The government has backed down over plans to cap housing benefit payments on social rented properties, a move that campaigners had warned would make thousands of vulnerable tenants homeless.
The 11th-hour change of heart was announced in a ministerial statement just a month before the changes, originally unveiled by the chancellor George Osborne in the autumn statement in November, were due to come in to effect.
The government said it was delaying the implementation of the policy for a year while it carried out a full review of the impact of the cap on tenants in supported housing.
Osborne had argued that capping local rates of housing benefit for social homes to bring it in line with private rents was a way to prevent social landlords from charging inflated rent for their properties.
But housing associations and homeless charities warned the move would put thousands on tenants in sheltered accommodation at risk of losing their homes, including frail older residents, victims of domestic violence and people with mental illness.
The delay comes weeks after the Department for Work and Pensions (DWP) dismissed housing association concerns over the cap as “scaremongering”.
The shadow housing secretary, John Healey, said: “Just weeks after ministers insisted they were pressing ahead with these damaging plans, they have now backtracked and said they’ll delay the implementation of these cuts.
“This is a victory for common sense and overdue recognition that the chancellor’s cuts plans are in complete chaos. While ministers have admitted they have no idea what the impact of their plans will be, housing organisations have been clear that these cuts will be a catastrophe for the people they support.”
Tens of thousands of supported housing units would be forced to close as a result of the cap, and many planned building projects cancelled, bringing about what some housing associations had warned would amount to “the end of social housing”.
This latest climbdown follows last month’s announcement of a 12-month exemption for providers of supported housing from the chancellor’s much heralded plan to cut social housing rents by 1%.
The National Housing Federation, which represents English housing associations, welcomed the deferral but warned that the sector still faced “substantial uncertainty” because of the threat of the cap being introduced at a later stage.
It said in a statement: “The best way to end the uncertainty is to remove that threat. We must make sure that a crude LHA cap does not play a part in the outcome of the review, and that the review delivers long-term stability and security for the sector.”
The delay was announced in a House of Commons written statement on Tuesday morning by Justin Tomlinson, the minister for disabled people at the DWP.
The statement said delaying the proposal was a way of ensuring “appropriate protections” for tenants and housing providers. It added: “This is why we are awaiting the outcome of a supported accommodation research project and subsequent policy review, to ensure support is focused on the most vulnerable, and appropriate groups are safeguarded. I consider it important to have evidence to support any decision.”
The chief executive of Homeless Link, Rick Henderson, said that while the deferral was welcome, it merely offered a postponement of the cap. He said: “While the next year will provide much needed breathing space to work out a more realistic solution with government, we know that many homelessness organisations will find themselves stuck in limbo and unable to commit to future projects until there is more certainty about their future rental income.”
The DWP said: “We value the role supported accommodation plays in helping vulnerable people, which is why we are deferring the social housing reforms for this sector for a year while we carry out a review and consult with stakeholders to ensure it works in the best way possible.”