London Councils, the umbrella body for local authorities in the capital, has published a report that suggests changes to the local housing allowance have not cut rents, and could even be contributing to an increase in housing costs.
The government introduced several changes to the local housing allowance between April 2011 and January 2012, including capping the maximum amount that can be claimed, and setting payments at a lower rate.
The Government claimed this would bring down rents in the private sector, however the research carried out by London Councils suggests this has not happened.
However, some London boroughs have seen rents rise by more than 20 per cent in recent months. in addition, working households accounted for 90 per cent of the growth in housing benefit in outer London, suggesting low-income working households are being hit hardest by the reforms.
The report also says more than two thirds of the increase in housing benefit payments are going into the private rented sector, rather than being reinvested in social or affordable housing.
London Councils is calling for changes to the welfare system that reflect the higher costs of living in the capital, including an exemption for below inflation rises in LHA payments.
Jules Pipe, Mayor of Hackney and chair of London Councils, said:
‘Councils want to support families, but the double whammy of the scale of welfare changes alongside cuts to council budgets makes this a massive challenge. The report shows that to avoid creating a chaotic system where the only beneficiaries are landlords and lettings agents, the government must ensure its reforms reflect London’s housing crisis.”