Anne - in putting the facts of your family's circumstances in the public domain you will find that people will make judgements based on what you say - even those who may not voice them - and of course 'claiming every benefit available' is not criminal - however if your family member's house is in a bad enough condition for them to be at risk of eviction then there are undoubtedly a lot of people who might consider them to be, shall we say, someone they would rather not live next door to. My own neighbour (opposite) was evicted three weeks ago and it has taken the council over a week of working there every day to fix the damage and neglect. Every service from builders to plumbers have been turning up. Whilst they never bothered me or did me any personal harm I can guarantee that many of my neighbours are glad to see the back of them.
But you also say of the family you refer to that they can't afford to fix their house (and you showed your own judgement on this when you referred to it's original condition). Without knowing how the house was damaged the implication I read in your post is that they caused at least some of the damage. They chose their actions that may have led to cause the damage to the property and they are still choosing how to respond to the damage and how to spend their money. If designer clothes and expensive furniture are more important to them than house repairs they are choosing to take the risk of eviction. That is entirely their choice. If the damage was caused by others from outside then there are other options available for funding the repairs, but they would have to choose to take that action.
Don't get me wrong, I'm not the banner waving sort who says that parents shouldn't smoke but should spend their money on food and clothes. I accept that it's not that easy and smoking is an addiction, and can be an important part of belonging to a social network; and that pets, hobbies and social activities are all important parts of daily life that need to be funded.
My point is that whilst our circumstances may not be of our choosing or our own fault, how we respond to them and how we deal with them is something we choose. Each choice we make builds the foundation for the next choice and so on, so it is not always easy to change. Choices are not always about making physical changes, sometimes they are the emotional choices we make in how we cope with a situation. However that is the root of social work, helping people make the choices that protect the vulnerable.
Back to topic. There will always be relative poverty wherever there is a free market economy. Even as you raise the incomes of the poorest members of society the wealthier will still be able to raise the game and spend more so pushing up prices and reinforcing the gap. How individuals define what is important in their lives, how they view money and how they choose to spend it has an impact too. Doesn't mean everyone should stop trying to fight for the rights of the poorer members of society though.