Written evidence submitted by Durham County
Council's Revenues and Benefits and Welfare Rights Services
EXECUTIVE SUMMARY
1. According to the Secretary of State for Work
and Pensions the budget outlined the first steps in achieving
the goal of supporting people to move into and progress in work,
while supporting those in the greatest need. In our opinion the
changes announced are simply a means to reduce the spend on Housing
Benefit and will not help in achieving this goal.
2. The cuts to Housing Benefit will do little
to improve work incentives in fiscal terms but will instead serve
to undermine and erode an individual's confidence as they have
to grapple with a reduced disposable income and the consequences
of living in poverty.
3. The majority of changes introduced will result
in lower Housing Benefit being paid with people having less disposable
income to meet shortfalls in rent. This will lead to increases
in the level of evictions and homelessness.
4. Restrictions in Local Housing Allowance rates
will restrict the choice and the number of affordable properties
available to those tenants in receipt of housing benefit to those
areas of cheaper accommodation.
5. It is clear that the changes announced will
add more complexity to a benefit system that the government has
acknowledged as already being too complex.
IMPLICATIONS OF
THE ANNOUNCED
CHANGES FOR:
Incentives to work and access to low paid work
1. It will be interesting to see how the Government
intend marrying the reforms of Housing Benefit with the structural
reform of the Social Security Benefits system in it's consultative
paper 21st Century Welfare. This structural reform is not likely
to take effect for four to five years.
2. The Housing Benefit changes proposed cannot
be seen in isolation from the wider Welfare Reform agenda or the
other cuts such as on tax credits identified in the budget.
3. The budget increased the means testing of
benefits to low income families, which will have the effect of
reducing work incentives, as it means families lose their benefit
for every pound earned. This Marginal Deduction Rate is noted
in the 21st Century Welfare document. The deduction rate can be
as high as 90% (130,000 people face a 90% who would gain 10p or
less from a £1 increase in earnings).
4. The Governments stated intention to increase
non-dependant deductions is alarming and will further erode work
incentives. As the rate of deduction is set according to earnings
levels of the non-dependant the dramatic increases proposed will
further serve to make a disincentive to attempt work. It is estimated
that the top rate of £47.75 per week would be increased to
at least £69 per week.
5. These non dependant deductions are difficult
to administer and unpopular with claimants. Problems around payment
can arise leading to tension within the household and pressure
on the non dependant to move out.
6. The 10% reduction in Housing Benefit for claimants
on Job Seekers Allowance for 12 months or more is a regressive
step. This looks like an attempt to make life on benefit uncomfortable
for the long term unemployed and in turn make work appear more
attractive. Akin to the principle of 'lesser eligibility' applied
in the Victorian era where conditions were attached to public
assistance which acted as a motivating factor to find work.
7. It runs the risk of jeopardising the lives
of vulnerable people living in areas of high unemployment and
joblessness without actually dealing with the root causes eg the
benefit system itself provides disincentives to try work as do
transport and affordability of childcare etc.
Levels of rent including regional variations
1. Many of the London-specific proposals, notably
the "cap" on LHA, will have limited impact in our area.
Across the board reductions of benefit rates to the 30th percentile
of average rents will however have a universal impact. In broad
rental market areas with significant variations in rent levels,
for example Durham City, LHA claimants will face further penalties
unless a corresponding reduction in rents occurs.
2. These changes may bring downward pressure
to bear on private landlords to reduce their rents if they can
keep good tenants. Do the Government have evidence that the level
of LHA has a direct effect on rent levels?
3. It is a particular concern that there appears
to be no mechanism for protecting existing tenants. As there is
no system of transitional protection afforded to existing tenants
they will suddenly find their rents unaffordable.
Shortfalls in rent
1. The Local Housing Allowance cap and restriction
to a four bedroom rate will not affect the County however the
LHA been set at the 30th percentile rather than 50% of the median
of local private rents will have a dramatic effect on people on
lower incomes.
2. The County is covered by three Broad Rental
Market Areas and according to indicative figures produced by the
Valuation Office Agency people will be faced with a reduction
in benefit of up to £14.38 per week.
| Note—All figures are indicative only, and not actual statements of fact
| LHA JUNE 2010
| LHA 30th percentile
(based on June 2010 LHA)
|
| BRMA ID | Broad Rental Market Area (BRMA)
| 1 Room | 1 Bed
| 2 Bed | 3 Bed
| 4 Bed | 5 Bed
| 1 Room | 1 Bed
| 2 Bed | 3 Bed
| 4 Bed |
| 66 | Durham
| £67.05 | £80.55
| £92.05 | £103.56
| £140.96 | £195.62
| £53.35 | £69.04
| £86.32 | £97.81
| £126.58 |
| Durham Reduction
| | | |
| | | -£13.70
| -£11.51 | -£5.73
| -£5.75 | -£14.38
|
| 67 | Darlington
| £55.00 | £82.93
| £97.81 | £115.07
| £159.95 | £172.60
| £54.50 | £80.00
| £88.60 | £105.52
| £149.59 |
| Darlington Reduction
| | | |
| | | -£0.50
| -£2.93 | -£9.21
| -£9.55 | -£10.36
|
| 65 | Sunderland
| £45.00 | £90.90
| £109.32 | £120.82
| £160.53 | £207.12
| £43.00 | £86.30
| £100.00 | £109.32
| £149.59 |
| Sunderland Reduction
| | | |
| | | -£2.00
| --£4.60 | -£9.32
| -£11.50 | -£10.94
|
3. It represents economic determinism on the part of the Government
whereby if the LHA does not meet the rent the tenant is faced
with either:
- Renegotiating their rent with their landlord;
- Finding the shortfall in their rent from their disposable
income;
- Moving home to a cheaper rented property; and
- The threat of eviction and homelessness.
4. The cuts proposed by the Government will place additional
pressure and demand upon the Discretionary Housing Payment (DHP)
budget. These monies are set to rise from £20 million to
£30 million in 2011 and to £60 million from 2012. Although
the increases in budget are to be welcomed they in no way make
up for the £1.8 billion cuts.
5. It appears that the Government intends to target this additional
assistance towards areas where the private rented sector is expensive
(ie London). Extra resources are of course welcome, though we're
sure there will be a high demand for payments.
Levels of evictions and the impact of homelessness services
1. Given the shortfall in rents we are likely to see tenants
unable to renegotiate their rents with landlords or to meet a
shortfall and a subsequent increase in rent arrears, evictions
and homelessness.
2. These changes would appear to be a false economy as inevitably
people subject to these cuts would turn to Local Authorities,
Health Services, Temporary Accommodation and Social Services for
assistance. The Federation of Law Centres have estimated that
an eviction and homelessness can cost up to £34,000.
Landlord confidence
1. With the reductions in housing benefit leading to shortfalls
in rent there is a likelihood that Landlords will be reluctant
to rent properties to those tenants in receipt of benefit
Community cohesion
1. The changes to the Local Housing Allowance rates will mean
that in order for LHA claimants to meet their rent liability they
will only be able to choose from the cheapest 30% of properties
in their local area of the appropriate size for their family.
2. We may see less community cohesion as tenants are forced
to migrate towards areas where cheaper accommodation is located
in poorer areas.
Disabled people, carers and specialist housing
1. The range of measures proposed in the Housing Benefit Amendment
Regulations (2010) are targeted more towards "general needs"
tenants than vulnerable groups living in the supported housing
sector. There are however many cross-cutting issues and potentially
significant overlaps with other welfare reforms and revenue cuts
already announced. The cumulative impact will not be known fully
until the conclusion of the ongoing review of the "exempt
accommodation" rules, announced by the DWP in January 2010,
though it is already possible to make some observations on the
impact that these changes may bring to the sector.
2. It is clear that a shift towards the time-limiting, capping
and tapering of entitlements is occurring. If the economy doesn't
expand as predicted and employment opportunities remain scarce,
the proposed 10% reduction to Jobseekers Allowance (after 52 weeks)
will significantly reduce the ability of unemployed claimants
to meet their housing costs. Combined with the capping of payments
in high cost areas, the "spiral effect" of increased
housing costs, rent arrears and eviction may be far more commonplace.
There is a clear risk that these measures could actually increase
demand for statutory services if the assumptions which underpin
them prove inaccurate. Reductions to Supporting People grants
(already announced) are already reducing the abilities of Local
Authorities to carry out vital work to sustain "at risk"
tenancies. Should increased numbers fall on hard times then costs
will merely be displaced from the HB scheme to other budgets,
or worse still we will see new pools of unmet need.
3. The DWP's risk analysis states that 99% of Local Housing
Allowance claimants will on average be £12/week worse off.
With regional variations in the economic recovery, some areas
(including Durham) could bear a disproportionate impact. Figures
quoted in the impact assessment already suggest that Durham will
take a bigger hit than many authorities.
4. The allowance of an extra room in the LHA size criteria
for disabled claimants with long-term conditions or those that
can prove the need for an overnight carer is welcome. It gives
claimants in the private sector parity with social housing, though
it remains to be seen how claims will be assessed.
5. With a clear emphasis on driving down costs across all
areas of Government expenditure, vulnerable adults will already
be suffering the impact of other funding cuts. Reliance on welfare
benefits to meet housing costs is usually just one part of a larger
funding package which ensures their safety and promotes greater
independence. Recent changes to the system for calculating eligible
rents in Temporary Accommodation suggest that a crude "LHA
plus adjustment" formula may be adopted for supported housing,
and depending on the level of that adjustment the consequences
could be severe.
6. Rents in the supported housing sector tend to be higher
than those in general needs housing because properties usually
meet costlier specifications or are acquired at high cost. Were
rents required to fall within significantly lower limits, "core
rents" would inevitably take priority over service charges.
Some landlords are already preparing for the threat by stripping
out a range of service charges to see if they can re-model rents
to fall within predicted targets. Removing vital housing services
may have a negative impact on the suitability of some accommodation.
7. Coupled with the scaling back of Supporting People Grant
and closure of the Independent Living Fund to new applicants,
the supported housing sector is becoming increasingly more expensive
for Local Authorities to maintain. Should tenants struggle to
meet their housing costs solely via Housing Benefit payments they
will be forced to look to other funding streams, including their
own disposable incomes or "top ups" from service commissioners.
At the very least, loss of Local Authority revenue from the "Fairer
Charging' framework would result. It is therefore vital that the
DWP carry out an impact assessment which takes into account Local
Authority revenue loss and increased levels of expenditure by
Social Services departments before the DWP's review of "exempt
accommodation" is concluded.
8. These amendments taken in isolation won't jeopardise the
continuing success of the supported housing sector. In the context
of wider funding adjustments and further cuts yet to be announced,
reductions in HB/LHA payments may actually add to the financial
burden of Local Authorities.
Older people, large families and overcrowding
1. Comments in relation to older people have been covered
in the previous section.
2. It is pleasing to note that older people are not affected
by the change in housing entitlements to reflect family size in
the social sector. However, this change in conjunction with others
simply adds yet more complexity to a system that has already been
acknowledged as being too complex.
3. As previously stated the cap on the LHA rate will not have
any effect in the County and is currently specific to the London
area. It may have the desired effect of reducing overcrowding
in properties but there is a risk that large families may be forced
to split up as they will be unable to afford the high rents for
large properties in the London area.
3 September 2010
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