From the beginning of April 2011 a number of changes were made to how housing benefit payments are calculated.

The first people affected are those making a new claim for housing benefit, though in time it's likely that almost all those claiming it – new and existing claimants alike – will be subject to the new rules.

News headlines

When the changes were first debated in 2010 they created a furore. Mayor of London Boris Johnson realised they would particularly affect London and objected to the proposals. A string of headlines followed, including: Housing benefit cap will lead to 'Kosovo-style' cleansing of London and Cameron and Boris at war over eviction jibe.

It was later accepted that the language overstated the reality of the changes, but the headlines do reflect that the changes will have a significant impact on many claiming housing benefit, and that the biggest impact will be in the capital, in particular central London.

What is housing benefit?

Housing benefit is a means tested social security benefit intended to help meet housing costs for rented accommodation, and typically helps those who are on unemployment benefit or a low wage.

When will the changes come into effect?

It's likely that those claiming housing benefit before 1 April 2011 will continue to receive their payments for:

• nine months
• until the local authority next assesses housing benefit

However, in time all claimants will be subject to the new rules. The changes themselves can be summarised as follows:

• Weekly excess abolished – £15 that some tenants got over and above their rent will no longer be paid
• Cap introduced – the cap will depend on the number of bedrooms in a property (if the claimant has a room in a shared property they're treated as having a one bedroom property for the purposes of the cap). The caps (the very highest payments local authorities can make per week) are: £250 for a one bedroom property (including shared accommodation) £290 (two bedrooms); £340 (three bedrooms); £400 four or more bedrooms).

It's important to note that the above are the highest payments local authorities are allowed to make, and aren't the payments made by local authorities up and down the country. In effect, local authorities will make payments much less than this, and only in central London will payments be anything like the ones above.

It's also important to note that all properties with five or more bedrooms will from now on be treated as a four bedroom property, so the maximum payment in future for any property will be £400.

The caps look extremely generous, but for most of the country caps will have no effect whatsoever. They will however, have an enormous effect on those claiming housing benefit in central London, and, to a lesser extent, inner London areas.

Before the changes were introduced, housing benefit claimants in central London properties were entitled to approximately:

• £375 per week for a one bedroom property (including shared accommodation)
• £550 per week for a two bedroom property
• £795 per week for a three bedroom property
• £1,250 per week for a four bedroom property
• £2,000 per week for a five bedroom properties

These changes only affect those in areas such as Kensington and Chelsea, and Westminster. However, those in inner London claiming housing benefit for a four bedroom property (or more than 4 bedrooms) will not get as much as they would have done had they claimed before 1 April, or get their payments reduced over time.

The caps therefore affect very few who claim, or who will claim, housing benefit. Other changes, though, will affect almost all claimants.

Reduction in Housing Benefit Allowance – the main change to housing benefit, we would suggest, is the reduction in the amount paid across the whole country. Currently the amount paid by local authorities isn't set nationally, but is calculated at a local level with the help of the Valuation Office Agency. Before the changes, payments to claimants were either the full amount of rent, or enough to pay for the bottom 50% of properties rent in full – whichever was less.

So for every 10 properties in any one area, the rent of five of them would be paid in full. If the property was more expensive than the average, the claimant got paid the average price of properties in the area as a contribution to the rent and had had to make up the difference themselves.

Now, under the new rules, housing benefit will pay rent for the bottom 30%. So in future, for every 10 properties in any one area, the rent of three of them will be paid in full. If the claimant is living in a property more expensive than the cost of the bottom 30% of properties, the claimant will have to make up the difference from their own resources.

The future

In future, local housing allowance rates will be updated in line with the Consumer Price Index, which measures the average changes in the prices of consumer products and services in the UK from month to month. It's the main measure of inflation in the UK, but generally shows a lower increase than previously used rates.

Homelessness charity Shelter has argued that the percentage of privately rented properties available to housing benefit claimants in central London will fall as a result of the changes, and that prior to the changes more than 50% would have been available. According to reports, there are fears this may fall as low as 7%. 

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