National Audit Office NAO

Changes to Local Housing Allowance are likely to have contributed to the affordability of tenancies for those on benefits, and are an element of the increase in homelessness. Since 2011, the Department for Work&Pensions has introduced a series of welfare reforms, including capping and freezing Local Housing Allowance. These reforms have been designed to reduce overall welfare spending and to provide incentives for benefit recipients to take up employment. They have reduced the amount of household income that it is possible to derive from benefits where the Local Housing Allowance applies. At the same time, rents in the private rented sector in much of the country - London in particular - have increased faster than wage growth. All of these factors appear to have contributed to private rented properties becoming less affordable, which in turn is likely to be contributing to homelessness caused by the ending of an assured shorthold tenancy (In the Report: paragraphs 1.20 and 1.21).

The government has not fully assessed the impact of its welfare reforms on homelessness. In our 2012 report Managing the impact of Housing Benefit reform, we found that the Department for Work&Pensions' assessment of the impact of its housing benefit reforms did not reflect their potential full scale, including an increase in homelessness. Subsequent research commissioned by the Department for Work&Pensions in 2012 on the impact of housing benefit reforms on homelessness did not establish how many of these households would have been homeless if the reforms had not been introduced. The Department for Work&Pensions has not carried out any more recent analysis, despite the introduction of a series of further welfare reforms since late 2012 (paragraphs 1.22 and 1.23).

The government has also not evaluated how local authorities are using the funding it has introduced to mitigate the potential impact of its welfare reforms. The Department for Work&Pensions increased the Discretionary Housing Payment (DHP) funding available to local authorities in Great Britain from L20 million in 2010-11 to L165 million in 2014-15. The increase was to provide some transitional support to households affected by welfare reforms. In 2015, the Department for Work&Pensions made a further L800 million available for this purpose. While the Department for Work &Pensions has commissioned research on how local authorities are using DHP, it has not evaluated the effectiveness of the different uses of this funding (paragraph 1.26).