Private rents are booming in London despite reforms to housing benefit that were expected to bring them down.
London Councils has released the latest report in its Tracking Welfare Reform series examining the impact on the capital of the government’s private sector housing benefit reforms.
The report shows that despite the measures taken, private rental growth is exceeding inflation, most noticeably in central London, and is up 20%year on year in some parts of the capital.
Some other worrying facts include housing benefit receipt in London continues to rise; private tenants receiving housing benefit account for two-thirds of London’s housing benefit growth over the past two years; and 90% of the growth in outer London over the past year is accounted for by families in work.
The growth in private sector housing benefit is not uniform; our research shows that numbers are shooting up in outer London and falling in inner London for the first time.
With London’s robust employment market, it is not surprising that a greater proportion of housing benefit recipients are in work than any other region. Given the correlation between strong employment markets and higher housing costs, it is also not surprising that London rents continue to rise.
The implementation of welfare reform does not take account of London-specific costs and factors, and there is a risk that its aims will not be realised for precisely that reason. The government should recognise that London is different and that tailoring is required if reforming welfare is going to work as intended in the capital.
Powers to borrow and build, targeting skills spending and tailoring financial caps to London’s circumstances are just three ways in which we can begin to tackle the drivers of welfare spending in the capital, get Londoners back to work and limit the impact of the changes on local authorities’ bottom lines.
The chancellor has said he will consider exempting high rent areas from below inflation housing benefit rises; exempting London in its entirety would be a strong recognition that the capital needs a tailored approach to tackle high welfare spending.
It will also give London boroughs some breathing space to enable them to manage the process of reform in as painless a manner as possible.
Hugh Grover, director of fair funding, performance and procurement, London Councils