Cuts to local housing allowance will cost £120 million a year due to rising homelessness

The government will face costs of up to £120 million a year due to the surge in homelessness caused by cuts to local housing allowance, new research from Shelter reveals today.

The housing charity commissioned independent research from the University of Cambridge to investigate the true impact of the cuts, both on households and on the government’s own finances.

The findings show that 134,000 households will either be evicted or forced to move when the cuts come in next year as they will be unable to negotiate cheaper rents.[1]

Of these, an estimated 35,000 households will approach their local authorities for housing assistance, and where councils have a legal duty to help[2] they will face costs of up to £120 million a year providing temporary accommodation such as hostels or bed and breakfasts.

The costs would cancel out a fifth of the £600 million the Treasury has said it will save from the cuts in 2012, the first full year they are in force.

There will also be additional administrative costs to councils in processing the thousands of homelessness applications they are likely to receive.

Campbell Robb, chief executive of Shelter says: “Shelter’s research clearly shows that not only is the government’s budget regressive, it doesn’t even add up. The devastating impact of cuts to local housing allowance on some of the poorest families in Britain will mean the government will not save anywhere near as much as it has claimed.

“Now that the true cost of these proposals has come to light, the government must urgently re-think these reforms and develop an alternative that protects the most vulnerable and delivers real savings to the housing benefit bill.”





[1] The evaluation of the pilot of Local Housing Allowance in 2004 found that 50% of landlords whose tenant faced a shortfall in their rent as a result of the new rate did not take any action, suggesting that the remaining 50% did not show forbearance to tenants

[2] A YouGov survey commissioned as part of the research showed that 26% of private tenants would seek assistance from their local council if they lost their home. On this basis, the research estimates that 35,000 households could approach their local authorities for assistance, of which only 19,000 will be in priority need and eligible for housing support.

Local authorities have a duty to house households which are assessed as unintentionally homeless and in priority need.


1.      Shelter commissioned independent research from the Cambridge Centre for Housing & Planning Research at the University of Cambridge to assess the full the impact of cuts to Housing Benefit and Local Housing Allowance. For a summary of the report contact the Shelter press office on the numbers above.

2.      HM Treasury’s Budget 2010, page 40, states that the saving from housing benefit reforms in 2012/13 will be £600 million

3.    All figures are for England

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