Working families renting homes in Hackney could face a monthly shortfall of up to £783 thanks to Chancellor George Osborne’s latest welfare cuts, it has been claimed.
A report by housing charity Shelter has revealed that more than 100,000 families in London will be affected by government plans to freeze the Local Housing Allowance (LHA) for private renters until 2020.
Hackney is set to be the third worst affected borough in London, after Chelsea, City of London and Westminster. In other EastLondonLines boroughs the impact will be much less severe, with families in Lewisham facing an average shortfall of £370.27, Croydon families facing £343.77, and Tower Hamlets families facing £263.86.
Shelter chief executive Campbell Robb, said: “This looming freeze could push thousands of working families in London to the brink.”
“Already struggling to bridge the gap between relentless rent rises and welfare cuts, many of those hit will face an uphill battle to keep a roof over their children’s heads, and put food on the table”, he said.
The benefit helps families on lower incomes to pay their rent.
One example of those likely to suffer the shortfall is Valerie Okoredafe, 30. She lives with her unemployed husband, five-year-old son and 18-month-old twin boys in a three-bedroom house in Bethnal Green and works part-time as a library assistant. She relies on housing benefit to pay the rent.
“I work as many hours as I can, and what I do get paid is instantly eaten up,” she said. “Every last penny is accounted for. If my rent goes up or my housing benefit gets cut I would be forced out of my home.”
The freeze comes as rents increases are surpassing wage growth making it increasingly difficult for families to find an affordable place to live.
Dan Wilson Craw, Policy and Communications Manager at Generation Rent, a local housing lobby group, said that the government doesn’t have to attack communities in order to bring down welfare spending.
“By building more social housing, more lower income families could access cheaper rents, and reduced demand for private rentals would lower rent for those tenants,” he said. “The housing benefit bill would be lower, and Londoners wouldn’t be forced out of the city they grew up in.”
As it stands, landlords can rent to families on benefits but critics argue the freeze on LHA will make this far less feasible.
Richard Blanco, London representative for the National Landlord’s Agency (NLA) says: “What we’ve seen is the proportion of landlords willing to let to tenants in receipt of benefits almost halve over the last two years because of government benefits cuts. I think the issue for landlords is that as LHA rates just keep getting lower and lower, it becomes unviable for landlords to let to people on benefits.
Shelter found that families in 8 out of 10 areas will face benefit cuts of at least £250 a month. In Hackney, the situation is bleak, with some families expected to face “extreme” shortfalls of nearly £800 a month.
Blanco, who currently lets a property in Lewisham for lower than the average market price, agrees that freezing LHA is not the sustainable approach. He argues that while it is frozen, rents are still increasing, leaving a much larger gap between household income and the cost of living.
“The government has got a bee in its bonnet that benefits have to come down,” he said.
“It’s not such a problem outside of London but you can’t have the Olympics and then complain that there’s loads of international investment and that everyone wants to live in London and then complain that rents are pushed up.”
A report released by the government’s Work and Pensions Committee said it was anticipated that reforms to LHA would cause shortfalls between benefit and rent levels, but they had also expected rent levels to decline as a part of the cuts.
However, the same report found that there was no reduction in rent arising from changes to LHA, and, in fact, private sector rent continued to increase by 8% each year.
“Blanco said: “Of course, the people who get blamed are the landlords, when actually we’re just part of a system that we don’t have a lot of control over. The media turns it into a pantomime where evil landlords just take the rent and go home and count the money, but it’s not like that.”