Written evidence
submitted by Building and Social Housing Foundation
EXECUTIVE SUMMARY
- Whilst portrayals of the housing benefit system
being "out of control" are inaccurate, there is a clear
need for long term reform of housing benefit and the wider system
of support with housing costs.
- Several of the mechanisms adopted in the budget
give cause for concern. There is a risk they will:
- Have unintended consequences that minimise the
public expenditure savings;
- Fail to meet one of the stated aims of the budget:
supporting the most vulnerable;
- Undermine the core purposes of housing benefit,
ie provision of access to affordable housing and protection of
residual income (the money left to live on after rent).
We recommend that the government should:
- 1. Recognise that the housing benefit system
is not "out of control" and consequently undertake the
serious process of reform of the system in a measured fashion
rather than as an emergency reaction to a perceived problem;
- 2. Define a narrow purpose for housing benefit
and use other mechanisms to deal with wider issues.
- 3. Adopt more nuanced methods to avoid excessive
payments, including reconsidering the use of caps on Local Housing
Allowance (LHA) and the adoption of percentile limits that reflect
the proportion of the rental market being funded by housing benefit;
- 4. Retain the link between the level of
support with housing costs and actual housing costs;
- 5. Address the negative impacts on young
and old people, particularly in relation to non-dependent deductions;
- 6. Simplify the action of the housing benefit
system in the long term, including by repealing all earlier housing
benefit systems (with a clearly defined transition period);
- 7. Reconsider use of reductions in housing
benefit as a work incentive;
- 8. Address the social impacts of property
size restrictions, particularly on families;
- 9. Address the supply-side implications of
changes in housing benefit;
- 10. Monitor the impact of changes to avoid
unintended consequences, particularly on:
- (a) Homelessness;
- (b) "Ghettoisation of poverty";
- (c) Other areas of public expenditure.
The Building and Social Housing Foundation (BSHF)
is an independent housing research charity which is committed
to ensuring access to decent and affordable housing for all. BSHF
holds Special Consultative Status with the United Nations Economic
and Social Council. Several months before the general election
BSHF planned a Consultation to be held at St George's House, Windsor
Castle. It was chaired by Lord Richard Best and brought together
practitioners and academics from a wide range of housing-related
backgrounds to examine support with housing costs. The first day
of this meeting coincided with the emergency budget[1].
This submission is largely based on the findings of that Consultation.
More detailed information, including a full response to the emergency
budget, can be found on the BSHF website (www.bshf.org) or on
request from the organisation.
1. RECOGNISE
THAT HOUSING
BENEFIT IS
NOT "OUT
OF CONTROL"
1.1 Whilst there is a clear need to manage overall
housing benefit expenditure, care must be taken not to create
significant adverse effects in the process. At their worst, negative
impacts could undo any public expenditure savings made, by resulting
in the need for additional expenditure on homelessness provision,
health, education and other service areas.
1.2 However, it is incorrect to portray housing
benefit as a system that is "out of control". In fact,
as a proportion of the overall benefits bill it is striking that
housing benefit has remained remarkably constant at around 14%
of total expenditure for many years. Between November 2008 and
April 2010 approximately 70% of the increase in total housing
benefit expenditure was due to the growth in the number of working
age claimants, suggesting that the increase was linked to reductions
in employment.[2]
1.3 Recent increases in expenditure largely reflect
this benefit reacting as we would expect, providing support to
more people in a downturn. A reduction in claimant numbers through
higher levels of employment provides the most effective option
for reducing housing benefit expenditure in the short term. However,
there is also a need to reform both housing benefit and other
forms of support with housing costs (such as favourable taxation
of owner occupiers and provision of housing at sub-market rents).[3]
2. CLARIFY THE
PURPOSE OF
HOUSING BENEFIT
2.1 The Council of Europe's guidelines[4]
on the effective use of housing allowances[5]
state:
The goals for a housing allowance system should
be to improve access to decent, affordable housing for all households
on low incomes and to function as a safety net for these households
against increases in housing expenditure or decreases in income.
2.2 As a broad principle there are many merits
in adopting a narrow purpose for housing benefit, and not attempting
to use it to achieve policy objectives that are non-core for the
benefit. Housing benefit is more likely to be successful if it
is only trying to do one or two jobs and is doing them well, than
if it is used to achieve multiple (potentially conflicting) policy
objectives, as it is at present.
3. ADOPT
MORE NUANCED
APPROACHES TO
SETTING LHA RATES
3.1 Exceptional instances (such as households
receiving housing benefit of around £100,000 per year) should
be addressed, but should not form the basis of a policy that will
have a major impact on those receiving much lower levels of housing
benefit. Whilst recognising that those in receipt of housing benefit
should continue to have to make choices about their housing, in
the same way that others do, the move to an LHA rate at the 30th
percentile and the cap on LHA rates has at least two potential
problems (see 3.2 and 3.4).
3.2 There is a risk that
households will simply be unable to find accommodation available
to them below the new lower LHA rate for the area. In some areas
the proportion of tenants claiming housing benefit is in excess
of 30%, making it impossible for all housing benefit recipients
to obtain accommodation costing below the 30th percentile.[6]
The impact of the cap will create particular challenges in securing
accommodation in the most expensive areas. Larger families in
particular will face a significant change and may struggle to
source suitably sized, reasonably priced properties, especially
in the initial period of the new regulations.
3.3 By setting LHA rates at a percentile in each
area reflecting the proportion of tenants receiving the benefit,
many of the savings in public expenditure could be achieved whilst
avoiding the worst pressures on local housing markets. If, for
example, the 20th percentile above the local proportion
of tenants receiving the benefit was used, then an area with five
percent of tenants receiving housing benefit would see its LHA
set at the 25th percentile, whilst one with 30 percent
receiving housing benefit would have its rate set at the median.
3.4 In the longer term,
concerns will centre on the potential for the creation of Parisian-style
banlieues, areas on the outskirts of the city with concentrations
of deprivation, while the city centre becomes exclusively for
the very well off. Further analysis will need to be undertaken
to establish what is likely to happen in the UK's context, but
the potential for the total exclusion of the poor from large areas
is clearly present in the measures announced in the budget.
3.5 Many housing benefit recipients already have
to make tough choices within the current system without these
additional restrictions. Nearly half face a shortfall at present,
which has to be made up from an income that can be very limited;
the average shortfall is £23 per week.[7]
These changes will potentially impact most upon an already disadvantaged
group.
3.6 The primary effect of crude caps on LHA rates
will probably be to make certain areas of central London inaccessible
to housing benefit recipients, especially for larger households.
If the intention of the policy is to reflect the choices that
(unsubsidised) housing consumers make in the market, then a less
crude mechanism might involve redrawing the Broad Rental Market
Areas, by re-examining the guidance given to Rent Officers to
ensure it reflects longer travel to work times in high-value areas.[8]
This may not be desirable, for the spatio-economic reasons identified
above, but it would be a more nuanced approach than a crude cap.
4. ENSURE THAT
HOUSING SUPPORT
REFLECTS ACTUAL
RENTS
4.1 Going back as far as the Beveridge Report
of 1942 the issue of "Benefit Rates and the Problem of Rent"
has been identified as a significant concern. Rents vary substantially
around the country[9]
and are generally the largest item of expenditure for households.
Therefore it is vital that policies take local rent levels into
consideration if they are to have similar outcomes for people
in similar circumstances in different parts of the country.
4.2 The decision to link LHA levels to the Consumer
Price Index (CPI) from 2013 will inevitably lead to situations
where the value of LHA available does not reflect changes in the
relative rent levels between areas. Two areas having similar rent
levels which diverge due to the popularity of one increasing,
will find that their LHA levels stay in step while actual rents
vary. More broadly, if rent inflation outstrips CPI in the long
term (as it has in the past), LHA levels in general will fall
in terms of their rent-purchasing power.
4.3 The flat rate non-dependant deductions across
the country fail to reflect local housing costs. Consequently
in some areas contributing for the non-dependant deduction might
be a relatively cheap way for a non-dependant to house themselves,
whilst in others it could be a very expensive option, relative
to other local rents.
4.4 Whilst the direct impact of many of the changes
will be felt most keenly in high rent areas, these have potential
knock-on effects in other areas. If people react by moving into
lower rent areas there will be an impact on the areas that they
move to, potentially putting a strain on those local authorities
(including on homelessness budgets). Since many low-rent areas
are also high-unemployment areas, it is also possible that people
will move to obtain cheaper accommodation, but then find their
ability to gain employment reduced. Further potential impacts
include effects on social cohesion, both of the areas that people
have left and of the areas they move into.
4.5 Caps on housing benefit rates in the private
rented sector can also have a knock-on effect on the social rented
sector. If private rented accommodation becomes harder to access
for those on low incomes, demand for social rented accommodation
may increase further, at a time when social housing waiting lists
already stand at nearly 1.8 million households.
5. ADDRESS
NEGATIVE IMPACT
ON YOUNG
AND OLD
PEOPLE
5.1 The budget announcements risk further exacerbation
of a tension that already exists within the housing benefit system,
specifically between the effects of non-dependant deductions and
the single room rent. In some cases these lead to major difficulties
for young people, particularly those on low incomes, who are seeking
accommodation.
5.2 Non-dependant deductions are a disincentive
for young people to stay at home; if they stay their parents may
find their housing benefit significantly reduced. The increases
in these deductions announced in the budget will mean that they
significantly reduce the housing benefit of some households. However
the single room rent, a special low rate of housing benefit paid
to under-25s, is generally so low that it makes finding decent
accommodation very difficult. The data show that the shared room
rate does not meet the cost of accommodation in approximately
70% of cases.[10]
This means that young people will significantly decrease the income
of their family household if they stay at home, but cannot find
decent accommodation if they leave.
5.3 It also appears that the non-dependant deduction
has a major financial impact on many older people. It appears
that non-dependants frequently do not pay the householder for
the benefit they are losing through the deduction. Even if they
are willing to pay, householders are put in the difficult position
of having to find out financial information about family members.
5.4 There is a risk of increasing public expenditure
if non-dependant deductions are set too high. At a certain point
non-dependants (if they are paying the householder) will decide
that it is better to go out and rent somewhere of their own. In
some cases the non-dependant will be eligible to claim housing
benefit in their own right, adding to public expenditure.
6. REMOVE HISTORIC
HOUSING BENEFIT
ARRANGEMENTS
6.1 Previous changes in the housing benefit system
have resulted in recipients being allowed to continue receiving
their benefits on the older (more generous) bases indefinitely.
This ongoing approach to retaining existing schemes is expensive,
adds complexity to the system and can be perceived as being unfair
(with tenants in identical properties and circumstances receiving
different levels of housing benefit). Consequently, as savings
are being sought from the budget, this would represent an area
where they could be achieved whilst fairness is increased.
6.2 When changes are made to the housing benefit
system, transitional arrangements should be adopted to phase them
in over a period of time. Whilst this adds a little complexity
in the short term, it avoids some of the worst consequences of
sudden changes. New transitional arrangements should be clearly
time limited to avoid the problems with multiple historic systems
running in parallel which have previously occurred.
6.3 For many households the cap will reduce their
income significantly, some by several hundred pounds per week.
This will represent a sudden and huge shock to those households.
The budget announcement contains no transitional protection.
6.4 At the least it will be important to ensure
clear information is provided in relation to these changes. Making
people aware of what is going to happen and giving them plenty
of time to move if necessary, will be vital particularly if they
have school-age children.
6.5 It is not feasible to expect everyone affected
by this change to relocate immediately or to renegotiate their
rent, so information and protection will need to be put in place.
Part of that protection may involve discretionary housing payments
(DHP). DHP policies may need to take particular note of the period
between the change affecting the tenant's housing benefit period
and the date at which they can reasonably move.
7. RECONSIDER
USE OF
REDUCTION IN
HOUSING BENEFIT
AS A
WORK INCENTIVE
7.1 As noted above, there are advantages in allowing
housing benefit to focus on its core function rather than attempting
to address additional problems such as worklessness. Plans from
the government to reduce housing benefit by ten% for recipients
who have been claiming Jobseeker's Allowance (JSA) for more than
12 months risk undermining the core purpose of housing benefit
and may not provide an effective work incentive.
7.2 This increased conditionality will leave
some households having to choose between reducing their housing
costs, making up the shortfall from their other income (and lowering
their general standard of living) or falling into rent arrears
if they are unable to secure employment. Landlords, whether private
or social, will not be able to accept rent arrears indefinitely,
so the potential for households to be evicted, and ultimately
become homeless, is clear. One group that may be particularly
susceptible to the impact of this policy is people who have moved
off Employment and Support Allowance/Incapacity Benefit onto JSA
under the stricter medical tests. These people may have poor health
or disabilities and therefore be disadvantaged in the labour market
and may take longer to get jobs.
7.3 Although this measure is not due to be introduced
until April 2013 there are still concerns about the supply of
work available at that time. Some commentators consider medium
term government estimates of unemployment to be overly optimistic.[11]
The government will need to closely monitor the employment market
to ensure that it is not penalising people who are genuinely seeking
work in a difficult economic climate.
7.4 Even if the government wishes to create work
incentives through the withdrawal of benefits (as opposed to,
or in combination with, positive methods such as enhanced support
for the long-term unemployed), there seems to be little logic
for applying the cuts to housing benefit. Local variation in rent
will lead to people losing very different sums depending on where
in the country they live, therefore providing a different perceived
"work incentive" in different geographical areas.
8. ADDRESS
THE SOCIAL
IMPACTS OF
PROPERTY SIZE
RESTRICTIONS
8.1 The budget announced plans to restrict housing
benefit payments to working-aged social tenants based on the size
of accommodation that they are deemed to need. Although their
legal security of tenure will be retained, the result would be
that if they are unable to afford their rent once the benefit
level is reduced they would have to leave the property. Generally,
allocations policies will prevent social tenancies being granted
for properties that are "too large" in the first instance,
so this policy will affect those households whose circumstances
change.
8.2 For many households experiencing a change
of circumstance it will not be easy to move to a smaller social
rented property as there is a shortage of accommodation in the
sector. The housing benefit system cannot require social landlords
to make offers on allocations, so the tenant may be faced with
a shortfall in housing benefit with no viable option to move to
another social rented property to resolve their situation. This
may precipitate a move to the private rented sector, with the
loss of security of tenure implied by that.
8.3 Social rented tenancies are a scarce resource,
so it is inevitable that government will seek to make the best
use of them. However the details of this particular proposal risk
ending security of tenure for some tenants without providing a
realistic alternative. Significant work will be necessary to resolve
these problems.
8.4 The impact of the restrictions should also
be considered in the light of the budget announcements on non-dependant
deductions. If the increase in the non-dependant deduction causes
a non-dependant to leave a working-age household, the household
could experience this restriction. The interaction of these two
policies will create further tensions and complexity for families
seeking to make decisions about their housing.
8.5 The property size restrictions will also
have an impact on separated parents (usually fathers) who have
access to children for part of the week. Eligibility for a property
with sufficient rooms can already be a significant barrier for
fathers who are not living with their children. The introduction
of this reduction in housing benefit will make it harder for these
fathers to be able to stay living in accommodation which enables
them to retain access to their children. This may undercut other
policy objectives which promote continued involvement of both
parents against a backdrop of increases in the number of lone
parent households.[12]
9. ADDRESS
THE SUPPLY-SIDE
IMPLICATIONS
OF CHANGES
IN HOUSING
BENEFIT
9.1 The impacts of changes to housing benefit
on the supply of accommodation (in both the private and social
rented sectors) should be of particular concern both to ministers
responsible for housing benefit (Department for Work and Pensions)
and for housing policy generally (Communities and Local Government
and devolved administrations). Close working between the departments
and the respective governments will be essential.
9.2 In the private rented sector, the proportion
of landlords who are willing to let to households receiving housing
benefit may fall further.[13]
As tenants' benefits payments seem even more uncertain than they
were previously, the ability of private landlords to finance the
acquisition and improvement of homes may be hindered. Private
landlords may decide to stop renting to housing benefit recipients
altogether if they can find alternative tenants, making it harder
still for benefit recipients to secure accommodation.
9.3 The impact on the private rented sector will
be further affected, albeit to different extents across the country,
by the decision to peg LHA rates to CPI. In the areas that experience
the highest rent increases following the indexation, there is
likely to be a substantial increase in rent arrears, increasing
tensions between landlords and tenants, probably with the long
term effect of further reducing supply. Similar effects, albeit
frequently on a larger scale, will also face social landlords,
whose business plans and financial strength are reliant to a large
extent on tenants receiving housing benefit.[14]
10. MONITOR IMPACT
OF CHANGES
TO AVOID
UNINTENDED CONSEQUENCES
10.1 The changes to housing benefit that have
been announced in the budget are substantial and are likely to
have a significant impact on both households and communities.
Some of the effects will be the direct cost savings that the government
hopes to achieve; however the changes are likely to have other,
unintended, consequences. It is essential that the likely outcomes
of the changes are fully evaluated. Any changes that are implemented
will require monitoring, both to assess whether they meet their
expected aims and whether they create unforeseen problems.
10.2 First, the government will need to closely
evaluate the likely impact of changes in several areas. The first
is homelessness, which the coalition government has promised to
"tackle head-on"[15]
through a new cross-departmental Homelessness Working Group. Relevant
authorities will need to assess likely impacts and then monitor
actual changes.
10.3 Secondly, the Secretary of State for Work
and Pensions has highlighted the problems of the "ghettoisation
of poverty". Changes to housing benefit should not exacerbate
this problem further.
10.4 Thirdly, the likely impact other areas of
public spending, such as health and education will need to be
closely monitored to ensure that the changes to housing benefit
are not leading to increased expenditure in these areas. For example
a report for Business Action on Homelessness found that the annual
cost to the state of a homeless person is £26,000.[16]
10.5 Monitoring of the DHP could help monitor
these changes. DHP is typically paid by local authorities to help
households at risk of homelessness. Rapid increases in the use
of this payment, or changes in its pattern of use, could indicate
incidents of homelessness that are only narrowly being avoided.
At present, local authorities are not required to give a breakdown
of how DHP is used; requiring this information to be collected
and reported would provide important data for researchers seeking
to track the impact of changes. Monitoring must be undertaken
directly by government departments, but external researchers will
need to have access to data to support the identification of emerging
trends.
26 August 2010
1 The full findings of the Consultation at Windsor
Castle will be published in the autumn, but a draft can be made
available to the Select Committee on request. Back
2
Diacon, D, Pattison, B and Vine J (2010) BSHF Submission to the
Spending Review 2010, http://www.bshf.org/scripting/getpublication.cfm?thePubID=8AF35100-15C5-F4C0-99BE979B7ACACA24
Back
3
Ibid. Back
4
Council of Europe (2008) Housing policy and vulnerable social
groups, page 88, http://book.coe.int/EN/ficheouvrage.php?PAGEID=36&lang=EN&produit_aliasid=2321 Back
5
Housing benefit is the UK's housing allowance for tenants. Back
6
In Blackpool, for example, 63% of private rented sector tenancies
are funded by housing benefit. Although this is not directly comparable
as the rate would be set for a BRMA not a local authority, it
gives an impression of the very high proportion of tenants claiming
in some areas. (Source: Blackpool Borough Council (n.d.) Blackpool
Housing Statement, 2009-12, http://www.blackpool.gov.uk/nr/rdonlyres/e12161d5-9c94-41c3-9d98-3259f4c970a7/0/fchousingstratdraftsummyversionfeb09.pdf) Back
7
Goodman, H. (2010) Answer to Parliamentary question on 5 March
2010, http://services.parliament.uk/hansard/Commons/ByDate/20100305/writtenanswers/part003.html Back
8
Current legislation requires Rent Officers to take into account
reasonable travel time to various facilities e.g. hospitals, schools,
shopping. It does not, however, allow Rent Officers to take into
account travel to work times which, if they could,
may have the effect of making some BRMAs smaller, undermining
the concept of "broad" rental market
areas. Care would need to be taken in amending legislation to
avoid unintended consequences. Back
9
The current LHA rate for a three-bedroom house in Central London
is £700 per week, compared to £92.31 per week for a
similar property in Blaenau Gwent. Back
10
Harvey, J and Houston, D. (2005) Research into the Single Room
Rent regulations, http://campaigns.dwp.gov.uk/asd/asd5/rports2005-2006/rrep243.pdf
Back
11
Chartered Institute of Personnel and Development (2010) Labour
Market Outlook: Summer 2010, http://www.cipd.co.uk/NR/rdonlyres/DE1D59DA-2424-4ABC-931E-ADDC8CC87329/0/5302_LMO_report_Summer10.pdf
Back
12
National Statistics (2009) Social Trends 40, http://www.statistics.gov.uk/downloads/theme_social/Social-Trends40/ST40_Ch02.pdf
Back
13
45% of local authorities already report that landlords are less
willing to let to housing benefit tenants since the introduction
of LHA. (Source: DWP (2010) Local Authority Omnibus Survey - Wave
20, http://research.dwp.gov.uk/asd/asd5/report_abstracts/rr_abstracts/rra_671.asp) Back
14
CIH (2010) Briefing on the Impact of Changes to Housing Benefit
and LHA in the Budget, http://housing.cih.co.uk/memberbriefing/documents/housingbenefit-July-2010.pdf
Back
15
Communities and Local Government (2010) Shapps: Rough sleeping
count masks real scale of the problem, http://www.communities.gov.uk/news/corporate/161113811
Back
16
new economics foundation (2008) Work it Out: Barriers to employment
for homeless people, http://www.bitc.org.uk/document.rm?id=8850
Back
| 
