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Analysis: the overlapping impacts of benefit changes in London

The current government has introduced a range of benefit changes with the aim of reducing welfare expenditure. The biggest cuts have been to housing benefit. As a result the impact has been particularly severe in London where both the proportion claiming housing benefit and the amount claimed is much higher than the national average.

Posted on 28 November 2014

These housing benefit cuts have worked differently for social renters and private renters, so the effect on claimants depends on the tenure they live in. The Local Housing Allowance (LHA) changes affected private renters by lowering the maximum that could be claimed whilst the under-occupation penalty (often called the 'bedroom tax') affected social renters by cutting entitlement for those deemed to have a spare room (a similar system already exists for private renters). Meanwhile the overall benefit cap cut the entitlement of workless families in any tenure.

The table below shows the average cut resulting from these three housing benefit changes in London compared to England as a whole. The overall benefit cap delivers by far the largest cut in income at £77 per week to around 21,000 households in London. But it affects far fewer than the 50,000 affected by the 'bedroom tax' and the 160,000 affected by the LHA changes. The table also shows the average cut from each policy is higher in London.

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The reason that these cuts are higher in London is that the average amount of housing benefit claimed is higher, which in turn is because housing costs in London are higher. The average cut to private tenants through the LHA caps at £23 per week is three times the average for the Rest of England.

Each of these cuts to housing benefit entitlement were introduced as different policies and at different times (and the impact of each is explored individually across this website). But for a household needing help with their housing cost the changes can interact to narrow the housing options available.

For example, a social renter that downsizes into the private rented sector to avoid the bedroom tax could find that they are instead affected by the LHA cuts. In fact DWP commissioned research reported that social landlords in London were not recommending that their tenants affected by the under-occupation penalty move to the private rented sector because in doing so their housing costs would increase. It also reported that some larger social rented properties that became available through the under-occupation penalty were hard-to-let as the family that moved into it could be affected by the overall benefit cap. Together these reforms mean that much of London, not just high priced Kensington and Chelsea, are out-of-reach for workless or low paid families that need help through housing benefit.

But benefit cuts have not been limited to housing benefit - this is merely the one that disproportionately affects London. Other cuts include council tax benefit, disability benefits, tax credits and unemployment benefits. Many of the households that claim one of these benefits will also claim another so will have seen their income cut multiple times.

In 2012/13 the incomes of the poorest fifth were at their lowest for ten years in real terms. These welfare reforms, many of which were introduced the following year - are likely to mean incomes fall further. Alongside this, the widespread impact of the housing benefit cuts across London means that many families will struggle to find an alternative home where they wouldn't be affected. Instead those families will have to find ways to reduce other types of expenditure of other items (such as food, fuel and transport) with their already falling income.