In November 2010 the government announced the controversial new cuts which were to be made to housing benefit we saw this come into force across the country from April this year. These cuts saw thousands of households in receipt of Local Housing Allowance (LHA) who pay rent to a private landlord facing losses of more than £50 a month. The decision was widely criticised by homeless charities and housing associations alike.

The Chancellor Mr Osborne justified these cuts by saying “We now spend more on housing benefit than we do on the police and universities”

The impact of these cuts were felt by every region across the country with the hardest hit being the South East where households saw a loss of £100 a month.

At present these cuts will only affect tenants making new claims, anyone who has been in receipt of LHA, in the same property on the same tenancy and has had no changes to their claim will not be affected until the changes come across the board in January 2012, this will give existing tenants time to adjust their circumstances and either find alternative cheaper accommodation or negotiate a lower rent with their current landlord.

These cuts have seen an obvious spiral with people becoming trapped in an endless cycle of debt, arrears and eviction, these circumstances could change the face of Cities and rural areas alike, with London being hardest hit as an estimated 93% of rents have become unaffordable for private tenants relying on housing benefit, pushing people on lower incomes into pockets of deprivation in areas with the cheapest housing, and with some less scrupulous landlords preying on the more vulnerable households knowing that people will be forced to rent a property at a lower rent just to have a roof over their head, this in turn has seen a return of rogue landlords who do not maintain their properties to a good standard because they know there is a huge demand for the lower priced properties.

A more concerning point is that the government fully acknowledged the impending impact of these cuts on peoples ability to pay their rent and the very real possibility that this would see a rise in homelessness, yet to date they have not put in place any contingency plans to help safeguard against these problems.

But the government is not done with the Private rental sector (PRS) just yet, 1st January 2012 will see further changes to LHA.

My home town of Hemel Hempstead in Hertfordshire, for example will see housing benefit payments being cut to as little as £78.50 per week or £340.17 per month, and with the cheapest room for rent in the area on at £390pcm* it is obvious that people will not be able to afford their current rents as these changes will affect ALL housing benefit recipients regardless of when they started their tenancy agreement.

This can only spell disaster for the PRS as tenants will quickly fall into arrears as they are no longer receiving the payment to cover their rent and will more and more people finding themselves having to claim housing benefit do to an increasing lack of employment, will we see an increase in evictions, homelessness and an inevitable drop in the average rental price as landlords are forced to lower their rents to accommodate the lower payments

*Correct at time of writing, info via Rightmove

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