Sunday 16 August 2009

Housing benefits

Housing benefits


Easy for some

We all know that people on employment and support allowance or jobseeker's allowance in Britain can also claim housing benefit (or local housing allowance) and council tax benefit. This may seem a simple matter if you can understand the forms (and even I, with all my brains, struggled with those). Once having filled in those forms correctly, it was easy for me when my current tenancy was managed by an agency on behalf of the landlord and in my previous tenancy, when the landlord was happy to accept housing benefit paid directly from the local council. When the landlord took over direct management of my current tenancy early in 2007, he flatly refused to accept such direct payments. This created new and unexpected difficulties for me.

Cash flow problem

My landlord expects monthly payments on the 25th of each month or as near as possible if it's Saturday, Sunday or a public holiday such as Christmas Day. Perfectly reasonable, you may think. Unfortunately, the housing benefit system doesn't allow for monthly payments. That may be why the landlord refuses to accept them although I'm only guessing. Instead, payments are made to me every four weeks, calculated proportionately. So I am short by more than twenty pounds each month except for once a year, when two payments occur between successive rental dates. That's what I call my bonus month.

Another curiosity is that Leicester city council refused to pay my housing benefit directly into my bank account prior to September 2008, even though they always paid landlords that way. I have no idea why, but it caused particular problems for me. It seems that the policy change relates to the introduction of local housing allowance, which is always paid to tenants. That creates a whole other set of problems for those landlords who were previously paid directly by the council. I may have more to say on that eventually, although it's not a problem that affects me personally.

Cheque clearance times

Due to the Bankruptcy from which I was discharged in September 2006, I don't have a proper bank account. I have a savings account into which my jobseeker's allowance is paid directly and takes the standard time to clear (traditionally three days, but quicker now, although I still get my jobseeker's allowance on the same day, the government having changed the payout date to take advantage of the faster clearance times). Unfortunately, when I pay cheques (including housing benefit cheques) into my savings account, they took (to use the official phrase) seven to ten working days to clear. That's nearly two weeks assuming that there were no public holidays in between. Again, things have improved, but it's still slow.

Furthermore, since my cheque normally arrived on a Wednesday, I couldn't pay it in till the Saturday when I was on a New Deal placement. And if that also caused it to straddle the Christmas period, a cheque arriving in December may not have cleared until it was nearly time for the following cheque to arrive in January. On top of all that, I sometimes had to worry about whether the Royal Mail would actually deliver my cheque. As things turned out, the 2007 postal dispute didn't cause any severe delays for me (some others, especially in Liverpool, were not so lucky), but I was always concerned that it might. I was thinking that next time there's a dispute, I may be less fortunate, but the September 2008 rule change allowing direct payments into bank accounts means that I don't have to worry about postal disputes delaying my benefit payments, although they would cause inconvenience in other ways, especially if employers choose to respond to job applications by post.

So it was that a cheque received during one month could usually only be used to pay the following month's rent, even if everything ran smoothly. And even then, it was twenty pounds short except once a year when I had the extra payment. This cash flow situation created a substantial problem for me when my landlord changed the system. Even though I'm back on an even keel, it's still awkward trying to figure out what my real financial situation is. Sometimes I may appear to have a lot of money available but I don't really. At other times, I may appear to have hardly any but I know that I only have a day or two to wait and there will be plenty. And, of course, because the housing benefit payment arrives at a different time each month on a revolving cycle, it's not as simple as looking up which day of the month it is. (Incidentally, my jobseeker's allowance is paid every two weeks and I don't particularly like that time-frequency either, but because I sign for benefit every two weeks, that is never going to change unless the entire signing on system does too.) At least now, I know that payment will be quicker.

To illustrate how extreme things were, let's look at February 2008. I received my housing benefit cheque punctually on Wednesday the 6th. I couldn't pay it into the bank until Saturday the 9th, which meant that it would clear by the 22nd (it might have been earlier but I didn't rely on that). My rent was due on the 25th (a Monday), so because my placement ended on the 22nd, I could rely on the money from that cheque clearing in time to help pay the rent - but only just. But supposing that my placement had lasted another week, so that I wouldn't have been able to pay the landlord in person? As, by then, I'd been transferred to the former farm near Ragdale, the only day that I'd have been able to pay the rent was on my job search day (a Tuesday). Perhaps the landlord would have agreed to accept the rent a day late, but I wouldn't want to use up his goodwill that way. No, I'd have paid the rent on the 19th, before the housing benefit cheque had cleared (I checked out of curiosity).

So, because of New Deal combining viciously with Leicester city council's refusal (at the time) to pay directly into my savings account combined with the bank's leisurely cheque clearance policy plus the same bank's refusal to allow me a standard bank account, there were circumstances in which the housing benefit cheque could reach me nineteen days before the next rent was due and I still wasn't be able to use the money to pay that rent, though of course it was available for the following month's rent. By that time, the next housing benefit cheque would also have cleared, so that was my once-a-year bonus month. Still, because of the conditions described above, my bonus month actually came several months later than it would if I had a standard bank account or if Leicester city council had paid my housing benefit directly into my existing savings account at the time. Note that I have not picked the most extreme possible case, which would cover the Easter or Christmas periods, both of which include plenty of public holidays to stretch the time-span further.

I can cope with all these quirky payments but then, I have a mathematical brain and I'm also able to cut my spending to the bare minimum if I absolutely have to, not least because I'm a bachelor boy and don't have to worry about anybody but myself. I can imagine that a lot of other people end up in big trouble trying to reconcile these money flows, especially if they have family or other commitments that I don't have.

And it's worse than that

While I have to pay rent in advance, my benefits are paid in arrears (that's over and above the problems I've already described). So when there is a rent payment increase, I lose out because I never really get back the extra money. For one month, I pay the extra amount. While Leicester city council eventually increases the benefit payment to me, that increase merely funds subsequent rent payments.

Local housing allowance

For the time being, Leicester city council are only using the new system for new claims, so I'm staying on the old housing benefit system although I'd be much better off under the new local housing allowance system. Elsewhere, some local councils have transferred everybody to the new system and this has created a lot of problems for some people. I expect to have a lot more to say on the subject eventually, but here's the basic rules.

As the law was originally set up, if tenants could find accommodation cheaper than their local housing allowance, they were be allowed to keep the difference up to a maximum of fifteen pounds per week. Any more than that apparently causes the local housing allowance to be cut. From April 2010, it seems that tenants will no longer be able to keep the savings, which removes the incentive to shop around and may lead to landlords raising prices for low-cost housing. There is pressure for the rule change to be dropped. Given the proximity of the 2010 election, the fight will be interesting. Either way, if the rent is higher than the local housing allowance, the tenant has to pay the extra.

I've worked out, based on the new system as originally implemented, that my rent is well within the allowance so I would be fifteen pounds a week better off if I were simply transferred to the new scheme. This reinforces what I've heard from my landlord - that my rent is much lower than it might be, perhaps because I've stayed in the same place for a long time. If I were to look for alternative accommodation to qualify for local housing allowance, I would certainly have to pay more, so I wouldn't be rewarded with a bonus of anything like the maximum amount - if I got one at all. And because I'd have to fund the cost of the move, anything less than the maximum wouldn't be worth having, so I won't bother.

This scheme does not affect me because I haven't moved since the scheme started. If I move, or if I get a job then lose it (for example, because it's a temporary job) and have to sign for benefits again, or if Leicester city council follow the example of some other councils and transfer everybody to the new system, I'll be put on the new local housing allowance.

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