Housing Benefit

What is Housing Benefit?

Housing Benefit (HB) is an income-related social security welfare scheme to help people pay their rent. It is also sometimes referred to as Rent Allowance or Rent Rebate. The scheme is only open to people living in rented accommodation (including council and social housing) and on low incomes.

The maximum a claimant could be entitled to is the whole of the rent they pay for their accommodation. This rent, however, must be "reasonable" for the type of home in the area, and the accommodation must be "reasonable" in terms of the claimant and his or her dependents' needs. The definition of the latter was changed dramatically in 1996 for single people aged under 25, with the introduction of the "Single Room Rent" (SRR) concept.

As such, because HB is so sensitive to local and individual conditions, unlike most social security benefits, it is administered by local authorities.

The determination of "reasonableness" is carried out by council Rent Officers, who also apply a complex set of deductions and premiums to calculate individual entitlements. The formulae are similar to those used for Income Support and income-related Jobseekers Allowance. HB does not cover charges for heating, water and energy, and deductions will be made where a property's rent includes those costs.

HB is paid by local authorities either directly to individuals or to private landlords on their behalf. If HB is being paid to assist a council tenant, it is directly deducted from the sum owed by the tenant to the local authority.


Background

HB has its roots in the "national assistance scheme" of 1948. Throughout the post-war period, successive governments' approaches to the problem of housing for people on low incomes fluctuated between building more social housing and providing support for rent.

As such, the arrangements grew to be highly complex, and were consolidated for council tenants in 1972 under the National Rent Rebate Scheme, and for private and housing association tenants in 1973 under the parallel Rent Allowance Scheme. Both were introduced at a time when local authority housing finance was being overhauled, with the effect that council rents rose sharply.

The introduction of these arrangements did not stem the growing complexity of the system, and generated a "better-off" problem, where payments differed under each scheme. HB was introduced under the Social Security and Housing Benefit Act 1982 to replace them. It was not until 1988, however, that HB was in full operation, with the integration of in-work and out-of-work HB systems, by which time it had already begun to be amended.

The Housing Act 1988 produced massive upheaval for the HB system. The Act began the deregulation of private sector rents, reduced protection for tenants and removed the right to independent assessment of "Fair Rents". In addition, the eligibility of students aged under 25 for HB was substantially cut.

This deregulation, alongside rising council and housing association rents, declining investment in social housing meant that HB expenditure tripled from £3.8 billion in 1986-1987 to £12.2 billion in 1997-1998. During the same period, claimant numbers fell from 7 million to 5.5 million.

Attempts were made through the Housing Act 1996 to bring HB spending under control, through the introduction of "Local Reference Rents" (determinations of average market rents for dwellings of the same size in an area) and the further restriction of eligibility for under 25s through SRR. This cut the entitlement of young people to the equivalent of a room in shared housing. According to the homelessness charity Shelter, the result of these changes is that private sector tenants today bear 70 per cent of the cost of their rents.

By the late 1990s, it was clear that HB was in need of sweeping reform, as it was costing too much, it was suffering from high levels of fraud, and it was exercising perverse incentives with regard to people moving into work. The Labour Government launched a major review in 2000 in the wake of the Housing Green Paper, "Quality and Choice: A Decent Home for All". The key aims of the reform in relation to HB were to improve customer service; reduce fraud and error; improve work incentives; and, for the future, explore other options to support housing policy.

In 2002 the Department for Work and Pensions published detailed proposals of future HB in “Building Choice and Responsibility: A Radical Agenda for Housing Benefit”. Central to the new system was the introduction of a flat rate payment system for private sector tenants in receipt of benefits. The DWP argued that this would simplify administration and make the system more comprehensible to claimants. Pilot schemes were launched in 2003 and 2004 to test this. New Local Standard Housing Allowances would also cut out the need for every case to be referred to Rent Officers, reducing bureaucracy in the system and the new system would also reduce the need for fresh claims when a claimant's working situation changes.

In January 2006 the Government published a welfare reform Green Paper entitled 'A New Deal for Welfare: Empowering People to Work' which included further proposals for reforming Housing Benefit, in particular rolling out an adjusted version of the Local Housing Allowance (LHA) to the deregulated private rented sector.

The Welfare Reform Act 2007 introduced changes to the administration of Housing Benefit (HB) with the national roll-out of LHA to the private rented sector, and an HB sanction for people who refuse to engage in rehabilitation following eviction for anti-social behaviour.


Controversies

As an integral part of the housing system, many of the problems relating to HB are tied up with wider issues of the availability and cost of housing and local government finance in general. Nonetheless, it is almost universally accepted that HB is in dire need of reform.

At the heart of many of the problems surrounding HB is the complexity of the system and the difficulties many local authorities experience in administering it. In 2002-2003, the average time taken to process a new claim was 48 days. The Government's target was 14 days, but the worst performing councils were sometimes taking as long as 150 days.

The fight against benefit fraud has contributed to this complexity and poor local administration, with the Verification Framework identified as particularly complicating. Under this, all new claimants must be investigated, rather than just those who pose the greatest risk. Local authorities claim that funding provided to implement the Framework by the DWP is inadequate.

At the same time, it is suggested that the demands put upon claimants by local authorities deter many who should be receiving HB from doing so. Shelter claims that 680,000 people are missing out on HB worth £1 billion per year as a result of this and poor administration. Improving "customer service" has been stressed by the Government as an area for improvement in both the Green and White Papers.

Nonetheless, fraud remains an enormous problem for HB. Complexity and bureaucratic inefficiency are widely acknowledged as causes of fraud and error. Income Support and JSA fraud are also seen as providing a "gateway" to HB fraud. The anti-fraud measures put in place to date are widely criticised as exacerbating the complexity problem. Another cause of fraud is the historic lack of central support and monitoring exercised by the Government over local administrations. In some areas, poor administration has become so bad that the Government has removed the council's responsibility and passed it to private contractors (eg the London Borough of Hackney).

HB has often been blamed for causing unemployment: firstly, through its steep deductions taper, making paid work uneconomical; and secondly, through the requirement to reclaim when employment circumstances change. HB has also been accused of causing homelessness: non-payment of HB by councils is identified as a major cause of rent arrears and even eviction.

Statistics

Around 5.1 per cent, or £750m, of Housing Benefit expenditure is estimated to have been overpaid during the period April 2006 to March 2007

Around 4.8 per cent, or £740m, of Housing Benefit expenditure is estimated to have been overpaid in the period October 2006 to September 2007

As at February 2007 there were 4.04 million recipients of Housing Benefit. The average weekly amount of Housing Benefit was £68.

Source: National Statistics May 2008

In 2006-07, the average time taken to process a new housing benefit and council tax benefit claim was 33 calendar days nationally and 54 days for the bottom 15 per cent.
The national average for the first six months of 2007-08 was 28 days, and the bottom 15 per cent. took an average of 39 days.

Source: Work and Pensions Secretary James Plaskitt – Commons Hansard written answer – March 2008

Quotes

"The CAB service very much regrets that the DWP are once again proposing to cut housing benefit (HB), council tax benefit (CTB)) backdating, despite the fact that a similar proposal was made in 2000 only to be withdrawn in the face of strong opposition and a highly critical report from the SSAC. Many of the arguments made at that time still apply.

"We do not consider that these proposals represent coherent policy making. Whatever the merits of the whole pension credit (PC) package, we do not believe that it is appropriate that this should be funded by cuts to housing benefit entitlement for either working age or pensioner claimants.

Citizens Advice – May 2008

“Whilst we strive to deal with claims sensitively and without unnecessary intrusion, we know that some pensioners don’t like being asked for information about their incomes and personal circumstances.

“A shorter back-dating period for Pension Credit will significantly cut the amount of personal information we need to request – and speed up claims."

Pensions Minister, Mike O'Brien, defending the decision to reduce the backdating of claims for Housing Benefit, Council Tax Benefit and Pension Credit from 12 months to three – December 2007