Written evidence submitted by Scottish
Federation of Housing Associations
1. EXECUTIVE SUMMARY
1.1 Any changes proposed to Housing Benefit impact
upon the rental income and cash flow of housing associations and
co-operatives. In Scotland, over 60% of all tenants in our sector
are reliant on full or partial Housing Benefit in order to pay
their rent[219].
This means that the changes proposed will impact upon over 150,000
tenants currently living in housing association and co-operative
properties in Scotland.
1.2 The following are the key points the SFHA would
like to make regarding the proposed changes to Housing Benefit:
- I. The SFHA would welcome a simplified benefits
system that makes it easier for people to claim what they are
entitled to, and ensures that everyone receives what they are
entitled to. We believe that the changes proposed to Housing Benefit
would be detrimental to tenants of housing associations and co-operatives,
who are often amongst the poorest in society. We also believe
that the changes proposed could put at risk the financial viability
of the housing associations and co-operatives themselves.
- II. We anticipate that, for housing associations
and co-operatives, these proposals will lead to:
- Increased demand for social housing at a time
when there is a housing shortage, with 280,000 applicants on housing
association waiting lists in Scotland. The sector is also challenged
with helping to meet the 2012 homelessness reduction targets.
All of this is against a backdrop of greatly reduced private and
public finance being available to build new affordable rented
homes.
- Increased rent arrears, with over 60% of housing
association tenants in Scotland reliant on full or partial Housing
Benefit to pay their rent.
- Increased demand for comprehensive benefits advice,
an increased need to profile tenants and a need to review business
plans due to uncertainty about receivable income. All of this
in a time when the Scottish Government is pushing for efficiency
across the sector.
- III. We anticipate that, for tenants, these
proposals will mean:
- The poorest members of society will be the hardest
hit. The Institute for Fiscal Studies has published research showing
that the changes will impact hardest on poor families with children
(over a 5% loss as a percentage of net income).[220]
- In practice, people with less money do not have
the resources to actively seek employment. The financial penalties
proposed will impact on tenants who are actively seeking work
for a year but cannot find a job,
- just as much as on those who are not seeking
a job at all. This is important in the context of a lack of employment
opportunities in many areas with active housing associations and
co-operatives.
- Financial penalties for those currently under-occupying
will impact significantly on tenants of housing associations and
co-operatives — and will also impact on those actively seeking
a new property as much as those who are not. Many housing associations
in Scotland offer incentives to tenants who are living in properties
that are too large in order to encourage better use of stock.
2. ABOUT THE
SFHA
2.1 As the national representative body for Scottish
housing associations and co-operatives, the Scottish Federation
of Housing Associations (SFHA) welcomes the opportunity to respond
to the Select Committee on Work and Pensions' call for evidence
about the impact of the Housing Benefit changes proposed in the
22 June Emergency Budget.
2.2 Scottish housing associations and co-operatives
own and manage around 40% of the country's affordable rented housing
stock. This represents over a quarter of a million homes across
Scotland. This sector has an asset value base of £7.6 billion,
concentrated in some of the poorest communities in our country.
2.3 The Work and Pensions Committee has called for
written evidence on the impact of the proposed Housing Benefit
changes. This submission takes each of the proposed changes in
turn and highlights the anticipated impact of each on the housing
association and co-operative sector in Scotland.
2.4 This submission is also supported by the Welfare
Rights Officers' Forum, whose membership is composed of welfare
rights officers working for housing associations and co-operatives
in Scotland.
3. IMPACT OF
THE PROPOSED
HOUSING BENEFIT
CHANGES
3.1 Local Housing Allowance
3.1.1 The Local Housing Allowance (LHA) does not
apply to social housing tenants. However, the changes proposed
for the LHA will have the potential to impact indirectly on our
sector. Three key changes are proposed: changing the basis of
the LHA calculation; capping the amount of allowance that can
be claimed for each property size; uprating the LHA by the Consumer
Price Index rather than taking account of local actual rent increases.
3.1.2 Changing the basis of the calculation of the
LHA to the 30th percentile of local market rents rather than the
50th (from October 2011), would reduce the number of properties
that can be afforded by those on low incomes looking for private
sector properties.
3.1.3 The cap on property size means that tenants
in the private rented sector and in receipt of LHA will only be
able to claim up to a defined maximum amount for each property
size, with an overall limit on LHA set at the cap for four bedroom
properties. This has the potential to limit what can be afforded
by those on low incomes in the private rented sector.
3.1.4 The LHA being uprated using the Consumer Price
Index rather than being based on actual rents in the local market
area means that, if average actual rents rise by more than this
figure, then the actual percentage of the market that will be
covered by LHA will shrink.
3.1.5 The SFHA anticipates that these three changes
to LHA will increase the demand for social rented housing from
those who may have chosen previously to live in the private sector
and can no longer afford to do so.
3.1.5 Currently, there are 280,000 applicants on
housing association waiting lists in Scotland. The potential increase
in applicants resulting from the LHA changes would exacerbate
the current shortage of housing in the sector. This would be taking
place at a time when the private and public subsidy available
to develop new affordable rented homes is both reducing and becoming
more difficult to access.
3.1.6 The increased volume of new applicants will
also limit the chances of existing tenants who require re-housing
due to over/under occupancy or health reasons.
3.2 Non-Dependent Deductions
3.2.1 The proposal to reverse the freeze on the levels
of non-dependent deductions will have significant implications
for the tenants of social housing, and social landlords themselves.
3.2.2 From October 2010 (when the national minimum
wage increase takes effect), according to our estimates, a non-dependant
who works 35 hours a week at the minimum wage will have to pay
16.2% of their take home pay as housing costs (excluding contributions
to council tax and utilities). If this working non-dependant obtained
a home of their own, they would qualify for help with their rent
as soon as the rent went above £73.00 a week (well below
the £250 per week threshold for Local Housing Allowance and
below average one bedroom rates in Scotland.)[221]
They would also get access to the Discretionary Housing Payment
scheme and possibly qualify through this for full Housing Benefit.
3.2.3 Therefore, although the UK Government believes
that this proposal will reduce expenditure, it also has the potential
to increase expenditure if more people get their own tenancies,
claim Housing Benefit in their own right, and there is an increased
reliance on discretionary payments.
3.2.4 The SFHA anticipates that this proposal will
also increase rent arrears as tenants find it increasingly difficult
to make up the shortfall in their Housing Benefit caused by higher
non-dependent deductions. .
3.2.5 Furthermore, this proposal also has the potential
to pressurise non-dependents to seek their own tenancies. This
would create additional demand for social housing at a time where
housing associations and co-operatives in Scotland have 280,000
applicants on waiting lists in Scotland and have to meet the Scottish
Government's 2012 homelessness reduction targets.
3.3 Limits To Benefit for Working Age Tenants
Deemed to Be Under-Occupying
3.3.1 Social landlords' allocations policies normally
prevent tenancies being granted for properties that are larger
than the household requires at the point of allocation. However,
where landlords have an acute shortage of smaller (usually one
bedroom) properties, they may allow the allocation of two bedroom
properties to single people or couples. The proposal to limit
benefit for working age tenants who are deemed to be under-occupying
would affect unfairly landlords and tenants in this situation.
This proposal will also affect those households whose circumstances
change during the course of their tenancy — often beyond
their control.
3.3.2 A number of housing associations in Scotland
encourage tenants who are under occupying properties to move to
more suitable accommodation. Incentives range from decoration
vouchers to cash. This is a far more productive means of dealing
with the issue of under-occupation, rather than inflicting penalties
on some of the poorest members of society.
3.3.3 These penalties also take no account of those
tenants who are under occupying but have been actively seeking
alternative accommodation. Given the housing shortage referred
to above at 3.3.1, there are limited opportunities for a housing
association tenant to move to another property.
3.4 Reduction in Housing Benefit to Tenants in
Receipt of Job Seekers Allowance for More Than a Year
3.4.1 This proposal will affect around 700,000 people
in the social and private rented sectors.[222]
In Scotland, as of July 2010, the claimant count for Job Seekers
Allowance (JSA) was 133,200.[223]
Not all these claimants will be in social rented housing and not
all will be long-term unemployed but there will be a significant
number that will be affected.
3.4.2 One group that may be particularly susceptible
to the impact of this policy is people who have been moved off
Employment and Support Allowance/Incapacity Benefit/Severe Disablement
Allowance onto JSA under the stricter medical tests. These people
may have poor health or disabilities and therefore be disadvantaged
in the labour market and may take longer to get jobs.
3.4.3 The penalties proposed also take no account
of those who are actively seeking work but have been unable to
attain a job. The Chartered Institute for Personal Development
identified that the deficit reduction measures announced by the
UK Government might see unemployment rise to nearly three million
in late 2012 and remain near to that level until 2015.[224]
The UK Government will need to monitor this measure closely to
ensure that it is not penalising people who are genuinely seeking
work in a difficult economic climate.
3.4.4 There is also a question of fairness relating
to this measure. It only affects people who receive Housing Benefit.
There is no equivalent penalty for people who are long term unemployed
who own their own homes or live with other people and do not pay
rent.
3.4.5 The SFHA believes that this proposal will create
planning and budgeting problems for our members. Landlords cannot
assume when signing up a tenancy that JSA claimants will have
a complete year of receiving the full rate of benefit if they
continue to be unemployed. The new tenant may already have been
on JSA for a significant part of the year or a full year already.
This will mean that landlords will have to have a more detailed
awareness of tenants' circumstances. This has the potential to
increase operating costs at a time when the sector is seeking
to reduce costs.
3.4.6 The SFHA anticipates that there will be many
examples where this penalty will operate in parallel with other
benefit deductions to put tenants in severe financial difficulty.
For example, a JSA claimant could already be in rent arrears and
repaying £3.30 a week deducted from the JSA direct. The same
claimant could also have received a Housing Benefit overpayment,
being deducted at £9.90 a week and a JSA deduction of £6.50
(based on a rent of £65.00 per week). It is likely that there
will be significant numbers of people on the basic Jobseekers'
Allowance of £65.45 being faced with paying out 30% of their
income on rent related costs.
3.4.7 The SFHA believes that, as with the other proposed
changes, the result of implementing this proposal will be increased
rent arrears, increased need for benefits advice and ultimately
increased use of legal remedies by landlords.
3.5 Discretionary Housing Payments
3.5.1 Whilst the SFHA supports any increase in spending
that is targeted on the most vulnerable, the total proposed increase
in spending on Discretionary Housing Payments (DHP) is less than
2.5% of the total package of Housing Benefit cuts. For many local
authorities, the amount they receive from government, plus their
own contribution, does not meet the demands for assistance from
this discretionary cash limited budget.
3.5.2 Also, at a time when local authorities are
implementing significant cuts in their budgets, additional resources
will be required to assess increased numbers of DHP applications
and cope with increased numbers of requests for reviews.
3.5.3 The SFHA believes that increasing numbers of
tenants will come to rely on DHP, which in turn means that increasing
numbers of tenants will have uncertain income. For landlords,
this increases the complexity and therefore the resources required
to monitor rent accounts and rent arrears. It will also make it
more difficult for landlords to predict their revenue income.
Rental income is the principal source of revenue income for housing
associations and co-operatives.
3.6 Overall Impact
3.6.1 The Institute for Fiscal Studies (IFS) published
research[225]
that shows that the proposed welfare reforms, including the Housing
Benefit changes proposed in the Emergency Budget, will impact
most on the poorest in our society. The research shows that families
with children, in the lowest income decile group, are impacted
upon the hardest — losing over 5% of their net income as
a direct result of the changes. Housing associations and co-operatives
in Scotland operate in some of the most disadvantaged areas and
house some of the poorest people. The SFHA objects to any set
of policy proposals that adversely impact largely on the most
disadvantaged.
3.6.2 The UK Government intends to achieve significant
savings through these changes, yet it is worth noting that, according
to DWP Statistics:[226]
- 50% of working people entitled to claim Housing
Benefit are not claiming it, with the average amount of weekly
unclaimed Housing Benefit for this group being £41.00.
- 80% of those households without children who
are entitled to Working Tax Credits are not claiming it, with
the amount of unclaimed Working Tax Credits each year standing
at £3.9 billion.
HMRC statistics show that over £1 million is
unclaimed in Housing Benefit each year and in total £16 billion
in all benefits is unclaimed each year.
The UK Government believes that it is spending too
much on benefit, yet these statistics indicate that significant
numbers of those who are entitled to claim are not doing so, and
therefore the UK Government are not actually spending as much
as they could and should be on benefits.
3.6.3 Housing associations and co-operatives in Scotland
use legal remedies, including eviction, to recoup unpaid rent
only as a last resort. However, if rent arrears increase as a
result of any or all of these proposals being implemented, as
we anticipate will be the case, landlords will have few alternatives
if they are to remain viable. The SFHA works closely with the
Scottish Government in order to ensure evictions are a last resort,
sitting on their Preventing Evictions Group and Homelessness Working
Group. We have also published Guidance on Preventing and Alleviating
Homelessness[227]
that we commissioned the University of Stirling to produce on
our behalf. Yet the changes proposed could potentially leave landlords
with no choice but to pursue this course of action due to the
increase in rent arrears created.
3.6.4 Every eviction costs social landlords a great
amount — in terms of the resources involved to pursue the
arrears, then pursuing court action, the ongoing advice provided
to the tenant and then reletting the property following on from
the eviction. 2006 research from Community Finance Solutions reported
in "Reaping the Benefits" suggests that every eviction
costs a social landlord £6,000,[228]
and research from Glasgow Housing Association in 2005 suggests
that, not including staff time, every tenancy that breaks down
costs the organisation over £1,300.[229]
4. RECOMMENDATIONS
4.1 The SFHA believes that we need a simplified benefits
system that makes it easier for claimants to understand and to
claim what they are entitled to. This would also make things easier
for benefits advisors. However, the proposed changes do not achieve
this objective and could serve only to exacerbate existing problems
rather than tackling them.
4.2 The proposed Local Housing Allowance changes
could only bring benefits to the housing market if they were offset
by increased investment in the building of new housing association
properties to meet existing and increased demand.
4.3 The SFHA would wish to encourage the UK Government
to look more closely at the success that Scottish housing associations
and co-operatives have had through incentives to encourage people
under-occupying properties to move to suitable accommodation.
We believe that this is preferable to introducing financial penalties
that unfairly and disproportionately impact upon the poorest in
our society.
4.4 Similarly, restrictions on Housing Benefit relating
to length of time claiming Job Seekers' Allowance seems to focus
too heavily on penalising, without offering any kind of incentive.
The impact on those actively seeking work in a challenging economic
climate has not been taken into account and must be.
4.5 The SFHA has argued for some time that there
must be more communication between the UK and Scottish Governments
in developing Housing Benefit policy. The Housing Benefit changes
proposed conflict with the Scottish Government's policy objectives
around efficiencies in operational costs and the reduction of
homelessness. This gives our sector serious business planning
challenges. The SFHA will be highlighting these in more detail
as the UK Government rolls out the recommendations of the Commission
on Scottish Devolution,[230]
which encouraged more discussion between the two Parliaments about
issues relating to Housing Benefit.
6 September 2010
219 Scottish Housing Regulator Registered Social
Landlords in Scotland Summary Facts and Figures 2008-09. Back
220
Institute for Fiscal Studies Research Challenging "Progressive"
Budget 25 August 2010. Back
221
In July 2010 Glasgow City council has a LHA rate for a one
bedroom property of £98.08 weekly Dundee £78.46 weekly. Back
222
www.insidehousing.co.uk/analysis/in-depth/streets-apart/6510541.article Back
223
www.statistics.gov.uk/StatBase/Product.asp?vlnk=15084 Back
224
Chartered Institute of Personnel and Development (2010). Deficit
reduction measures will raise UK unemployment to close to 3 million
by 2012, www.cipd.co.uk/pressoffice/_articles/jobsforecastrelease100610.htm?IsSrchRes=1 Back
225
Institute for Fiscal Studies Research Challenging "Progressive"
Budget Briefing Note 25 August http://www.ifs.org.uk/bns/bn108.pdf
(Figure 2) Back
226
DWP Report: Income Related Benefits Estimates of Take-Up in
2007-08 http://www.dwp.gov.uk/docs/ifd250609benefits.pdf and DWP
Statistics Website http://statistics.dwp.gov.uk/asd/index.php?page=irb_2 Back
227
Preventing and Alleviating Homelessness, SFHA Guidance,
August 2010. Back
228
Taken from NHF/FSA Publication "A Guide to Financial Capability
For Social Housing Tenants" 2008. Back
229
Taken from NHF/FSA Publication: "A Guide to Financial
Capability For Social Housing Tenants" 2008. Back
230
Final Report of the Commission
on Scottish Devolution, Recommendation 5.19, June 2009. Back
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