Welfare Reform Bill

Memorandum submitted by the National Housing Federation (WR 12)

Introduction and summary

The National Housing Federation represents 1200 independent, not for profit social housing providers in England. The Federation's members include housing associations, co-ops, trusts and stock transfer organisations. They own and/or manage more than 2.5 million homes provided for affordable rent, supported housing and low cost home ownership.

· We are extremely concerned that Clause 68 of the Bill gives too wide a power to government. This power will allow governments to introduce major reform to the benefits system without proper parliamentary scrutiny.

· The under occupation penalty for social housing tenants is punitive, poorly targeted and will do little to address the problems of overcrowding. It will push people into severe hardship and debt, and many existing tenants will be forced to move. We also believe that while there may be short-term budget savings, in the long-term the tax payer will foot a mounting bill as the toll on people’s physical health, stress levels, job prospects, educational attainment and the ability to draw on and provide support to family members all take effect.

· The overall benefit cap for families will punish large families and is a barrier to housing associations developing badly-needed family sized housing in the South of England.

· Reform of the Social Fund should include a duty on local authorities to provide equivalent support.

· A working age disabled person living in a registered care home should have the same entitlement to help with the additional costs of mobility as a disabled person living in the family home or supported housing. There is no double subsidy here.

· It is essential that the Bill allows flexibility within Universal Credit administration to allow for help with housing costs to be paid to the tenant of a property and for tenants to continue to be able to choose to have their benefit paid direct to their landlord.

· We believe that the introduction of civil penalties is unnecessary and that help with housing costs should not be subject to sanctions that are unrelated to the claim for housing costs.

Powers given to the Secretary of State

1. Help with housing costs is a fundamental part of the safety net for people who lose their jobs, for those who are unable to work because of disability or caring responsibilities and for those on low to moderate wages. The rents for social housing tenants are much lower than in the private market and the levels of housing benefit reflect the actual rent charged. The link between benefit paid and actual rents ensures that people can continue to stay in their own home on low wages, or through a period of unemployment, or a temporary reduction of hours. It also gives older people the security that they will be able to continue living in their home through retirement. For social landlords the certainty of benefit payments that reflect actual rents has been important to their ability to secure private investment at highly competitive rates and ensure that they can maximise their capacity to build much needed social housing.

2. This principle should be carried over into the new Universal Credit: the housing cost element of Universal Credit should reflect local and regional variations in housing costs . T he link between the level of benefit paid and actual housing costs should be retained (Clause 11) .

Impact of the under occupation cut for social tenants

3. Plans to cut the housing benefit of families living in homes deemed by the Government to be larger than required represent an unprecedented attack on the family life of existing social tenants. The proposal, to be introduced through secondary legislation following provisions in Clause 68 of the Welfare Reform Bill, will cost an estimated 670,000 working-age social tenants an average of £13 a week [1] , although many stand to lose much more . [2]

4. A percentage reduction of housing benefit will be made based on the numbers of extra bedrooms, with the Department for Work and Pensions (DWP) considering a cut of up to 15% for those with one ‘spare’ room and up to 25% for those with two or more ‘spare’ rooms. [3] Pensioners are not included in this cut but disabled people, working families on low incomes and families with young children are. The measure will hit separated parents who share the care of their children. It will hit couples whose children have left home but whose children still visit. It will hit couples who use their ‘spare’ bedroom when recovering from an illness or operation. And it will hit families including disabled people who may have lived in the same home for years.

5. Real-life examples of housing association households who can expect to see their housing benefit cut if this measure becomes law, all of them for ‘under-occupying’ by one bedroom, include:

· A couple living in a two bedroom property who are looking to adopt a child

· A widower living in a two bedroom property since his wife passed away last year

· A single parent with a young severely disabled child who was allocated a three bedroom specially adapted flat as her son had a large amount of equipment to store. S he sometimes needs additional help caring for him overnight.

· A single woman with mental health problems, who previously cared for her now deceased mother, living in a two bedroom house.

· A single parent aged 25, living in a three-bedroom house in St Helens, Merseyside, with her seven-year-old daughter. She was unemployed for several years but started working two years ago. She struggles to make ends meet but wants to work, but would not be able to maintain her tenancy if it was not for housing benefit. She is already struggling with rent payments - and has arrears of £613 - and would be in danger of ending up in court if her benefit was reduced for 'under-occupying' her home.

6. Almost a third (32%) of all working age housing benefit claimants in the social rented sector will be affected by the ‘under-occupation’ measure, but some regions will be hit harder than others. In the North East of England, almost half (46%) of social housing tenants are expected to be affected. In the North West, the proportion is 43%. [4]

7. Based on average rents, a couple in the North East in a three bed flat – and therefore with two spare rooms – would have to find up to £17.50 extra per week to pay their rent or face losing their home. A couple in a two bed flat in the same region would lose up to £9.80 per week.

8. The DWP has suggested this housing be nefit restriction will provide ‘ an incentive to move to mo re suitably sized accommodation’ . [5] But the Department’s own impact assessment reveals a significant shortfall in one-bedroom properties into which households ‘under-occupying’ two- or three-bedroom properties might try to move to avoid getting into debt. [6] For example, some 600,000 working-age housing b enefit claimants are deemed to ‘ need a one-bedroom property nationally. But the number of one-bed properties is just 360,000, leaving a 240,000 shortfall in homes of this size, and meaning many people would see a cut in their housing benefit with no prospect of being able to move to a smaller social home within their region.

9. The impact assessment admits: In many areas this mismatch could mean that there are insufficient properties to enable tenants to move to accommodation of an appropriate size even if tenants wished to move and landlords were able to facilitate this movement. [7] Not only are there insufficient properties but the one bed flats needed are not available - in 2009, just 38,700 one bedroom housing association properties were let to people of all ages in England. [8]

10. Although housing associations and local authorities recognise that they need to do as much as they can to facilitate the transfer of tenants to more appropriately sized properties, the reality is that local authorities want to prioritise households on the waiting list over existing tenants who want to move. I f tenants are forced by this measure to move into the private sector this would cost the DWP more in benefit – for example, a couple with one child moving into the private sector from a three bed social flat in Crawley would be entitled to around £66 per week more in benefit to cover their additional housing costs, even on the new, lower Local Housing Allowance (LHA) rates, based on the 30th percentile of local rents.

11. The DWP has said that the new size criteria in the social rented sector will ‘replicate’ the situation in the private rented sector . [9] However, this comparison is based on the assumption that both sectors operate within similar markets, whereas in reality there are huge differences. When it came in Local Housing Allowance was only for new claims. Local Housing Allowance is a flat rate paid to households based on the household size. People can shop around with this money. In comparison i n most areas the re is an acute shortage of social housing which has inhibited mobility and choice. In areas where there is a shortage of one bedroom flats or the housing is unsuitable for people with children (for example high rise flats) couples or single people may have been allocated two bedroom properties.

12. Many tenants whose children have grown up and left home will be very reluctant to move. Such households tend to be older and may have grown attached to the home they have made their own and in which they have raised their children. Moving could also uproot them from the places where they have family and friends, thus depriving their adult children of a helping hand or ready access to child care. As well as having a detrimental impact on family lives this could also increase the cost to the taxpayer as publically funded services may have to pick up the pieces.

13. Even where households are willing to move to a smaller property in the same area, in practice the absence of available alternatives means that families will have to try to make up the shortfall in their rent out of the rest of their benefit income , or by taking out loans. The DWP is suggesting that people can take in a lodger but this assumes that there is a market for this, and that there is room for an extra adult in the house. The presence of a lodger in the house also raises child protection issues for families.

14. The DWP’s impact asses sment claims the proposal will ‘free-up accommodation’ for overcrowded households. [10] In reality it will do little to address problems of overcrowding. The areas most affected by the ‘under-occupation’ penalty – the North East and North West of England, for example – have the smallest incidence of overcrowding (3-4% of households in the social rented sector) while London, which has the greatest concentration of overcrowded families (13.5%), [11] will be the least affected of all regions by the ‘under-occupation’ measure. It is therefore poorly targeted.

15. People with disabilities will be one of the hardest hit groups. Of the 670,000 working age social sector claimants expected to be affected by the measure, 450,000 (66%) are disabled. [12] Many social homes are adapted to be accessible for people with disabilities. Research by the National Housing Federation has found an estimated 108,000 working age social housing tenants in Britain claiming housing benefit live in adapted homes with one or more spare rooms. Adaptations are tailored to each person’s specific needs and requirements – often paid for through government gran ts or the NHS or local authority or by the housing assoc i ation . There may be no suitable smaller property available locally, and even if alternatives are available, adaptations will need to be made to the new property. The average cost of a Disabled Facilities Grant exceeds £6,500, [13] and a ramp will cost £500 or level access shower £ 3,500. [14] This may mean that the tax payer may see a net cost in forcing a disabled person to move from their home to slightly smaller property.

16. The DWP’s plan to introduce the new benefit restrictions for all existing social tenants at the same time, from April 2013, raises numerous questions about the viability of the proposals in practice. Who will determine if a household is ‘under-occupying’ the property? Who will assess which rooms constitute a bedroom? How will local authorities deal with adjusting a huge number of claims at the same time? What will be the process of review and the resources requir ed to verify people’s claims? Implementing the proposals all at once for new and existing tenants will place a huge strain on local authority housing benefit administrators at a critical time for the introduction of the Universal Credit.

17. This proposal will increase the risk of rent arrears among social tenants, which in turn could threaten the development of new homes by housing associations. Riverside housing association estimates the measure will affect about 7,000 of its tenants, who collectivel y stand to lose ‘at least £2.5m’ in benefits per year. [15]

We believe that Clause 68 should be deleted from the Bill.

Overall benefit cap

18. The Bill gives the Government power to apply an overall cap to the benefits to which a single person or couple is entitled. The caps will operate by reducing the amount of benefit paid to cover housing costs (ie. it is housing benefit that is reduced once the total reaches £26,000).

19. The measure risks uprooting families from their communities or pushing them into debt, arrears or homelessness. While it will mainly affect recipients of LHA in the private rented sector, it could also present problems for families in new housing association homes let at near-market (up to 80% of market value) rents, particularly larger families in London and the South East. The overall cap will also represent a risk to housing associations’ revenue, and could act as a barrier to increasing sector capacity, particularly with regard to larger family homes.

20. If the cap was introduced today, a couple with three children living in a three-bedroom home in London on 80% market rent could be left with just £112 per week once they have paid their rent. [16]

We believe that the measure should be withdrawn.

Sanctions, benefit withdrawal and civil penalties

21. The Bill brings in a tough new regime of sanctions for claimants. We believe that there is a need for the Bill to protect payments for housing costs so that people are not faced with losing their home. If protection is not provided around help with housing costs then we will see much increased levels of homelessness and family breakdown.

22. The current system allows for appropriate recovery of benefits and there is no need for addition civil penalties for claimant error (Clause 111).

In the event of benefit sanctions, protection should be placed around help with housing costs.

Personal Independence Payment (PIP) for people living in care homes

23. The Bill cuts the payment of PIP to people living in care homes whose fees are met by the local authority. Taking this benefit away from people living in care homes will mean that disabled people will be unable to visit family and take an active part in their local community. The costs of specialist transport are not met by the fees paid to care home owners by social service departments. It is very unlikely that local authorities will be able to make up the difference with increased fees.

We believe this measure should be withdrawn.

Social Fund abolition

24. The Bill abolishes elements of the discretionary Social Fund, which provides vital emergency help for families in crisis and support for people moving into the community from institutional care. We are concerned that the Bill contains the provision to abolish the fund before the Government has finished consulting on an alternative system. There are no provisions in the Bill to impose a duty on local authorities to replicate the support provided through the Social Fund. With huge pressures on local authority finances, local decision making may leave families forced to go to loan sharks for emergency help and disabled people moving out of long-stay hospital forced to look to charity to provide basic furniture for a flat.

The Social Fund helps some of the poorest people in society and we would expect proper proposals to be put in place to ensure the welfare of these people, before the current system is abolished.

Direct payments to landlords

25. The Bill is silent on the continuation of direct payments to landlords, despite indications from the DWP that they will be retained in certain circumstances. The Government, in its White Paper on the Universal Credit, stated: "We... recognise the importance of stable rental income for social landlords to support the delivery of new homes and will develop Universal Credit in a way that protects their financial position. Options for achieving this could include some ongoing use of direct payments to landlords, use of direct debits, and a protection mechanism which safeguards landlords’ income." [17]

26. The Federation understands that any changes to the way payments are made will be set out in regulations published at a later date. We believe that tenants should be able to retain the choice to have their benefit paid direct to their landlord. This will help reduce personal debt and the risk of people losing their homes. More than 15% of local authority tenants and 13% of housing association tenants do not have a bank account, and so would be unable to pay their rent by direct debit if direct payment to landlords were brought to an end. [18] A pilot ending direct payments to landlords, carried out by L&Q housing association, was unpopular with tenants and led to significant increases in rent arrears. [19] For social landlords, the payment of benefit direct has been a critical component of their ability to secure private investment at highly competitive rates, and to maximise their capacity to deliver much needed affordable homes at good value to the tax payer.

We are seeking assurances from government that it will continue to allow tenants to choose to have payments paid direct to landlords.

27. The Government has made repeated references to its decision to increase funding for Discretionary Housing Payments, which local authorities may use to target help at those struggling to pay their rent. The overall pot is to be doubled by £10m to £20m in 2011/12, and then increased by a further £40m, to £60m, in each of the three years from 2012/13 to 2014/15. A further £50m has been set aside "to help meet the housing needs of claimants who are affected by the changes", bringing the total amount of additional funding over the Spending Review period to £180m. While any increase is welcome, this additional support is dwarfed by the £2.1bn the Government expects to cut from housing assistance each year by 2014/15. It represents a sticking plaster, not a solution.

March 2011

[1] Impact assessment (Under-occupation of social housing) , DWP , February 2011, p.8

[2] Housing association tenants are expected to lose £14 a week on average. Some 30,000 social tenants are likely to lose £25 and over. Impact assessment (Under-occupation of social housing) p.8

[3] Verbal briefing by DWP officials

[4] Impact assessment (Under-occupation of social housing) p.11

[5] Impact assessment (Under-occupation of social housing) p.1

[6] Impact assessment (Under-occupation of social housing) p.8

[7] Impact assessment (Under-occupation of social housing) p.8

[8] CORE 2009/10

[9] Impact assessment (Under-occupation of social housing) p.5

[10] Impact assessment (Under-occupation of social housing ) p.1

[11] Impact assessment (Under-occupation of social housing) p.15

[12] Equality Impact Assessment (Housing Benefit: Size Criteria for People Renting in the Social Rented Sector) p.13

[13] CLG figures for 2007/8 quoted in The increase in need and future of state provision www.careandrepair-england.org.uk/timetoadapt.htm

[14] Shower, ramp costs taken from average handyperson scheme within the midlands 2009, using AKW products The Cost of Living – cost effective independence at home , AKW 2009

[15] Welfare Reform Bill Second Reading Briefing , Riverside, p.3

[16] National Housing Federation research based on rents in BMRA in inner North London.

[17] Universal Credit: Welfare that Works , November 2010 , p.20

[18] Excluding post office accounts. Family Resources Survey 2008/9

[19] Where’s the Benefit , L&Q Group, February 2004