Written evidence submitted by New Charter
Housing Trust Group
EXECUTIVE SUMMARY
We have considered the budget announcements and have
grave concerns in regard to the impact these changes will have
on our tenant's debt levels, the provision of the housing service,
the diversity of our neighbourhoods and the increasing pressure
to provide new homes.
The proposals for reform in the emergency budget
we believe are harsh and offer little incentive to enter the work
place. Simply cutting benefits does not act as an incentive to
work.
In summary our view is:
- — Low
income families will suffer disproportionately. Higher non-dependent
rates and reduction in entitlement because of household size,
cuts income to the family where there is already a restricted
budget in the home. This may actually lead to an increase in fraud.
- — Rent
arrears will increase significantly leading to higher levels of
personal debt. We already know that personal debt is a huge issue
for those in work.
- — Tenants
will be forced to use alternative money lenders ultimately forcing
people to leave their homes to escape the harsh reality of the
loan shark—a large number of our tenants tell us that they
have money worries.
- — Eviction
numbers and therefore the number of homeless households will increase
leading to less cohesive, community minded neighbourhoods, hampering
the approach of the Big Society.
- — Registered
Providers will move away from offering non-core support services
and concentrate on harsh rent recovery which has no regard for
vulnerability or helping people into work. We believe that this
would be a backward step and will undo a lot of intensive financial
inclusion work that has been received well by tenants.
- — The
arrears pre-action protocol in the Courts hamper harsh recovery
methods as we are required to provide evidence that we have done
all we can to assist the tenant particularly where there are HB
issues. Ultimately, the Courts may not be able to cope with increased
caseload.
- — Household
size entitlement does not offer the opportunity to move to smaller
accommodation given that where service charges apply, the gross
rent on a smaller property could be higher. This does not appear
to have been considered. The whole approach could be one of encouraging
overcrowding.
- — Housing
waiting lists will be put under pressure due to family breakdown
with non-dependants requiring accommodation and the impact of
the cut in LHA in the private sector. We believe that we will
see an increase in the creation of ghettos.
- — Allocation
policies may begin to exclude people on benefits which promotes
discrimination leading to lack of choice for the most vulnerable
in society. We are very concerned how these proposals will affect
supported housing schemes which may lead to a reduction of this
type of accommodation.
- — The
business of providing homes will be affected by increased costs
and inability to secure funds for any new build. We have little
confidence in the view that cutting Housing Benefit actually offers
any incentive at all.
- — We
believe that the proposals have no regard to the fact that we
are social housing providers whose values mean we support
opportunity and choice for all.
1. INTRODUCTION
1.1 Our views are detailed in reaction to each
of the specific areas of reform and relate back to the issues
on which the Committee wishes to focus
As a general point, we are concerned that the income
and therefore the welfare of tenants will be put under serious
strain. Not only will they see a cut in HB but additionally a
cut in other income through other welfare reform proposals. The
impact of all these proposals over a relatively short period of
time will have serious consequences and are not incentives to
work.
Without detail of the amount that benefit rates will
be cut makes it difficult to accurately predict how harshly tenants
will be affected. Our submission is therefore based on the fact
that tenants income will be reduced, and the impact that any reduction
in income has on the financial well being of our tenants.
2. UPRATING NON-DEPENDANT
DEDUCTIONS
2.1 The immediate issue is the increase
in rent liability for the tenant. Whilst it is accepted that non-dependants
should pay towards the upkeep of the home, anecdotal evidence
shows that the arrangements for rent within the home is usually
much less than the non-dependant charge. This ultimately means
that rent arrears start to increase and the tenant will quickly
find themselves facing an eviction warrant.
2.2 Where the non-dependent is forced to leave
the household, we will see an increase in the numbers on the housing
waiting list for a group of people who cannot afford to rent a
home. Restrictions for the under 25's mean that on a low income,
they cannot afford to pay a shortfall between rent and housing
benefit, and we will see a return of "rough sleeping".
2.3 Where the non-dependant leaves the family
home, we then find that the home is under occupied adding to the
difficulties that are associated with a HB level that reflects
the household size (detailed more fully at point three)
2.4 New Charter provides debt advice to tenants and
we are already aware that where the service is utilised, the tenant
has an average level of unsecured debt in the sum of £10,600.
This higher non-dependent charge will only lead to increase that
debt. This is of great concern as a great deal of work has been
under taken to help people manage their debt and to recognise
personal responsibility in managing that debt.
2.5 The likely outcome of this element of reform
alone is that evictions will increase; there will be an increase
in under occupancy; an increase in the number of homeless households
and ultimately a breakdown of the family.
2.6 This approach could actually lead to more
fraud being committed as the tenant will be reluctant to inform
the LA that a non-dependent has moved into the home especially
where the non-dependent charge is greater than the loss of HB
for under occupancy
2.7 We estimate that upward of 1,500 households,
(8%), will be affected by this change.
3. LOCAL HOUSING
ALLOWANCE AND
DHP
3.1 This may not immediately be recognised as
having an impact on the social sector but with the move to 30th
percentile, we believe we will see an increase in people leaving
the private rented sector and again putting more pressure on the
waiting lists in the social sector. This will lead to private
landlords not willing to take tenants who are entitled to HB therefore
restricting choice and stifling mobility. Ultimately, we can see
this leading to the social sector being overwhelmed.
The positive element here of course is the additional
allowance for carers.
3.2 The increase in the DHP is welcomed however,
it is assumed that this sum will be allocated in the main to the
private sector and particularly in the South. We do not feel that
this is going to be of huge benefit in the social sector.
4. PROPERTY
SIZE ALLOWANCE
4.1 This is the area that brings with it most concern
and as it is already acknowledged that this would bring the biggest
saving in the payment of HB then this view is justified. It is
interesting to note that there has not been to our knowledge any
move to restrict the amount on Council Tax Benefit payable for
the size of the household. This is welcomed in one respect as
tenants do not see a further reduction in benefit but it does
not accord with the view that people should be moved away from
benefit dependency.
4.2 The household allowance and the additional
non-dependent issue give the tenant a poor choice of which circumstance
provides the smaller shortfall in the benefit rate. The choices
are:
- to have a non-dependent in the household and
receive a higher household size benefit with a high non-dependent
charge; and
- or ask the non-dependent to leave and incur a
cut in the household size benefit.
4.3 Tenants may want to move to smaller homes
that are not available. Where there is a possibility of a move,
this is further complicated where the smaller property may be
a flat. Whilst the rent element of the flat may be lower (due
to the application of the rent restructuring framework) the services
associated to a flat, particularly a multi storey, will make the
overall rent higher. The best option for the tenant therefore
is to remain where they are as they would have a smaller shortfall
in the rent.
4.3.1 To demonstrate this point, the all-inclusive
rent for a two bedroom house within our stock is £76.39.
A one bedroom multi-storey flat has an all-inclusive rent of £83.63
This approach offers nothing to address under-occupancy
issues and in fact promotes a view that remaining in the existing
home is the better option. It actually could encourage a situation
where overcrowding occurs to enable a higher rate of HB to be
awarded. We fail to see how this approach offers any incentive
to work.
We estimate that over 2,500 households, (13%), will
be affected by a cut in HB for household size.
4.4 There are likely to be issues for single
people who have children who stay at weekends and need two bedrooms.
The parental contact in a relationship breakdown is crucial for
the children. Clarification is needed to establish if in this
situation, the bedroom allowance would include visiting family
members. This is unclear at the moment but could have a huge impact
on this group.
4.5 Allocations Policy may see a means test introduced
rather than being based on need. There is no point setting someone
up to fail through attracting rent arrears. This is not an incentive
to work and could be deemed to prejudice those who are in receipt
of benefit. Social Providers offer services based on need not
income.
4.6 We are unclear if temporary accommodation
for the homeless or other supported housing will be affected.
The people using these facilities will in the main be of working
age and if the household limit is applied to a rent which by its
very nature provides intensive support, they will not be able
to afford the temporary accommodation.
We are looking for assurance that schemes looking
after the needs of vulnerable groups will be excluded from the
property size element. The impact will be the withdrawal of this
type of accommodation and again an increase in homeless families
living on the streets. The time spent in supported accommodation
gives the ideal opportunity to help build a close family who have
aspirations and can gain the skills to enter the work place.
4.7 Increased arrears and more prescriptive arrears
recovery takes away the support that the social sector offers
to help people sustain their tenancy. This is due to the reallocation
of resources to collect debt. Providing support we believe promotes
the "Big Society" creating neighbourhoods where people
want to live and it is a backward step to put these services at
risk.
4.8 There will inevitably be increased evictions
due to higher arrears where the household shortfall cannot be
met. Research shows that each eviction has an average cost of
£6,500. Whilst benefit reform will save money, the financial
impact on the social sector is huge.
4.9 A worrying aspect in relation to this is
that we believe we will see increased usage of loan sharks as
tenants try to address the problem of finding money for additional
outgoings when their income in other areas is being cut. This
adds more pressure on tenants and the services that we try to
provide. Overall indebtedness increases and is a disincentive
to return to work.
4.10 An increase in the number of abandonments
will occur, with the cost for each abandonment in the region of
£6,000. As people get more involved with door step lenders
and loan sharks, debt levels can provoke a need to run and we
are left with a vacant property. As vacancies increase, more money
is required to relet it and again we see the financial implications
on the business.
4.11 Court costs will increase due to the increasing
arrears, again adding to personal debt levels. The additional
problem is then placed on the courts trying to deal with an increase
in caseload. Arrears build to a higher level due to waiting for
hearing dates.
4.12 Rent increases will be limited by Government
Policy, (subject to new rent setting process), giving little scope
for the landlord to recoup increased management costs. The landlord
is trapped in a situation where income is falling yet rents cannot
be increased to a market level to try to recover costs. Again
this impacts on the ability to deliver support services to enable
people to enter the work place.
4.13 We were involved in the debate in relation
to potential payment direct to tenants not to the landlord. This
brings with it again increasing costs of collection for the landlord
and no guarantee that the money will come in at all. Without the
support from financial inclusion initiatives, a significant number
of tenants will not be able to manage their money effectively.
This is an issue that is being considered in the document "21st
Century Welfare" but will impact on the HB proposals.
4.14 Under 25's will be a group that cannot afford
to rent. The diversity in neighbourhoods starts to be affected
as we will see a reduction in single young tenants. They will
become excluded from being a tenant of a social landlord. This
could actually lead to people taking substandard property and
the creation of ghettos to accommodate individuals with little
choice.
4.15 Issues arise for BME groups who need larger
accommodation. They will see a cut in maximum amount payable on
the home and a rent that is much higher than the level of HB particularly
in the private sector.
4.16 Table 1 below shows some of the results
from a survey of 1,000 tenants. The worrying aspect here is that
although tenants' overall (88%) say they can budget well, 34%
say they don't know where their money goes. In addition 49% say
they have money worries. This suggests they will react badly to
any change in income or trauma.
Any cut in benefit is going to have an impact on
the lives of tenants who are already balancing their income.
4.17 When we look at the situation for the working
population surveyed, the results are worse with more people holding
long term debt and 58% having money worries.
People moving into work need additional support to help them manage.
The cuts in HB will put those services offering support at risk
as resources have to be moved to collect increasing arrears.
4.18 The table clearly shows that tenants who
are in work, of which 26% claim HB, will find themselves in a
much worse situation. It offers a clear indication that for this
group, there is no incentive to remain in work and may encourage
them to give up.
Table 1
| Financial Inclusion Survey November 2009
| All tenants | Working tenants
|
| Loans and Debts |
| Hold long term debt | 27.40%
| 38.36% |
| Using licensed door step lenders | 5.50%
| 6.85% |
| Using a loan shark | 1.00% |
1.83% |
| Loans from other non financial institutions
| 7.70% | 9.59% |
| Debts on credit cards | 6.50%
| 7.76% |
| Accessing advice and money management
|
| Money advice—don't know where to go |
25.70% | 20.55% |
| Welfare benefits—don't know where to go
| 20.80% | 19.18% |
| Not enough money | 19.00% |
21.46% |
| Can budget well | 88.20% |
84.02% |
| I have money worries | 48.50%
| 57.99% |
| No idea where money goes | 34.10%
| 36.07% |
| Would like help with money management | 15.50%
| 19.18% |
5. TIME LIMITING
FULL HB FOR
PEOPLE ON
JOBSEEKERS ALLOWANCE
5.1 The issue here is that tenants who are receiving JSA may
well be trying to secure a job. As we are aware, the number claiming
JSA is expected to hit its peak in 2012 therefore showing that
there is an expectation that unemployment will rise. We cannot
therefore understand why a cut in HB for those who have been out
of work for 12 months will act as an incentive to find work where
the tenant is actively seeking employment. Are there to be allowances
where it is demonstrated that the individual concerned is doing
all they can that this will not be implemented?
5.2 New Charter has 8% of tenants receiving JSA (though we
have no indication as to the length of time they have had a claim).
These individuals may well be subject to a reduction in HB because
of the household size and this further cut would seem to add to
an already difficult situation.
Again this group may be forced into the hands of the loan shark
in order to maintain their home.
5.3 Table 2 below shows the range of benefits being claimed
by the tenants surveyed.
A wide range of benefits are in payment with people in work requiring
support to maintain their working status. Any cut in HB puts the
ability to continue in a job at risk
Table 2
| Financial Inclusion Survey November 2009
| All tenants | Working tenants
|
| Welfare benefits currently being received
|
| Housing Benefit in payment | 65.90%
| 25.57% |
| Council Tax Benefit in payment | 64.80%
| 30.59% |
| Job Seekers allowance | 7.90%
| 0.91% |
| Child Tax Credit in payment | 22.40%
| 38.36% |
| Working Tax Credit in payment | 9.70%
| 33.33% |
| Employment support allowance in payment |
3.20% | 0.46% |
| Retirement Pension in payment | 29.40%
| 2.74% |
| Pension Credit in payment | 20.20%
| 0.91% |
| Other benefits in payment | 40.30%
| 48.86% |
6. CASE
STUDY
We would like to share with you a successful approach
to dealing with hard to let properties where there were severe
ASB issues. The ability to work in this way will be compromised
should HB be reformed as the budget states.
We have managed to turn around estates from areas
where people don't want to live into areas where voids are now
minimal and the tenants have created opportunities to receive
work experience through initiatives on the estate. This could
only be done through local lettings policy where people are moved
into property where they would under occupy, and this results
in creating a neighbourhood that is sustainable and saves money
in the long term. The alternative would be to leave the estate
to get into a worse condition with high levels of ASB. The HB
proposals put these neighbourhood initiatives at risk and undermine
a very productive and successful approach.
7. FINANCIAL
IMPACT ON
THE BUSINESS
We recognise that we operate in an extremely challenging
economic environment, and that the public expenditure reductions
arising from the Emergency Budget and the forthcoming Comprehensive
Spending Review will have a significant impact. Our role is to
manage the impact in a way which does not deflect us from our
objective of providing quality homes to our customers. However,
as a cashflow driven business, the Housing Benefit changes will
undoubtedly present us with a series significant financial challenges
arising from the undoubted increase in rent arrears which will
occur:
- 1. The delivery of investment programmes
and achievement of Decent Homes Standard and beyond will be compromised;
- 2. The capacity to develop and build additional
affordable housing will be significantly reduced;
- 3. Our business has been developed on the
basis of creating diverse and stable communities; increased evictions
and the impact of the under-occupancy issue will undoubtedly lead
to an increasingly transitory tenant base and will prejudice the
delivery of a viable business; and
- 4. The confidence of Funders will be dented,
and may potentially lead to the unavailability of further funding
streams, (which have been the cornerstone of the success of the
social housing sector)
3 September 2010
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