Social housing is back in the limelight as the Government launches a new benefits cap affecting thousands of social tenants across the UK.

However it is not just tenants that will be affected by the changes, social landlords could lose out as well.

So how will the new changes affect both tenants and landlords?

Firstly let’s clarify what the benefit cap actually is. 

What is the benefit cap? 

The benefit cap refers to the amount of overall benefits one household can claim from the government. This can consist of child tax credits, employment support allowance, child benefit and housing benefit to name but a few.

The new changes which came into force on 7th November will see households having a limit of £20,000 of benefit entitlement outside of London and £23,000 within London. Previously the total amount one household could claim was £26,000 which equates to up to £500 per week.

Here is an example of how this would be broken down:

(figures taken from The Guardian)

How will social tenants be affected?

The new benefit cap affects anyone receiving out of work benefits, but the hardest hit will be single parents living in social or affordable homes. The new limits mean households will receive a cut to their housing benefit with many tenants no longer able to afford their weekly rent. This would result in them either needing to downsize to a more affordable property or risk being evicted and placed in temporary accommodation.

In the example above the couple would previously have been just £14 per week short of their weekly rent of £180. However with the new changes they would only receive £106 per week in housing benefit, a shortfall of £74 per week which over the course of 1 year could mount up to over £3,800! 

The Chartered Institute of Housing (CIH) estimates that over 115,000 households could be affected and according to The Gingerbread group, over 43,000 single parents with a child under 5 years old are at risk. 

How will this affect social landlords? 

If these tenants are unable to make up the shortfall of up to £7,000 per year, social landlords stand to lose out on as much as £37 million in rental income.

The main properties at risk are homes of 3 bedrooms or more which in certain areas make up over 50% of stock of housing associations.

Also at risk are social landlords with properties out for affordable rent as their tenants are required to pay 80% of the market rate as opposed to just 40-50% for social housing.

Let’s take London for example where there are approximately 23,000 affordable homes up for rent:

Social housing has taken several blows in the last few years so will the Autumn spending review see some changes that could offer landlords a much needed lifeline?

Watch this space. 

By Anna Symington

Please Note: Every care was taken to ensure the information in this article was correct at the time of publication. Any written guidance provided does not replace the reader’s professional judgement and any construction project should comply with the relevant Building Regulations or applicable technical standards. However, for the most up to date LABC Warranty technical guidance please refer to your Risk Management Surveyor and the latest version of the LABC Warranty technical manual.

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