Report Department for Work and Pensions Research Reports 838
Monitoring the impact of changes to the Local Housing Allowance system of Housing Benefit: interim report
This Interim Report forms part of the Department’s comprehensive independent review in evaluating the impact of changes to the Local Housing Allowance (LHA) system of Housing Benefit (HB), which were introduced from April 2011. The changes to LHA were announced in the June 2010 Budget and the Comprehensive Spending Review announcement of 2010 and included: changing the basis for setting LHA rates from the median (50th) to the 30th percentile of local market rents; capping LHA rates by property size and scrapping the five-bedroom rate; removing the £15 per week excess that claimants could keep if their maximum LHA entitlement exceeded their rent; increasing financial support for Discretionary Housing Payments (DHPs); temporarily widening the discretion of local authorities to make direct rent payments to landlords; and raising the age at which the Shared Accommodation Rate (SAR) applies from 25 to 35.
This report contains findings from a mixture of quantitative and qualitative elements: interviews with landlords which were undertaken between November 2011 and January 2012; claimant interviews that were undertaken in early 2012; and interviews with front line housing and benefits advisors between May and June 2012. 1 Additionally, the spatial analysis component of the evaluation maps trends over time for different types of housing and labour markets across Britain, using national data from the Single Housing Benefit Extract (SHBE) and the econometric analysis uses SHBE data from June 2010 to December 2011 to provide estimates of the impacts of the reforms on shortfalls between the new LHA rates and contractual rents between new and repeat claimants, on one hand, and landlords, on the other.
Overall, the research into the early impacts of the LHA reforms shows that the main effects have been quite geographically limited and the impact is far more marked in the London housing market than elsewhere. Administrative data indicates that the anticipated displacement of existing LHA households in these areas has not taken place in the 12 months following the introduction of the changes. The transitional measures, such as DHPs, appear to have blunted the impacts in London and tighter PRS markets elsewhere (such as York and Cambridge), as they were partly intended to do. At the time of the research, the early effects of the LHA measures had also been limited in terms of displacement, additional evictions or more cases of homelessness specifically caused by the LHA reforms. While analysis of the incidence of reductions in LHA rates indicates that 94 per cent of the gap falls to tenants through increased shortfalls (with 6 per cent of the gap met by landlords through reducing rents), qualitative interviews highlighted the existence of some informal arrangements whereby landlords 'turn a blind eye' to tenants who fail to meet the full rent payment, at least for the remainder of their current tenancy; additionally, it may also take time for market rents to adjust to the changes.
Many of the research findings at this early stage have inevitably been provisional; further waves of the research will be able to ascertain whether many of the concerns expressed in these interim research outputs about the longer term impacts of the LHA measures are supported by empirical analysis, or whether they will prove in the end to have been overstated, as landlords and claimants both continue to adapt to the changes.
This report is being published alongside Wave 23 of the Local Authority Insight Survey. An early findings report of the LHA evaluation was published in June 2012 and a further report is due to be published at the end of the year.
1. In other words, the majority of interviews were conducted several months after the measures had been introduced for new claimants (from 1 April 2011), but before they had an impact on the rents and housing circumstances of most existing claimants.