Changes to Housing Benefit announced in the June 2010 Budget - Work and Pensions Committee Contents


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:

  1. 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.
  2. II.  We anticipate that, for housing associations and co-operatives, these proposals will lead to:
    1. 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.
    2. Increased rent arrears, with over 60% of housing association tenants in Scotland reliant on full or partial Housing Benefit to pay their rent.
    3. 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.
  3. III.  We anticipate that, for tenants, these proposals will mean:
    1. 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]
    2. 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,
    3. 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.
    4. 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]

  1. 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.
  2. 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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