Welfare reforms aimed at reducing rents are failing in their task and could even be driving rents upwards according to a report by London Councils, the body which represents the capital’s local boroughs.
The report analyses the impact of coalition reforms to Local Housing Allowance (LHA) which limit the amounts private tenants are able to claim towards their rent.
When the reforms were introduced it was claimed that reduced taxpayer support would lead to rents falling as landlords adapted to reduced household incomes.
However the report says some boroughs have seen rents rise by over 20 per cent over recent months and that working households accounted for 90 per cent of the growth in housing benefit in outer London.
It also notes that more than two-thirds of the growth in housing benefit receipts are in the private rented sector where properties are more expensive than social rented homes.
London Councils says this is increasing costs for the taxpayer and directing money to private landlords which could otherwise be reinvested in new affordable social housing.
The report calls on Ministers to reflect London’s higher costs of living in any reforms and for a London exemption from below inflation rise in Local Housing Allowance.
It also calls for a full assessment of the financial burdens on local authorities arising from welfare reform.
Mayor Jules Pipe, Chair of London Councils, said: “Councils want to support families, but the double whammy of the scale of welfare changes alongside cuts to council budgets makes this a massive challenge.”
“The report shows that to avoid creating a chaotic system where the only beneficiaries are landlords and lettings agents, the government must ensure its reforms reflect London’s housing crisis.”
The report warns that if rents continue to rise, households on lower incomes could be forced to move to less expensive areas, impacting on the character of some inner London boroughs.
Mayor Pipe added: “Whatever the government’s intentions, we’re now starting to see real evidence that its reforms are having perverse side-effects. This is a wake-up call for the government to tailor its plans to London and so avoid hitting families, renters and taxpayers.”