Housing benefit: cuts on the way

The 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 over £10,000). 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 is the maximum rent you can get paid. It relates to the number of bedrooms you are entitled to, which is one if you are single or a couple with no children. Those cuts are fairly typical but in London and in some cities they are much bigger.

From April 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 on or 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 for 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 amount 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 a figure more like 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. If you are single with an income up to £157 a week you will get all your rent paid. For a couple the limit is £236. With higher incomes you may still get some of your rent paid. For example if your rent is £107 a week which is the average 1-bed private landlord rent then a single person will get some help with an income up to £321 a week and a couple up to £400 a week. At those incomes the amount you get will be 50p a week. But they show how high incomes can be for some help to be given to people over 65. If your rent of LHA is higher than £78 then you can get help at even higher incomes.

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 state pension age capital does not affect your housing benefit if it is up to £10,000. 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. 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
Because the rules are so complicated more than a quarter of a million people over 60 who could claim housing benefit fail to do so. Between them they lose between half a billion and one billion pounds a year – an average of about £47 a week each.

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, possibly to nothing. In Northern Ireland you may be able to get your rates reduced. You can claim housing benefit with pension credit and council tax benefit by calling 0800 99 1234. If you are a private tenant you will pay your rent as normal and the housing benefit will be paid direct into your bank account. Council and housing association tenants will have their rent reduced.

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