WIREDGOV

• Full report - Managing the impact of Housing Benefit reform

The National Audit Office has reported yesterday on how the Department of Work and Pensions is placed to tackle the significant challenge of implementing the reforms to housing benefit.

As part of the measures announced in the emergency budget in June 2010 and the Spending Review of October 2010, the Government announced changes to housing benefit, including reductions to local housing allowance rates for private rented sector claimants and deductions in payments to social sector tenants in under-occupied homes.

The Department is actively preparing for the implementation of housing benefit reform, using available data to assess the impact of the reforms on current entitlements. It has estimated that the reforms will result in around two million households receiving lower benefits, with a smaller number receiving substantially less. Claimants with large numbers of children and those living in areas of high rent such as London will be most affected.

The Government intends the reforms to improve incentives to work and lead to positive changes for claimants. Reforms could also lead to hardship or an increased risk of homelessness. How tenants and landlords will respond is highly uncertain at the moment and the Department has commissioned independent research to evaluate the impact of the reforms after implementation.

The Department is also working with local authorities to identify the extent to which the reforms will increase the administrative burden on the authorities. It clearly has further ground to cover. Many people know very little about the changes to housing support; and the extent to which claimants have been informed varies according to where they live. Surveys of private rented sector respondents found that 87 per cent knew little or nothing about the changes that would affect them.

Uprating local housing allowance by the consumer price index, rather than local rent inflation, could put pressure on the supply of affordable local housing. The speed and extent of shortfalls could be significant. Downward pressure on rents or increased employment would mitigate the impact but NAO analysis indicates that, on current trends, 48 per cent of local authority areas in England could face shortfalls by 2017.

The Department has put in place transitional support through increased funding for discretionary housing payments. It needs to work with other departments and local authorities to monitor emerging issues and manage risks for both private and social tenants.

Amyas Morse, head of the National Audit Office, said today:

"The Department is working to manage the introduction of the housing benefit reforms, but their full impact is currently uncertain and depends on how households and the housing market react, locally as well as nationally. The Department has a crucial role to play in anticipating and addressing adverse consequences for claimants and the administration.

"Some challenges cannot perhaps be planned for: where the interaction of local authority funding constraints, the social housing stock, rental market conditions and the local economy produces extreme impacts.

"As issues emerge, the Department will need to be capable of a flexible response, well- coordinated with other sources of support for claimants."

Notes for Editors

1. The Department forecasts that, in the absence of reforms, housing benefit spending would rise to £23.9 billion in real terms by 2014-15. The Department expects that, as a result of reforms, real expenditure on housing benefit will fall to around £21.6 billion by 2014-15, saving around £2.3 billion per year.

2. Reforms will result in around two million households receiving lower benefits, with a smaller number of households receiving substantially less. The Department's impact assessments estimate that 1.4 million claimants in the private rented sector will be affected by changes to local housing allowance. In the social rented sector, 660,000 claimants with one or more extra bedrooms could lose between 14 per cent and 25 per cent of their housing benefit (an average loss of £14 a week). The overall benefit cap will affect 56,000 households losing on average £91 per week.

3. Press notices and reports are available from the date of publication on the NAO website, which is at http://www.nao.org.uk/. Hard copies can be obtained from The Stationery Office on 0845 702 3474.

4. The National Audit Office scrutinizes public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 860 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of more than £1 billion in 2011.