LHA cap will leave 12,000 younger Scots facing £8.6m rent shortfall

scotland-house-home-stockAround 12,000 mainstream social tenants across Scotland aged under 35 could collectively face an annual rent affordability gap of up to £8.6 million when a UK government cap on housing benefit into force, according to a new report.

Under proposals by the Department for Work and Pensions (DWP), Local Housing Allowance (LHA) payments or the housing element of Universal Credit will be limited to that of the shared accommodation rate after April 2019.

Research commissioned by the Chartered Institute of Housing in Scotland in partnership with the Scottish Government has found that the cap will see thousands of younger Scots collectively hit by a rent affordability gap of between £5.3m and £8.6m when the changes are implemented.

Conducted by the Indigo House Group, the research published today reveals that the cities of Edinburgh and Glasgow are likely to be the most severely affected by the policy with 27% of all of Scotland’s single Housing Benefit claimants aged under 35 living in these two cities, equivalent to more than 6,500 people. The total weekly shortfall in Edinburgh is expected to be £19,600 and in Glasgow, those affected face a collective weekly shortfall of £18,800.

Analysis of average social sector rents shows the potential financial impact for individuals varies considerably depending on the size of home they are living in and how social rents compare with LHA rates for the area.

Across Scotland, single tenants under the age of 35 living in a one bedroom home and affected by the cap will face an average shortfall in rent of £6.60 per week. The highest shortfall for one bedroom homes will be experienced in Edinburgh at £22.09 per week. Meanwhile, there are eight areas showing no shortfalls between the average local one bedroom social rents and the ‘cap’ LHA rate.

Since October 2015, the UK government has made various proposals and amendments to cap Housing Benefit or the housing element of Universal Credit for social housing tenants at LHA rates, including for those living in supported or temporary accommodation. The proposals are intended to bring payments for social housing tenants in line with those living in the private rented sector.

Legislation to implement these proposals has yet to be introduced. However, as the proposals currently stand, single people under 35 years of age will see their allowance capped at the Shared Accommodation Rate (SAR).

An upper estimate of the impact of the policy suggests that around 14,400 tenants could face a collective shortfall of £8.6m annually. These figures were arrived at by calculating the difference between average rents by property size submitted annually to the Scottish Housing Regulator by individual social landlords, comparing this with the SAR in the corresponding local authority area and multiplying this by the estimated total number of social tenants aged under 35 living in that area.

An alternative method using DWP figures was also used. By excluding an estimated 2,500 Housing Benefit claimants aged under 35 who are thought to live in temporary or supported accommodation and may therefore benefit from a partial or total exemption from the proposed LHA cap, the research estimates that the LHA cap would still hit around 12,000 social tenants living in mainstream accommodation with a collective rent shortfall of £5.3m per year.

Although it is anticipated that some tenants living in specialist and temporary accommodation will be protected from the cap, it is not yet clear what exemptions will be made or how much funding will be available to plug this gap.

Minister for housing Kevin Stewart said: “This report demonstrates the impact that the next round of harsh welfare cuts from the UK government is having – this time on younger, single people. These cuts are expected to remove up to £8.6m in welfare from a group of young people who rely on these benefits due to low incomes. There are few options for social landlords or tenants to mitigate the impact, especially as those affected will largely already be in some of the cheapest accommodation available.

“We share the concerns that so many have around the potential impact of these cuts. I will be writing to David Gauke MP to make sure that he takes account of this report and calling on him to use the Budget to announce he should not apply the shared accommodation rate in the social sector.”

CIH Scotland policy and practice manager, Ashley Campbell, said: “The results of this research confirm the damaging impact the UK government’s plans to cap housing benefit at LHA rates will have on younger social tenants in Scotland. That impact goes far beyond the immediate financial effect.

“Many of those 12,000 affected face the prospect of falling into rent arrears and, in the worst cases, losing their home and being made homeless. In many cases, local authorities will face real challenges with rehousing those now unable to afford their rent because we simply do not have enough appropriate housing available to do so.”

Chair of CIH Scotland, Amanda Britain, added: “We plan to make the UK government aware of the key findings of this research and the full scale of the negative impact the LHA cap will have on social tenants aged under 35. We are urging the government to rethink its entire approach and to take active steps to prevent what will otherwise be a disaster waiting to happen in April 2019.”

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