e-mail Paul Lewis on paul@paullewis.co.ukThe Government is planning to save up to £2 billion a year by cutting the amount it spends on helping low income households with their rent. Some cuts start this month and will affect people who rent from private landlords. The Department for Work and Pensions estimates that 52,000 lower income over 60s will find their help with rent cut. Those in council or housing association property will not be affected.
Local Housing
Allowance
Help with your rent is called Housing Benefit and how much you
get depends on your household circumstances, your age and your income (and
savings if they are substantial). If you are in a council or housing association
house or flat it also depends on your rent. But if you rent from a private
landlord then the actual rent you pay may not be used. The maximum amount of
rent is fixed by law and is called Local Housing Allowance or LHA. This LHA is
being reduced from April.
At the moment the LHA is fixed at what is called the ‘median’ rent in your area. That means half the rents are above that figure and half below. So for example the LHA for a 1-bedroom property in Bristol before the changes was £121.15 a week. But under the new rules from April that will fall by £6.92 to £114.23. The LHA relates not to the number of bedrooms you have but the number you are entitled to, which is one if you are single or a couple with no children. The average rent for a two bedroom property will fall from £150 to £138.46, a cut of £11.54 or nearly 8%. To be entitled to a 2-bedroom rent you will need at least one child. Those cuts are fairly typical but in London and in some cities they are much bigger.
Overall the change means that people on housing benefit will be able to afford three out of ten local properties of the appropriate size whereas under the old rules they could afford half of them. The new rent levels will apply at once to anyone renting a property from April. For existing private rented tenants who began renting on 7 April 2008 or later they will apply nine months after the first anniversary of their claim which falls after 1 April 2011. So if your first claim was on 8 October 2008 the new rate will begin nine months after 8 October 2011 which is 8 July 2012. Once the change starts the amount of housing benefit will fall and you will have three choices. Find the extra; negotiate a lower rent with the landlord; or find somewhere to live which is within the LHA limit. If this causes hardship every local council has a discretionary housing payment fund but it is likely to be under great pressure.
One other change may affect Saga readers. Until April if the actual rent was less than the LHA then the tenant could keep the extra up to £15 a week. From 1 April that stops. The maximum rent that will be paid will be the LHA or the actual rent if that is lower.
If you are in council or housing association property then the rent you use in the calculation is generally the actual rent, though there are some circumstances in which you will not get the full rent counted if you live in a bigger property than you now need. People who have claimed housing benefit for a private rented home since before 7 April 2008 will also have the actual rent used unless they move home or have a break in their housing benefit.
The sums
How
much help you get with your rent will also depend on your age. Those over 65 get
the most help, people aged from women’s state pension age to 64 get a bit less
and those under women’s state pension age get a lot less. Women’s state pension
age is rising in stages and is currently about 60 years 6 months. But by this
time next year it will be 61. A single person with an income of £150 a week
paying the average 1-bed private rent of £107 a week will get housing benefit of
£53.38 at age 25 to 60. At women’s state pension age that will rise to £98.78
and at 65 the whole of the £107 a week rent will be paid.
A single person can get some help with this average 1-bed rent if their income is up to £321 a week (over 65), £301 a week (WSPA to 64) and £231 a week (aged 25 to WSPA). For a couple those figures are £400, £373, and £269. At these limits the amount you will get will be around 50p a week. But they show how high incomes can be for some help to be given.
Tenants who rent from private landlords can get help with higher incomes as rents and the LHA are usually higher.
Those income figures assume you have no capital – which includes money in the bank, shares and investments. Income from the capital such as interest is ignored. If you are over women’s state pension age capital does not affect your housing benefit if it is up to £10,000 – under that age it is £6000. If it is above that level then an addition is made to your income. It is £1 a week and then another £1 a week for each complete £500 (£250 if you are under women’s state pension age). If your capital is above £16,000 you cannot get housing benefit unless you also get the guarantee part of pension credit.
How to claim
You claim housing benefit from your local council. If you are entitled to
housing benefit you will probably be able to get your council tax reduced too.
If you are over 60½ you can claim housing benefit with pension credit and
council tax benefit by calling 0800 99 1234.
You can check your entitlement to means-tested benefits at www.turn2us.org.uk/benefits_search.aspx
And if you are a private tenant you can see how the April changes will affect you at hbupdate.com
e-mail Paul Lewis on paul@paullewis.co.uk