Government sets its sights on poverty trap

The government will on Monday unveil the first step of its plan to free hundreds of thousands of people from the poverty trap, Housing Today can reveal.

The scheme, Working Future, will bring high rents in private-sector temporary housing down to social housing levels so that tenants can afford to come off housing benefit and find work.

The project, developed by registered social landlord East Thames, and Redbridge, Newham and Waltham Forest councils, will help 100 households in east London over two years.

The scheme could bring down the country’s £12.2bn housing benefit and £2.5bn Jobseekers’ Allowance bill if it were rolled out nationally because participants would claim a lower level of benefit once in employment.

Victor da Cunha, managing director of East Thames’ subsidiary East Homes, said: “If the pilot is successful, not only will it be cost-neutral to the Treasury, it will reduce other costs in the benefits system. I think the most powerful thing that comes out of it is the extra tax revenues generated by people being employed. That’s a commercial perspective that won’t have been missed by the Treasury for the Department for Work and Pensions.”

Typical rents in London for temporary accommodation, which is often rented from a private sector landlord by a housing association, can be about £300 to £400 a week. Tenants cannot afford to start work because if they do they will lose their housing benefit, which covers their whole rent, and will not be able to pay the full rent on low wages.

The pilot aims to enable families to get financial benefits from work, even on lower wages, by bringing their rent down to a social-housing level of about £90 a week. The extra rent would be paid by East Thames using government grant set aside for the pilot.

The scheme is funded by top-slicing £2.28m from the DWP, which funds housing benefit. Normally, all that money would go in housing benefit to the private landlords of temporary accommodation. Under the scheme, some of the money will go to tenants to allow them to pay a social-housing-level rent, while East Thames will pay the rest directly to the private landlords to meet the full rent. But as the total rent to be paid remains the same, the project will not cost the Treasury any additional money, even if the tenant is unemployed. If the resident gets paid work, even at a low wage, they should be able to pay the lower rent.

Residents will be chosen to take part in the scheme by May, and the project will begin in July. A control group of 100 households outside the scheme will be monitored to check the effects of the pilot.

East Thames will provide support for people hoping to start work, including work experience, job interview language classes, and help with converting qualifications gained abroad.

In December, the number of households in temporary accommodation topped 100,000 (HT 17 December, page 11).

The government has set a target of halving that number in five years.

A spokeswoman for the ODPM said the pilot could help to reduce the numbers in temporary accommodation. She said: “While it’s not the primary aim, once people join the pilot and have got into employment they might be able to access a greater range of housing options and move into more permanent placements.”

Housing benefit minister Chris Pond said: “Because of the high cost of temporary accommodation and the growth of it [it is useful to look at] whether it in itself becomes a deterrent to moving into work. But the main purpose of the project is not to achieve a saving on benefits.”