For the young people that Centrepoint supports, complicated benefit rules and high housing costs can mean that they face a double disparity of unemployment and housing instability. To give young people the help they need, and to ensure that those facing homelessness can both enter the workforce and experience long term housing stability, Centrepoint are calling on the Government to use the Spring Budget to level up the social security system for homeless young people.
How does the Spring Budget impact young people?
The Spring Budget comes at a time of significant anxiety for many households across the United Kingdom. As has been well publicised, stagnant wage growth, inflationary pressures on energy and food and growing inequality have contributed to the development of a post-pandemic economy that fails to work for those on the lowest incomes and/or who are in receipt of social security benefits.
Moreover, Government cost-of-living support for households has regularly failed to reach those in most need. While last autumn’s emergency budget underscored the Government’s intent to support vulnerable households by raising the National Minimum and Living Wage, increasing benefits in-line with September’s inflation rate and implementing the Energy Price Guarantee, it is clear that these changes have not significantly improved living standards.
Inflationary pressures have undoubtedly continued to increase costs, plunging a great number of young people into housing and food insecurity. Equally, existing issues inherent within our nation’s social security regime, such as the lower Universal Credit rate for under 25s, and barriers to the housing market, like limited social housing development and inadequate Local Housing Allowance Rates, mean that vulnerable young people continue to be at a disadvantage.
Furthermore, young people living in supported accommodation provided by organisations like Centrepoint face additional barriers to improving living standards. At a time of rising economic inactivity amongst young people, the continued application of policies that discourage those living in supported accommodation from entering the workforce should be questioned.
To give young people the help they need, and to ensure that those facing homelessness can improve their living standards, Centrepoint are calling on the Government to use the Spring Budget to level up the social security system for homeless young people. This means:
Making work pay for young people in supported accommodation
For young people living in supported accommodation, such as care leavers and those who have experienced homelessness, access to employment can be a critical step in their journey to independence.
However, high housing costs and complicated benefits rules for young people in supported accommodation can mean that taking on more than minimal hours at work can drastically reduce the amount of Housing Benefit that they are entitled to. This can quickly see young people running into rent arrears and debt, and in some cases young people’s overall income can reduce significantly.
Therefore, young people living in supported housing who choose to work often try to keep their hours and their earnings below a certain level. This is because small fluctuations in hours and levels of pay can leave young people owing significantly increased amounts of rent – due to the high costs associated with supported housing and their reduced Housing Benefit earnings.
Explainer
Unlike those in general needs social housing, young people living in supported accommodation do not pay for housing through Universal Credit. This is because they receive Housing Benefit rather than the housing element of Universal Credit.
Once a young person in supported accommodation starts earning a wage, their Universal Credit allowance is tapered at 55p per pound.
When this young person earns more than £111.32 per week – roughly equivalent to 11 or 12 hours of work at the minimum wage - their Universal Credit will be tapered to nil. This means that they will no longer receive their full Housing Benefit entitlement.
When this happens, the young person’s income is reassessed under the Housing Benefit rules and any earnings above their applicable amount of £66.05, minus a £5 disregard, are tapered at a higher rate of 65 per cent. Any income over the applicable amount will, therefore, be withdrawn at the faster rate of 65p per pound.
This complexity can lead to a cliff edge where young people who work are losing more money than expected.
Accordingly, young people in supported accommodation face a difficult choice between stable housing and employment. Centrepoint research into the benefits system in October 2021 found that of 215 homeless young people in supported accommodation across the UK, almost half (48 per cent) reported that they had to turn down a job or more hours due to the impact this would have on their benefits.
In this way, young people living in supported accommodation can experience significant barriers to living independently. The fact that they are discouraged from entering the workforce can mean that, when they are ready to move on, they have limited experiences of employment and little or no access to savings. This can result in fewer opportunities to access independent accommodation – due, in part, to the inadequate Local Housing Allowance rate, discrimination from private landlords and the dearth of appropriate general needs social housing.
Our solutions and policy recommendations
To ensure that work always pays and that young people can start their careers, we believe two targeted changes to the Housing Benefit system can remove the cliff edges faced by young people and promote a smoother transition from benefits to work:
- Increase the applicable amount within Housing Benefit for young people in supported accommodation to £111.32 a week, either by raising the personal allowance or introducing a new premium.
- Reduce the Housing Benefit taper rate to 55p to bring it in line with Universal Credit.
Restoring the local housing allowance and keeping it linked to real rents though regular uprating
Between 2016 and 2020 LHA rates were frozen, leading to a growing gap between rents and entitlements, more households unable to meet housing costs and local authorities facing difficulties in preventing and relieving homelessness. Rates were restored to the thirtieth percentile in April 2020, but frozen again in cash terms in 2021.
For young people on low incomes, the failure for LHA rates to keep track with rents has made it likely that they will experience shortfalls in their income. Not only are Local Housing Allowance rates substantially lower than most private rents, entitlement for single people under 35 is usually paid at a Shared Accommodation rate leaving an even greater shortfall if people are renting a one-bedroom flat.
This means that vulnerable young people often have to pay for parts of their rent from their own income, and that those individuals in receipt of the UC standard allowance will have limited finances to pay for bills and essentials.
Explainer
The LHA rate should enable a young person claiming UC to afford the cheapest 30% of rooms in the private rented sector. However, Centrepoint has found the lowest form of the LHA rate – the Shared Accommodation Rate - only covers the full cost of renting the cheapest 25% of private sector rooms in 17 out of 226 Local Authorities.
The average shortfall between the LHA rate and the accessible cheapest 25% of the rental market for young people across England – where the LHA rate is less than the cheapest rental costs – is nearly £95 per month, compared to £70 per month in last year’s analysis.
However, in some local authorities the shortfall is hundreds of pounds, and in one local authority area young people could be forced to make up over £275 to cover the rent.
Centrepoint has warned that continued Government inaction in the wake of increasing rents could cause more young people to become homeless. The charity’s Helpline has seen its busiest months since it opened five years ago, with record numbers of callers in October and November 2022 – much of which is attributable to increasing private sector rents and inadequate social security provision. Moreover, helpline Advice Workers have noticed a considerable increase in the number of young people working full-time who cannot afford private rents. In the last few months, for example, Centrepoint Helpline has been “catching people who wouldn’t normally use the service”.
Our solutions and policy recommendations
In the long term, Government, Local Authorities and sector stakeholders need to invest in delivering genuinely affordable homes that young people can afford to rent, such as social rented housing and innovative housing models such as Centrepoint’s Independent Living Programme. However in the short term – to prevent homelessness and help those on low incomes access private rented accommodation – the Government must ensure that housing support through the benefits system is linked to the real costs of renting. This can be done by:
- Uprating the current Local Housing Allowance rates, taking into account latest data on inflation in the private housing market.
Centrepoint have written a statement responding to the Government’s spring budget. In this statement, we call on the Government to support young people at risk of/experiencing homelessness by:
- Making work pay in supported accommodation.
- Increasing the Local Housing Allowance rate.