Cutting the cap

Originally published on November 1 on my blog for Inside Housing

You might think a policy that threatens more than 300,000 children with destitution and homelessness would be attracting more attention.

The reduction in the overall benefit cap starts in just six days’ time (Monday November 7) and will be introduced in different areas over the next few weeks. It is the first of a series of crucial events for housing this month that I blogged about yesterday. But only now is it getting much attention in the national media. That’s partly thanks to new analysis by the Chartered Institute of Housing (CIH), which suggests that 116,000 families will be affected and a total of 319,000 children.

The cap is being reduced from £26,000 a year to £23,000 in London and £20,000 elsewhere (lower limits apply to single people with no children). The cap essentially works via housing benefit. The more children people have, the higher their non-housing benefits will be and the more their housing benefit will be cut. At the levels of the lower cap, widespread rent shortfalls are inevitable unless people qualify for one of the exemptions or a discretionary housing payment (DHP) from their local authority.

The original cap was set at a level that affected areas with the highest private rents and the largest families: half of the 20,000 families affected live in London and the South East.

The impact of the lower cap will be felt in every part of Britain and in social housing as well as the private rented sector. This much was clear even in the government’s own impact assessment despite the Department for Work and Pensions (DWP) scaling back its estimate of the numbers affected to 88,000 households with 244,000 children losing an average of £60 a week each.

The CIH puts the numbers who will be capped around 30% higher than that at 116,000 families and 319,000 children. Here are the results broken down by region and the number of children in the family:

The likely impacts can be illustrated by looking at what capped families will have left to pay their housing costs once their other benefits are taken into account. A couple with three children will have £50.80 a week left to pay their rent under the £20,000 cap which will leave a shortfall even against rents in social housing. A couple with two children will have £117.92 a week, which is less than some social rents and less than most ‘affordable’ and private rents.

The greatest impact will obviously still be in high rent areas and on people with larger families but this shows that this is not the end of the story. For example:

• 60% of capped families are in social housing
• Private renter couples with three children stand to lose more than £100 a week in more than half of all local authority areas
• Some families face losses of up to £500 a month (and some will lose all but 50p a week of their housing benefit)
• Rents in London are so high that even 6,000 one-child families will be capped
• This figure does not include households with no children, who account for around 6% of those currently capped. The total number of households affected by the new cap will therefore be several thousand higher than in the table

The CIH’s chief executive, Terrie Alafat, warns:

“We are seriously concerned that this could have a severe impact on these families, make housing in large sections of the country unaffordable and risk worsening what is already a growing homelessness problem.

“This is a measure which seriously risks undermining the government’s commitment to make society fairer for families in Great Britain and we suggest that they look at this urgently.”

Concern about the likely impacts of the cap is also starting to emerge in the local media and in this great piece by Aditya Chakrabortty in The Guardian today. Here are some examples:

• Leeds. The city council says the number of families capped will rise from 250 to 1,400. A local campaign group says 1,800.
• Liverpool. Analysis by the council says a total of 840 families with 2,800 children will be capped and lose an average of £44 a week. It points out that temporary accommodation for homeless people costs £400 a week. See this post by Joe Halewood for an indication of the impact even before the cap begins and for how people will lose even more money when they move on to universal credit. Joe argues the number of families affected in Liverpool will be even higher – and puts the number of families affected nationwide at 139,000.
• Middlesbrough. The council says the number of families capped will rise from 75 to 502 (against a DWP estimate of 400). That includes 93 who will have their housing benefit reduced to the minimum of 50p a week.
• St Albans. The council says 211 families will be affected, double the DWP estimate. If those 48 will lose more than £100 a week.
• DWP says 100
• Swale. The council says 323 families will be capped and 88 who will lose more than £100 a week.

The CIH analysis and these local examples show that the impact of the lower cap will be felt right across the country and that a significant proportion of families affected will have next to nothing to pay their rent.

Working out exactly how many is tricky but applying the Middlesbrough figures across the whole country implies that more than 20,000 families will be left with just 50p a week for their housing costs. That also seems to tally with the numbers affected by the existing cap, who will now lose an extra £3,000 or £6,000 a year depending on where they live.

That 50p figure is set as a minimum to enable families to qualify for DHPs. However, the budget for them will be stretched to breaking point by the lower cap and existing commitments such as the bedroom tax. In the short term, perhaps local authorities will have enough in the pot for the rest of this financial year.

In the longer term, things will get worse. Though social rents are set to fall, private rents will carry on rising and most working age benefits are frozen until 2020. Landlords looking at these figures will wonder how long they can carry on housing people who are out of work or who might be in future. If the lower cap will even hit people on social rents, what price affordable or private rents?

The lower cap seems certain to trigger rising rent arrears and in consequence an increase in homelessness that could cost more than the cap saves. This just days after the government backed a bill to reduce homelessness.