Half of all LAs could face affordable housing shortfall

Housing benefit reforms, which will cut payments to private and social housing tenants in under-occupied homes, will cause LAs to run short of affordable housing by 2017, the Department of Work and Pensionssaid.

David Whittaker, managing director of Mortgages for Businesses, said there was no easy answer to the predicament.

He said: “There is an immense mismatch in the requirement for rented housing and the creation of new homes which is going to continue for a number of years.

“Housing associations were historically the stop gap for shortages in LA housing but they no longer have an open amount of money from the government to build houses so it does come to the private rented sector.

“But this sector has been stalled as well because buy-to-let landlords are not generally the creators of housing stock. They are also reliant on house building which is not keeping up with current requirements for housing never mind future needs.”

And he added: “Landlords are not simply waiting to house these people - what landlord has vacant stock? The reason that yields are better than they have been for some years is because tenants are already in short demand.”

As part of the measures disclosed in the emergency budget in June 2010 and the spending review of October 2010 the Government announced changes to housing benefit including reductions to local housing allowance rates for private rented sector claimants and deductions in payments to social sector tenants in under-occupied homes.

DWP has forecasted that there will be a £2.3bn saving from the reforms in 2014-15 which will result in around two million households receiving lower benefits.

Claimants with large numbers of children and those living in areas of high rent such as London will be most affected.

Amyas Morse, head of the National Audit Office, warned there would be limits to what the Department of Work and Pensions could do to mitigate the crisis.

Morse said: “Some challenges cannot perhaps be planned for where the interaction of local authority funding constraints, the social housing stock, rental market conditions and the local economy produces extreme impacts.”Downward pressure on rents or increased employment would mitigate the impact but NAO analysis indicated that, based on current trends, 48% of local authority areas in England could face shortfalls by 2017.”

The department also revealed that many people know little about the changes.

The National Audit Office said how tenants and landlords will respond is highly uncertain at the moment but DWP has commissioned independent research to evaluate the impact of the reforms after implementation.