Written evidence submitted by Peabody
1. INTRODUCTION
1.1 We have considered the potential impact of
each of the government's proposals. Some impact directly on Peabody
and people living in our communities; others have a more immediate
effect on the Private Rented sector, but potentially have longer-term
consequences on our residents and the affordable housing sector
as a whole.
1.2 Our response sets out a number of general
observations and more detailed comments on the measures most likely
to impact on Peabody and our residents. We have made specific
references to the areas noted by the Committee as the focus for
their inquiry. We have used a number of case studies from our
work to illustrate our key points (included as Appendix 1) and
made recommendations, where appropriate.
2. OVERALL COMMENTS
2.1 We understand the rationale for change in
this area and the need for the coalition government to make savings,
improve efficiency, streamline the benefits structure and incentivise
people to work.
2.2 We have a number of general observations
on the proposed measures and the potential impact on our residents,
the housing sector and London as a whole. These are set out below:
2.2.1 The combined impact of the proposals is
likely to exert further pressure on a limited number of affordable
homes in London. With forecast growth in London's population and
a reduced number of affordable homes being completed following
the economic downturn, pressures on housing supply are likely
to grow.
2.2.2 There is potentially a significant impact
on the shape and composition of communities across the capital.
Many parts of London are likely to be unaffordable for a large
number of people and the polarisation of markets will not assist
community cohesion.
2.2.3 Measures may exacerbate hardship for some
of the most vulnerable members of society. The cost of living
is higher in London than other parts of the UK and many are already
struggling to meet the costs of life's essentials such as fuel
and food.
2.3 Given the wide-ranging nature of the benefit
reforms proposed we would urge the government to ensure that the
evidence bases for the changes have been fully evaluated both
for each measure and to consider the cumulative impact of proposed
changes. We would encourage the government to take a practical
approach to understanding how the proposed changes might affect
tenants and to ensure suitable support is available to manage
any negative impacts and protect the most vulnerable members of
society.
3. COMMENTS ON
THE DETAILED
PROPOSALS
3.1 Deductions for non-dependants will be
uprated in April 2011 on the basis of prices. This will reverse
the freeze in these rates since 2001-02
3.1.1 We understand the rationale behind this
proposal, but are concerned that it may lead to increased hardship
for families. Non dependant family members will be asked to pay
more towards the rent of the property they share. If they cannot
afford this increase, as demonstrated by Case Study A,
and the tenant cannot afford the rent rise themselves, it will
lead to rent arrears and the potential risk of homelessness to
both parties from legal action for possession.
3.1.2 The reasons why non-dependent people reside
in a property are varied. They might be caring or providing support
for a vulnerable and elderly tenant or be in need of support themselves.
Other reasons could relate to the lack of available affordable
housing or a sudden change in life circumstances. The withdrawal
of the non-dependant from home might have a number of unintended
consequences on the welfare of individuals and may lead to dispersal
of families and communities. At a time of growing youth unemployment,
increasing non-dependant deductions could force more people out
of the family home, when they most need support.
3.1.3 In Case Study A (Appendix 1) we
have outlined the effects of the proposed rise on the net income
for adults earning a low wage. Increases to rent contributions
will not be affordable to those already on low wages. DWP's report
of households below average income revealed that in 2008-09 the
rise in working age adults living in relative poverty (after housing
costs) rose by 0.3 million from the previous year to 7.8 million.
3.1.4 Options for non dependants may then be
limited. They could be forced to leave the property to enable
the tenant to retain their home by covering the full rent due
by housing benefit. If the non-dependant leaves the property,
they may present themselves as homeless, seeking affordable one
bedroom accommodation and placing further strain on the supply
of affordable homes. The supply of one bedroom accommodation in
London does not currently meet demand, so local authorities may
expect to see an increased demand for temporary accommodation,
also in short supply.
3.1.5 Other options for tenants, who cannot afford
the increased contributions, might include the non-declaration
of non-dependants. However, they will in turn lose housing benefit
related to family size, as they will be assessed as under occupying.
RECOMMENDATION
3.1.6 We urge the government to further consider
the impact on the groups most at risk from these reforms—in
our view, these are the under 25s, and over 60's—and to
retain the freeze on deductions for these groups.
3.2 Housing Benefit awards will be reduced
to 90% of the initial award after 12 months for claimants receiving
Jobseeker's Allowance. This will be introduced in April 2013
3.2.1 We recognise the government's aim to incentivise
people to find work. Housing providers have a key role to play
in this area and central to Peabody's mission is the belief that
regular endeavour, whether that be through work or other activity,
makes people feel valued and makes an important contribution to
our society.
3.2.2 Peabody has significant experience in getting
our residents and people in our communities into employment. These
programmes reduce the government's benefit spend. Our experience
shows that there are multiple, often linked, barriers to employment
and these include:
- Lack of basic skills, training and qualifications.
- Lack of self-confidence.
- Culture of worklessness, with family or friends
not having worked.
- Family circumstances—including lack of
appropriate housing or childcare arrangements.
- Unrealistic expectations.
3.2.3 We have found that, for someone who has
recently become unemployed, it can take, on average, up to six
months to find work. For the long term unemployed, this might
extend beyond 12 months, even up to three years. Intensive and
focused support is often required to support people to become
job-ready.
3.2.4 A 10% reduction in benefit will impact
on living standards, and may lead to increased poverty, even homelessness,
if living costs cannot be maintained. We are deeply concerned
that this proposal puts additional financial pressures (on top
of those resulting from other economic measures such as an increase
in the VAT rate) on the individuals already engaged in the process
of finding work.
3.2.5 In our experience, job seekers allowance
at £65 per week, coupled with housing benefit to cover rent,
is often below both the national minimum wage and the London living
wage advised by the GLA (see case study B). The Greater London
Authority report for 2010 identifies that in London, an hourly
wage rate of 17% above the National Minimum Wage rate of £5.80
is needed to provide a reliable margin so that the wage-earner
will not fall into poverty.
3.2.6 Our case study demonstrates that reducing
housing benefit for long term unemployment reduces job seekers
allowance which is needed to make up the rent shortfall. Debt
is often the result of not being able to manage living costs,
and unmanageable debt may result in homelessness. The withdrawal
of benefit might increase debt and hinder both ability to keep
pace with living costs, and job searches. The pressure on us as
a housing provider will be to restructure any increasing debts,
and set up and monitor new payment arrangements which will impact
on our finances, as target levels for rent arrears may not be
met.
3.2.7 We are concerned that the proposed reduction
in housing benefit is not connected to any criteria other than
length of receipt. The proposal is not linked to any direct programme
to assist people into work and it is unclear whether there is
evidence to support the proposal that a reduction in housing benefit
would act as an incentive for people to find employment.
RECOMMENDATIONS
3.2.8 We would encourage the government to establish
and publish its evidence base for this proposed change and to
demonstrate how it will impact on the employability of tenants
in receipt of housing benefit. If the government is determined
to implement this measure we would urge them to consider using
it as a targeted sanction for those not engaged in the process
of finding employment. We would be willing and keen to help the
government or Select Committee undertake any further research
into options to increase employment, particularly for our long
term unemployed. We would like to invite members of the Select
Committee to see our employment programmes in action.
3.3 From April 2013, housing entitlements
for working age people in the social sector will reflect family
size
3.3.1 Under-occupation is an issue for all housing
providers. Various nomination agreements with different local
authorities and ensuring the right mix of homes is available to
meet demand make mobility difficult. Under-occupation does not
allow us to make best use of stock, especially where demand for
larger housing is currently highest in London.
3.3.2 We expect this reform proposal to have
the most significant impact on those under-occupying, for example,
older people (under retirement age) whose children have left home,
lone parents and vulnerable groups. However, as case study C highlights,
there are difficult (and unintended) consequences that must also
be considered, in this case the risk to children in not having
access to both parents in cases of relationship breakdown.
3.3.3 The sector currently lacks sufficient housing
of the right type or size to offer residents who wish to "downsize"
and remain in their existing community. This measure may lead
to further pressures on demand for affordable housing.
3.3.4 We note a requirement to set out careful
definitions around "working age" and how housing requirements
might relate to family size.
3.4 The Government contribution to Discretionary
Housing Payments will be increased by £10 million in 2011-12
and £40 million in each year from 2012-13
3.4.1 We welcome the additional funding for Discretionary
Housing Payments to allow for the possible increase in applications.
We would suggest, however, that this may not be sufficient to
deal with the scale of the cuts proposed.
3.4.2 It is our experience that as the current
administration of these payments differs from borough to borough,
awards cannot be relied upon to assist debt restructure, or temporary
changes in circumstances. Case study D illustrates this. Since
April 2007, we have applied for 27 Discretionary Housing Payments,
of these only 10 were successful. Even so, this still amounted
to a further £2,119.81 in extra rent payments.
3.4.3 There is likely to be a significant increase
in applications for these awards, as longer term job seekers whose
housing benefit is cut, and larger families whose benefit is capped,
fall into arrears and will need assistance to meet shortfalls.
Meeting shortfalls may become a common occurrence, if low paid
work stops and starts, and alternative cheaper housing is not
available
3.4.4 Whilst this increase is welcomed, it may
not be sufficient to deal with the scale of the cuts proposed.
We do need clarity on how it will be prioritised and allocated.
If we can agree consistent guidelines, we will be able to better
advise tenants, and succeed in taking the right action sooner
to deal with arrears.
Our comments on the other welfare reform proposals
are as follows:
3.5 From October 2011, Local Housing Allowance
rates will be set at the 30th percentile of local rents (instead
of the 50th percentile)
3.5.1 We note that this will primarily impact
on tenants in the private rented sector, who will have access
to fewer properties where the full rent would be covered by housing
benefit. This is likely to have a disproportionate impact on London.
It could increase the demand for social housing, increase demand
for housing options services and result in the concentration of
tenants in particular geographical areas, changing the shape of
local communities and housing markets. Families who are already
marginalised may suffer the most; children may be displaced from
their schools and social and support networks will be severed.
3.6 From 2013-14, Local Housing Allowance
rates will be uprated in line with the Consumer Price Index (CPI)
3.6.1 We note that by linking Local Housing Allowance
with the Consumer Price Index, rather than the Retail Price Index
from 2013, may affect availability of affordable private rented
sector housing in London. If allowances do not keep up with inflation,
and affordable properties in London will not be widely available,
then private sector housing becomes affordable in certain areas
only, and labour markets may become less able to afford mobility,
needing to relocate into the new "affordable" areas.
If private sector housing is not affordable, then demand for general
needs social housing will increase.
4. CONCLUSION
4.1 We understand the rationale for changes to
the current housing benefit system and the government's desire
to make savings and efficiencies in public expenditure. However,
our experience in working in some of London's most deprived neighbourhoods
leads us to concerns about how these proposals might impact on
the poorest and most vulnerable in our society—articularly
when examined in conjunction with other economic measures and
proposed wider changes in the welfare benefits system.
4.2 We are concerned that the measures will place
increased pressure on the demand for affordable homes in London
and on many tenants in social housing. Half of our residents are
already in receipt of housing benefit which demonstrates that
they already experience low pay, unemployment or vulnerabilities.
Key to managing any reduction in benefits will be the availability
of suitable employment and services to support vulnerable residents
make changes to their lifestyles.
4.3 We would encourage the government to demonstrate
a sound evidence base to illustrate the impact of these proposals
and to engage with organisations delivering services in this area
to fully understand the potential consequences. Peabody would
be happy to engage further with the government on this and extend
an invitation to members of the Committee to see our work in action.
6 September 2010
APPENDIX 1
PEABODY CASE STUDIES
These case studies are all based on Peabody tenants
and housing benefit issues that they have raised with our staff.
We believe it is important to view potential policy changes in
terms of their impact on individuals, families and tenants.
CASE STUDY
A—IMPACT OF
NON-DEPENDANT
DEDUCTION
A tenant in Wandsworth, claiming Income Support has
an adult child. The adult daughter is 23, and returned to the
family home after a relationship breakdown. She works full time
and has a gross income of £236 per week. There is a non dependant
deduction of £38.20 that she is expected to make.
However, her net income is nearer to £168 per
week. She has Credit Card debts and a bank loan (which she had
taken out to cover the private rental deposit on a property when
leaving home). This leaves her with £108 per week. Travel
costs to and from work are £41 for her travel card. This
leaves £67. At present after paying her non dependant deduction
to her mother, she has only £28.80 disposable income to cover
clothing, lunches, and any other expenses.
As the tenant's daughter is working she cannot get
assistance with legal costs to fight for her deposit money, so
is forced to service a loan. We cannot negotiate down the other
non priority debts without adversely affecting her credit rating,
which would affect her ability to privately rent in the future.
Any increase in the non dependent deduction rate
would have serious consequences for the family.
CASE STUDY
B—IMPACT OF
REDUCING HOUSING
BENEFIT BY
10% AFTER 12 MONTHS
FOR TENANTS
IN RECEIPT
OF JOB
SEEKERS ALLOWANCE
- (a) A tenant in Haringey was in receipt of
Incapacity Benefit for depression. In June 2009 he decided that
his symptoms might improve if he found part time employment. Despite
applying for many jobs, he has been unsuccessful so far.
With his current weekly rent at £92.25, he would
face a £9.25 weekly shortfall in his rent if his housing
benefit was reduced by 10% after 12 months on Job Seekers Allowance.
He receives £65.45 Job Seekers Allowance from which he can
allocate £5 per week for travel and correspondence at present,
once utilities and housekeeping is paid out. In reducing his housing
benefit it would limit his ability to actively seek employment.
- (b) A lone parent in Islington has three
children, above the age of seven. She now claims Job Seekers Allowance.
It has been agreed that she look for work locally so that she
can work full time and utilise a breakfast and after school club.
However, it would appear demand for local positions outstrips
supply as she hasn't been successful. The tenant has widened the
geographical search to include a local bus route, but to no avail.
A 10% cut in the £103.61 weekly rent would mean
losing £10.31 from the family budget. Having drawn up an
income and expenditure sheet, the only way to cover this would
be to cut back on food or utilities, which would cause hardship
for the children.
CASE STUDY
C - IMPACT OF
DEFINING HOUSING
BENEFIT BY
CURRENT FAMILY
SIZE
- (a) A tenant in Barnet currently lives in
a two bedroom flat. He had custody of his son, but lost this due
to an industrial accident and a subsequent descent into alcoholism.
The tenant has now been sober for two years and is currently working
with Social Services to gain full custody again, and the Job Centre
Plus to find suitable employment.
Should changes by made so that he can only receive
benefit as a single person household, he would not be considered
to need a two bedroom property and therefore only be paid housing
benefit on the basis of a one bedroom. This would then mean facing
the choice of having less contact with his son, or not paying
the shortfall of rent from his benefit. If he were to downsize
to a one bedroom property, it would not be considered suitable
for his son to be returned to his father. Both options would adversely
affect the tenant's ability to provide a suitable home.
- (b) A tenant in Wandsworth lives in a three
bedroom property. She receives partial housing benefit as she
works part time. Her son is severely disabled and returns home
periodically from his supported housing. The tenant's daughter
periodically also returns home as the flat shares that she resides
in do not always run to plan. The policy would mean a large shortfall
in Housing Benefit during periods that tenant lives alone. This
is on top of the administrative burden of having to report the
changes when the house becomes fully occupied. At present, the
tenant knows how much of a non dependent deduction will apply,
and reports and commences to pay the shortfall. Under the new
system she will face additional costs on top of this.
CASE STUDY
D - DISCRETIONARY HOUSING
PAYMENTS
A tenant in Islington had started her first job,
and there was a £23 per week shortfall in her Housing Benefit
award. We applied for a Discretionary Housing Payment to cover
six months so that she could clear other priority debts incurred
whilst on Job Seekers Allowance (gas, electricity and water rates).
We demonstrated how the DHP would enable tenant to manage fully
after this period. She was turned down, and a review was also
turned down. Another tenant in Islington had seen a cut in hours
from full to part time. The Housing Benefit shortfall fell to
£19. We applied for a Discretionary Housing Payment to enable
the tenant to manage the transition. This was awarded.
Different approaches to administering discretionary
housing payments are a common concern amongst our welfare and
benefit advisors. Without an Independent Review Service, it is
almost impossible to know if Discretionary Housing Payments are
being administered fairly and consistently. Administration such
as this leaves questions unanswered.
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