Full impact of housing benefit reforms in private rented sector ‘still to happen’ – report

The impact of housing benefit reform on tenants living in the private rented sector has been “geographically limited” but London has been hardest hit, according to research published today by the Department for Work and Pensions.

Research from an independent consortium led by the Centre for Regional Economic and Social Research (CRESR) at Sheffield Hallam University on behalf of the DWP covers the impact of changes to local housing allowance (LHA) in the private rented sector.

The research looked at the attitudes of claimants and landlords in 19 areas across Great Britain following housing benefit reforms that started in April 2011.

The report finds:

  • The anticipated displacement of LHA households has not yet happened
  • It is falling to tenants to fill the benefit gap in the majority of cases (94%) rather than landlords through reducing rents (6%)
  • In 120 council areas, reductions to housing benefit have been £5 or less
  • The extra £130 million of support from DWP to councils to help tenants has “blunted the impacts in London and tighter PRS markets elsewhere.

Minister for Welfare Reform Lord Freud, said: “Reform of housing benefit in the private sector was absolutely necessary to control a system that saw spending double over a decade to more than £20 billion a year. However, it is also necessary to monitor and follow the reforms to help us build and learn for future reforms.

“I want to thank the consortium led by the Centre for Regional Economic and Social Research (CRESR) for their ongoing work and look forward to the final report.”

Consortium lead Ian Cole, Professor of Housing Studies, Centre for Regional Economic and Social Research (CRESR), said: “This report provides findings from in-depth interviews undertaken with claimants, landlords and housing advisors in early stages of the implementation of the reforms.

“In addition an econometric and spatial analysis of housing benefit claims provides insights to the initial impacts of the reforms across the country.

The report concludes: “Overall, the research into the early impacts of the LHA reforms shows that the main effects have been geographically limited. The impact is far more marked in the London housing market than elsewhere. The on-flows of LHA claimants at LA level since the reforms have reduced most sharply in the London central areas, reflecting the wider gap between average rents and LHA rates in these boroughs.

“The anticipated displacement of existing LHA households in these areas has not yet taken place. The transitional measures, such as DHPs, appear to have temporarily blunted the impacts in London and tighter PRS markets elsewhere (such as York and Cambridge), as they were partly intended to do.

“At the time of the research, the early effects of LHA reforms had also been fairly limited in terms of displacement, additional evictions or more cases of homelessness. Underlying housing market pressures in the PRS were more significant drivers of landlord and claimant behaviour.

“Analysis of the incidence of the reductions in LHA rates indicates that 94% of the gap falls to tenants to meet through increased shortfalls, while 6% of the gap is met by landlords (through reducing rents).

“There may, however, be informal arrangements whereby landlords ‘turn a blind eye’ to tenants who fail to meet the full rent payment, at least for the remainder of their current tenancy, and it may take time for market rents to adjust to the changes.

“Many of the research findings at this early stage have inevitably been provisional; many tenants were still in the transitional protection period at the time of the interviews, and housing advisers felt that the impacts of the measures would not become evident until 2013.

“The next phase of this research project will involve reporting on the findings of the follow-up large-scale surveys with claimants and landlords being undertaken in late 2012; the further in-depth qualitative interviews claimants and landlords undertaken in early 2013; housing adviser focus groups; and further spatial and econometric analysis of data running through to early 2013.

“Through these combined methods it will be possible to ascertain whether many of these interim research findings continue to hold in the longer term, or whether the impacts will change, if landlords and claimants adapt in a different way once the LHA reforms become more embedded.”

The full research ‘Monitoring the impact of changes to the Local Housing Allowance system of Housing Benefit: Interim report’ is available here.

Article courtesy of 24dash

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