DWP Housing Benefit Reform:Impact on Claimants in the

Private Rented Sector

Communities Analytical Services

Structure

• Background - Housing Benefit• Profile - Edinburgh Tenants in 2004• Determining Housing Benefit • Why Reform?• Analysis• Findings• Behaviour?

Housing Benefit:

• A means-tested social security benefit to help people with low incomes pay for rented accommodation.

• Administered in the Private Rented Sector, it is flexible to local market conditions.

Eligibility:

• Example: – A single person household, between the age

of 25 and 59, earning less than £59.15, is eligible for the maximum level of Housing Benefit

– For every pound earned above this, 65p in HB is withdrawn

Eligible for what? HB Determination - Old System

• For each applicant, maximum HB will be the minimum of:

– The mid-point of local market rents (the LRR)– “ “ “ “ “ “ “ for an

appropriately sized property (the ‘notional rent’)– The property’s actual rent

…And for who?Profile of Edinburgh Tenants - 2004

Gender

31%

69%

Male

Female

Age

13%

68%

12%7%

Under 25 25-49

Older Working age Pensionable age

Working Status of Working-Aged Tenants

21%

15%

43%

21%

In workNot working, have worked in past 2 yearsNot working, last worked more than 2 years agoNever worked

Household Composition

3% 7%

52%9%

29%

Couple, no childrenCouple with childrenLone ParentsOther multi-person householdSingle Person

Income and Economic Wellbeing

• 20% of tenants< £5,000 per year

• Mean income: £8,766

• 73% of tenants ‘getting by alright’ or better

• 26% ‘not managing very well’ or worse

Old SystemRecap• Each household can have rents supported up to

either the local average; the average for a suitable size property; or the actual rent

• This means tenants don’t gain by finding anything cheaper than average

• …and it’s unclear what level of HB a tenant will receive.

New System What Will Change?

• A Single Local Housing Allowance for each area

New SystemWhy Reform?

• A fixed LHA might give:»Fairness»Choice»Transparency»Simplicity

What will change? Existing Tenants

• For existing tenants, local boundaries will expand.

• This may alter what is considered a reasonable local rent (an LRR) within these areas.

• …which may affect some tenants’ maximum housing benefit entitlement

AnalysisExisting Tenants

For each claimant recorded between November 2006 and October 2007

• Comparison of – Original ‘maximum rent applicable for housing benefit

purposes’– Simulated ‘maximum rent applicable for housing benefit

purposes’ given new Locality boundaries

• For around 54,000 Scottish Households

Impact Existing Tenants

• 5% of existing Scottish claimants would face a reduction, averaging £6.04.

• 88% of existing claimants will face no change in housing benefit.

• 7% of existing claimants will see an increase in housing benefit.

Impact by Local Authority

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Increased Housing BenefitNo ChangeReduced Housing Benefit

What will change? Future Claimants

• Introduction of Broad Rental Market Areas – Will make some less expensive localities more

attractive

• Introduction of a flat-rate Local Housing Allowance– Will make some cheaper properties more attractive

Method Future Claimants

• Limited to describing the ‘generosity’ of the new system relative to the old

– Future tenants will face different accommodation choices

– But ROCAS can only examine currently-occupied properties

FindingsRelative Generosity of LHA

• If existing tenants, in their existing properties, were to switch to the LHA:

– 80% would see an increase in HB– 7% would see little change in HB– 13% would see a reduction in HB

• But variation in effect between Local Authorities

…if existing tenants switched

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Accommodation Choice and HB Support: Absolute Affordability

• Under the old system, 57% of existing claimants face a shortfall between their rent, and their maximum HB

• If these tenants were to switch to LHA, this figure would reduce to 36%

Absolute Affordability Shortfall by Local Authority

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Missing AnalysisWhat can’t we say?• Existing Tenants – of those facing increases and

decreases in HB, who are most financially vulnerable?

• Future tenants – given the weak link between accommodation choice and HB, how will future choices change?

• Landlords – Will market power lead to price-fixing?