As rents have risen, a lower benefit cap could leave thousands of Londoners facing eviction and relocation – and their landlords facing an identity crisis

The big housing story of the moment is the expansion of the right to buy, but the imminent cut in the benefit cap from £26,000 to £23,000 could have a far more devastating impact upon social landlords and tenants.

In London, social landlords who have embraced the affordable rent programme – which can see social tenants charged far higher rents – could be very badly hit by an increase in arrears once tenants receiving housing benefit see their support cut by £3,000 a year.

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The overall benefit cap is popular among the wider public, but most people don’t realise that it only applies to those who, often through no fault of their own, are paying a high rent.

At present, a working-age family claiming benefits can claim up to £500 a week. This is set to drop to £440 following the emergency budget in July. The new cap applies to anyone receiving an out-of-work benefit, including jobseeker’s allowance and employment and support allowance, which is paid to people with disabilities. If you imagine the £500 in benefits as a pile of pound coins it is the housing benefit that sits at the top of the stack. As the cap comes down it is the housing benefit that is sliced off first.

Take this example. A couple with three children in a three-bed housing association property in Islington pay a rent of £180 a week. They both have disabilities and are entitled to employment and support allowance. Their current weekly benefit entitlement is £500: child tax credits £171; employment support allowance £115; child benefit £48; housing benefit £166.

Because of the existing benefit cap, there is already a gap of £14 a week between the rent and the housing benefit. This is not a huge problem; they could make up the difference from their income benefits. But the reduced cap of £440 will take £60 a week off their housing benefit leaving them with a weekly shortfall of £74 on the rent. That amounts to £3,848 a year.



Tenants hit by the cap will have little option but to downsize to cheaper properties miles away or face eviction

In the past four years around 23,000 London homes have been rented at the higher “affordable rents”, with prices set at up to 80% of market rents (typically housing associations rented homes at “social rents” of around 40-50% of market rates). Detailed data is hard to come by, but around 5,000 of these are three-bedroom houses and larger. The average rents are around £250 a week, and over half house tenants receiving out of work benefits who will be affected by the reduced cap.

Using the example above, these tenants could quickly build up arrears of up to £7,000 in a year (assuming they are not evicted sooner). This amounts to a potential loss of income of £37m for the social landlords affected. Tenants hit by the new cap will have little option but to downsize to smaller and cheaper properties, most likely outside of London, or to face eviction into temporary accommodation such as bed and breakfasts.

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This leaves questions for social landlords to answer. Having let these “affordable” homes to people in the same way as social rented homes will they admit any liability for the problem they have created? And to whom do they let these properties in the future?

It seems to me that the only option will be to treat “affordable rent” homes as an intermediate product which is only suitable for people in relatively high-paid work. If that is the outcome, the outlook for poor people waiting for social housing looks bleak.

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