Most of London's new housing benefit claims are from working families - The Guardian

Working families who are struggling to afford spiralling cost of renting in London account for the lion's share of a surge in the numbers of households claiming housing benefit in the capital.

Nine out of 10 new claims for local housing allowance (LHA) in outer London are from families with at least one adult in work, a study has found, demolishing the myth that all claimants are "workshy" or "scroungers".

The study by the thinktank London Councils also found signs that the housing benefit cap is driving poorer families out of inner London areas to cheaper outer boroughs, sparking fears that an exodus could cause a shortage of school places in areas such as Haringey, Barnet, Enfield and Croydon.

Although ministers argued that the cap would curb the £20bn a year housing benefit bills and drive down rents, a surge in number of private sector rents in even the cheapest areas of London means benefit spending in the capital is continuing to rise.

The report says: "Low income working households in London are, in large numbers, in need of public subsidy to maintain themselves in accommodation in the city in which they work."

The buoyant rental market in central London means that landlords are refusing to drop rents below benefit cap levels, and increasingly are choosing not to let properties to people who are in receipt of benefits, the report says. The effect is to push up rents across the capital.

The biggest rent rise between March 2012 to March 2013 was in the borough of Richmond, west London (up 31%). But it was inner London where increases in the lowest quartile rents were most concentrated, up 23% in Wandsworth, 21% in Tower Hamlets, and 18% in both Hackney and Kensington and Chelsea.

There is evidence welfare changes are triggering an exodus to the suburbs of poorer families from the centre, where the highest concentrations of private rented stock are located. There was a 9% rise in the number of LHA claimants in outer London in the year March 2012 to March 2013, and a 2% fall in inner London claimants over the same period.

Jules Pipe, the chair of London Councils, said the government was in danger of creating a chaotic system where the only beneficiaries were landlords and letting agents.

He said: "Whatever the government's intentions, we're now starting to see real evidence that its reforms are having perverse side-effects. This is a wake-up call for the government to tailor its plans to London and so avoid hitting families, renters and taxpayers."

A spokesman for the Department for Work and Pensions said: "Reform of housing benefit was absolutely necessary to keep housing benefit costs under control and there should be no presumption that housing benefit will always pick up the bill in areas of high and rising rents."

Young people in receipt of LHAs were among those hit hardest by the changes. Restrictions on what 18- to 35-year-olds can claim have seen over 3,000 people in that age group stop claims in inner London, where only three boroughs ? Lewisham, Newham and Wandsworth – have, in theory, properties affordable to young people under cap levels.

Housing benefit caps introduced in January 2012 set a limit on how much tenants can claim, ranging from £250 for a one bedroom property to £400 for a four bedroom property.

Around 850,000 London households are in receipt of housing benefit, 282,000 of them in private rented accommodation.