live chaotic lives”, who are becoming less able to afford rental accommodation.

“This puts the most vulnerable in society in a very difficult position,”1 he says. This leaves them exposed to rogue landlords.

Chief Executive of homelessness charity Shelter, Campbell Robb, notes that business could be affected, as the changes might make urban centres “no-go zones for anyone on average or below-average wages.”

“If we want to safeguard the [economic] recovery, we need to make sure that the people who keep our economy going will be able to find a genuinely affordable place to live,”1 he says.

The changes will also impact housing associations. The National Housing Federation (NHF) discovered that 91% of housing associations expect the launch of Universal Credit to make rent collection more difficult. Almost two-thirds believe that their legal costs will rise as they chase unpaid rent.

The NHF warns that on average, housing associations expect up to 35% of rent to go unpaid.

However, some buy-to-let lenders have not considered the effects of welfare reform on their business. One senior banker comments: “I haven’t really thought about it. But I will now.”1

The Council of Mortgage Lenders (CML) cautions that banks could review their buy-to-let policies if the benefit changes affect landlords’ cash flow.

Head of External Relations at the CML, Sue Anderson, explains: “If benefits are reduced, then to the extent that those benefits impact on cash flow of the borrower and therefore risk to the lender, the changes could result in a greater build up of arrears.”1 

Managing Director of buy-to-let lender Paragon Mortgages, John Heron, thinks the changes will only impact a small amount of tenants.

And Alex Hammond, of specialist buy-to-let lender Kensington, advises landlords with housing benefit tenants to prepare: “It puts more emphasis on carrying out financial checks before the tenancy begins.”1