September 7, 2010 5:50 pm

Warning over housing benefit cuts

The British Property Federation (BPF), which represents property investors, warned on Tuesday that the government’s proposed cuts to housing benefits are a “recipe for destitution” that would hamper economic recovery across the country.

The BPF estimates that the government’s suggested budget reductions could force up to 800,000 claimants of local housing allowances to leave London and other cities where jobs are more available, to find shelter.

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The trade body believes there are over 400,000 new claimants that will be hit by the changes, and that a further 400,000 people already in work and claiming the benefit may be priced out of their homes.

Ian Fletcher, the BPF’s director of Policy, said: “For the victims of the recent recession and working claimants the last thing they need is to move away from their local jobs market as a result of the cuts to their housing benefit entitlement. It is no means certain that the policy will incentivise claimants back to work and could have the opposite effect.”

The government believes it can save £1.8bn a year from the annual £21bn housing benefit bill - or 7 per cent of the total - which is paid to people who are unemployed or on low incomes. The benefit goes to 4.5m families, of which about a third live in private rented accommodation.

From October 2011 the local housing allowance rate would be set at the 30th percentile of local rents, the government said. At present, the system pays at the median level of rent in an area. Housing benefit will also be linked to consumer price inflation rather than the higher retail price index.

There is also to be a strict cap of £250 a week for a one-bed property and £400 a week for four bedrooms or more, the equivalent of about £20,000 a year. This move comes after newspaper stories about unemployed families living in “palatial” homes in wealthy areas of London.

As an incentive to make people work, claimants receiving jobseeker’s allowance (JSA) for more than a year will see their housing benefit cut by 10 per cent. On Monday, the TUC warned that almost 200,000 unemployed adults will lose nearly £500 a year if the cut is introduced. Those who will be hit include 102,000 adults who have been claiming JSA for 12 months or more, 68,000 lone parents and at least 24,000 disabled people.

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