Most social housing tenants will see little or no direct benefit from Chancellor George Osborne’s promised cut in rents, an economic think tank has said.

Mr Osborne announced in his summer Budget that rents for council and housing association tenants in England would be cut by 1% a year for the next four years.

However the Institute for Fiscal Studies (IFS) said that for many tenants the reduction would be offset by a loss of housing benefit which will typically be cut pound-for-pound as their rent falls.

As a result, the biggest beneficiary will be the Exchequer which will gain an estimated £1.7 billion from the fall in benefit entitlements while the disposable income of tenants will rise by just £700 million.

While 1.6 million of the 3.9 million households in social housing will gain an average of £420-a-year, the IFS said they would generally be on middle incomes and therefore not entitled to claim for housing benefit.

At the same time, the IFS said the rental income of social landlords was set to fall by £2.3 billion-a-year, leading the Office for Budget Responsibility to calculate that 14,000 fewer social sector properties will be built between now and 2020-21.

However the IFS said that the changes would strengthen the incentives for tenants to work as they would lose less of their means-tested benefits if they took a job or increased their hours to earn more money.

Robert Joyce, one of the report’s authors, said: “The Government had committed to increasing social rents for ten years; but after just one of those ten years, it announced that rents will instead fall for the next four years.

“This instability could damage the ability of social landlords to plan and finance new house-building.”

A Government spokesman said: “Around a third of social sector tenants – four million households – pay their own rents without housing benefit and will benefit directly from rent reductions.

“By lowering social rents the Government is helping to protect social tenants from rising housing costs, while ensuring fairness for taxpayers.”

Source – Express & Star