People who make a claim now will be affected by the changes immediately. People who have been claiming housing benefit for a while will be protected until various points throughout 2012. When you will be affected by the cuts depends on the date you signed up for housing benefit. (Click on the relevant bullet below to jump to the text.)
The housing benefit you receive for private rented accommodation is determined by the Local Housing Allowance (LHA) rate, and varies depending on the local area where you live. It’s also subject to an overall cap depending on the number of rooms you are entitled to.
Previously LHA rates were decided by looking at the rental prices of the area from lowest to highest, and then taking the middle value. There were separate LHA rates for different size properties, from one bedroom up to a four bedroom property.
From April 2011 LHA changed. Instead of it being set so that you could afford half of the available rental properties on the local rental market, it’s now set at one third.
Previously you could afford roughly half of the rental market in your area. Now you can afford just one third.
Before April 2011: Now:
To check your local LHA rates visit LHA Direct.
If you found a property that was cheaper than the average rent, you could previously keep up to £15 of your Housing Benefit as an excess payment. This is no longer allowed and will be reduced from your housing benefit.
More money will now be reduced from housing benefit for households that have non-dependents living in the household. These are adults, whether they are relatives (perhaps an adult son or daughter) or permanent boarders. These reductions are based on the expectation that non-dependents will make a contribution to the household income.
If you are single and aged under 35 you will be restricted to the rate for a single room in a shared house, rather than the rate for a self-contained one bedroom property. This works out as receiving a lot less housing benefit per week and having to share a property with other people.
Local Housing Allowance has always been calculated according to local rents. By April 2013 housing benefit will be calculated by using the Consumer Price Index (CPI). CPI is the value of goods and services consumed in the household. The CPI does not reflect house prices, as rent can often rise at a faster rate than consumer goods. If housing benefit is calculated this way, then there may not be enough money to afford to rent a property.
People who are of working age will receive the amount of money which reflects their household size. If they rent a property in the social rented sector (such as council or housing association property) they will not be allowed to rent a property deemed bigger than their needs. So a single person whose grown-up children have moved away will not be able to receive housing benefit for the extra rooms they are no longer using. They may have to move out if they could not supplement the housing benefit to cover the cost of the extra room.
The total amount that a household can claim will be capped at around £500 per week. This means that families will have to find a property that costs no more than £500, regardless of whether or not it has sufficient rooms. There are exceptions for people who receive Disability Living Allowance, Working Tax Credit or War Widow Pension.
For more information about these changes and how they will affect you please visit www.adviceguide.org.uk.