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Minister fears housing benefit plan risks rise in homelessness

February 21, 2013 1:55 PM
By Juliette Jowit, political correspondent in The Guardian
Originally published by East Midlands Liberal Democrats

Danny AlexanderDanny Alexander urges Iain Duncan Smith to think again, saying vulnerable tenants may lose homes

Danny Alexander, chief secretary to the Treasury, has written to Iain Duncan Smith urging him to moderate his housing benefit reforms. Photograph: Steve Back/Barcroft Media

Changes to the way housing benefits are paid have sparked concern at the top levels of government amid fears that tenants who cannot manage their money will fall into arrears and be made homeless.

The proposed change away from paying most housing benefits directly to landlords in favour of payments to tenants have also led to fears that social landlords like housing associations will not have the financial security to invest in much needed new affordable homes.

The new policy is part of a wider revolution in benefit payments, housing benefit and five other major schemes will be rolled into a single universal credit, in the hope that it will be simpler for people to move into work and up the pay-scale without losing more state support than they earn in extra income.

However, Danny Alexander, the Liberal Democrat chief secretary to the Treasury, has written to work and pensions secretary, Iain Duncan Smith, outlining his fears about the change in housing support, and urging his Conservative cabinet colleague to moderate his reforms.

It is understood that Alexander, who as a senior cabinet member would have signed off the original proposal, accepts that tenants will not all get a choice about how their housing benefit is paid, but he has threatened to block the changes unless more safeguards are brought in for the most vulnerable tenants.

On Wednesday though the Department for Work and Pensions moved to soften any row, saying that six pilot schemes were being run in order to work out which benefit claimants would not cope with the changes, and that the department would make exceptions for these groups.

Duncan Smith will be reluctant to abandon the idea, however, as it is also central to the belief among supporters of universal credit that people moving into work need to be encouraged to take more responsibility for their own finances so they can better cope when state benefits are withdrawn.

A National Housing Federation spokesman said early findings from government trials of the new system showed 8% rent arrears - a 60% increase on normal levels of about 5%.

"Many residents on low incomes currently choose to have their benefit paid direct to their landlord as a rational choice to help them manage their finances," said the spokesman.

"The government is planning to remove that choice. More than a third of housing associations believe the shift to direct payments to tenants under universal credit will make it harder for them to build new homes, as they will have to deal with rising arrears in an already tough economic climate.

"The cumulative impact of a range of welfare reforms and housing benefit cuts is a real cause for concern and the best thing the government could do to reassure social landlords and lenders would be to continue to allow people to have their benefit paid direct to their landlord."