Mr Osborne announced the changes to housing benefit which will come into affect from April 2011 stated housing benifit now costs £21billion a year, compared with £14billion 10 years ago said: “We now spend more on housing benefit than we do on the police and on universities combined.”

Housing benefit was now “completely out of control” and in “dire need for reform”, with some families receiving as much as £104,000 a year in housing benefit in some parts of London.

He said: “The cost of that single award is equivalent to the total income tax and national insurance paid by 16 working people on median incomes.”

The Changes in Housing Benefit from April 2011

New limits for housing benefit – £280 a week for a one-bedroom home to £400 a week for a four-bedroom property – would be introduced, radically cutting the maximum that could be claimed.

The measures also include:

• re-setting and restricting Local Housing Allowances
• increasing deductions
• reducing certain awards
• time-limiting the receipt of full Housing Benefit for claimants who can be expected to look for work
• restricting Housing Benefit for working-age claimants in the social rented sector who are living in a larger property than their household size warrants
• new maximum limits on housing benefit: from £280 a week for a one-bedroom property to £400 a week for a property of four or more bedrooms
• re-adjusting Support for Mortgage Interest (SMI) payments – currently 1.58 percentage points above the Bank of England Base rate; from October 2010 SMI will be paid at the Bank of England’s published Average Mortgage Rate

How the rate of Housing Benefit is set

From April 2011, Housing Benefit will be set in line with the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI). Both are measures of inflation published monthly by the Office for National Statistics.

The CPI measures the average changes in the prices of consumer goods and services in the UK from month to month. It is the main UK measure of inflation, and forms the basis for the government’s inflation target.

The RPI is similar in nature to the CPI, but differs in the type of goods covered and how it is calculated. The RPI includes mortgage interest payments and housing depreciation, while the CPI does not.

Current levels of support for mortgage interest payments would also be adjusted while council house tenants would only be entitled to “appropriately sized homes”.

How this could affect you as a Landlord

The effect of this reform will not only hit people on low incomes but will also hit landlords who may find their tenants defaulting on their rent.

Landlords that have a large mortgage may find the rent does not cover the mortgage or landlords with a large rental property may find it more difficult to rent out their property, add the risk of more people being made unemployed the situation for tenants and landlords do not look good.

Communities secretary Eric Pickles, laid an order before parliament suspending Hips, stating;-

“The expensive and unnecessary home information pack has increased the cost and hassle of selling homes and is stifling a fragile housing market, this action will encourage sellers back into the market, and help the market as a whole and the economy recover.”

However the Energy Performance Certificate (EPC) which was included in a HIP will still need to purchased within 28 days of the propertybeing placed on the market.