Written evidence submitted by The Riverside
Group
1. INTRODUCTION
1.1 We watched with interest the measures announced
by the Chancellor during the emergency Budget and recognise the
need for reducing the deficit in these challenging economic times.
However we have some concerns about the severity of the proposed
housing benefit cuts and the impact they could have on our tenants.
2. SUMMARY OF
RESPONSE
2.1 In response for the call for evidence we would
like to make the following points:
- There are several complex barriers to work that
can prevent tenants from leaving benefits and entering employment.
The proposed changes do little to address these barriers and will
act mainly as a punitive measure for the long-term unemployed.
- Our tenants, many of whom are already living
on extremely low incomes through jobseeker's allowance (JSA) or
disability benefit, will face significant drops in income and
may experience hardship as a result of the benefit restrictions.
- Our modelling shows that as a result of the planned
10% restriction on housing benefit, our tenants on JSA (including
those likely to move onto JSA from other benefits as part of reforms)
could stand to lose an annual total of £1.5 million in housing
benefit
- The proposed restrictions for those under-occupying
homes could result in a total annual loss of housing benefit of
£927,000 to £3.32 million, depending on the way in which
the government applies restrictions
- The changes for JSA claimants could put around
4,000 of our tenants at risk of rent arrears, and consequently
eviction and homelessness — placing further strain on public
resources
- The potential loss of income through housing
benefit could impact on our business model, limit the amount of
community investment we can carry out, and is equivalent to 68
new homes for affordable rent or 45 new homes for low-cost home
ownership.
2.2 We conclude that it is not appropriate
for the government to attempt to achieve a non-housing outcome
by using restrictions on housing benefit. This benefit is designed
to meet housing need and it should continue to meet that core
purpose only. We have concerns that the measures will be regressive,
punitive and will impact on the wellbeing of our tenants as well
as restrict our ability to invest in communities and build much-needed
new housing.
3. INCENTIVES TO
WORK AND
ACCESS TO
LOW-PAID
WORK
3.1 Riverside owns and manages housing in some of
the most challenging neighbourhoods in the country — over
half of our housing is located in the nation's 10% most deprived
areas. We actively seek to improve the work chances and financial
inclusion of tenants. Through our first-hand experience and a
research project carried out with the Policy Studies Institute[39],
we know that worklessness is a complex issue and that our tenants
face significant barriers to work, whether the incentive is there
or not. These barriers include ill health, caring responsibilities,
lack of work chances in local labour markets, and challenges in
accessing affordable childcare.
3.2 We feel the changes proposed in the Budget do
nothing to address these barriers and will act mainly as a punitive
measure rather than increasing chances to work, particularly in
the areas of entrenched unemployment and other deep-rooted social
issues in which we mainly operate. Any restrictions on benefits
would need to be counterbalanced with adequate local initiatives
that address the deeper social issues that create barriers to
work.
4. SHORTFALLS IN
RENT — CHANGES
TO HOUSING
BENEFIT FOR
JSA CLAIMANTS
4.1 We know that 68% of our households have a net
income of less than £199 per week, and that 25% live on less
than £99 per week. Further restriction on their income is
likely to cause significant hardship to a group that is already
in the lowest income band. We have carried out some modelling
exercises in an attempt to quantify the amount of income our tenants
stand to lose due to the proposed changes to housing benefit for
those on JSA for 12 months or more.
4.2 Our average weekly rent stands at £74.28,
meaning that the average single tenant on JSA for over 12 months
would stand to lose £7.43 of their housing benefit due to
the 10% restriction. If they were to make up the shortfall with
their JSA, this would mean a loss of weekly income of 11% —
a significant amount for someone who is already living on around
£65 each week to cover food, energy, clothing and so on.
4.4 15% of our working-age households are unemployed
and actively seeking work, so are likely to be on JSA. In addition
to this are tenants who are sick or disabled, or those who stay
at home to look after family - people who may be moved onto JSA
from other benefits as part of the reforms. Combined, these groups
make up 57% of our households. Of these, around a quarter have
been out of work for 12 months or longer.
4.5 A conservative estimate of the total annual loss
of benefit for this group is £986,091. This was calculated
on the assumption that half of the households on some form of
disability benefit, or who stay at home to look after family,
would move onto JSA as part of welfare reforms — this could
in reality be higher or lower. However, the worst-case scenario
shows that total loss of benefit could climb to around £1.5
million — if all tenants on JSA for over 12 months, including
those previously on other benefits, were subject to the 10% restriction.
4.6 We are concerned about the "broad brush"
approach taken by the proposed reforms, which leave no scope for
differentiating between JSA claimants who have genuinely been
trying to enter work but have been unable to, and those who have
no intention of going back to work. We feel it would be unfair
to penalise those who are unable to find work due to the economic
situation, or more general barriers to work, through restricting
a vital source of income.
4.7 We feel that it is right that claimants who have
no intention of going back to work should be encouraged to seek
employment — however we feel that the JSA system, rather
than housing benefit, would be the appropriate way to manage this.
5. SHORTFALLS IN
RENT—CHANGES
FOR THOSE
UNDER-OCCUPYING
SOCIAL HOMES
5.1 While we recognise the need to tackle under-occupation
in social housing, we note with concern the proposals to restrict
housing benefit for people living in homes that are larger than
their family size. The lack of detail announced for this measure
makes it difficult to model accurately. However we have done some
rough calculations that give a general idea of the potential impact
of these changes.
5.2 Our figures show that we currently have 8,862
working-age households under-occupying by one bedroom or more.
We have 2,280 under-occupying by two bedrooms or more. This level
of under-occupation is mainly due to the type of housing stock
and its geographical spread, rather than tenants wilfully under-occupying.
5.3 Using broad assumptions, we estimate that the
total annual loss of benefit for these tenants could range from
£927,000 to £3.32 million — depending on what
restrictions the government decides to impose.
5.4 Restricting a tenant's housing benefit for under-occupying
will likely force them to look for smaller accommodation. One
significant problem with this is that in many areas, we have a
lack of suitable homes to move them to. This is a particular problem
on estates that have been transferred from local authorities.
Through our many stock transfers we have inherited mostly family
homes, and our stock is replaced at a rate of around 1% per year.
This means the amount of smaller stock available is extremely
limited, and may force claimants to look to the unregulated private
rented sector. This could expose them to the risk of poor quality
accommodation and higher rents — and potentially generate
higher Local Housing Allowance payments.
5.5 A further issue of concern is that a large proportion
of our stock is made up of low-rent, small Victorian terraced
housing. Tenants living in this type of housing may be classed
as under-occupying if they have a spare room, when in reality
they have very little space. This begs the question of whether
basing occupation levels on bedroom numbers alone is fair.
5.6 Any proposals to restrict the amount of housing
benefit social tenants can claim due to under-occupation should
therefore take into account the size of the property in square
metres, its rent level, and the availability of alternatives.
6. LEVELS OF
EVICTIONS AND
THE IMPACT
ON HOMELESSNESS
SERVICES
6.1 The likelihood of rent arrears building up due
to restrictions on housing benefit means that a high number of
our tenants will be put at risk of eviction and eventual homelessness.
We are deeply concerned about the prospect of imposing benefit
restrictions on a group that is already on a low income and may
not have experience of paying their own rent directly, meaning
they are more likely to build up arrears.
6.2 Based on our earlier calculations around JSA
claimants and those who may be moved onto JSA, a conservative
estimate for those at potential risk of eviction would be around
2,400 households. However, the "worst case scenario"
that we modelled could see over 4,000 households at risk of falling
into arrears and being evicted. This does not include tenants
who could be placed at risk due to the under-occupation measures,
so the actual number could in fact be higher.
6.3 This of course would place further pressure on
local authorities and homelessness services, all of which will
create a cost to society. Ultimately, imposing restrictions on
housing benefit in this way is a false economy that could result
in higher costs to the taxpayer in the long-term.
7. LANDLORD CONFIDENCE
7.1 Housing associations have built up a business
model that is successful in delivering affordable homes and quality
services for tenants, using a combination of grant and private
funding. However, there is potential for these changes, if implemented,
to place that model at risk and restrict our ability to deliver
on our objectives.
7.2 In particular, lenders may take a different view
of the risk profile of housing associations in circumstances where
income is threatened in this way. This could potentially lead
to higher margins being charged, which would have implications
for our ability to provide new affordable housing.
7.3 Riverside prides itself on being a leader in
community investment activities such as improving the financial
inclusion of our tenants, creating cleaner and greener spaces,
and helping our tenants into work. In 2009-10 we spent around
£2.3 million on community investment. Faced with threats
to our income of over £4 million due to housing benefit restrictions,
we are concerned about how the housing benefit changes will impact
on our ability to carry out these "housing plus" activities
effectively — resulting in a negative impact on our communities,
which are already among some of the most challenging in the country.
7.4 A similar situation arises for our development
activities. Currently, our net costs after grant stand at around
£70,000 for an affordable home to rent and £105,000
for a shared ownership home. Taking £4.8 million as an estimated
loss of income under the "worst case scenario", this
is equivalent to 68 new homes for affordable rent or 45 new homes
for shared ownership each year.
8. CONCLUSIONS
8.1 We recognise the need to tackle worklessness
and the welfare bill but feel that the measures announced in the
emergency Budget regarding housing benefit are not the appropriate
way for government to go about this. Housing benefit is designed
as a means of assistance from the state to meet housing need,
and as a point of principle we feel the benefit should not be
used to achieve non-housing outcomes.
8.2 The government has stated its intention to protect
the poor and vulnerable in a progressive society. However, we
feel implementing these changes will in fact be regressive and
could cause hardship for low-income households.
8.3 We are deeply concerned about the impact that
the changes will have on the financial wellbeing of tenants and
also on our funding model. There is a real risk that restricting
income in this manner will not improve the situation of tenants
but conversely result in raising homelessness and higher costs
to the taxpayer. The threat to our business model will also impact
on our ability to improve communities and deliver the new affordable
housing that the country greatly needs.
3 September 2010
39 Policy Studies Institute and Riverside (2010): Understanding
worklessness and financial exclusion in social housing - research
summary. Back
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