Written evidence submitted by Fast Trak
Solutions
SUMMARY
This submission makes the following points that we
hope will be of interest to the Committee's inquiry:
- The Government's
planned approach risks undermining the potential of the private
rented sector as an alternative to social housing at a time when
it is highly unlikely that it will be able to afford to build
new housing.
- Approached
in the right manner the private rented sector provides a more
appropriate balance between the security of tenure needed to hold
down employment and which is afforded by social housing, and the
flexibility needed to be able to respond to the need to move to
a different area in pursuit of employment opportunities.
- The proposed
HB/LHA changes go beyond the Departmental responsibilities of
the Department of Work & Pensions to impact on the work of
Department of Communities & Local Government.
- Planned
changes to rent levels fail to address the more serious problem
of BMRAs not functioning correctly, which lead to taxpayer concerns
about the appropriate use of public funds.
- The number
of people requiring temporary accommodation because of the proposed
changes will increase substantially, as they give up accommodation
they can no longer afford. Councils, under statutory homelessness
obligations, will be responsible for helping those people find
that accommodation. This will cost the taxpayer more in the long
run.
Housing support claimants renting in the private
rented sector have long faced a series of entrenched problems.
Even before LHA in was introduced in April 2008, social tenants
faced issues with landlord stigma regarding their ability to meet
rent payments. At the same time, local authorities have often
been the cause of a delay in rent payments and, for any number
of reasons, suspend or cease benefits payments to social tenants
during the tenancy. Justifiable or not, this provides no security
to private landlords that rent payments will be made regularly
and on time. The result of this situation is that the majority
of private landlords are simply unwilling to consider LHA claimants
for tenancy agreements, leaving them no other option than to fall
back on social housing, exacerbating the current crisis.
Fast Trak Solutions has developed a comprehensive
solution to the issues highlighted above. FTS pre-assesses prospective
tenants' LHA allowance and issues them with an Agreement in Principle,
guaranteeing private landlords that the tenant will have the available
funds to meet rent payments. It also includes an ongoing rent
guarantee, providing landlords the assurance that rent payments
will be made regardless of either a tenant defaulting on a payment
or a local authority suspending the benefit and insures the landlord
against the tenant causing damage to the property. This gives
the reassurance necessary for landlords to grant tenancy agreements
to social tenants, which will hopefully have long-term benefits
in terms of removing the stigma and allowing LHA to function in
the spirit intended. For the tenant, the scheme substantially
reduces the large upfront costs that he or she must pay to rent
in the private rented sector even via LHA (dilapidations deposit,
first month's rent and administration fees). On average, these
costs usually amount to some £1,500. In London, the average
is approximately £2,500. The Fast Trak Scheme reduces these
costs to just £499.
This work means that FTS has a wealth of firsthand
experience and knowledge; not only in dealing with LHA claimants,
but also with landlords, letting agents and local authorities,
all of whom play a role in the operation of LHA and in finding
those households a home. We are keen to use that knowledge to
help better inform the policymaking process in Westminster and
raise awareness of the way in which we work.
A more detailed explanation of the Fast Trak Solutions
can be found in Appendix A.
RESPONSE TO
THOSE AREAS
RAISED BY
THE COMMITTEE
Incentives to work and access to low paid work
As set out in the June Budget, the Government's objective
in introducing changes to Housing Benefit (HB) is to "remove
payments that trap benefit claimants in poverty instead of providing
incentives to work". FTS strongly supports the need to reform
welfare payments so that they do not provide a perverse incentive
for long-term claimants to avoid employment opportunities. However,
the Department of Work & Pensions (DWP) has clearly made reducing
HB expenditure a political priority and the knock-on effect of
this will be to reduce the appeal of the private sector as a means
of housing low-income households at a time when the Government
is simply unable to fund the building of new social housing. We
would argue that with the right approach, the greater use of this
sector to house people claiming welfare support is more, not less,
likely to encourage a shift towards encouraging a working lifestyle
and create savings for the national purse. This is because it
is able to take a more balanced approach that provides tenants'
with the security of tenure necessary for a working lifestyle
(unlike temporary accommodation) whilst also providing them with
the flexibility to follow employment opportunities (unlike social
housing).
The reduction in HB payments will obviously lead
to an increase in demand for social housing. Even during times
of record Government expenditure, house building schemes have
struggled to keep pace with this demand. In the City of Westminster,
where the planned HB changes are expected to have the largest
impact, the waiting time for a three bedroom property is already
over seven and a half years[35].
Following the April 2011 changes, more households will look towards
local councils to provide accommodation which they, along with
housing associations, will not be able to supply. The end result
is that those households will rely on LA provided temporary accommodation
(provided under the statutory homelessness duties) whose less
than stable nature invariably renders it unsuitable for finding
work. At the other end of the spectrum, there are well-known concerns
about the inflexible nature of traditional social housing. Tenants
are understandably often unwilling to follow employment opportunities
outside of their immediate location for fear of not finding a
new property, because waiting lists are universally long.
HB and LHA have the potential to provide a balance
between the two extremes of temporary accommodation and social
housing. An appropriately funded HB/LHA welfare support policy,
coupled with a landlord incentive model such as Fast Trak Solutions,
has the potential to provide households with accommodation that
provides the right mix of security and flexibility. Many council
tenants determine their employment choices purely on the basis
of the availability of social housing, rather than viewing the
private rented sector as a viable option. FTS addresses this issue
directly. On the one hand, tenants are provided with the security
of tenure necessary for a working lifestyle but on the other,
our model overcomes the barriers (chiefly cost and landlord concerns)
that prevent them from moving around to find work as and when
necessary. Whilst strictly speaking not the responsibility of
the DWP, we believe there needs to be greater recognition from
both it and the Department for Communities & Local Government
(CLG) of role the private rented sector can play in this respect.
We believe that as part of its considerations, the
Committee should examine the Government's planned changes within
this wider context. Whilst there will be an understandable desire
from the Committee to closely focus on the impact of the change
from a purely Work & Pensions perspective, other organisations
participating in the inquiry will, like FTS, undoubtedly stress
the cross-Departmental impact of the planned changes.
Levels of rent, including regional variations
Whilst being a passionate advocate for the potential
of the private rented sector to help house poor and vulnerable
households, FTS also firmly respects and supports the Government's
obligation to safeguard the taxpayer's interest. We support the
use of HB as a means of utilising the private rented sector but
believe that there needs to be a balanced approached to rental
values to ensure that public funds are used appropriately. We
believe that that the Government's proposed approach is not balanced
in this respect as it does not take into account the wider impact
that simply slashing HB/LHA payments could have on the public
purse (through an increased reliance on temporary accommodation).
In seeking to address the issue of inappropriate
HB payments, the DWP should instead focus on the way in which
LHA payments are calculated. We believe that this would be a far
more successful and targeted intervention than simply reducing
the level of the rent cap or reducing the percentile used from
the 50th to 30th. The Committee will obviously be aware of the
Broad Market Rental Areas (BMRAs) that form the basis of rent
valuations. Our experience leads us to believe that at present
these Areas are simply too large and as a result there is often
too greater a variation in the rental values within them. The
end result is that claimants are often then able to use HB to
find accommodation at disproportionate rents in to their circumstance
that is an inappropriate use of public funds in the mind of both
the taxpayer and Ministers, leading to the current proposal to
simply reduce the level of rent paid, rather than directly addressing
the flaws in the existing BMRA model that cause the rent to be
set at that level in the first place. We therefore believe that
the Committee should seriously consider recommending that the
Government review the operation of BMRAs ahead of any re-consideration
of rent levels.
Shortfalls in rent/Levels of evictions and the
impact on homelessness services
It is the same flaws in the BMRA model that cause
LHA rents in some areas to be disproportionately high that also
cause LHA rates in other areas to be disproportionately low, causing
shortfalls in rent. These shortfalls mean that those households
least likely to be able to afford accommodation are unable to
find housing via LHA thereby remaining dependent on the assistance
of the local authority under their statutory homelessness obligations,
at a greater cost for longer. We would urge the Committee to note
the problems of claimants being able to fund inappropriate accommodation
via LHA (as often featured in the national media) and of tenants
facing a shortfall in rent as they are two sides of the same coin
and are inextricably linked.
Furthermore, in those areas where rents are low as
a result of the problems with the BMRA model, those people who
are able to make up the difference in rent using other benefits
to support the rent will face a new shortfall as a result of the
proposed changes. The end result is that those households, if
evicted, will also find themselves listed as "priority need"
and so reliant on local authorities to help them find accommodation,
all at a greater cost to the public purse than before.
Shelter research shows that some one million households
are currently claiming LHA; nearly half already face a shortfall
in their rent of almost £100 per month. London Councils estimate
that some 18,600 households will be affected by Government's proposals,
of which 14,600 are households with children. Furthermore, the
Chartered Institute of Housing estimates that on average, households
in three bedroom properties will face a shortfall of £475
per annum.
Whilst the detail of council's homelessness obligations
do not fall within the scope of this inquiry, it is also worth
noting that the cost of meeting them also does not fall within
the responsibility of DWP and so will not be a factor in their
policy making process. Nevertheless, the proposed changes to HB/LHA
will undoubtedly impact on these obligations and therefore the
additional cost will fall on the taxpayer albeit through CLG.
Under these duties, they will need to find those people temporary
accommodation at an increased cost to the public purse; as the
Communities & Local Government Select Committee concluded
in a recent report, "rents paid to secure temporary accommodation
from the private sector are even higher than market rents"[36].
90% of people who use temporary accommodation do
so through HB. The taxpayer will still need to fund accommodation
for those households, albeit with the added premium attached to
temporary accommodation; in 2009-10 the Government will distribute
nearly £80 million to local authorities in homelessness grants[37]
to cover the cost of finding that accommodation. This comes on
top of nearly £600 million[38]
spent on HB for renting temporary accommodation in England. We
once again would urge the Committee to consider the wider impact
of the proposed HB proposals on the public purse and the need
to recommend that DWP take these broader considerations into account
when considering taxpayer value for money.
Landlord confidence
When introducing LHA, the Government faced long-standing
issues with private landlords' concerns of the administration
of Housing Benefit in general. Both FTS's experience and National
Landlords Association research has shown that the majority of
landlords are reluctant to rent their property to HB claimants
because of a combination of concerns about their suitability for
property, the problems associated in dealing with administration
of HB, concerns about non-payment of rent and the mis-alignment
of rent payment cycles (like most Government payments, HB/LHA
is paid in arrears rather than in advance).
DWP's decision to cap LHA payments from April 2011
will undoubtedly add to existing landlord concerns about HB/LHA
tenants' ability to pay rent. The vast majority of existing tenants
will face a shortfalls in rent when contracts are due for renewal
and landlords are likely to seek possession rather than accept
reductions in rent at a time when market rents are rising. Those
that do retain tenants will face a heightened risk of tenants'
failing to pay rent and the reinforcement of existing stereotypes,
undermining efforts to address the stigma that many HB/LHA claimants
face when seeking accommodation in the private rented sector.
As a result fewer landlords in the mainstream of the sector will
be willing to rent their property to HB/LHA claimants, leaving
those people reliant on those "slum" landlords whose
properties are less likely to be of a decent living standard.
Community cohesion
FTS strongly believes that the use of the private
rented sector to house welfare claimants is the single most likely
way to improve community cohesion and prevent the creation of
large communities where a culture of work is simply non-existent.
As such, HB and LHA are important means for creating more mixed
communities and preventing the "ghettoisation" that
is all to often linked to long-term welfare dependency.
If Government policy can overcome those barriers
to the PRS that FTS has not only identified but that it also tackles,
the private rented sector has the real potential to "regularise"
LHA and housing benefit claimants by opening up new opportunities
to find accommodation in the mainstream of the sector. By providing
those people with the opportunity to live side by side in communities
with households who simply use their private income to pay for
their accommodation, they are exposed to other households on a
daily basis, tackling the problem of community worklessness.
CONCLUSION
FTS hopes that this submission is helpful to the
Committee's inquiry into the operation of the Local Housing Allowance.
As a final note, we would urge the Committee to as far as possible
take a holistic view of the impact of DWP's planned changes to
HB and to consider their impact beyond any one Government department
and the wider impact on the public finances, in whose name they
were introduced.
FTS's work with landlords, local authorities and
tenants means that we are able to rise above any sectional interest
to take a broad view of how the Government's proposals will impact
on those people involved in LHA. As such, we believe we have a
unique contribution to make to the Committee's work and we would
warmly welcome the opportunity to provide further evidence orally.
2 September 2010
APPENDIX A
TACKLING BRITAIN'S SOCIAL HOUSING CRISIS
THE FAST TRAK SOLUTIONS: HOW IT WORKS
Fast Trak Solutions provides an innovative
policy solution to the country's social housing crisis by providing
a streamlined Local Housing Allowance (LHA) application process
that moves households off social housing waiting lists quickly
and efficiently. It overcomes the barriers that many LHA claimants
face in trying to find decent quality accommodation in the private
rented sector, making it a viable alternative to waiting for an
indeterminate period of time for local authority and housing association
provided accommodation. This scheme works as follows:
- 1. Prospective tenants are directed to Fast
Trak Solutions through recommendation and referral from local
authorities and local private property rental agencies that are
part of Fast Trak Solutions's network, or direct contact.
- 2. Trained staff collect individual applicants'
data in order to provide a pre-assessment of the individuals or
family's entitlement to LHA. Fast Trak Solutions staff advise
on the relevant paperwork and information required.
- 3. In addition to the pre-assessment, a tailored
referencing process is undertaken to establish the applicant's
credit history, including previous landlord references as well
as fraud and money laundering checks.
- 4. On completion of this process, if approved,
the prospective tenant will receive an Agreement in Principle
(AIP) document that contains information on the total rent approved.
- 5. The issuing of the AIP is a guarantee
to the tenant for the rent figures quoted. This rental value is,
in turn, guaranteed by way of and insurance backed rent warranty
that assures the private landlord of the tenants' ability to pay.
- 6. An additional insurance policy can be
taken out that insures the private landlord to the value of one
month's rent against any dilapidations that may occur during their
tenure. This avoids the tenant having to find deposit one month's
rent.
- 7. The tenant now armed with the agreement
document, approaches landlords or the landlord's agents who recognise
the scheme. The recognition of the Fast Trak Solutions allows
the tenancy agreement to be drawn up as soon as the Tenant has
found suitable property and no further referencing is required.
- 8. The pre-assessment data and other information
is then collated with the tenancy agreement and submitted to the
Local Authority for priority processing.
This process can be completed rapidly, and the Fast
Trak Solutions is already proving it has the ability to house
social tenants in a matter of days, rather than the years they
may wait on social housing lists.
The advantages of Fast Trak Solutions for…
The Tenant The
tenant is at the heart of the Fast Trak Solutions. The scheme
allows those tenants on housing waiting lists, with no realistic
chance of receiving a tenancy before being listed as in emergency
need, the opportunity to find a home quickly and efficiently.
Moreover, Fast Trak complements the original spirit of LHA, by
placing an emphasis on the individual to find a suitable property
and to gain maximum benefit from their LHA entitlement. The Fast
Trak system helps the tenant get into new property before the
situation becomes an emergency and assists the tenant in an orderly
and timely application for LHA.
Local Authorities Local
authorities are simply inundated with social housing requests.
Costs are rising sharply as the numbers increase and the ability
to deal with applicants in a timely manner is being curtailed.
Fast Trak speeds up the application process and helps to reduce
costs, assisting the local authority both in the delivery of value
for money services and in the execution of their responsibilities
in this area.
Landlords In a difficult
market, Fast Trak delivers a readymade and substantial source
of new, credit worthy tenants to private landlords. The scheme
gives assurances on the suitability of potential tenants and provides
the guarantee that rent payments will be made in full, providing
the financial security necessary to incentivise attitude change
amongst private landlords to accepting social tenants.
Letting Agents In the
current market conditions, many property agents are surviving
on their letting business. Fast Trak provides letting agents with
increased market opportunity within his area that will enhance
existing businesses.
35 http://www.westminster.gov.uk/services/housing/housingoptions/supplyanddemand/
Back
36
Pt 291, p 93, House of Commons Communities & Local Government
Select Committee, Eighth Report of Session 2007-08, The Supply
of Rented Housing. Back
37
Answer to Written Parliamentary Question, Hansard, 20 July 2010,
Column 217W, Homelessness. Back
38
Written evidence to the House of Commons Communities & Local
Government Select Committee, Eighth Report of Session 2007-08,
Written Evidence-Volume II, Memorandum by the Department for
Work and Pensions. Back
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