Housing benefit celebrates its 18th birthday

On what was only its second birthday, in 1984, a leader in the Times dismissed it as "the biggest administrative fiasco in the history of the welfare state". Next month, the fiasco otherwise known as housing benefit will be 18 years old - but the bureaucratic nightmare that began at its birth has only worsened.

Thousands of claimants are in debt, with delays in payment forcing them into rent arrears. Others are at risk of eviction. Intended to help the most vulnerable, Britain's crumbling housing benefit system appears to be doing the very opposite.

To coincide with the 18th anniversary, the National Housing Federation (NHF), representing 1,400 housing associations, has produced a report into the failures. The report, Housing Benefit - No Cause to Celebrate, reveals that 1.5m of Britain's 4m housing benefit claimants, are owed money - totalling up to £1.6 bn.

A straw poll of 500 people surveyed for the report found that two-thirds were owed an average £1,102, experiencing delays of up to five months. According to the NHF, housing associations are owed a total £84m in late benefit payments.

Although housing benefit was introduced in 1982, its roots lie in housing subsidies launched in 1919 to make council rents more affordable. By 1972, local authorities were obliged to provide rebates for their own tenants and allowances for private tenants. The existence of two schemes was confusing, and so housing benefit was born. But it was introduced with such haste, and without any support to councils, that administrative chaos ensued.

A Commons social security select committee report last year blamed the chaos on privatisation and red tape. The volume of claims overwhelms contractors who run housing benefit services. In Lambeth, south London, a backlog of 40,000 claims last year forced the Labour council to spend £1.5m helping its contractor, Capita, to process paperwork.

As for red tape, in 1999 there were 85 government-inspired regulation changes, mostly to do with fraud detection. They required new computer software and a reorganisation of how claims were processed. Councils were given little warning of the changes. Today's NHF report states: "Some initiatives designed to tackle fraud have themselves become part of the problem. Information required by the government's verification framework lengthens the process considerably and puts off some of those genuinely entitled to claim."

The system also suffers in-built problems. Where housing benefit is paid direct to the landlord, it is paid four weeks in arrears. This automatically puts the tenant in arrears, since their tenancy will usually require rent in advance.

Another complication arises when a claimant's employment situation changes - even if it is just a few hours' work - and the claim has to be adjusted. In some cases, housing benefit stops completely; in others, benefit is paid as before and, months later, the claimant is told they have been overpaid.

Debra (not her real name), a lone parent from London with two young children, had a part-time job at a shop last summer. At Christmas, her local authority decided she was no longer eligible for housing benefit. Now she owes £800. She says: "Before I took the job I kept checking with advisers that I'd be better off. Not once did they warn me by how much my housing benefit could drop. I feel betrayed."

Benefit also has to be amended if recipients have adult children or ex-partners living with them. The amount received is reduced, the assumption being that the non-dependants can make a contribution to the rent.

Last year, a pressure group of London's biggest housing associations, known as G15, became so exasperated with the housing benefit system that it urged the government to strip councils of their responsibility for it. The government's housing green paper came down against such a drastic step, but suggested "expert help teams" to support struggling authorities.

And while no one expects the anti-fraud measures to be scrapped, landlords and benefit officers agree that the government must simplify the system. The NHF says claimants should be eligible for awards of housing benefit for a fixed period - maybe six months - and that the policy on non-dependants must be reviewed. It says the four-weeks-in-arrears rule should end and landlord and tenant representatives must be involved in the help teams to improve administration.

Experts are also demanding more research into whether the introduction of the verification framework was worth the negative impact on efficiency and the human cost of the crisis. Jim Coulter, the federation's chief executive, says: "Housing benefit administration is bringing misery and hardship for some of the least well-off and most vulnerable. Over its 18 years of life, it has become too bureaucratic, too complex and has lost its way."

• Housing Benefit - No Cause to Celebrate is available free from the National Housing Federation on 020 7843 2234.