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Social Housing Speed Read – Government abandon LHA cap for social tenants

The Government announced at Prime Ministers Questions last Wednesday morning that it has abandoned its plans to cap housing benefit for social housing tenants at the Local Housing Allowance (LHA).

What was the LHA cap policy?

In November 2015 George Osbourne first announced the Governments plans to cap housing benefit for tenants of social housing at the LHA. The LHA is used to calculate housing benefit for tenants renting from private landlords.

David Orr, Chief Executive at the National Housing Federation (NHF), said that “the LHA cap bore no relation to the real cost of providing supported housing, a view which had cross-party consensus”. Housing Associations consistently warned that this benefit cut would have been a particular problem for those in supported housing as their rents include enhanced services and facilities meaning many would not be able to afford the shortfall between the rent and housing benefit under the LHA cap.

The policy also meant many Housing Associations and charities were forced to halt developments and a survey by the NHF in August discovered that 85% of supported housing developments had ceased to progress due to uncertainty over funding.

What are the changes?

Labour had scheduled a second opposition day debate to discuss Governments plans on the LHA cap and was planning to seek a motion to call the Government to change its mind.

However, the Prime Minister announced last Wednesday during PMQs that the cap will not apply to supported housing and will not be implemented in the wider social rented sector.

Terrie Alafat, Chief Executive of the Chartered Institute of Housing (CIH), said that this decision is “great news”. He went on to say that applying the cap to the wider social housing sector “risked putting social housing out of reach of younger people in many areas. The Government has clearly listened to the concerns of housing professionals across the UK.”

Liberal Democrat communities spokeswoman, Wera Hobhouse, said “this cap would have hit the most vulnerable in our society… it is right that the Government has U–turned. Ministers must now reverse their damaging decision to scrap housing benefit for 18 to 21s that risks pushing more young people into homelessness”.

What does this mean?

This U-turn will hopefully encourage Housing Associations to continue with otherwise halted developments – Home Group said following the announcement that it would release £50m to build out three paused schemes.

However, Labour has warned that “the devil will be in the detail – and the funding”. In June the Government anticipated a £520m saving from the LHA cap. Labour therefore does not expect the Government to U-turn fully as it will have to meet this cost elsewhere. The Government is due to respond on Tuesday to the consultation on the future funding model for supported housing, which will hopefully reveal more on the Government’s plans.

Despite relief amongst the social housing sector, the private rented sector is still left with problems to face. Successions of cuts and frozen rates for four years until 2020 means the LHA is almost guaranteed to leave private tenants with shortfalls against their rents and the prospect of private landlords dealing with increasing rent arrears, which may have an impact upon local authorities and their housing duties if there is any increase in private tenants being evicted because of those arrears.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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