Readers of my previous blog (The Housing Benefit Revolution: More Research Needed?) will be aware of the government’s recent changes to Housing Benefit. You may also be aware that Housing Benefit is paid directly to the tenant and not to the landlord; however this wasn’t always the case.

Prior to 2008, Housing Benefit was usually paid direct to the landlord, however in April of that year the then Labour government decided to reverse this system so that instead Housing Benefit would be paid direct to the claimant. The reasoning behind the change was that it would help benefit claimants (who historically may be unused to budgeting), learn how to manage their finances.

Well-meaning the change may have been, however it wasn’t long before its negative impact on landlords became an issue.

In July 2009 the BBC highlighted a number of instances of rent being unpaid to landlords due to the new system1. These stories did not seem unique, as landlords were soon indicating their changing stance on accepting Housing Benefit tenants. At the time of the BBC report the National Landlords Association (NLA) carried out research showing that 52% of landlords were no longer willing to let to LHA tenants because they often fell into arrears2.  More recently; a survey of over 1,000 UK landlords by Spareroom in January of this year found that 59% were stating no housing benefit tenants on their adverts, with 87% saying they’ve had problems with housing benefit tenants not paying rent on time.

So it would seem that the Government's faith in housing benefit claimants learning to budget their own finances; may have been misplaced.

Not that this misplaced faith is unique. In August 2010 the housing minister Grant Shapps announced a new government policy. It was called the New Homes Bonus Scheme. Its aim was a worthy one, as Shapps himself made clear at the launch:

‘With house building falling to its lowest level since 1924, action is needed now to build the homes the country needs. That's why these new powerful incentives to build will be introduced early in the Spending Review period. And it's why I have confirmed that those councils who go for growth by providing planning permission now will reap the rewards. So I urge councils to seize the moment and open up a debate with their communities now about the new homes they need and how they would use the new Bonus.’3

Roll on January 2012 and a freedom of information request from Inside Housing4. This request was to all the 349 councils of England who had received the bonus in April 2011. Of the 349 councils contacted; 331 responded. The information gleaned from their request makes for interesting reading:

  • Over 70% of councils in England had not spent their share of the bonus
  • 54% stated that the bonus money had instead been allocated to their general council fund
  • 21 councils admitted their decision to use the money for wider council work was due to the government's cuts to the local authority grant 

So let’s be totally clear: over half of the Councils in England have allocated their New Homes Bonus to their general council fund, instead of using it for its intended purpose of encouraging new homes.

I can’t be the only person who sees similarities in tenants using their Housing Benefit payment to pay for other things than the cost of their housing, and in Councils doing likewise with the New Homes Bonus.

If our own local Councils can’t budget themselves; what chance do those on the lowest incomes?

Would it not have been better to make Councils apply for their reserved share of the bonus, once they had documentary evidence showing planning permission had been granted for a development to proceed?

If there is one positive outcome that can be gleaned from the misusing of the New Homes Bonus Scheme, it is that the Government will surely now have to ring-fence any future Housing initiatives; so that they guarantee, and insure, the full benefit for which they were commendably created.

1Source: BBC: ‘Benefit tenants 'rip off' landlords’.
2Source: Landlord Today: ‘Nine out of ten landlords owed rent by LHA tenants’
3Source: Department for Communities and Local Government. ‘Grant Shapps: Extra funding for councils who go for growth now’
4Source: Inside Housing. ‘Councils bite into new homes bonus’