Housing benefit curbs 'will push out the poor'

Thousands of poor families living in central London are at risk of losing their homes because of the Chancellor's housing benefit reforms, councils warned today.

Charities fear that George Osborne's new limits on housing benefit, aimed at stamping out "mansion benefit" claims of £100,000 a year or more, will leave large swathes of the capital "no-go" areas for the poor.

Mr Osborne has capped four-bedroom houses at £400 a week, three-beds at £340 and two-beds at £290.

London Councils, which represents the 33 boroughs, warned that the capital would be hit "disproportionately" and said it has been inundated by calls from alarmed housing officers.

London Councils chairman Jules Pipe, who is also Labour mayor of Hackney, said: "This blanket cap ignores the high rental values in many areas of London and, without providing any form of alternative housing provision, makes large swathes of the capital virtual 'no-go' areas to large numbers of people, including those who are needed to keep both business and vital public services operating."

In seven of the most expensive local authority areas - Camden, the City, Hackney, Hammersmith & Fulham, Kensington and Chelsea, Tower Hamlets and Westminster - local private rents are higher than the benefit cap throughout the borough.

All the other boroughs have some areas where larger properties cost more than the cap and where bigger families on housing benefits will no longer be able to pay the rent.

Charities said the reforms will inevitably dilute London's characteristic mix of rich and poor with the possible creation of Parisian-style "banlieues" on the fringes of the capital while the centre becomes a "wealthy ghetto".

Some inner London councils already have arrangements allowing them to "farm out" claimants to cheaper boroughs with more available housing.

About 170,000 families in London pay rent to landlords and receive the local housing allowance.

Kay Boycott, director of policy and campaigns at Shelter, said: "Claimants will be receiving a reduced amount of support forcing them to make up an even bigger shortfall to stay in their homes. Unfortunately, for many this will mean borrowing on credit cards or cutting back on essentials."

The issue hit the headlines when it emerged a mother of eight, Francesca Walker, was living on housing benefit in a £2.6million five-bedroomNotting Hill townhouse, costing taxpayers £90,000 a year.