CPAG’s challenge to the housing benefit changes

Housing benefit (HB) is a weekly welfare benefit which is intended to help claimants on low incomes meet the cost of their rent. The maximum weekly amount of housing benefit which can be paid to claimants renting in the private sector is limited. The current rules which restrict the amount that can be paid are the local housing allowance (LHA) rules. The LHA is a system of flat rate allowances payable for categories of property determined by bedroom size within a “Broad Rental Market Area” (BRMA). The maximum weekly housing benefit the claimant is entitled to is the LHA for the size category of property which s/he is entitled to in the area where s/he lives.[footnote 1].

Changes coming into force from April 2011

The Government has introduced rules [footnote 2] which make the following changes. The intention is to save £2 billion:

1. They reduce the maximum size of a dwelling which can be paid for by housing benefit to 4 bedrooms, saving £210 million over 4 years.
2. They cap the LHA rates payable for each category of property to the following wherever the property is situated in the country:
• One bedroom in shared house £250
• One bed self contained £25
• Two bed £290
• Three bed £340
• Four bed £400
This saves £45 million over 4 years.
3. They remove the provision which allows a claimant to retain up to £15 where they rent a property below the LHA rate, saving £1.84 billion over 4 years.
4. They reduce the LHA rate from the median of rents in each BRMA to the 30th percentile, saving £1.201 billion over 4 years.
5. They allow for an additional room to be included in the size criteria for a non-resident carer of a disabled claimant, costing £60 million over 4 years.

The rules allow for the rate of HB to be protected for up to 9 months for existing claimants.

The issues in this case

CPAG has brought a case challenging the first two of these changes; the reduction to 4 bedrooms and the overall cap. [footnote 3] CPAG has been granted permission to proceed with a claim for judicial review by the Administrative Court. The case should be heard by the end of July.

The legal basis for CPAG’s challenge is as follows:

• The changes are contrary to what parliament intended the fundamental purpose of the housing benefit scheme to be; it was meant to be a national scheme to prevent homelessness. The overall cap would mean that a large area of central London would no longer be accessible to housing benefit claimants in the private rented sector.
• The Government has failed to have due regard to the general equality duties under the Race Relations Act 1976 and the Sex Discrimination Act 1975. It is likely that black and minority ethnic groups and lone parents will be disproportionately hit by both cuts being challenged.

The case has been brought by judicial review in the Administrative Court. Counsel in this case are Martin Westgate QC and Jamie Burton, from Doughty Street Chambers.

We have asked the court to consider whether to grant us permission to go ahead with the case by the end of March, and we have asked for a final hearing by the end of June.

Why are these changes being made?

The main reason for these changes is to save money. The Government has said that housing benefit cost £17 billion in 2008-9, £20 billion in 2009-10 [footnote 4] and is forecast to cost £25 billion by 2015. However, the part of the HB scheme affected by the changes, HB claims administered under the LHA rules, accounts for around £5 billion of the annual budget.

The Government also says that housing benefit acts as a disincentive to work and allows housing benefit claimants to live in accommodation that low income working households could not afford. It says the likely effects of the changes have been exaggerated. It believes landlords will reduce rents. It has said it will review the effects of the changes after a year.

CPAG does not accept the Government’s reasons are valid. In London, which is the worst affected area, 87% of HB claimants are in work. [footnote 5] It seems very unlikely landlords will agree to reduce rents, especially in areas like London where there is a high demand for housing. It also seems possible that these changes could end up costing more than they save for the reasons that are set out below.

Who will be affected and where?

There is a great deal of evidence about the likely effects of these changes. There has been a consultation by the Social Security Advisory Committee (SSAC), [footnote 6] and a consultation by the Work and Pensions Committee (WPC). [footnote 7] The government has carried out an equalities impact assessment. A large number of NGOs, local authorities, and other groups responded to these consultations. SSAC recommended that the changes should not go ahead. The Government has responded to both reports.

The reduction to 4 bedrooms will affect around 9,000 large families and households across the country. [footnote 8]

The overall cap will affect Central London. The Government’s evidence shows that:

• In the Central London BRMA [footnote 9] the percentage of accommodation let at or below the caps will fall from 52% to 7%;
• In the Inner North and West London BRMA that percentage will fall from 51% to 25%; and
• In Inner South and West London it will fall from 51% to 29%. [footnote 10]

The Mayor of London thinks around 9,000 London households will have to leave their homes as a result of the caps, and that about 4,600 will be unable to find anywhere else to live “locally”. This could mean upwards of 20,000 children having to move, 14,000 out of their local area. [footnote 11]

The Government has accepted that some people will have to move. Lord Freud, the Minister for Welfare Reform, said:

“A small number of people in the most expensive places will, of course, have to move, but they will not have to move far, and we will work with local authorities to give those people the support that they need. In central London, 2.5 million jobs are accessible within 45 minutes of travel. Bus fares, although they went up this month, are no more than £1.30 for a single journey so they can go long distances on a bus”.

Many of the contributors to the consultations have been very worried about the social consequences of these reforms, and have argued the may end up costing more than they save. Shelter has said that the reforms “will only generate greater financial and social costs in the future”. [footnote 12]

It seems very likely that these changes will have a big impact on local communities, particularly in central London, where so many people will have to move so far from their homes. Children’s education could be affected, disabled people will find it difficult to move away from specially adapted accommodation, and everyone affected will have difficulty moving away from medical and social services they need. There are concerns that London could become increasingly “ghettoised”, with poorer people being forced to move to cheaper areas. The Government has not tried to work out how much the social consequences of the changes might cost, in terms of homelessness, effect on children’s education, on medical and social services.

Effects on particular groups

The Government has said it doesn’t have enough information to be able to say whether black and minority ethnic groups will be disproportionately affected by the changes. It has accepted that “As some ethnic minority groups tend to have a higher proportion of large families these measures may impact on them disproportionately”. [footnote 13]

The Equalities and Human Rights Commission has pointed out that that in
2001, 'nearly half (45 per cent) of the total minority ethnic population lived in
the London region, where they comprised 29 per cent of all residents'. It
therefore seems likely that changes that have a big impact on London,
will also have a disproportionate impact on ethnic minority groups.

Lord Freud has said the Government will “commission independent, external research to help us evaluate the impact of the reforms” including “what is happening in black and minority ethnic households”. [footnote 14] But the interim findings of the report will not be made until spring 2012, when these changes will have been in place for a year, and the final report will not appear until early 2013.

The Government’s impact assessment showed that 46% of lone parents and 49% of couples with children will be affected by the reduction from 5 to 4 bedrooms. [footnote 15]This shows there is likely to be a disproportionate effect on women since 90% of lone parents are women.

Reducing hardship

The Government has allocated extra money to pay discretionary housing payments. These top up housing benefit where it is not enough to meet the rent. The idea is to try and reduce the worst effects of the changes. An extra £10 million in the first year, and £40 million in each year from 2012-13 has been allocated. The problem is that this money is not likely to be enough to make up for £2 billion worth of cuts. The Mayor’s office has asked for 95% of it to be used for London. But if the money is all used up in London, there won’t be any left to help with problems caused by the changes being made elsewhere in the country.

CPAG is looking for case studies of claimants and groups who are likely to be affected by these changes. Please note that we cannot give advice to individuals, so if you are a claimant and you think you will be affected by these changes, you should seek advice from a CAB, law centre, solicitor or other advice agency.

Notes
1. The claimant could get less HB than this if s/he has income or capital to take into account. [back to text]
2.The Housing Benefit (Amendment) Regulations 2010 (SI no 2835) (HB(A) Regs), and The Rent Officers (Housing Benefit Functions) Amendment Order 2010 (SI no 2836) (RO(HBF)A Order) [back to text]
3. CPAG does not agree with any of the changes the government is making to housing benefit, except for the payment for an extra room for a carer for a disabled person. We think it is clear from the evidence that each of the changes will increase child poverty nationally. We believe that the HB scheme is an important way of combating homelessness and poverty and we do not think it should be cut. We are challenging these two aspects of the changes in particular because we believe there are legal grounds to do so. There are a number of other negative changes which will affect HB claimants in the Welfare Reform Bill, introduced from April 2013; LHA rates will be uprated based on the basis of the Consumer Price Index, rather than on the basis of local rents; restrictions on the size of property covered by HB for working age claimants in the social rented sector, and there will be an overall cap on how much benefit a family can receive. [back to text]
4. The recent increase is mainly because more people have been claiming housing benefit as a result of the recession, see the Two Year Review of the LHA, DWP, February 2011 http://www.dwp.gov.uk/docs/lha-review-feb-2011.pdf. [back to text]
5. See SSAC report footnoted at 6 [back to text]
6. http://www.official-documents.gov.uk/document/other/9780108509551/9780108509551.pdf [back to text]
7. http://www.publications.parliament.uk/pa/cm201011/cmselect/cmworpen/845/84504.htm [back to text]
8. See Two Year Review of the LHA, footnoted at 4 – the 9,000 figure is made up of 8,100 claimants currently entitled to a 5 bed property plus 900 claimants formerly entitled to larger properties. [back to text]
9. This covers all or part of LBs Camden, City of London, Hackney, Hammersmith and Fulham, Kensington and Chelsea, Islington, Tower Hamlets and Westminster. [back to text]
10. See SSAC report footnoted at 6 [back to text]
11. See the Mayor of London’s Evidence to the WPC footnoted at 7 [back to text]
12. See Shelter’s Evidence to the WPC footnoted at 7 [back to text]
13. See SSAC Report, DWP Impact Assessment p 74. [back to text]
14. House of Lords Annulment Debate 24/1/11 http://www.publications.parliament.uk/pa/ld201011/ldhansrd/text/110124-0003.htm#1101255000080 [back to text]
15. See the SSAC Report footnoted at 6 Impact Assessment p 94 [back to text]

March 2011