A HOUSING crisis is looming in Oxford because benefit cuts will mean people can no long afford their rented homes, experts fear.

Oxford City Council says it is already struggling to cope with new caps on the Local Housing Allowance (LHA), which is paid to 12,670 people on benefits or low incomes to help pay their rent to private landlords.

Since April, LHA rates for new claimants have been based on the lowest 30 per cent of local rents, instead of the average rent.

From January, the new rates will start applying to people already receiving housing benefits.

Current claimants, whose allowance is reviewed annually, have been given an extra nine months’ grace before their benefits are cut.

That means that from January up until 2013, households will start to receiving between £50 and £100 less each month, according to the city council. Under the new rates, they will only be able to claim £78.46-a-week for a shared property, £150.65 for a one-bedroom flat, £181.15 for a two-bedroom home, £213.46 for a three-bedroom house or £279.23 for a four-bedroom property.

Because the rates are calculated based on rents across most of Oxfordshire, experts predict masses of claimants will be drive out of the city to Didcot, Bicester, and other Oxfordshire towns.

The Oxford Mail has calculated only a fraction of available property in the city is cheap enough to be affordable under the new rates.

Just seven out of 190 one-bedroom flats, six out of 250 two-bedroom homes and two out of 237 three-bedroom houses advertised on property website Rightmove are cheaper than the new LHA maximum rents.

Oxford City Council says there are 40 per cent fewer properties available than under the old rules.

Head of strategic housing Graham Stratford said: “The problem is that properties outside of Oxford are cheaper than in the city, but the market is very much smaller.

“In Oxford landlords can find other markets. They can rent to students, young professionals or visiting academics.

He added: “The landlords are walking away from us in droves because the rents are not high enough. That will mean more people in temporary accommodation at more cost to the public purse.”

The new rules also mean large families will not get a house with more than four bedrooms, and single people aged 25 to 34 will only be able to get a room in a shared property, and not a flat of their own.

And more cash is deducted from housing benefit for every grown-up child living in the house, because they are assumed to be paying rent.

Meanwhile increasing numbers of landlords used to receiving higher taxpayer-funded rents are now refusing to take benefits claimants.

But advice centres in Oxford say people do not yet realise the full impact of next year’s changes.

Laura Wilson, of Agnes Smith Advice Centre in Blackbird Leys, said: “People will possibly leave Oxford, or end up homeless. It is going to be desperately worrying for many people.”

City council leader Bob Price warned a rise in homelessness could force the council to top-up housing benefits from its own finances.

He said: “The impact on the council’s finances could be very serious.

“It is increasingly difficult for people to find places to go in Oxford, so we end up either having to put them out into places like Witney, Banbury or Reading, or we have to start using hotels more.”

A spokesman for the Department for Work and Pensions said: “Our housing benefit reforms will restore fairness to a system that has spiralled out of control, and ensure that benefit claimants make the same choices about where they can afford to live as people in work.”