Written submission from Shelter
SUMMARY
1. Shelter welcomes the committee's decision
to investigate the impact of welfare reforms and we are pleased
to have the opportunity to contribute. Our submission will focus
on the housing implications of the reforms, particularly in terms
of changes to housing benefit, the Social Fund and Council Tax
Benefit.
2. The Welfare Reform Bill enables the Government
to make significant reforms to the welfare system. It will transform
the housing benefit system, not just through the introduction
of the Universal Credit but also through a number of additional
reforms including the new household benefits cap. This is on top
of substantial cuts to local housing allowance (LHA) which were
made via secondary legislation last year and are now being implemented.
The Bill contains other measures that have significant implications
for housing, including the localisation of both the Social Fund
and Council Tax Benefit.
3. These changes, given that they will have a
profound impact on local authorities and on housing in general,
are of enormous relevance to the work of the Department for Communities
and Local Government (CLG) and therefore to this committee. However,
it is Shelter's perception that the Department of Work and
Pensions (DWP) and CLG have not been taking a sufficiently joined-up
approach throughout this process of reform and that the lack of
coordination will compound the adverse impacts of the reforms.
4. We believe that the interaction between the
CLG's housing reforms and the DWP's housing benefit reforms has
not been fully assessed or understood even by the officials developing
the reforms, let alone by Ministers or parliamentarians. For example,
the household benefit cap may create significant complications
in terms of the discharge of homeless duty and the delivery of
new affordable homes in many areas. Furthermore, the combined
effect of housing changes, benefit reforms and legal aid cuts
amounts to a fundamental erosion of the housing safety net which
will leave many more people vulnerable and at risk of homelessness,
and will create enormous pressure on (and added cost for) local
authorities, at a time when they are least able to bear it.
IMPACT OF HOUSING BENEFIT CUTS ON LEVELS OF HOMELESSNESS
5. Shelter supports the principle of the Universal
Credit, but this is just one element of a wider set of reforms
which amount to a significant cut to housing benefit levels in
both the social and private rented sector (see annex for a full
list of the housing benefit reforms). There is compelling evidence
to suggest that these cuts will place considerable financial difficulties
on claimants and will lead to an increase in homelessness and
knock-on costs for local authorities.
6. Research undertaken by Cambridge University
for Shelter last year found that the cuts to LHA will lead to
134,000 households being either evicted or forced to move as they
will be unable to negotiate cheaper rents.[38]
Of these, an estimated 35,000 households will approach their local
authorities for housing assistance, and where councils have a
legal duty to help they will face costs of up to £120 million
a year for providing temporary accommodation. There will also
be additional administrative costs to councils in processing the
thousands of homelessness applications they are likely to receive.
7. These problems will be compounded by measures
in the Welfare Reform Bill. The linking of LHA with inflation
will erode its value in the long term and mean that 60% of local
authority areas will be unaffordable for LHA claimants by 2030.[39]
The household benefit cap will mean that families with three children
will lose housing benefit in more than a third of local authorities.
And the "under-occupancy" cut will affect a third of
all housing benefit claimants living in the social rented sector.
IMPACT OF HOUSING BENEFIT CUTS ON LOCAL AUTHORITY
HOMELESS DISCHARGE
8. The benefit cuts will make it enormously challenging
for local authorities in higher rent areas to fulfil their homeless
discharge duty, because it will be much more difficult for them
to find accommodation that families can afford under the cap.
Now that local authorities are gaining new powers under the Localism
Bill to compel families to be re-housed in the private rented
sector, it is likely that they will respond to the cap by increasingly
placing families in cheaper areas far away from the local authority
in which they became homeless. There is already a legal precedent
for families that have been found homeless in London to be placed
in Birmingham, and we expect movements of this scale to be a growing
trend once the reforms have been implemented.
9. In some cases claimants may have to bear the
impacts of the cap by cutting back on essentials or living in
squalid or overcrowded conditions. Increased rates of discharge
into the private rented sector, combined with the impact of the
benefit cap, will mean that there is likely to be greater demand
for help with rental deposits and other costs such as furniture.
It is unclear how local authorities will be able to respond to
this need, especially given the forthcoming changes to the Social
Fund (see below). It is crucial that the interaction between the
benefit cap and the new rules on private rented sector discharge
are properly considered and investigated before the reforms are
implemented.
IMPACT OF HOUSING BENEFIT CUTS ON THE DELIVERY OF
NEW AFFORDABLE HOMES
10. Changes contained in the Localism Bill will
mean that new social homes are likely to be rented out under the
new affordable rent tenure at 80% of market rent. Social landlords
will need to let new properties at this rate in order to leverage
in enough capital to deliver new homes: this proposal is at the
heart of the Government's plans to promote the delivery of 150,000
new affordable homes. However, in expensive areas of the country
households that are subject to the benefit cap are unlikely to
be able to afford to live in properties at this cost, and the
housing benefit they are entitled to will no longer cover their
rent.
11. The Mayor of London and a number of social
landlords have publicly acknowledged that the benefit cap is at
odds with current housing delivery policy and that it will make
it difficult to ensure that enough affordable family homes are
built. Compounding this is the huge uncertainty about how housing
support in the social rented sector will be paid after the introduction
of the Universal Credit. It is understood that the default will
be for the payment to go to claimants, rather than direct to landlords
as is currently the case in the social rented sector. The prospect
of this in terms of the added risk it represents is making lenders
very nervous and is hampering the efforts of social landlords
to raise private finance for new developments.
LOCALISATION OF THE SOCIAL FUND
12. The Social Fund is a pot of money available
to help people on low incomes with one-off costs such as buying
basic furniture. This is currently administrated by central government
but the Welfare Reform Bill devolves responsibility for managing
the fund down to local authorities with no ring-fence. Shelter
does not believe the case has been made for the devolution of
the Social Fund, especially if this is not coupled with clear
duties for local authorities on how they should manage and distribute
the money. Our main concern is that non ring-fenced funds will
be redirected towards other local authority priorities, removing
a vital lifeline for some of Shelter's most vulnerable clients.
13. With council budgets coming under increasing
financial pressure, there is a clear risk that local authorities
will not provide discretionary assistance and will refocus funds
on other priorities. Research[40]
by Homeless Link into the initial impact of the spending cuts
suggests that two in five local authorities are making unjustifiably
large cuts to Supporting People budgets in relation to the settlement
they have received from central government. We are concerned that
Social Fund budgets could be similarly targeted for cuts. The
Social Fund is already unable to meet more than two-thirds of
legitimate demand and this is unlikely to improve if budgets are
reduced.[41]
14. The Social Fund provides a valuable lifeline
to households not in priority need. The majority of people who
are awarded crisis loans are able-bodied single men under the
age of 35. These groups will often not be eligible for other grants
and assistance and the Social Fund may represent the only funds
that are available to help them establish or retain a home. If
this source of funding is lost there is a risk that homelessness
among this group will increase, with inevitable consequences for
local authority budgets and welfare spending. In Shelter's experience,
helping homeless households to acquire essential household items
via the Social Fund can be crucial in assisting them to secure
and sustain a tenancy, and research by Heriot Watt University[42]
has identified lack of furniture as a major risk factor for tenancy
failure.
LOCALISATION OF COUNCIL TAX BENEFIT
15. The localisation of Council Tax Benefit will
impact on the ability of low income households to meet their housing
costs. Though Shelter generally supports the idea of benefits
being responsive to local conditions, the Government's proposals
in this instance go far beyond this. Our concern is that this
reform will create a postcode lottery with reductions being applied
unevenly across the country, which could have the unintended consequence
of pricing benefit claimants out of certain areas and driving
them into others.
16. Shelter is concerned that the localisation
of Council Tax Benefit combined with a ten per cent reduction
in overall expenditure will result in some groups receiving less
support towards council tax than is currently the case. With local
authorities having the freedom to design schemes as they see fit,
there is a risk that reductions will not be applied uniformly
and that some groups (inevitably those who are not in priority
need for housing) will receive greater reductions than others.
This reform undermines a long-established principle that people
in similar circumstances should expect similar support from the
state.
17. The localisation of Council Tax Benefit also
undermines the Government's aims of simplifying the benefits system
and reducing marginal deduction rates by combining benefits into
a single Universal Credit. Shelter supports the Universal Credit
because we believe it will help to tackle work disincentives and
reduce complexity, which are serious problems for our clients.
But a separate stream for Council Tax Benefit works against these
aims by increasing marginal deduction rates, thereby reducing
the rewards from work and making it more difficult for claimants
to calculate how much better off they would be in work.
LOCALISM
18. We were interested to see the comments made
by the committee in its recent report on localism, criticising
the Government's centralist approach to welfare reform. Shelter
agrees that it is important that housing benefit is responsive
to local rent levels and this is why we have opposed the Government's
plans to remove the link between local rents and housing benefit
rates by linking local housing allowance (and longer term the
housing element of the Universal Credit for claimants in the private
rented sector) to inflation instead of to rents. This will mean
that housing benefit rates will, over time, become increasingly
out of kilter with rents.
19. However, we disagree with the committee's
view that the welfare system should be subject to any further
localisation than is currently the case as we believe that there
needs to be some degree of central coordination in the system
to promote efficiency, simplicity and fairness.
June 2011
HOUSING BENEFIT CHANGES—TIMETABLE FOR
IMPLEMENTATION
NB: This information is accurate as of 16 June 2011
but is subject to change
| Date | Reform
| Mechanism |
| From April 2011 | For new claimants—the separate local housing allowance (LHA) rate for five bedroom homes will be abolished so that the maximum rate that can be claimed will be for four bedroom homes.
| Secondary legislation (passed) |
| From April 2011 | For new claimants—Claimants will no longer be able to claim a £15 weekly excess if their rent is lower than the amount of LHA they receive.
| Secondary legislation (passed) |
| From April 2011 | For new claimants—The percentile of market rents used to calculate Local Housing Allowance (LHA) rates will be reduced from the median to the 30th percentile of local rents.
| Secondary legislation (passed) |
| From April 2011 | For new claimants—The maximum LHA payable for each property size will be capped (so that LHA weekly rates cannot exceed £250 for a one bedroom property; £290 for a two bedroom property; £340 for a three bedroom property; and £400 for a four bedroom property).
| Secondary legislation (passed) |
| From April 2011 | For existing claimants—existing claimants will be affected by the above changes up to nine months after the date of the anniversary of their claim.i
| Secondary legislation (passed) |
| From April 2011 | An additional bedroom will be included within the size criteria used to assess housing benefit claims in the private rented sector where a disabled person or someone with a long term health condition has a proven need for overnight care.
| Secondary legislation (passed) |
| From April 2011 | Non-dependent deductions will be increased in stages over three years.
| Via the annual up-rating (no legislation required).
|
| From January 2012 | The age threshold for claiming the Single Room Rate (SRR) will be increased from 25 to 35.
| Secondary legislation (due to be laid in Parliament in summer 2011).
|
| From 2012-13 | Discretionary housing payments (DHP) will be increased from £10 million in 2011-12 to £40 million a year.
| No legislation required. |
| From April 2013 | HB will be restricted for working age claimants in the social rented sector who are occupying a larger property than their household size warrants. This is likely to apply to claimants with at least one spare bedroom.
| Welfare Reform Bill (currently going through Parliament)
|
| From April 2013 | The maximum amount of benefits an out of work household can claim will be capped at approximately £500 per week (£26k per annum) for couples and lone parents and £350 per week for singles.
| Welfare Reform Bill (currently going through Parliament)
|
| From 2013 | Introduction of the Universal Credit which will incorporate housing benefit for claimants in both the private and social rented sectors.
| Welfare Reform Bill (currently going through Parliament)
|
| From 2013-14 | LHA rates will be up-rated by the Consumer Price Index (CPI) rather than in reference to local rents.
| Welfare Reform Bill (currently going through Parliament)
|
Table Note
i Existing claimants will affected earlier if they
move or their household size changes. In these circumstances,
only claimants who have their claim assessed before their anniversary
date because they become eligible for a larger property will receive
nine months transitional protection.
Claimants will not receive the full nine months transitional protection
if they move or become eligible for a smaller property under the
bedroom calculation during the nine months. Therefore some existing
claimants may be affected well before January 2012.
Existing claimants will not receive nine months transitional protection
from the loss of the £15 excess; they will lose the excess
from the anniversary of their claim.
38
http://england.shelter.org.uk/professional_resources/policy_library/policy_library_folder/how_will_changes_to_local_housing_allowance_affect_low-income_tenants_in_private_rented_housing Back
39
http://england.shelter.org.uk/professional_resources/policy_library/policy_library_folder/the_impact_of_welfare_reform_bill_measures_on_affordability_for_low_income_private_renting_families Back
40
http://homeless.org.uk/cuts2011 Back
41
House of Commons Committee of Public Accounts. The Community Care
Grant. 2010 Back
42
Pawson et al. Investigating Tenancy Sustainment in Glasgow. 2006 Back
| 
