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DWP Housing Benefit Reform:Impact on Claimants in the
Private Rented Sector
Communities Analytical Services
Structure
• Background - Housing Benefit• Profile - Edinburgh Tenants in 2004• Determining Housing Benefit • Why Reform?• Analysis• Findings• Behaviour?
Housing Benefit:
• A means-tested social security benefit to help people with low incomes pay for rented accommodation.
• Administered in the Private Rented Sector, it is flexible to local market conditions.
Eligibility:
• Example: – A single person household, between the age
of 25 and 59, earning less than £59.15, is eligible for the maximum level of Housing Benefit
– For every pound earned above this, 65p in HB is withdrawn
Eligible for what? HB Determination - Old System
• For each applicant, maximum HB will be the minimum of:
– The mid-point of local market rents (the LRR)– “ “ “ “ “ “ “ for an
appropriately sized property (the ‘notional rent’)– The property’s actual rent
…And for who?Profile of Edinburgh Tenants - 2004
Gender
31%
69%
Male
Female
Age
13%
68%
12%7%
Under 25 25-49
Older Working age Pensionable age
Working Status of Working-Aged Tenants
21%
15%
43%
21%
In workNot working, have worked in past 2 yearsNot working, last worked more than 2 years agoNever worked
Household Composition
3% 7%
52%9%
29%
Couple, no childrenCouple with childrenLone ParentsOther multi-person householdSingle Person
Income and Economic Wellbeing
• 20% of tenants< £5,000 per year
• Mean income: £8,766
• 73% of tenants ‘getting by alright’ or better
• 26% ‘not managing very well’ or worse
Old SystemRecap• Each household can have rents supported up to
either the local average; the average for a suitable size property; or the actual rent
• This means tenants don’t gain by finding anything cheaper than average
• …and it’s unclear what level of HB a tenant will receive.
New System What Will Change?
• A Single Local Housing Allowance for each area
New SystemWhy Reform?
• A fixed LHA might give:»Fairness»Choice»Transparency»Simplicity
What will change? Existing Tenants
• For existing tenants, local boundaries will expand.
• This may alter what is considered a reasonable local rent (an LRR) within these areas.
• …which may affect some tenants’ maximum housing benefit entitlement
AnalysisExisting Tenants
For each claimant recorded between November 2006 and October 2007
• Comparison of – Original ‘maximum rent applicable for housing benefit
purposes’– Simulated ‘maximum rent applicable for housing benefit
purposes’ given new Locality boundaries
• For around 54,000 Scottish Households
Impact Existing Tenants
• 5% of existing Scottish claimants would face a reduction, averaging £6.04.
• 88% of existing claimants will face no change in housing benefit.
• 7% of existing claimants will see an increase in housing benefit.
Impact by Local Authority
0%
20%
40%
60%
80%
100%
Sti
rlin
g
Ea
st
Re
nfr
ew
sh
ire
So
uth
Ay
rsh
ire
We
st
Du
nb
art
on
sh
ire
Du
mfr
ies
& G
allo
wa
y
Ea
st
Du
nb
art
on
sh
ire
Re
nfr
ew
sh
ire
Gla
sg
ow
Cit
y
No
rth
La
na
rks
hir
e
Sc
ott
ish
Bo
rde
rs, T
he
Sc
otl
an
d
Inv
erc
lyd
e
Ea
st
Ay
rsh
ire
We
st
Lo
thia
n
Fif
e
Mid
loth
ian
No
rth
Ay
rsh
ire
So
uth
La
na
rks
hir
e
Cla
ck
ma
nn
an
sh
ire
Fa
lkir
k
Ea
st
Lo
thia
n
Eile
an
Sia
r
Du
nd
ee
Cit
y
An
gu
s
Ab
erd
ee
n C
ity
Mo
ray
Pe
rth
& K
inro
ss
Hig
hla
nd
Ork
ne
y
Ab
erd
ee
ns
hir
e
Sh
etl
an
d
Increased Housing BenefitNo ChangeReduced Housing Benefit
What will change? Future Claimants
• Introduction of Broad Rental Market Areas – Will make some less expensive localities more
attractive
• Introduction of a flat-rate Local Housing Allowance– Will make some cheaper properties more attractive
Method Future Claimants
• Limited to describing the ‘generosity’ of the new system relative to the old
– Future tenants will face different accommodation choices
– But ROCAS can only examine currently-occupied properties
FindingsRelative Generosity of LHA
• If existing tenants, in their existing properties, were to switch to the LHA:
– 80% would see an increase in HB– 7% would see little change in HB– 13% would see a reduction in HB
• But variation in effect between Local Authorities
…if existing tenants switched
0%
20%
40%
60%
80%
100%E
ast
Ren
frew
shir
e
Sti
rlin
g
So
uth
Ayr
shir
e
An
gu
s
Du
mfr
ies
& G
allo
way
Ab
erd
een
Cit
y
Du
nd
ee C
ity
Gla
sgo
w C
ity
Wes
t D
un
bar
ton
shir
e
Wes
t L
oth
ian
Hig
hla
nd
Ren
frew
shir
e
Eas
t D
un
bar
ton
shir
e
No
rth
Lan
arks
hir
e
Per
th &
Kin
ross
Sco
ttis
h B
ord
ers,
Th
e
So
uth
Lan
arks
hir
e
Eas
t A
yrsh
ire
Inve
rcly
de
Fif
e
No
rth
Ayr
shir
e
Ab
erd
een
shir
e
Cla
ckm
ann
ansh
ire
Ork
ney
Mid
loth
ian
Fal
kirk
Eas
t L
oth
ian
Mo
ray
Eile
an S
iar
Sh
etla
nd
Increased Housing Benefit
No Change
Reduced Housing Benefit
Accommodation Choice and HB Support: Absolute Affordability
• Under the old system, 57% of existing claimants face a shortfall between their rent, and their maximum HB
• If these tenants were to switch to LHA, this figure would reduce to 36%
Absolute Affordability Shortfall by Local Authority
0%
20%
40%
60%
80%
100%
Mo
ray
An
gu
s
Ab
erd
een
Cit
y
Ork
ney
Du
nd
ee C
ity
Per
th &
Kin
ross
Ab
erd
een
shir
e
Hig
hla
nd
Fif
e
Eil
ean
Sia
r
Wes
t L
oth
ian
Sco
ttis
h B
ord
ers,
Th
e
Sh
etla
nd
Eas
t L
oth
ian
Du
mfr
ies
& G
allo
way
Eas
t A
yrsh
ire
Eas
t R
enfr
ewsh
ire
Eas
t D
un
bar
ton
shir
e
Mid
loth
ian
Wes
t D
un
bar
ton
shir
e
No
rth
Lan
arks
hir
e
So
uth
Lan
arks
hir
e
Ren
frew
shir
e
So
uth
Ayr
shir
e
Gla
sgo
w C
ity
Sti
rlin
g
Cla
ckm
ann
ansh
ire
No
rth
Ayr
shir
e
Fal
kirk
Inve
rcly
de
% Too Large
% Too Expensive
Missing AnalysisWhat can’t we say?• Existing Tenants – of those facing increases and
decreases in HB, who are most financially vulnerable?
• Future tenants – given the weak link between accommodation choice and HB, how will future choices change?
• Landlords – Will market power lead to price-fixing?