Reduced benefit cap makes housing unaffordable to many

24 June 2015, 21:23   By Tim Williamson

CURBS on welfare spending will hit vulnerable families hard, forcing many out of their homes and further into poverty, say leading charities.

family bills worried
Credit: BearFotos/

The Government is reducing the benefit cap with a dual aim of cutting its expenditure and encouraging families back to work.

But the money it will save is just a very small percentage of its target.

And charities like the Chartered Institute of Housing (CIH) and Gingerbread say it will have a devastating effect on those whose benefits are cut.

They claim it will make it harder for vulnerable people to find employment and increase levels of homelessness.

Lowering the cap will hurt the poor

The Government is planning to reduce the benefit cap from £26,000 to £23,000 a year (or £440 a week for families with children).

The aim, as with much of current welfare reform, is to save money yet still provide people with the support they need. Yet the amount it's predicted the measure will save is modest.

The Institute for Fiscal Studies (IFS) estimates the cuts will save around £100 million a year, just a small percentage of the £12 billion in annual welfare savings it plans to make.

According to the Chartered Institute of Housing, the cap will have significantly more impact on those who rely on benefits, making it impossible for many large families to afford a property.

It will also dramatically increase the number of claimants affected. Figures show that 23,000 households are subject to the current limit, but when the cap is lowered another 70,000 will be affected.

The challenge large families face is that with a cap on overall benefits, the more they claim for basic allowances the less is left for housing.

A couple with three children, for example, might only have £110 left to pay for their rent because they have already received £330 in other benefits.

That would not be enough for a three-bedroom housing association home anywhere in the UK apart from some areas in the north.

The private sector is even more out of reach with rent for a three bedroom home at least £500 per month in every region of England.

The situation is even starker for single parent families, who make up the majority of households affected.

More than two thirds of these families include a child aged five years or younger, which means the parent is exempt from having to find employment.

But since the benefit cap was first introduced in April 2013, many have had no option save to find work or see their benefits slashed - as we've reported previously.

Many have already lost up to £50 or £100 a week.

Back to work?

The Government's intention is that as well as saving money, the benefit cap will help encourage people with families to go back to work.

Gingerbread chief executive Fiona Weir believes, on the contrary, that it is more likely to force them into poverty.

She says that new statistics show the "devastating impact" that the Government's welfare reforms have had on children.

Further, taking money away by cutting tax credits and other financial support will mean more children's lives are "blighted by poverty".

Moving a long distance away to find an affordable home makes it even harder and more expensive for vulnerable people to find employment. As the CIH's Gavin Smart points out, cut off from friends and family they lose the support groups that they relied on, and that helped them with things like childcare.

Even if parents do find work there is no guarantee that circumstances will improve. More than 40% of part-time jobs fail to pay the Living Wage.

And recent research from the Joseph Rowntree Foundation revealed that more than half of the 13 million people living in poverty the UK were in a working family.

It's clear the system isn't working, claims Ms Weir, when one in four single parents working full time are still in poverty.

For Gingerbread, restricting entitled benefits is a short term solution for saving money - but one that is likely to backfire by increasing poverty and making it harder, not easier, for vulnerable people to find work.

The long term answer they say, lies in increasing the supply of affordable houses.

However this is an unlikely scenario, with Shelter saying that we're building at least 100,000 fewer homes each year than we need.

To alleviate the situation they estimate the Government would have to invest another £1.2 billion each year to boost the building of social and intermediate housing to required levels.

But with the Government eager to cut public spending, it's unlikely that it will explore a solution that involves it spending significantly more.

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