The DWP’s latest policy is a stitch-up

A storm and the DWP logo
Steve Topple

The Department for Work and Pensions (DWP) has gone full ‘smoke and mirrors’ with its latest policy. Because while it’s claiming to help “900,000” people, it looks more like a right stitch-up.

The DWP: trumpeting hot air?

On Monday 13 January, the DWP said it’s increasing Local Housing Allowance (LHA) rates for private renters. As the government’s website notes:

LHA rates relate to the area in which you make your claim. These areas are called broad rental market areas (BRMA). …

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LHA rates are based on private market rents being paid in the BRMA which can differ from advertised rents.

LHAs calculate the amount of Housing Benefit & Universal Credit (housings costs element) the DWP gives you. So, what’s the deal with this new policy?

The DWP trumpeted:

The freeze on Local Housing Allowance rates that has been in place since 2016 has… been lifted… meaning that rates will rise by inflation from April.

There are around 1.4 million people in the private rental sector… this change will provide an average of around £10 extra a month

£10? Ten pounds…?

All well and good if you rent privately. But even so, as one Twitter user pointed out:

Also, as housing writer Joe Halewood angrily noted, private renters have suffered for years already:

£10 extra a month may be cold comfort to many. It’s even less comforting when some local authorities are set to hike Council Tax bills by 4% from April.

But this policy means nothing if you’re in social housing. If you are, you’re in for a nasty surprise soon.

Meanwhile…

The 2016 Welfare Reform Act forced social housing landlords to reduce rents by 1% a year. But this ends in April 2020. As Inside Housing reported, for the next five years rents will now increase by 1% plus Consumer Prices Index (CPI) inflation. That rate was 1.5% in November 2019.

So for example, if you live in London, the average weekly social rent was £121.85 in 2018-19. But from April, this would go up to £124.90, or an extra £158.41 a year.

Now, the DWP may argue that in tandem it’s ending the benefits freeze. It’s increasing welfare payments by CPI inflation, too. But that still doesn’t make up for the additional 1% on social housing rents.

With this, the DWP may argue that both Housing Benefit and Universal Credit could cover your full rent. Therefore, social rents going up won’t affect you. Of course, depending on your personal circumstances, the DWP may only cover part of your rent. So the rise may hit you anyway.

But what this and the LHA increase don’t account for is the controversial “benefit cap“. This restricts how much social security you can get. It’s not changing.

Giving with one hand

For around 75,000 households, while their benefits will go up, the LHA may increase, and / or their housing costs may be covered, this won’t matter anyway. The benefit cap will just take the extra cash away from them.

For example, say you’re one of those 75,000 families and live in social housing in London. You may end up £158.41 a year worse off.

So ultimately, the DWP may give with one hand, thanks to the LHA and lifting the benefits freeze, but it’ll take away with the other, thanks to the benefit cap. And it’s money many of the poorest families in the country can’t afford.

Featured image via Pixabay – EliasSch2 / Wikimedia – UK government

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