thinks Bob Mander
In 2008, Local Housing Allowance was the New Housing Benefit. Extensively piloted, simple to calculate, and empowering to its recipients, it was a major plank of the Government’s social policy.
But, instead, the Government was plagued by headlines that sounded like this:
Housing Benefit man rents £1 million flat in Westminster....or....There was too much litter in Kensal Rise so I moved my family to Kensington.
Local Housing Allowance, then, appears to have brought Housing Benefit into disrepute. But we’ve been so quick to castigate Local Housing Allowance, the opportunity to trial important concepts that would help us with Universal Credit has been lost.
As well as the high levels of rent that can be met in central London, there are two aspects to Local Housing Allowance that are widely held as “controversial”:
1. The £15 “top-up”, and
2. The fact that Local Housing Allowance is generally paid to the claimant, not to the landlord
I will deal with each in turn.
The £15 “top-up”
If the claimant is smart (or lucky) enough to secure accommodation at less than the Local Housing Allowance, the claimant gets to keep up to £15 per week of the difference. “So we pay their rent for them and give them £15?” asked one of my staff when Local Housing Allowance started (I work in a Housing Benefit office). “Yes,” I said, “its to give people an incentive to shop around and not always choose the most expensive one they can get.” I went on to explain that, under some of the LHA pilots, the claimant got to keep all of the difference, not just £15.
However hard I tried to explain the logic of the “top-up”, to most Housing Benefit officers, this was illogical. The typical Housing Benefit officer will have a gut instinct that to pay the claimant more than their rent (even if it is only £15 per week more) is wrong.
I went to a Housing Benefit conference in Birmingham in 2009, and I was openly jeered when I suggested that the top-up should be increased, not abolished.
Without a significant top-up, there is no mechanism in place to encourage claimants away from the top end of their market. I argue that if the top-up had been set at (say) 50% of the difference, we would not have seen the explosion in the Housing Benefit budget in central London. People would have down-sized, and/or naturally been attracted towards the cheaper fringes of the areas they wanted to live in, without the need for Boris Johnson’s “Highland Clearances”.
But in the end, the Housing Benefit officers had their way. The Government has announced that from April 2011, the top-up will be abolished. A useful tool in controlling benefit expenditure has been lost.
Paying LHA to the claimant, not the landlord
This too, was wrong. “Throwing good money after bad” was how one colleague put it. The money is for the rent, so why shouldn’t it be paid to the landlord?
Well, the answer is in what lies behind LHA. LHA was not just a simple mechanism for arriving at the eligible rent. It was a social experiment. It had years of academic research behind it, before it was put into action. The Government of the day wanted Housing Benefit recipients to behave like “real” people (i.e. people not on benefit) – to choose whether to spend all of their budget or keep the difference (the “top-up”), and to be responsible for their own money and pay the landlords themselves. This was Labour’s plan to combat the culture of benefit dependency - the idea that the tenancy agreement was a contract between the landlord and the State, and the HB tenant was a helpless bystander.
So LHA contained rules to make it difficult to pay the landlord direct. Difficult, but not impossible. Landlords often put a lot of pressure on Housing Benefit officers to pay them, not their tenants. Housing Benefit officers, who didn’t agree with it anyway, were often quite easily persuaded to make creative use of the loop holes.
And there we have it. Local Housing Allowance failed, because benefit staff and the Daily Mail headline writers never understood what it was trying to achieve. LHA was not given a fair trial. We will never know whether it was a good idea or not.
Universal Credit will be easy to administer if the “rent bit” is a standard amount always paid to the claimant with the rest of the Credit. But if you have to sometimes pay the rent bit to the landlord, or adjust the rent bit downwards if the real rent is lower than the standard amount, then a lot of the joy of Universal Credit is lost.
So we will walk towards Universal Credit without knowing who to pay the rent bit of Universal Credit to (see Jim Arnold’s article on whether to pay the rent bit to social landlords, elsewhere on this website). And we have lost a useful tool in encouraging benefit people to shop around like “real” customers.
R. Mander 16/11/10, revised 5/1/11.