Housing benefit cuts: Just how desperate is the secretive DWP?

When government ministers resort to briefing what purports to be new statistical evidence on important policy issues to selected lobby journalists rather than making it available to the public, it is clear indication that they are unsure of their ground. The Department for Work and Pensions has been a hotbed of this sort of quasi-official briefing for several months, as has been pointed out here and by FullFact.

When government ministers resort to briefing what purports to be new statistical evidence on important policy issues to selected lobby journalists rather than making it available to the public, it is clear indication that they are unsure of their ground. The Department for Work and Pensions has been a hotbed of this sort of quasi-official briefing for several months, as has been pointed out here and by FullFact.

Yesterday, parts of the lobby were treated to a briefing on housing benefit which fitted the pattern perfectly: exaggerated claims based on out-of-context figures and pointless data manipulation.

The timing in this case – in time to influence journalists in advance of Tuesday’s Commons debate on housing benefit – raises questions about what exactly is going on in the Department for Work and Pensions, which yet again has failed to give this material an official outlet on its website.

The motivation for the briefing is obvious. After a summer in which ministers shamelessly sought to mobilise grievances against housing benefit claimants in order to further the welfare cuts agenda, two key pieces of genuine evidence emerged which derailed the strategy.

In September, a report commissioned by DWP under the previous government demolished the myth that housing benefit households were routinely occupying housing which could not be afforded by low income workers: the researchers from the University of Birmingham found there were no significant differences in the rents faced by the two groups – there just weren’t enough large families occupying mansions in central London to even make a dent on the statistics.

At the same time, figures revealed in a parliamentary question showed that some 26 per cent of those losing under the housing benefit cuts were in employment. Taking account of the large numbers in receipt of Jobseeker’s Allowance it became apparent that over half the working age HB clients losing in next year’s cuts were either working or recently unemployed. Pretending that the cuts would only affect households fitting the media stereotype of long term worklessness was no longer viable.

Hence yesterday’s briefing, which aims to change tack by focusing on ‘greedy landlords’ rather than workshy tenants, while also seeking to displace the very clear conclusions of the Birmingham report.

The briefing reads:

Landlords from the private sector are taking advantage of the Housing Benefit regime, the Minister for Welfare Reform Lord Freud said today as figures show that as thousands more benefit claimants are renting properties in the private sector, landlords are cashing in by pushing up rents.

Since November 08 and February 2010, private rents have fallen by 5 per cent whilst over the same period DWP figures show that Housing Benefit rents went up by 3 per cent…

Lord Freud said:

“It is clear that Housing Benefit rents are rising faster than the market. In fact as rents in the private sector dropped by 5 per cent, Housing Benefit rents have been rising by 3 per cent – this cannot be fair, private sector landlords are taking advantage of a system that’s clearly out of control.

“We must end this practice of inflating prices when the Government is paying the bill – in future landlords will need to reduce their rents or risk their homes becoming empty.”

Tough words, but does the evidence stack up? The figures cited appear to refer to eligible rents rather than housing benefit payments, and the department does not publish these figures any more. But it is clear from the department’s quarterly statistical release that housing benefit payments in the private rented sector rose between November 2008 and February 2010. It is also clear, although this is not mentioned in the briefing, that the increase levelled off after February, so that payments have risen hardly at all this year.

This is precisely what would be expected if rents were falling last year, as housing benefit payments track median rents closely but with a time lag. Thus while there is little correlation between changes in median rents and changes in housing benefit payments from one year to another, changes in rents correlate strongly with changes in housing benefit payments in the next year (a correlation coefficient of 0.67 for the period 1997/8 to 2006/7).

It would thus be potentially misleading to compare changes in housing benefit and rents starting and ending on the same dates, and the same applies to eligible rents; to then state on the basis of such a comparison that “landlords are cashing in by pushing up rents” is exorbitant.

In any case, there is an element of misdirection in focusing on increases in rents when the overwhelming driver of growth in housing benefit in the private rented sector is the increase in the number of people claiming.

The table below uses the accounting identity Expenditure = (Caseload X Average payment) to break real terms growth in housing benefit for social and private tenures since November 2008 into caseload and payment components.*

It shows that increases in average payments in the private rented sector account for only 10 per cent of all HB growth – and even this is not a sign of landlords pushing up prices, because there have been enormous flows of tenants on to LHA since 2008, and it would hardly be surprising if those impacted by the downturn in employment had, on average, higher rents than the existing caseload. Within the private rented sector, 86 per cent of growth came from increased numbers of recipient households. When it comes to accounting for recent growth in housing benefit, rent inflation is a red herring.


Change in HB expenditure (Nov 2008 – Jun 2010, constant Sep 2010 prices)

Caseload growth: private rented sector

63
Caseload growth: social sector 20
Payment increase: private rented sector 10
Payment increase: social sector 7
All 100

Source: Calculations from DWP Housing benefit and council tax benefits statistical bulletin

In its attempts to see off the embarrassment caused by the Birmingham report, DWP has insisted on the fact that the data used by the researchers preceded the national roll-out of the Local Housing Allowance (the new form of housing benefit in the private rented sector).

The implication was that things have changed since 2008, and yesterday’s briefing makes an attempt to update and displace the conclusions of the Birmingham report by including a bizarre set of tables which appear to show the difference between the rents paid by LHA households and low income working households not in receipt of LHA using current data.

In fact there is no new data on low income working households in DWP’s figures; in order to make a guess at their rents, they simply make use of percentages taken directly from the Birmingham report which they claim has been superseded (table 4.9, page 56). These are then applied to local LHA rates, which are presented as if they represented the rents actually paid by LHA tenants rather than the maximum they could possible claim.

Here, for example, is what the tables show for one-bed flats in Islington and Leeds respectively. (LIW refers to ‘low income working’). It is hard to see how anyone could read this without getting the impression that HB tenants in Islington are paying £250 and low income working families are paying £233 – showing that LHA tenants are paying more than their working peers:

LB Islington (Inner London North BRMA), one bedroom property

LHA rate: HB tenant – £250; LIW tenant: £233.

Leeds (Leeds BRMA), one bedroom property

LHA rate: HB tenant – £109; LIW tenant – £98.

However, the department’s own impact assessment for the housing benefit cuts shows that as of February, the average LHA award for a one-bed property in Islington was £168 and in Leeds £94. (DWP Impact assessment table 36). So the LHA maximum cannot be taken as a guide to what tenants are paying in rent or receiving in LHA – and those figures on what working households are paying should be taken with a pinch of salt as well.

If this is the best that a department with the enormous analytical capacity of DWP can do to evidence ministerial claims that LHA households are occupying more expensive properties than low income workers, it is hard to imagine a stronger endorsement of what the authors of the Birmingham report say:

“If the policy objective is to set levels of HB support to the average (median) of rents paid by other similar tenants not on HB with similar characteristics, then the analysis would suggest that to a large extent this is being achieved.”

That sort of message doesn’t help with the cuts agenda, but for how long can DWP continue to ignore the evidence it commissioned?

* Breaking down expenditure growth by caseload and payment components using the identity [Expenditure growth between t1 and t2] = [(Change in caseload t1 to t2 ) X (0.5 X payment t1 + 0.5 X payment t2)] + [(Change in payment t1 to t2 ) X (0.5 X caseload t1 + 0.5 X caseload t2)] where t1 and t2 are points in time.

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