In the Tory Conference this week, George Osborne announced the welfare budget was to be cut in order to try and lift the UK out of the recession.
Housing benefits came under fire from prime minster David Cameron, who stated that housing benefit claimants were living in properties that other workers could only dream of.
In the conference, the Chancellor spoke of limiting housing benefits for the under 25s, a restriction on Local Housing Allowances and capping the amount paid according to property size.
Ajay Jagota, managing director of North East-based KIS Lettings, comments: “The economy continues to flatline with little evidence of any recovery soon and something needs to be done to reduce the welfare costs. While I understand the motives for cutting housing benefits, the government really needs to deliver the changes correctly.”
Housing benefits currently cost the taxpayer around £20bn a year, and if the Chancellor’s plans come to light, welfare cuts of £10bn will be made between 2015 and 2017. The move to limit housing benefits for under 25s will also mean young people without a job will have to live at home.
Ajay says: “Society is supposed to encourage young people to go out to work and save for a house, but in the current economic climate, it’s becoming increasingly difficult for them to do that. If housing benefit is cut for young people, we’re removing that last-resort safety net that they currently have. So it makes their plight to find work, leave the family home and become independent even more difficult.
“They might fly the nest but then what would happen should they be made redundant? They’d be back living with their parents.”
Restrictions like the Local Housing Allowances could see around 774,970 households losing an average of £9 a week. Limits on the amount paid according to size of property will also be capped; for example, a four bedroom house will be capped at £400 a week. This will affect around 21,060 who will lose an average of £74 a week.
Ajay is voicing concerns for those who would be left in difficult situations if they couldn’t access housing benefit.
The first concern is exemplified by someone like a single mother who is under 25 and receiving housing benefit. If housing benefit is cut, this leaves the mother in a very difficult situation.
Ajay says: “Some young people are lucky enough to have the support of their parents, who can come to their son or daughter’s rescue when things go wrong, but not everyone has this support around them. This situation could put the young mother in an almost impossible situation.”
Ajay is also worried about the outcome of cutting housing benefit and the effect it would have on landlords.
Taking an example of a housing benefit tenant aged under 25 might take out a six month short-hold tenancy agreement, but then what would happen if they lose that housing benefit as a result of government cuts. The landlord legally can’t evict a tenant until the six months is up.
Another scenario could see a tenant sign a six month short-hold tenancy agreement and then unexpectedly through no fault of their own lose their job before the end of the tenancy. In this instance, if the tenant had no means of paying rent, the landlord stands to lose a considerable amount of money.
Ajay adds: “If housing benefit is cut, we could see these potential scenarios become real life situations. If the proposal goes forward, I urge the government to look at the possible scenarios and create a credible plan; if it isn’t, we could end up creating a worse situation than we have today.”