Housing Benefit Reform (Private Rented Sector)

Tuesday 30th November 2010 Written Statements

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

In June 2010, the Government announced a number of measures that will contain housing benefit expenditure and create a fairer system of support by taking steps to ensure that people on benefit are not living in accommodation that would be out of reach of most people in work. In its first step to reform housing benefit, the Government are amending legislation in relation to customers living in the private rented sector, primarily affecting customers whose housing benefit is assessed according to local housing allowance rules.

I have today laid the Housing Benefit (Amendment) Regulations 2010 and amendments to the Rent Officers (Housing Benefit Functions) Order 1997 that will bring into effect measures to:

i. remove the five-bedroom local housing allowance rate so that the maximum level is for a four-bedroom property.

ii. introduce absolute caps so that local housing allowance weekly rates cannot exceed £250 for a one-bedroom property; £290 for a two-bedroom property; £340 for a three-bedroom property; £400 for a four-bedroom property.

iii. remove the up to £15 weekly housing benefit excess that some customers can receive under the local housing allowance arrangements.

iv. include an additional bedroom within the size criteria used to assess housing benefit claims in the private rented sector where a disabled person, or someone with a long-term health condition, has a proven need for overnight care and this is provided by a non-resident carer.

v. set local housing allowance rates at the 30th percentile of rents in each broad rental market area rather than the median.

The Government are convinced it is absolutely necessary to take urgent steps to manage housing benefit expenditure, and to ensure that people who make new claims for housing benefit in the private rented sector are prevented from claiming the higher rates of local housing allowance. The Government have listened to advice from the Social Security Advisory Committee and from key stakeholders in relation to the implementation of these measures and, clearly, it is essential that existing customers have sufficient time to adjust to their new circumstances. In order to ensure a smooth transition for the changes in 2011, the measures will come into force as follows:

The measure to provide an additional bedroom within the size criteria for some customers with a non-resident carer will proceed in April 2011. All claimants who meet the criteria will be entitled immediately from April.

All changes that will adjust the way local housing allowance rates are calculated will come into force from April 2011 for new claims to ensure the measures are fiscally neutral over the spending review period. Existing claimants affected by the changes to local housing allowance rules will continue at their current rate of benefit until their claim is reviewed by their local authority; they will then have a further period of transitional protection at their current local housing allowance rate of up to nine months if there has not been a relevant change of circumstances. No one will be able to receive more in benefit than they pay out in rent once their claim has been reviewed.

In addition to the funding announced to increase the discretionary housing payment fund, the Government have allocated a further £50 million over the spending review period to support the implementation of these measures. This will provide targeted support to help meet the housing needs of claimants who are affected by the changes, and we will work with local government on its allocation.

The Government intend that the measures they are introducing to adjust local housing allowance rates will act to reduce rents in the private rented sector. To support this, the Government are temporarily widening the discretion of local authorities to make direct payments to the landlord in some circumstances where it will support tenants in retaining or securing a tenancy. The Government will work closely with local authorities to ensure this provision is used only in very specific circumstances where landlords are reducing rents to a level that is affordable for claimants.