High demand for emergency funds

By on 09/05/2013 in Cllr Cotton, News
Cllr John Cotton

Cllr John Cotton

Birmingham City Council recorded a huge increase in the number of people seeking help to pay their rent in the first two weeks after Government welfare reforms came into effect.

There were almost 2,000 applications for Discretionary Housing Payments in the first two weeks of April – 50 per cent more than for the whole of the first quarter of 2012-13.

Of the 1,980 Birmingham applications, 56 per cent related to the social sector size criteria (popularly dubbed the Bedroom Tax).

The Discretionary Housing Payments scheme was introduced in 2001 so local authorities could provide short-term payments to people facing problems with their housing costs.

Now Cabinet Member for Social Cohesion and Equalities, Cllr John Cotton, says the system is struggling to meet the demands as welfare reforms take effect.

He said: “These shocking statistics speak for themselves. As we feared, welfare reforms, in particular the ‘Bedroom Tax’, are having a devastating effect on many of the most vulnerable people in Birmingham and there’s only so much we can do to help.

“We’ve been given £3.77 million to deal with this but the estimated reduction in housing benefits across the city, with respect to the ‘Bedroom Tax’ alone, is over £11 million. So there’s clearly a massive shortfall.

“The City Council is working closely with partners from across Birmingham - voluntary organisations, charities, community groups and others at the front line of supporting vulnerable people - to ensure that we have a properly coordinated response to these enormous changes.

“But the figures from just the first two weeks of the new system show that demand for help will be incredibly high and yet again local government is left to pick up the pieces.”

Discretionary Housing Payments

  • The Government has allocated a cash limited fund to allow Birmingham City Council to make awards in the form of Discretionary Housing Payments for families in receipt of Housing Benefit who have a shortfall between the amount of benefit they receive and the amount of rent they need to pay to their landlord.
  • These payments are made from a separate fund with a limited budget and are awarded as a short-term measure for those experiencing difficult circumstances.
  • Birmingham City Council currently pays housing benefit to approximately 81,000 social housing sector tenants and to approximately 34,000 private sector tenants. Traditionally social housing tenants would only receive DHP in the area of exceptional hardship. Our calculations and profiling indicate that up to 13,557 social housing sector tenants are under occupying and therefore likely to be impacted by the social sector size criteria. Of these, it is estimated that, approximately three quarters, 10,449, are under occupying by 1 bedroom and, approximately one quarter, 3108, are under occupying by 2 bedrooms.
  • When we apply the restrictions we can see that the shortfall in Housing Benefit amounts to £213,033 per week or £11,077,723 annually.
  • Of the £3.77 m of the DHP funding available to Birmingham City Council, the Council will require up to £1m in relation to private sector tenants due to the Local Housing Allowance changes. There will still be a significant number of tenants who have not moved to smaller properties or are continuing to pay rents above the reduced Local Housing Allowance levels implemented in April 2011. Whilst these claimants may have intended to service the shortfalls from other income streams, many will find this difficult and require additional financial support in 2013/14.
  • In addition, the introduction of the Benefit Cap will affect around 1350 households in Birmingham and this is likely to give rise to further applications for DHP. It is estimated that the Benefit Cap is likely to cause a loss of around £88 per week to households where the Benefit Cap applies, this amounts to £4,576 a year and a total loss of £6m a year.
  • There are also those applicants who would have traditionally sought assistance for DHP for reasons of exceptional hardship prior to the welfare reforms which historically used up all of the available funds of between £650-800k.
  • Based on an average rent of a 3-bedroom property owned by Birmingham City Council of £86 per week, a tenant who was in receipt of full housing benefit but is under occupying by 1 bedroom will now have a shortfall of £12 per week, £52 per month and £626 per year. If the property is under-occupied by 2 bedrooms, the shortfall will be £21 per week, £93 per month and £1118 per year. If such an award were made it would be significantly higher than the average award for DHP made in 2012/13 of £304.24 meaning that less applicants could be assisted.

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