WRITTEN SUBMISSION
FROM THE
NATIONAL HOUSING
FEDERATION
The National Housing Federation represents 1,200
independent, not-for-profit housing associations in England and
is the voice of affordable housing. Our members provide two and
a half million affordable homes for five million people. The Federation
welcomes the opportunity to respond to the Department for Communities
and Local Government Select Committee inquiry into the implications
of welfare reform.
INTRODUCTION
1. The National Housing Federation has welcomed
the Government's plan to simplify the benefits system into a Universal
Credit that provides greater incentives to work. However, it is
important the Government is alive to the risks of centralising
the administration of housing benefit and seeks to preserve some
of the administrative efficiencies in the current system and effective
joint working between landlords and administrators.
2. Housing benefit in the social sector is currently
paid—often directly to landlords—by local authorities.
There are several advantages to such a system, including councils'
local knowledge and the ability to provide claimants with face-to-face
meetings and advice.
3. Under the proposed changes, local housing
benefit structures would be largely swept away and replaced with
a centrally administered system that would be responsible for
providing a range of vital support under the umbrella of the Universal
Credit. The changes would be significant for both users and administrators.
4. Questions that the Government will have to
address include:
— To
whom will the Universal Credit be paid? Current benefits are paid
to different people—rent to the tenant, child benefit to
the main carer and Jobseeker's Allowance to the job seeker. The
Department for Work and Pensions (DWP) wants a single payment
made to each household but we would be concerned if support for
housing costs was to be paid to someone other than the person
responsible for paying the rent.
— Can
a centralised benefits system remain knowledgeable about, and
responsive to, local claimants? Who or what will replace the local
expertise and presence of local authority housing benefit staff?
The very distance between the administration of housing benefit,
as it becomes rolled into the Universal Credit, and its claimants,
has the potential to create problems. Ideally, some of the things
recipients like about the current system—for example, the
opportunity for face-to-face contact with officials—would
be preserved.
— How
will rent arrears be kept to a minimum if tenants are no longer
able to choose to have their housing benefit paid directly to
their landlord? The evidence suggests that an end to direct benefit
payments to landlords will lead to increased arrears, which would
jeopardise housing associations' security of income and limit
their ability to develop new homes. In addition, some people do
not have bank accounts and would therefore find it much harder
to budget their spending.
— Who
will be responsible for determining which working-age households
in the social rented sector are "under-occupying" and
therefore liable for a housing benefit cut averaging £676
year?
— What
effect will changes to the housing benefit entitlement of tenants
in both the private rented and social sectors have on homelessness?
— What
will happen to the transparency and accountability of emergency
support when the Social Fund is abolished in its current form
and replaced with an undefined system of local support?
— Who
will be responsible for updating central records when changes
are made to social rents? Currently, tenants do not need to put
in a new claim when their rent goes up. Instead, the landlord
informs the local authority, which alters the housing benefit
paid accordingly. This is much more efficient than 20,000 tenants
each having to inform the central authority that is running the
Universal Credit.
— Will
the IT system designed to run the Universal Credit be delivered
on time—and will it work? Government computer systems have
had their problems in the past, but the potential consequences
of a household's entire income going unpaid due to technical errors
could be very serious indeed.
— What
happens to older people? Universal Credit is a working-age benefit
and we understand that pensioners are expected to receive their
housing support through the existing Pension Credit. DWP has released
very little detail about how this will be administered and any
changes that older people or landlords can expect.
Landlords can play an important role in smoothing
the process of change and informing tenants. But they need to
prepare for fluctuations in their revenue flow and to do this
effectively they need answers to the questions as soon as possible.
RECOMMENDATIONS
5. Retain the right of tenants to choose to have
their housing benefit, or housing element of their universal credit,
paid directly to their landlord.
6. Drop the new size criteria for the social
sector that will lead to 670,000 households across Great Britain
losing an average of £676 per year in housing benefit for
"under-occupying" their homes. At the very least there
should be exemptions for disabled people in specially designed
or adapted properties, and for all recipients of Disability Living
Allowance.
7. Issue the consultation on the future of "exempt
accommodation" that reflects the importance of supported
and sheltered housing in meeting broader government objectives
of greater efficiency in social care and choice and control for
disabled people.
8. Ensure that funds for the local replacement
of the Social Fund are ring-fenced and local authorities are given
statutory duties to guarantee that the most vulnerable people
do not lose out from hard-pressed councils redistributing funds
to other areas, as has happened in some cases with Supported People
funding.
9. Provide clear and detailed plans, including
a timetable, for the proposed system of support with housing costs
for older people.
10. Involve social landlords at an early stage
in discussions about the transfer of administrative responsibilities
from local authorities to the new system.
Recognise that many disabled and vulnerable people
live in social housing. Retain links between local authorities
and the new Universal Credit administration to support effective
homelessness prevention work.
HOUSING BENEFIT
Direct payment to landlords
11. We are concerned that under the Universal
Credit tenants will be compelled to receive their housing support
directly from the DWP. Currently many social housing tenants choose
to have their support for housing costs transferred directly to
their social landlords. This freedom to choose should be retained
under the Universal Credit. It is an important option for people
on a low income, or with poor access to credit and traditional
bank accounts, to use to help them budget month to month.
12. The Government, in its White Paper on the
Universal Credit, stated: "We... recognise the importance
of stable rental income for social landlords to support the delivery
of new homes and will develop Universal Credit in a way that protects
their financial position. Options for achieving this could include
some ongoing use of direct payments to landlords, use of direct
debits, and a protection mechanism which safeguards landlords'
income."[5]
13. However the Welfare Reform Bill is silent
on this vital issue. There are real fears that any introduction
of direct payments to tenants to cover housing costs in the social
rented sector will precipitate increased difficulties in budgeting
for tenants, rising arrears and rising collection costs for landlords.
The loss of direct payments would also be likely to have an impact
on cash flow-based loan security valuations and will cut future
borrowing capacity of housing associations at a time of constrained
public spending.
14. London housing association L&Q, which
ran a pilot to test the implications of paying benefit directly
to tenants, found it increased arrears and was not popular with
tenants. In areas where it had moved a significant number of tenants
to the new system as a "big bang" approach, the rate
of arrears increased from 3% to 7%. L&Q estimated that if
this pilot was replicated across the association then arrears
would increase from £2.5 million to more than £6 million
(2004 figures).[6]
15. The proposed move to mandatory payment of
support for housing payments to tenants will lead to a range of
additional costs for landlords, which will in turn have an impact
on their ability to fund new development. They include increased
management costs as staff will have to spend more time with tenants
on benefit to arrange payment, to set up and implement different
collection systems, to deal with HB/UC administration, and to
help sort out errors. Other additional costs could be created
by increased management costs on arrears recovery and legal action
against tenants. The L&Q pilot identified an additional cost
of £300,000 in transaction costs for its 16,500 tenants on
housing benefit if 90% were to move to payments direct to tenants.[7]
16. An estimated 15% of local authority tenants
and 13% of housing association tenants do not have a bank account,
and so would be unable to pay their rent by direct debit if direct
payment to landlords were brought to an end.[8]
Where people do have an account that allows payment by direct
debit, people face financial penalties if there is not enough
money in the account to cover the direct debit. Such penalties
compound personal debt.
17. The Council of Mortgage Lenders has expressed
concern at the proposal and has called for direct payments to
landlords to be retained.
18. The Federation has raised concerns with ministers
about the importance of secure income to housing association investment,
to continue development of much-needed new homes, and the significance
of direct payments in helping tenants on low incomes avoid debt
and arrears. We are working with DWP officials to help design
a workable payment system but we are also calling for legislation
to include the right for tenants to continue to be able to choose
direct payment.
SUPPORTED AND
SHELTERED HOUSING
19. The Government intends to consult on proposals
to change the payment of housing benefit to claimants in what
the DWP terms "exempt accommodation", which is supported
and sheltered housing for vulnerable people. Supported and sheltered
housing includes schemes to allow independent living for disabled
people, hostels for homeless people and refuges for people fleeing
domestic violence. An independent analysis by Frontier Economics
concluded that this specialist housing delivers a net benefit
of £639 million a year; including £219 million a year
from older people's housing, £199 million a year from specialist
housing for adults with learning disabilities and £187 million
a year from specialist housing for people with mental health problems.[9]
20. Housing benefit for vulnerable tenants underpins
the revenue for these services and any changes could force existing
schemes to close. These schemes are already under pressure from
local cuts in the Supporting People budget. It is vital that we
have clarity from Government as soon as possible on their intentions
for benefit claimants in such schemes. The DWP has suggested that
there will be an ongoing role for local authorities and any retention
of local knowledge, and link to local commissioning for Supporting
People, would be welcome. However, existing efficiencies in the
way benefit is administered should be protected. Claimants should
retain nationally determined entitlement to housing benefit but
there is an ongoing role for local administration.
UNDER-OCCUPATION
AND THE
OVERALL BENEFIT
CAP
21. Measures in the Welfare Reform Bill to introduce
new size criteria in the social sector in effect place an onus
on administrators to police people's living arrangements while
at the same time shifting power to the centre as housing benefit
is rolled into the centrally-administered Universal Credit.The
Government has announced plans to reduce housing benefit for working-age
tenants it considers are "under-occupying" social homes—even
if they have lived there for decades. Under the new restrictive
size criteria, each person or couple living as part of a household
would be allowed one bedroom, except for under-16s of the same
gender, and under-10s of different genders, who would be expected
to share bedrooms. Any household deemed to be "under-occupying"
their home by one bedroom would lose 13% of their housing benefit
while any "under-occupying" by two or more bedrooms
would lose 23%. The measure, which would come into force in April
2013, would hit 670,000 working-age housing benefit claimants
in the social rented sector—32% of the total—rising
to about 760,000 by 2020.[10]
Those affected would lose an average of £13 per week—£676
per year. Housing association tenants would lose an average of
£14 per week or £728 per year. Those affected will include
disabled tenants—including claimants of Disability Living
Allowance and Employment and Support Allowance, and those living
in specially designed or adapted properties—separated parents
who share the care of their children, couples who use a "spare"
bedroom when recovering from an illness or operation, couples
whose children have "flown the nest" but still visit,
families who foster children and people in areas with no smaller
social homes available. Ministers hope to save £490m per
year from this measure.
22. Several unanswered questions remain about
the way in which the size criteria would work in practice. We
do not yet know who will take on the potentially onerous responsibility
of determining what constitutes a spare bedroom in order to calculate
whether a family is deemed to be "under-occupying".
Individuals may be required to declare whether they have any "spare"
bedrooms as measured against DWP rules. But who will be expected
to verify that self-declaration, or test samples? What happens
when a "bedroom" is too small to share?
23. In some parts of the country, families have
been purposefully allocated properties that under the new size
criteria would be considered too large for them. This may have
been in order to prevent a concentration of children on an estate,
or in high rise flats or because there is a severe shortage of
suitable smaller accommodation. The new system would take precedence
over local discretion and lettings policies and could lead households
into hardship without a clear route to avoid any penalty.
24. The Government has repeatedly cited its increase
in the size of Discretionary Housing Payments (DHP) as a way of
addressing some of the "hard cases" that might emerge
following the reforms. But, despite recent increases, the size
of the pot remains woefully inadequate for the task. Whether local
authorities will be able to match DHP to claimants who are dealing
primarily with a centralised administration system is not yet
known. The plan to introduce the under-occupation measure at the
same time for both new and hundreds of thousands of existing tenants
could potentially be extremely destabilising for tenants, landlords
and local authorities.
The Welfare Reform Bill also includes proposals to
impose a cap on the total amount of benefits a household may claim,
again from 2013. The cap would be equivalent to the average take-home
pay of a working family—£500 a week (£26,000 a
year) on current projections. Households affected by the cap will
see their housing benefit reduced and where they are unable to
find work, or have very young children, will face the choice of
reducing weekly expenditure or getting into arrears and risking
losing their home. Ministers have referred to giving families
"intensive support" in this situation but there has
been no detail on who will be responsible for giving this support
and who will pay for it. It is likely that the policy will put
more pressure on local authorities as families present as homeless.
SOCIAL FUND
25. The abolition of the Social Fund and the
decision to develop a non-ring fenced local alternative raises
serious questions about the future of emergency support and accountability
and transparency when it comes to investment. Community Care Grants
(CCGs) and Crisis Loans (CLs) provide much-needed finance for
emergency expenditures and transition into the community. We believe
that localisation is not the most effective way to improve the
way the system operates. A localised service is likely to be less
efficient in terms of running costs and less consistent in terms
of standards of provision. Localisation of the discretionary Social
Fund is likely to result in both fragmented and inadequate provision
for vulnerable individuals and families, and great additional
demands being placed on local authority resources that cannot
be adequately met.
26. We understand that the new provision will
fall under the remit of social services and yet the Association
of Directors of Adult Social Services has highlighted significant
problems with the proposals. We share their concerns about local
authorities' capacity to manage the demand, and about the way
the changes could create unnecessary tensions between the holistic
nature of social care and the requirement to apply the financial
criteria in awarding CCGs and CLs.
27. We are also concerned that the extra administrative
burden will make it impossible for local authorities to continue
to offer the kind of emergency financial support that CCGs and
CLs have provided. The resulting gap in provision may drive vulnerable
people to payday lenders or home credit agencies with crippling
rates of interest at 180-500% APR. If funding is transferred to
local authorities it is therefore crucial that a ring-fence is
retained. We are already seeing the effects of removing ring-fences
from funding streams in periods of increased pressure on local
authorities, for instance since its ring-fence was removed, the
Supporting People budget has seen large-scale cut backs in many
areas.[11]
28. It is also important that when designing
replacement provision, local authorities are able to operate within
a framework that includes a robust assessment of levels of local
need so that resources can be allocated in a way that meets actual
local requirements. We call for an appropriate level of scrutiny
to ensure that local decisions are transparent and accountable,
and suggest that a national framework for guidance on delivering
the provision would help support local authorities to develop
a fair and transparent system. Mechanisms should be put in place
to monitor local authority spending of funds on support for vulnerable
people at times of crisis and transition, and spending must be
transparent. Local authorities should therefore have a duty of
care so that, even in the midst of difficult spending decisions,
there is adequate support for people with need to access emergency
finance.
In any localisation of the system, it is imperative
that people still understand their eligibility for support, are
able to access face-to-face support when applying for help, and
have recourse to an independent appeals system. The appropriate
infrastructure to make this possible is likely to be expensive
for local authorities.
DCLG & DWP: WORKING
WELL TOGETHER?
29. Major changes to housing policy are being
led by the Department for Communities and Local Government at
the same as the Department for Work and Pensions is radically
changing the benefits system. We have observed different approaches
to policy-making that could create difficulties the closer we
get to implementation.
30. For example, DCLG has provided cash to help
disabled people get their properties adapted, and Housing Minister
Grant Shapps said in March this year that helping disabled people
live comfortably and independently in their own homes was a "key
commitment for this Government".[12]
But under the Department for Work and Pensions' plans to penalise
"under-occupation" in the social sector, an estimated
450,000 disabled people will face housing benefit cuts averaging
£676 per year and will face pressure to leave their homes.
There is an acute shortage of specially designed or adapted homes
and landlords have very little flexibility to offer people smaller
alternatives. There will be a cost to adapting new homes to meet
disabled people's needs.
31. DCLG has introduced a new investment regime
for housing associations, under which most of the subsidy for
developing new homes will come, not from Government capital grant,
but from revenue from rents set at up to 80% of the local market
rate and greatly increased private borrowing by housing associations.
Such a system, based on increased borrowing against the higher
rents rather than up-front capital grants, is inevitably riskier
for landlords. But not only is the Government pushing ahead with
the reforms, it is doing so just as the DWP proposes a range of
changes to support for housing costs that could jeopardise that
revenue stream. The overall cap on benefits, for instance, will
mean that building larger family homes in places like London and
the South East will generally not be viable because the near-market
rents are likely to result in many households needing greater
assistance than the £26,000 household benefit cap will allow.
The end of direct payment of rent to landlords will increase costs,
place revenue at risk and result in a rise in the cost of borrowing
and re-pricing of existing loans.
More effective joint working between DCLG and DWP
would help to ensure that welfare reform and housing policy share
objectives, particularly around vulnerable people and reducing
homelessness. The current proposals on benefits reform from DWP
may inhibit efforts by DCLG to reduce homelessness.
CONCLUSION
32. While the Universal Credit, in centralising
administration, offers many opportunities to improve the system,
it also creates challenges that will have to be met as the changes
are introduced. Central to these is the loss of local discretion,
backed by local expertise and decision-making. By simplifying
the system overall, there is a risk that its responsiveness to
local circumstances could be significantly compromised. Effective
information sharing will therefore be crucial if the new arrangements
are to work in a way that safeguards the interests of the most
vulnerable households, in particular. We hope the Committee will
recommend that Government provides more information on how the
specifics of the new regime will work, and that all efforts are
made to prepare administrators and claimants for what are likely
to be the biggest changes to welfare in a generation.
June 2011
5 Universal Credit: welfare that works, November
2010 http://www.dwp.gov.uk/docs/universal-credit-full-document.pdf,
p.20, par. 31 Back
6
Where's the Benefit? L&Q, February 2004 Back
7
ibid. Back
8
Family Resources Survey 2008-09. Figures exclude post office accounts,
which do not accept payment by direct debit. Back
9
Frontier Economics, Financial Benefits of Investing in Specialist
Housing for Vulnerable and Older People (September 2010),
www.frontier-economics.com/_library/pdfs/frontier%20report%20-%20financial%20benefits%20of%20investment.pdf Back
10
p.8 DWP Impact Assessment on Under-occupation of Social Housing,
February 2011
http://www.dwp.gov.uk/docs/social-sector-housing-under-occupation-wr2011-ia.pdf Back
11
See the results of our survey of Supporting People providers
http://www.housing.org.uk/policy/older_and_vulnerable_people/housing_related_support.aspx Back
12
Grant Shapps, DCLG press release, 3 March 2011 http://www.communities.gov.uk/news/housing/1857639 Back
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