Welfare reforms are 'onslaught on the vulnerable'

Campaigners say benefits changes will cost some families hundreds of pounds a year and make others homeless

Criticism of Iain Duncan's Smith's welfare reform gathered pace this weekend, with campaigners claiming many thousands of families will be forced into poverty by the changes.

The National Housing Federation (NHF) claimed the plan to impose a cap on housing benefit payments amounted to an "onslaught on the vulnerable", which would cost more than 900,000 low-paid people an average of £624 a year – forcing them into debt or homelessness.

The impact of the cap will be felt UK-wide the federation said, but it also warned that a number of large cities in the north of England would be particular black spots.

The warning came as parent groups claimed that thousands more families will be forced to repay tax credits. Currently, credits are based on a family's own estimate of income in the coming year and they are allowed to earn up to £25,000 more than that figure before they have to repay the excess. But the Chancellor, George Osborne, has announced the "clawback" threshold will fall to £10,000 next April and to £5,000 by the end of 2013, raising the prospect of families facing demands for huge repayments to the Treasury.

Lee Healey, a benefits expert, said the changes would have a dramatic impact on poorer families. He said: "I expect overpayments to rocket, and for many more people to be hit with an overpayment of their tax credits."

Mr Duncan Smith, the Work and Pensions Secretary, last week announced a wide-ranging reform of Britain's "antiquated" benefits system, proposing better incentives for people to return to work, and to cut down on bureaucracy.

Last year more than a million families were overpaid child or working tax credit but the Government eventually wrote off more than £2bn from the amount owed. The Independent on Sunday has established the Government expects the overpayments bill to soar by more than £700m in the three years to 2013-14.

Kate Bell, of the lone parents' charity Gingerbread, welcomed the overall plans but added: "We'd like to see a system that takes overpayments out of the system, where people do not have to deal with that stress."

The NHF also gave a guarded welcome to Mr Duncan Smith's proposal to amalgamate benefits into one payment. The welfare reforms will limit housing benefit to £400 a week on homes with four or more bedrooms, £340 for a three -bedroom home, and £250 a week for a two-bedroom home. They will also mean that instead of people on housing benefit being able to claim rent in line with properties in the bottom half of the local private rented market, they will be able to claim rent only in line with the bottom third of properties.

The NHF chief executive, David Orr, said: "Ministers have said consistently since taking office that they will do their utmost to protect the most vulnerable – and yet the introduction of the housing benefit caps will clearly lead to an onslaught on some of the most vulnerable groups in society. The changes could see hundreds of thousands of vulnerable people fall into debt, forced out of their homes and neighbourhoods and crammed into overcrowded ghettos. Many others will simply become homeless."

The NHF analysis revealed hundreds of thousands of the unemployed and low-paid single parents would be hit by the changes. It found that 18,870 people would lose out in Birmingham, 15,610 in Leeds, 12,620 in Liverpool and 10,210 in Manchester.

Mr Orr added: "The proposal to roll all benefits into one is good in principle but we want to see how this will be implemented to ensure that they support people into work, without putting rent payments at risk."