Rent crisis predicted by Newcastle housing chief as Government caps welfare

Newcastle-based Home Group has warned a Budget welfare cap could mean that rents will rise beyond the ability to pay for many people

Chancellor of the Exchequer George Osborne lays a block during a visit to a Barratt Homes building site
Chancellor of the Exchequer George Osborne lays a block during a visit to a Barratt Homes building site

A North housing chief has warned that a Budget welfare cap could mean thousands are left struggling to keep a roof over their heads.

The Chancellor revealed that many state hand-outs will now be capped, with a set budget each year rather than the Government handing a blank cheque to the Department for Work and Pensions.

But with social housing rents allowed to go up above inflation, the Newcastle-based Home Group is predicting a financial nightmare for many in years to come.

Chief executive Mark Henderson said the region faced a situation in which housing benefit could fail to keep up with minimum increases in housing costs.

He said: “At current rates this welfare cap is a cut to the incomes of some of the most vulnerable people in society. The Government sets yearly affordable rent increases at CPI +1%.

“Many people who rely on affordable housing could see an increasing gap year-on-year between their housing benefit and the cost of their homes.

“The danger is that affordable housing will no longer be affordable to a significant number.”

In his Budget George Osborne said that “any Government that wants to spend more on benefits will have to be honest with the public about the costs, need the approval of Parliament, and will be held to account by this permanent cap on welfare.”

Last night Gateshead MP Ian Mearns said Mr Henderson was not the first housing boss to warn of a rent crisis for the low-paid.

Mr Mearns, who sits on the All Parliamentary Group on housing in the North, said: “There is a bit of ongoing research being conducted for the group called Real Life Reform which is highlighting the sort of concerns outlined by Mark at the Home Group.

“And frankly what we have heard from the Home Group is no surprise. There is clear and undeniable evidence that some of the most vulnerable people are being battered by the Government’s so-called welfare reforms.”

The Northern Housing Consortium has said the Budget was “a mixed bag” for the region.

Executive director Charlotte Harrison said: “Help to Buy is currently working well in the North East, developers have told us that it has brought back confidence to the region and made sites that were not moving much more viable.

“However, the danger is if in the short-term a housing bubble pops up in the South East, the Government may be minded to switch off a programme which is overheating in the South East but working well here.

“That said, Help to Buy isn’t a long-term solution and the Government will have to manage this extension very carefully.

“The Chancellor also gave us more details on how the welfare cap will work – effectively tying in successive governments to a cap on welfare.

“The biggest element of welfare spending actually relates to pensions and currently the Government is not minded politically to change pension spending - even if there is a case for it economically.

“The details of what’s in and what’s out of the cap also point to some possible unintended consequences and challenges. Housing Benefit is in – but we’re seeing nationally increases in the rate of benefit claims in the private rented sector and what’s more, a lot of that increase is driven by people in work.”

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