How does the new Overall Household Benefit Cap work – and how will it affect you?

The new, lower Household Benefit Cap: What does it mean for you?

From 7th November this year, the government will be rolling out a new, lower limit on the total amount a working-age household can receive in benefits, including housing costs. The highest total amount allowed will be £257.69 per week for a single person, and £384.62 for a family (higher limits apply in London).

This cut is part of the government’s campaign to convince us that people receiving benefits are “scroungers” and that benefits encourage people to avoid work. The reality is very different: UK out-of-work benefits are amongst the lowest in Europe, and anyone who can’t “prove” they are seeking work is subject to severe sanctions.

The new Benefit Cap will quickly place many families at risk of homelessness – especially if they rent in the expensive and insecure private sector. It applies equally to people who would normally be exempt from seeking paid work – for example lone parents of very young children, and many people who have been assessed as being too ill to work by the (notoriously harsh) Work Capability Assessment.

Below, we explain how the new Overall Household Benefit Cap will work and give some examples how it will affect different families. However, this page cannot cover every type of situation. If you think you may be affected, we recommend that you seek advice from a qualified advice worker (eg at the CAB). You can also check your current entitlement using an online benefits calculator, eg. www.entitledto.co.uk

Please note that your household is exempt from the cap if you, your partner or a dependent child (under 18) receives any of the following:

  • Working Tax Credit

  • Support Component of ESA (ie not the Work Related Activities Group)

  • The equivalent of these under Universal Credit

  • DLA, PIP or Attendance Allowance

  • Industrial Injuries Benefit or equivalent under War Disablement Pension or Armed Forces Compensation Scheme.

  • War Widow’s or Widower’s Pension.

  • If you are a carer for someone who is not your partner or child under 18 (eg an elderly parent) you are currently not exempt, even if they live with you and receive an exempt benefit themselves. However, from November 7th, anyone who gets Carers Allowance or Guardian’s Allowance will be exempt.

  • If the claimant has worked for at least 50 of the 52 weeks before making their claim, the Cap will not apply for the first 39 weeks of their claim (or whatever part of that is left when the Cap comes in). So the hardest hit will be those who have had periods of sickness, childcare responsibilities or insecure work.

If you are already affected by the existing cap, your benefits will be reduced immediately from November 7th. You will receive a decision letter from the DWP and you should check this and contact Housing Benefit if any details are wrong. For other claimants the cap is likely to come to Leeds some time in the New Year.

So how is it worked out?

Basically, you add up the total income from Job Seekers Allowance, Income Support or ESA (Work-Related Activities Group only), Child Benefit and Child Tax Credit. Subtract the total from £384.62 (the maximum allowed under the Benefit Cap). What is left is the maximum amount you can receive in Housing Benefit. If your rent is more than that, you have to make it up from the money you get for you and your children to live on.

Some examples

To work out how specific families will be affected, we have assumed that the rent for a family renting in the private sector is the same as the maximum Local Housing Allowance rate for a particular family size and composition. This is a fair assumption as the LHA only covers the cheapest third of homes available to rent in Leeds. Figures are rounded to the nearest pound.

Example one – a lone parent with a boy aged 2, a girl aged 7 and a girl aged 12, renting in the private sector.

Parent’s Income Support – £73

Child Tax Credit for 3 children – £171

Child Benefit for 3 children £48

Total = £292

Benefit cap of £385 minus income of £292 = £93, but the family has a three bedroom housing need (2 children under 10 are expected to share), and the likely private-sector rent for this is £151.50 (call it £151). The family faces a weekly shortfall of £58 and will be unable to pay their rent.

Example two – a lone parent assessed as unable to work due to long-term illness, with a girl aged 13 and boys aged 12 and 15, renting in the private sector.

Parent’s ESA – £102 (reducing to £73 from April 2017)

Child Tax Credit for 3 children – £171

Child Benefit for 3 children – £48

Total = £321

Benefit cap of £385 minus income of £321 = £64, but the family has a 3 bedroom housing need (2 under-16s of the same sex can share), and the rent is again £151. The family faces a weekly shortfall of £87, and will be unable to pay their rent.

Example three – lone parent on ESA, with 4 children (boys 3, 6 and 12, girl 14) renting in the private sector.

Parent’s ESA – £102

Child Tax Credit for 4 children – £224

Child Benefit for 4 children – £61

Total = £387 – just OVER the Benefit Cap amount.

They have a 4 bedroom housing need (two of the boys sharing, the girl entitled to her won room). They will have NO money left for rent.

Some examples from the social sector

Example four – unemployed couple with 3 children, renting from the council.

Parents’ JSA – £115 (yes, a couple only get £114.85 between them)

Child Tax Credit for 3 children – £171

Child Benefit for 3 children – £48

Total = £334

Subtracting this from the Benefit Cap of £385 leaves £51, but the family has a 3 bedroom housing need. A typical Leeds council rent for a 3 bedroomed house is at least £85. They face a weekly shortfall of £34 and are unable to pay their rent.

Example five – couple on ESA with 3 children, renting from a housing association.

Parents’ ESA – £144 between them.

Child Tax Credit for 3 children – £171

Child Benefit for 3 children – £48

Total = £363

Subtracting this from the Benefit Cap of £385 leaves £22. The family has a 3 bedroom housing need, and a typical housing association rent for this size house is around £115. They face a weekly shortfall of £93 and are unable to pay their rent.

So what will happen to these families?

Firstly, these are not extreme examples. The new Benefit Cap may affect households as small as 1 parent 2 children in the private rented sector, or 1 parent 3 children in the social rented sector. And of course there are families much larger than the ones in our examples, some already affected by the current Benefit Cap of £500 per week

The government has estimated that 1,409 Leeds households will be affected (that is, 5,120 children!), and we think the true numbers will be much higher. The average shortfall is likely to be as much as £75 per week – far more than can be made up from the meagre money they receive for food and bills – with the largest families receiving little or nothing towards their rent.

Shortfalls of this size are bound to lead to evictions on a massive scale – first of all in the expensive, insecure and profit-driven private sector. But even in the social sector, it is hard to imagine tenants being kept on if they simply can’t pay their rent.

Some tenants get help in the form of Discretionary Housing Payments (DHP), but the amount provided by the government for this purpose is totally inadequate. The new Benefit Cap and the bedroom tax combined amount to a cut in the council’s Housing Benefit budget of around £11.84 million per year. This year’s DHP allocation was less than one sixth of this, and it is not likely to increase much in the future.

The burden on the DHP budget is also set to soar with the switch to Universal Credit, which nationally has thrown 90% of claimants into rent arrears.

Clearly, this means NO DHP for most tenants. And many people who currently get DHP (for example to help with the bedroom tax) are unlikely to carry on getting it!

Crisis of housing affordability, and crisis of affordable housing!

Even on the government’s unrealistically low figures this is obviously a crisis on a massive scale. If a household with children is evicted, they may have to be placed in bed and breakfast accommodation – at a cost of, say, £350 per week to the council. The costs to the future of the children involved do not need to be spelled out.

The effects of the Cap will reach much further than the families directly affected. It will place more strain on public services already slashed to the bone by government cuts to council budgets. Families not currently affected may be refused tenancies based on the landlord’s view of their future “risk” of being capped. Even housing associations may be forced to avoid letting to larger families. Overcrowding will soar – encouraged by the council as a way of reducing the strain on the DHP budget.

No to the Benefit Cap – No to attacks on Council housing!

The Benefit Cap is stupid, inhumane and unbelievably expensive, and it needs to go!

But we need much more than that. As our examples show, the least expensive homes are council homes. They are not “subsidised” by the tax-payer; in fact they pay for themselves through tenants’ rents, whilst saving huge amounts on Housing Benefit which would otherwise be subsidising the profits of private landlords.

We have seen street homelessness double in the last few years, mainly as a result of benefit cuts, high rents and insecure private sector lets. There are around 25,000 households on the waiting list for Leeds council houses. Yet the government is enacting policies which will drastically reduce the amount of council housing.

  • Cuts like the Bedroom Tax and the Overall Household Benefit Cap cost the council (and housing associations) millions in uncollectable arrears

  • The compulsory 1% year-on-year rent reduction for council tenants (and other social tenants) is costing the council around £283 million compared with its projected housing budget for the next 10 years.

  • The Housing and Planning Act seeks to force councils to sell off their “higher-value” council homes to subsidise discounts on the right-to-buy for housing association tenants.

  • The Act requires new housing developments to include 20% new “starter homes” to buy, taking the place of social or affordable homes to rent.

Hands Off Our Homes is campaigning for secure, decent affordable social housing for everyone who needs it. We do this by lobbying our councillors and MPs, organising demonstrations, raising awareness, supporting affected tenants where we can, and seeking to build local networks of resistance against attacks on our housing rights.

This information is also available as a 4 page A5 flyer – see here

For more info or to join our mailing list, email handsoffourhomes@gmail.com, or phone/text 07504017322 or 07930966205 Find us on Facebook or read our blog at www.handsoffourhomes.org.uk

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