From
February 22, 2010
Ministers are to crack down on excessive housing benefit payments in a series of reforms designed to curb the increasing £17 billion annual rental bill.
Yvette Cooper, the Work and Pensions Secretary, plans to cap the highest rates paid to private landlords — as much as £1,800 a week — to stop families on benefit living in palatial homes at the taxpayers’ expense, The Times has learnt.
The reforms, to be announced in the run up to next month’s Budget, are expected to save hundreds of millions of pounds a year, but could result in hundreds of families being evicted from expensive accommodation with six months’ notice.
The move is a response to a growing number of cases, particularly in London and other cities, where local councils have been forced to pay private rents for families in five-bedroom mansions worth more than £1 million because of the shortage of suitable council housing.
The housing benefit bill, which covers rents in the private and social sector, has jumped from £11 billion in 1998 to £17.4 billion in 2008-09 and goes to 4.5 million claimants. The Treasury has forecast that this will rise to £20 billion by 2011 because of the recession, rising private rents and a critical shortage of social housing. The average rent in social housing is only£72 a week against £108 in the private sector.
Roughly 100 families are now receiving more than £1,000 a week in rent — up to a maximum of £1,800. But the problem is growing across the country as landlords take advantage of generous benefit limits. Thousands of households are receiving payments of £500 a week or £26,000 a year to live in homes beyond the reach of most working families.
Councils have to house anyone who has been homeless for six months, but they also have to pay housing benefit for anyone already receiving such payments who moves from a different area. In these cases the family can move into any house and the council is obliged to cover the payment.
Last week it emerged that Essma Marjam, a single mother with six children, had moved into a £2 million house in Maida Vale, costing the taxpayer £1,600 a week in rent.
Ms Cooper has now decided to exclude the top 5-10 per cent of private rents when making housing benefit calculations. This could either be done nationally, penalising London properties most, or regionally, which would save more money.
Helen Goodman, the Benefits Minister, told The Times yesterday that a regional scheme could save hundreds of millions of pounds a year.
The highest rents could come down by more than £1,000 a month and average rents could fall by at least £100 a month under the new calculations.
Ms Goodman admitted that the new cap could result in evictions but hoped these would be minimal. The spiralling housing benefit bill is largely due to a critical shortage of social housing which has led to a greater reliance on private sector homes. The Government virtually stopped building social housing in the late 1990s and the recession is preventing Gordon Brown from making much progress on his ambition to build three million homes by 2020, including nearly one million social houses.
Recent figures from the National Housing Federation predicted that only 45,000 social homes would be built in 2009/10.
High rents were first addressed in 2008 when the Government introduced a formula for calculating maximum payments. Under the new system of local housing allowances the Valuation Office Agency links maximum benefit rates with weekly average private rents for different-sized homes in over a hundred zones.
James Purnell, the former Work and Pensions Secretary, put a another sticking plaster on the problem in October 2008 when he put a 5-bed limit on housing benefit claims. The aim was to stop bigger families with six or seven children living in stucco mansions. That failed too.
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