Impact of the changes to Housing Benefit announced in the June 2010 Budget

Written evidence submitted by Children Schools and Families

Executive summary

1. This is a response to the request for evidence by the Work and Pensions Committee on the impact of changes to housing benefit announced in the June 2010 budget. This includes some changes intended to be introduced in April and October 2011 which have already been tabled as draft regulations, and some longer term changes. We have considered how all these changes may affect the families that we work with, in terms of work incentives and access to work, rent shortfalls and homelessness, community cohesion, and impact on large families, overcrowding and disabled people.

2. Camden Children Schools and Families welfare rights team advises and supports families on issues to do with benefits and tax credits. We currently have three specialist projects focusing on families with children under 5; families with disabled children; and working families or families who are moving into work or training. As a result, we have taken into consideration the experiences of our clients, and the possible impact on them, of these changes. We have focused particularly on the impact on working families and on work incentives for families moving into work, as well as families with disability.

3. We believe that these changes will have an adverse effect on a large number of our clients who have rent liability, and in particular those in the private sector, many of whom will see shortfalls in rent and a sharp rise in associated problems such as rent arrears, debt, poverty, eviction and homelessness. We expect that this would have an adverse impact on community cohesion and work incentives. The changes could have a particularly significant effect in a Borough such as Camden. The limited supply of social housing means that many families, including families with potential vulnerability such as single parent families and families with disability, are unable to access social housing so rent privately. High average rents and local housing allowance awards mean that many families receive housing benefits, including many working families on low and medium incomes. The high average rents and high reliance on housing benefits of private tenants in this area could mean that the proposed changes will have a disproportionate impact on families in this area, who could face significant shortfalls and in some cases find it almost impossible to find affordable accommodation in the area.

From October 2011, LHA rates will be set at the 30th percentile of local rents (instead of the 50th percentile)

4. This change is likely to have an impact on the majority of our clients who rent in the private sector. Many have moved into private rented accommodation on the assumption that their rent could continue to be covered by housing benefits under the LHA scheme. Many families who had moved into private renting did so after years in temporary accommodation waiting unsuccessfully for social housing, and did so having been persuaded by the housing department that , under the LHA scheme , they could achieve at least a certain amount of housing stability in the private sector. This will no longer be the case. Many of these families will find that their housing benefit can no longer cover their rent because of the change to the 30 th percentile. This applies equally to working families as to families that are out of work, because high average rents and the amount of families stuck in low paid work in this area combine to mean that a lot of working families receiving housing benefit in the private sector.

5. One result of these changes could be the disruption caused to families by having to move . This is already an issue for many families renting privately as opposed to social tenants. Having to frequently move from place to place has can have a substantial negative impact on children’s development and welfare, and in particular on their school work and education. If the family has to move a substantial different, the children may also have to move school and move away from support networks, relatives and friends, which can also only have negative impacts on children’s development.

6. A further result of the changes could be a weakening of social and community ties in local areas. Under the proposed changes to the LHA, many families will find it impossible to find alternative accommodation unless they either move into overcrowded accommodation or leave the Borough altogether. However, many families rely in networks of family and friends living in their local area. This is particularly the case for many of our clients in single parent families who often rely on support networks outside their immediate family unit, and for many families from BME communities. These local networks of support have an unseen benefit to the taxpayer, as they allow members of a community to provide unpaid care for one another. For example, many of our clients provide care for elderly or disabled relatives living in their area below the level requi red to receive carer’s allowance, or may not be able to receive carer’s allowance because they are working . Many clients rely on family and extended support networks locally to care for and support them . In particular many single parents rely on the children’s grandparents for informal childcare and support as well as, or instead of , any formal childcare that they use. They can gain a level of flexibility and informal support from this care which often facilitates their ability to enter, or remain in, work. If these clients mov e to an area far away, it is likely to have costly knock on effects such as increased reliance of the people for whom they care on social services; increased use of formal childcare; work disincentives or further barriers to work; negative impacts on children’s social development; and a lack of support available for clients which may in turn damage their own mental health and therefore ability to access or remain in work.

7. If families do not move, they will be facing a shortfall in their rent. This can only lead either to rent arrears and further problems with debt, or to increased poverty and hardship if families meet the shortfall out of their other income. These changes will therefore impact negatively on child poverty and on families’ finances. This in turn has a major negative impact on work incentives and access to work . Many families identify arrears and debts, other financial problems, and worries about housing security, as the major barriers to work. A report in May 2010 commissioned by Manchester City Council and carried out by the Centre for Responsible Credit and Centre for Economic and Social Inclusion found that money problems, and in particular debts and arrears, impacted on job seeking behaviour by:

a. Distracting people from job search;

b. Constraining job search activity;

c. Creating disincentives to work; and

d. Reducing the chances of people sustaining their employment.

These findings were strongly reflected in the experiences of clients using our service with money problems. Exacerbating these problems through the housing benefits system will create extra problems for working families, putting their ability to remain in work in jeopardy, and will also create extra problems for families who are out of work, meaning that they are less likely to move into work in the long term.

8. A further result of the changes is likely to be a significant rise in homelessness and a significant increase in pressure on the local authority homeless service in this Borough as a result. Camden has a severe shortage of social housing and the local authority has tried to ease the pressure this causes by supporting families to rent in the private sector. With changes to housing benefits proposed in these amendments, this may no longer be possible for many families, and many of those who have already moved into the private sector will face eviction and homelessness once again. The result will be further shortages of social housing and further pressure on housing allocations in Camden.

9. It is true that the transparency behind the LHA system has resulted in many landlords increasing their rents to the level set for the LHA to take advantage of the system. If the proposed changes have the desired impact, hopefully many landlords will decrease their rents in accordance with this, which would advantage both the claimants and the taxpayers. However, unless landlords reduce their rents in significant numbers, there is a real danger that there simply will not be enough properties available within the 30 th percentile for families to move into. This is a particular issue for inner London where there is acute pressure on housing, a transient population, and a ready supply of prospective private tenants who are either well off enough to not need housing benefits, or not entitled to housing benefits for immigration reasons, to mean that landlords are likely to be able to continue to charge the higher rents and still find tenants. The Department should carry out thorough research into the intentions of landlords and, if the amendments are approved, consider how it will ensure that landlords will reduce rents and that there is a sufficient supply of affordable properties in all areas within the 30 th percentile.

10. T here is a real danger that in some areas, rather than reduce average rents and therefore result in savings for the taxpayer, the proposed changes will simply result many more families experiencing a substantial shortfall in rent, a lack of alternative accommodation, and therefore homelessne s s, family disruption, increased hardship and poverty, and further barriers to work. All of these likely outcomes will have social and financial costs which cancel out any savings to the taxpayer.

Deductions for non-dependents will be uprated in April 2011 on the basis of prices. This will reverse the freeze in these rates since 2001/2.

11. Non-dependent deductions cause many for our clients which in many cases have been ameliorated by the freeze in these rates since 2001/2. As we advise families, many of our clients are tenants with teenage children who will shortly cease being treated as dependents, moving into work (often low paid), higher education, or benefit claims. Many parents feel concerned that their children will not be able to move into their own accommodation for some time, because of a severe shortage of social housing available combined with difficulties of renting in the private sector (which will be exacerbated by these proposed changes to housing benefits). The result is that many parents will expect their children to remain living with them as non-dependents, potentially for many years. Parents in this situation often face difficulties as they will start having non-dependent deductions made for their children, but their children may not be contribution sufficiently, or regularly enough, towards their rent or council tax. It is often especially difficult for claimants in this situation as many young people will not yet be used to living independently or managing their money. This is a common cause of rent arrears and housing uncertainty for our clients, in both the social and private sectors. Working parents in particular, will find it hard to predict their housing benefit payments with the combination of means testing and non-dependent deductions, both of which may vary considerably over time. This change could increase these pressures and uncertainties at what can be a difficult financial time for many families, and in turn increase barriers to work for affected families.

From 2013-14, local housing allowance rates will be uprated in line with the CPI

12. This policy will further widen the gulf between rent liability and housing benefit awards for many people. It is hard to see how it will apply in practice or that it is an appropriate way to cut costs in the housing benefits system. Eroding further the link between actual rent and housing benefits will create more uncertainty and confusion for families and could potentially have dramatically different impacts in different areas.

From April 2013, housing entitlements for working age people in the social sector will reflect family size

13. This will create further problems for families whose children are now adults and who may be moving into their own accommodation. It could throw such families into further housing uncertainty, effectively taking away their security of tenure and their ability to think about their house as their permanent home. This will also cause further disruption to the family’s other children who remain in the home, and therefore negative impacts on their education. In particular, this will cause problems to care providers such as grandparents whose grandchildren stay with them occasionally but who could not be taken into account as part of their family for housing benefit purposes. Therefore this could have knock on effects on family stability and community cohesion. For those who chose to remain in their home even though their rent cannot be covered by housing benefits, this could cause rent arrears with related pressures on local authorities.

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.

14. This policy will have a substantial negative impact on the finances and work incentives of a large number of our clients. This policy effectively works as a sanction on any claimants with rent liability who have failed to find work after 12 months on jobseeker’s allowance, even if they have fully complied with the jobseeker’s allowance regime. This will have an especially adverse impact on those claimants who have most barriers to accessing work, but nevertheless claiming jobseeker’s allowance, such as single parents with children aged 7 or over (or aged 5 or over if proposed changes are implemented) and people with long term health conditions and disabilities who have not been found to have limited capability for work under the work capability assessment. Imposing sanctions on the jobseeker’s allowance regime for claimants who refuse to comply is one thing, but imposing a uniform sanction after 12 months on claimants who have been fully complying seems unnecessarily harsh. The impact also depends on how high the rent liability of the family is. For many families renting privately in Inner London, rent liability will be extremely high and the impact on their financial situation of this reduction will be most severe. If the LHA award is £290 per week the weekly reduction would be £29 which is a substantial amount of a family’s income.

15. The result of this will be further shortfalls in rent on top of shortfalls brought about by other elements of proposed reforms. This will no doubt result in either rent arrears and other debts, or severe hardship and poverty for many families. This is especially inappropriate because it will come at a time when those families most need additional support, as those who face long term unemployment often face the biggest barriers to work and need additional support to help them into work. For many, the additional financial difficulties will be a significant work barrier and disincentive. The May 2010 Manchester City Council report quoted above found that money problems had a substantial negative impact on job-search activity and peoples’ ability to move into and remain in work. The combination of housing uncertainty, poverty, rent arrears and possible homelessness is far more likely to set up further barriers to work for families in this situation, than to incentivise them to take up work. It is also hard to see how it could incentivise families to take up work to avoid this deduction, when it applies to jobseeker’s allowance claimants, who must already be actively seeking work in order to qualify for benefit in the first place, and who will be facing additional compliance and pressure to find work after 12 months as well. If the claimant is not engaging with the jobseeking process they will face sanctions through the jobseeker’s allowance regime in any case. Effectively imposing additional sanctions through the housing benefits system, whether or not that claimant is complying with the jobseeking process, is an unfair and counter-productive approach.

From April 2011, HB claimants with a disability and a non-resident carer will be entitled to funding for an extra bedroom

16. This policy would be of benefit to many of the families most in need . For example in a family with a disabled child or adult extra space is needed for things like equipment or because the disabled person needs extra space to be able to move around or simply because the disabled person in question cannot share their room with anyone else due to their symptoms or special needs.

17. For a family in this situation overcrowding is often detrimental to the health of the disabled person both mentally and physically, but it can also be mentally strenuous for other family members too such as siblings and carers.

18. It would also be helpful to many of the families we advise to also look into adjusting the size criteria to allow an extra bedroom in the homes of non-resident parents who provide substantial minority care for their children, as well as adjusting the housing benefit calculation personal allowances for these families. Some of the families we work with have a separated former partner of the child’s primary carer who provides substantial care, including cases where the child has a disability, but as a minority carer they cannot have these circumstances taken into consideration in their housing benefits. In the case of a now single non-resident parent, this means that they would have to live in a 1-bedroom property, with a potentially negative impact on their ability to provide appropriate and suitable care for their child.

From April 2011, LHA rates will be capped at £250 per week for a one bedroom property, £290 per week for a two bedroom property, £340 per week for a three bedroom property and £400 per week for four bedrooms or more

19. This change will also have a significant effect on a large proportion of families renting privately in Camden . Imposing some form of a cap is clearly necessary as LHA rates in some areas for some household sizes have reached very high, and unsustainable levels, at times. However this cap will exacerbate problems for certain groups, specifically many tenants in the Central London Broad Rental Market Area (BRMA) and large families (also affected by the 4 bedroom ceiling) in other inner London BRMAs. A projection by the Valuation Office Authority found that 1-bedroom, 2-bedroom, 3-bedroom and 4-bedroom entitlements could all be affected by this change in the Central London BRMA, with a shortfall of £60 per week for a 1-bedroom property, £124.63 per week for a 2-bedroom property, £260 per week for a 3-bedroom property and £400 per week for a 4-bedroom property on a projection based on current rates.

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

20. While an increasing the budget for discretionary housing payments is welcome, it is not effective or productive to do so as a compensation for unfair reductions in statutory entitlement to housing benefits. The increase in this budget is surely an acknowledgement of the damaging effect that many of these changes will have, in the short term but also in the long term, on housing benefits claimants. Increasing the DHP budget will help to ease some of these problems but is not a solution to them and will still leave many claimants unable to access them. This introduces further hurdles and barriers for claimants and further costs and administration for local authorities. Because of the extra administration, it is likely that the most marginalised and vulnerable claimants will be least able to access discretionary housing payments, and therefore even more disproportionately affected by the overall impact of housing benefit reforms.

21. In summary, the combined impact of the various proposed changes to housing benefits are likely to have a negative impact on the clients that we work with. Specifically, it will result in severe rent shortfalls, poverty, debt and arrears. The long term impacts are likely to be an increase in homelessness, with resulting additional pressures on the local authority; increased debt, poverty and housing instability, with potentially damaging knock-on effects on claimants ability to access work and remain in work; and disruption to families, with negative impacts on community cohesion and family stability. The potential costs to families and taxpayers could therefore be far higher than any savings made by these changes.

7 September 2010