APPENDIX 1
DETAILED ASSUMPTIONS IN ESTIMATING PUBLIC
EXPENDITURE IMPACT OF LAWN MOVES
The potential saving from a LAWN moves depends
on the cost of the temporary accommodation. This in turn varies
according to the size of the accommodation. So the bedroom profile
of LAWN moves is important. From the LAWN statistics for Q1 2003-04
they are 40% for one bedroom, 35% for two bedroom and 25% for
three+ bed. The weighted average cost of temporary accommodation
for this profile was £225 per week at end 2002. These figures
will inevitably change over time. They are unlikely to fall significantly.
The extent to which the numbers in temporary
accommodation would go down for each LAWN move needs to be defined
and done so for each bedroom category size to be realistic. Hence
it is assumed that 60% of one bedroom moves would result a drop
in the numbers in temporary accommodation, 80% of two bedroom
moves and 90% of three+ bedroom moves. This does not assume that
the LAWN movers are homeless persons, but it relies on the fact
that any social tenant moved by LAWN will free up a council or
RSL dwelling for use by another applicant. In London the bulk
of new applicants rehoused are the homeless.
Assuming that only a proportion of moves result
in a reduction in temporary accommodation reduces the averaged
weighting saving to about £175 per week.
The great bulk of this cost is met by central
Government, through housing benefit (HB) and most of the remainder
by local authorities.
Relatively few persons are working at the time
of their homelessness and it is assumed that if placed in temporary
accommodation whose rents are £200+ per week the depth of
their poverty trap would mean that relatively few such homeless
persons would find a job.
However with rents of the order of £50
per week for council housing on average outside London, the East
and South East it is reasonable to assume that within a reasonably
short period of time a proportion of the movers would start to
gain employment. We assume that 10% of the population gain employment
a year after a LAWN move, 20% after two years up to a maximum
of 30% reached after three years. This reduces the HB cost to
Government. It is also assumed that LAWN movers will, if in employment,
stop renting their home after 10 years. So the HB savings would
cease at that point.
The incentives assumed are:
— £4,000 dowry to the receiving
landlord.
— £500 incentive to the LAWN service
provider.
The discount rate assumed for the Present Value
calculation is 5%. The savings would be even greater if the Treasury's
revised base discount rate of 3.5% was assumed.
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