Housing and Homelessness

Housing benefit cuts in London push low-paid families into poverty

  • Published: Jun 17, 2014
  • Category: Housing and Homelessness

As the latest data shows London’s rents are more than double the national average, our report looks what this means for working and workless poor in the capital and the impact of housing benefit cuts

Last week the VOA published data on rent levels across the country. It showed that in London typical rent for a 2 bedroom property was £1,375 per month, 80% higher than the next highest region (£750 in the South East) and more than double the England average (at £575). So what does this mean for low income families trying to get by in London and how have cuts to housing benefit affected them differently? Our report, out today, explores this.

Under the Coalition Government a series of changes have been made to housing benefit that effect low income private tenants. One change was a reduction in the maximum amount of housing benefit that could be claimed, from the median to the 30th percentile of local rents. Another was a national cap on the amount that can be claimed even if local rents exceed it, in practice this only applies in London.

Housing benefit is not an out-of-work benefit, it is provided to lower income households to help cover some or all of their rental costs. A working household can be entitled to housing benefit if their earned income is insufficient to cover the cost of their rent and other essentials. In London where rents are so much higher over half of housing benefit claimants affected by the caps are in work.

So when housing benefit entitlement is cut the incomes of workless and working recipients fall. Across London, because of the higher housing costs, the cut is much greater. In practice these cuts can reduce the incomes of working families below the poverty line.

For example take a family with two teenage children paying a typical rent for a three bedroom property in Haringey (a north London borough). Even if both parents were working full-time at the London Living Wage (£8.80ph) they would be entitled to housing benefit. If the caps had not been introduced they would have had an income of £33 per week above the poverty line. But as they are subjected to the reduced limit, their housing benefit is cut and they now have an income £22 below the poverty line. For workless families the situation is even more acute with income falling more than £200 per week short of the poverty line. 

What is also striking though is that one of the aims of this policy was to ‘incentivise work’. But in London where rents are so much higher, the policy even cuts the incomes of low paid full-time workers. How are they expected to respond to this increased work incentive?

The full report can be viewed here. It was written by NPI for Shelter, with funding from Trust for London.

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