Communities and Local Government CommitteeWritten evidence from The Chartered Institute of Housing

The Chartered Institute of Housing (CIH) is the professional body for everyone involved in housing and communities. Our goal is simple—to provide housing professionals with the advice, support and knowledge they need to be brilliant. Our work is driven by a passionate belief that our contribution as housing professionals is vital to making communities great places to live and work—and that everyone is entitled to a decent, affordable home in a thriving, safe community.

CIH is a registered charity and not-for-profit organisation. This means that the money we make is put back into the organisation and funds the activities we carry out to support the housing sector. We are a membership organisation with a diverse and growing membership of over 22,000 people who work in both the public and private sectors, in 20 countries on five continents across the world.

This response draws on the experience and expertise of members and officers across CIH, including Scotland, Wales and Northern Ireland. CIH delivers a range of services and tools to help local authorities (LA), social landlords and tenants prepare for changes to welfare benefits, and a great deal of our knowledge and understanding of impact and implementation comes from this work.

Some of our concerns about the administration and implementation of universal credit have already been raised in our written evidence to the Communities and Local Government Select Committee, the DWP Select Committee implementation inquiry into universal credit (August), the Social Security Advisory Committee Inquiry and during the passage of the Welfare Reform Act.

We note the Select Committee is inviting submissions covering progress made to date on the implementation of welfare reform by LAs. Although the inquiry is focussed on LAs we have also gathered feedback on the interaction between social landlords and LAs on welfare reform too where relevant. Our response focuses on six of the Committees’ core questions as below.

Summary

CIH has long called for reform of the welfare system and has supported the principle of a universal credit to simplify benefits. CIH have worked with DWP and DCLG throughout the design of universal credit and reforms to the welfare system to seek to ensure the proposed system works for claimants and housing providers. Our priority for the welfare system is that it provides an effective system for help with housing costs. Central to that effective system are:

Provision of sufficient funds for the clamant to secure suitable accommodation (size, quality and location).

Transparency in how the system will work and what claimants can expect to receive.

Speed and accuracy in determining payments and ensuring payments are received in a timely manner.

A definition of “vulnerability”.

Claimant choice in whether their payment is made to them or their landlord in the first instance.

Certainty for the claimant and landlord—this includes provision of a trigger or switch back mechanism to ensure rent is paid direct to the landlord where arrears build up.

As universal credit implementation progresses, we continue to assess whether it will create an effective system of help with housing costs and continue to have concerns about the implementation of universal credit.

The process of designing and implementing universal credit poses a number of strategic and operational risks to provision of an effective system. At this stage we are still looking for assurance that these risks will not occur, because of their potential impact on both the ability of lower income households to secure appropriate housing and on the ability of social landlords to provide it.

Q1: Is the guidance available to local authorities from central government on implementing welfare reform adequate? Are there areas where more or better guidance is required?

While there has been guidance on what the changes are within welfare reform and universal credit in particular, there has been limited guidance on the implementation aspects of the new system. There are still many gaps in the details of welfare reform which hinder LA and landlord ability to plan sufficiently for the future—although we recognise some of the detail is due to be deliberated via the draft regulations which have just been published.

We are concerned that it is still unclear how some elements of universal credit will work. Consequently, additional guidance and clarity is needed on:

Tackling homelessness and housing options.

Delivering the social fund.

Working with partners to deliver local support around implementation of universal credit.

Shape and availability of a local DWP service for those who need a face to face service.

LA role in administration of universal credit and subsequent advice function.

Guidance on dealing with consequences of welfare reform (eg problems from rent arrears, overcrowding, under-occupying and so on).

Trigger points on direct payment of housing costs to landlords are not clear:

Vulnerability criteria needed quickly.

When can landlords obtain direct payment in response to rent arrears?

How long will that last?

The housing sector is incredibly resourceful and resilient and will, of course, look to provide positive solutions for its tenants. However, the lack of knowledge underpinning how future changes will be rolled out hinder the development of proactive responses. Indeed, it is evident that providing a resourceful solution for one client group will not necessarily benefit all client groups.

We are concerned that the cumulative effect of under-occupation measures, council tax benefit reductions and other welfare reform measures are not being thought through effectively by some LAs and social landlords. It is not clear to what extent (if any) guidance is prompting people to join these things together.

We are aware LAs and social landlords are expressing concern that the “real” findings from the direct payment pilots are being hidden by DWP. We do not believe DWP are necessarily deliberately withholding these findings, but the results are being made available much more slowly than originally planned. While we recognise some of the complex analysis and interpretation challenges here, the timing of the implementation of universal credit has not been changed, and it is imperative that DWP releases this information as a matter of urgency, if LAs and social landlords are to prepare effectively for the introduction of universal credit. On this matter, as facilitators of the Direct Payment Learning Network, we strongly urge DWP to be more open and transparent so that organisations can prepare effectively, realistically and pragmatically.

There is a lack of information on how welfare reform will be implemented in Northern Ireland. While this is in part understandable (given the Bill is passing through the Assembly) work on regulation and implementation under universal credit is underway and organisations may be in a better position to prepare for supporting the delivery of the new system if they have more information at this stage.

Q2: Is the Government’s timetable for implementing Welfare Reform achievable?

The timetable for implementing welfare reform in an ideal world would mean that all learning from pilot or experimental approaches is understood first before national roll-out. However, we know that is not realistic, but are concerned that the timetable appears to be driven by a political programme rather than through implementation practicalities. Having demonstration projects finishing just as the main elements of universal credit are to be rolled out nationally (albeit in a phased way) means DWP, LAs and providers will need to act incredibly quickly to put learning as to what works and how it needs implementing in place before October 2013.

Hence the question returns to the degree to which the systems and processes will be in place to work through the changes. There are some real concerns that failure to really digest, absorb and understand the implications and experiences of the direct payment demonstration projects and next April’s North East pilots will lead to poor quality implementation.

LAs and social landlords are going to be looking at their budgets for 2013–14 now, but there is relatively little information available from the direct payment projects and the universal credit pathfinders haven’t started yet. In terms of business planning this lack of information is creating a massive difficulty for housing providers who simply do not yet know the extent of the resources and services they are going to need to provide.

The links between different parts of the implementation programme (eg the universal credit pathfinders and the direct payment demonstration projects) appear to be weak. This increases the risk that the final system will not work smoothly and it gives rise to many questions and concerns which hinder preparations for implementation by third parties.

Many organisations are concerned whether the IT system will be ready in time and able to cope — if this isn’t, it places into jeopardy the ability of universal credit to be rolled out effectively and could place considerable strain on the LA and housing sector in attempting to deliver services using an ineffective IT system. There is a real risk of significant problems where families will lose payments and housing providers will need to pick up the pieces as a result. There needs to be a greater degree of transparency and clarity around what the national IT roll out on

October 2013 will actually look like and what provisions are being made for new claimants to access the old system for a protected period after October 2013. We understand DWPs intention is for all new claimants to access universal credit from October 2013 but our members question whether a contingency plan is in place.

Northern Ireland will benefit from a delay in introducing universal credit which will allow more time to prepare for the new structures. However, NI housing providers will be faced with implementing the under-occupation penalty barely a month after the Bill has received Royal Assent. The uncertainty around the legislative timetable and what concessions may or may not be secured has left housing providers and tenants in a situation where information will only become available in some cases, as new measures are implemented. This is obviously not practically suitable for organisations planning services and mirrors concerns in the rest of the UK.

Q3: Are local authorities being allocated sufficient resources to deliver services such as localised Council Tax Support and advice to claimants on universal credit?

There is a lack of resources available for LAs now and it is not yet clear what additional resources LAs will need given the on-going processes/mechanism for delivery of universal credit is still being discussed or developed. Until plans are firm, it is difficult for LAs to identify the exact resources required.

We would welcome clarity on the advice role of LAs and on whether LAs will be able to administer some elements of the claims process; in gaining such clarity, this would enable some firm decisions on resourcing to be made as discussed earlier.

As we have continued to argue, there will remain a need for the LA to have an administration role in determining universal credit claims. It is difficult for LAs to set budget plans for future years now, when the potential resource implications from this decision are not yet known. Under the current welfare system, LAs can intervene in a claim and give appropriate advice. However, under universal credit in the proposed system of a nationally delivered advice and sign up through DWP, LAs will not be able to intervene in a claim or give appropriate advice. In the absence of a defined advice role, LAs envisage their resources being diverted into advising/supporting people on universal credit issues as a substitute for a locally accessible DWP presence.

LA and social landlords are also concerned they will need to provide a high level of staff time assisting people to make universal credit claims where they are providing IT access (eg in reception areas) or signposting to other services, despite potentially having no advice role in the locality. It is highly likely that any advisory service offered by LA is likely to be affected by cuts to the General Fund in terms of the way in which LA services are provided. If LAs were to have an administrative role their advice role will be more effective.

Respondents to a baselhe survey1 from the Direct Payments Demonstration Projects’ shows that 54% of tenants surveyed would be confident in receiving their housing payment direct to their bank account. However this means 46% of tenants surveyed would not be confident receiving their housing benefit payment direct to their own bank account; and a quarter of all respondents said they would need support if housing benefit were paid directly to them. This raises questions as to the extent to which LAs are adequately resourced to provide sufficient help to claimants.

Part of a responsible approach to this would be to have a joined up service working with advice and support agencies locally, such as CAB. However, it is vital to note that the voluntary sector can not be expected to pick up the pieces left by a reduction in LA capacity and advisory services without adequate resourcing. It is not yet clear what, if any, additional funds will be available to LAs, housing providers and partners to deal with the increased demand in support services.

We are also concerned that there is a general lack of awareness among claimants about how the changes will affect them and what is going to happen locally and nationally. At the moment, our evidence seems to suggest it is often social landlords proactively informing claimants on changes to the welfare system rather than LA benefit departments. There is a real need for a joined-up approach so that LAs share the burden of informing tenants and claimants and taking a positive proactive approach.

The effect of changes to the welfare system in terms of other benefit/tax credit changes, alongside changes to council tax support and universal credit, will have a greater cumulative impact on the groups likely to suffer most and those already struggling in today’s economic and employment climate.

We are concerned that private tenants are not receiving the level of information needed to make informed choices and decisions around their on-going housing and welfare needs. Ensuring private tenants have access to advice and support is vital and LAs should ensure this occurs in their area too.

Q4: Are there financial risks to local authorities from Welfare Reform changes? Are such risks being adequately addressed?

There are of course risks to LAs from welfare reform changes and we have articulated a number of these throughout this consultation response.

Our key concern is that there remains a difficulty in accurately assessing the entire risks from welfare reform, simply because there is a lack of information. It is difficult to assess risks simply because of the uncertainty around universal credit and the impact on customers.

Increasingly we are finding that LAs are finding it difficult to manage these risks simply because there is insufficient information available on the detail or practical processes as yet. LAs and social landlords are having to plan for changes and make financial assessments for potential service delivery mechanisms when the detail of processes and mechanisms are still being assessed through the demonstration projects and the North East roll out in April 2012.

LAs are doing their best to address and contain risks, but there are considerable risks to revenue. Many LAs seem to be making extra provision for rent arrears or bad debts. Stock holding LAs, for example, are likely to lose money through rent arrears. Those without stock but still with homelessness duties will see an increase in homelessness without the recourse to discharge the duty. This is bound to mean caution for LAs in using their HRA reserves and similar difficulty for social landlords. Holding reserves is a key part of any successful organisation’s business and risk management approach; some will need to tap into these reserves. An additional risk is around new development—there may be a potential increase required in capital subsidy to new housing development to protect registered providers from the increased risks of welfare reform.

Evidence from our members suggests LAs and housing providers are thinking about the knock-on effects of welfare reform. For some, this is around looking at the potential increases in costs in the provision of homelessness services (including temporary accommodation) following evictions arising from loss of benefit and or direct payments. Indeed, many will need to look at the increased demands on health and local care services, and a potential increased need for support from children’s services especially around safeguarding children. Similarly, providers are also concerned about the increase in transaction costs and increased income collection costs where non-payment of rent or failed direct debits impact on cash flow. The need for increased levels of support for such claimants has previously been mentioned in this response. The cumulative effect of the welfare changes, not simply related to local housing allowance, housing benefit, council tax benefit but also to disabled people, means that changes to income will hit tenants/claimants in all directions but not necessarily all at once. For some, this may mean adjusting to one change in circumstances only to face another later down the line.

Consequently one of the biggest knock on effects from welfare reform surrounds communicating and supporting tenants/claimants through the changes which is an incredibly resource intensive process.

In Northern Ireland—the Northern Ireland Housing Executive’s 90,000 houses are deficit funded with rents set by the Minister for Social Development. Therefore the NIHE’s budget will be impacted by failure to collect rental income (if under-occupation shortfalls aren’t paid by tenants). The implementation in Northern Ireland is hampered by the delayed legislative process, lack of information to conduct an impact assessment and different housing structures to the rest of the UK. Hence, planning for implementation is difficult when it is not yet clear what Northern Ireland should be planning for and whether decisions or regulations made in England will apply there. Consequently, our members in Northern Ireland argue the need for greater transparency and engagement with the housing sector would be helpful.

Q5: How will the separation of the administration of Council Tax Benefit and Housing Benefit affect claimants?

Most LAs manage council tax benefit (CTB) and housing benefit together so claimants may not currently think about these claims in isolation. However, most will need to shortly as the 10% changes to CTB start to be felt.

Our evidence suggests the separation of these functions is likely to lead to a combination of effects. The complexity of universal credit, applying online, receiving monthly payments to one household member, along with impending changes to CTB and households having to make further adjustments to already stretched budgets, is likely to cause confusion among claimants who will simply find the scale of changes to the system difficult to navigate. Aligned to this, claimants are also likely to be unprepared for the contribution they will need to make (for example in addition to the under-occupancy contribution). The LA and housing providers’ role in assessing stress points and providing adequate support and advice is evident. However, in common with our points made previously, there are currently insufficient resources available for LAs and others to act accordingly.

In Northern Ireland, the restricting of the NIHE when there is significant change to the benefits system is also going to have an impact with, as yet, no clarity on when and how the benefits and administration that currently sits without the NIHE will operate in the future.

Q6: Are there sufficient safeguards to protect social landlords from financial harm resulting from the payment of housing benefit direct to claimants?

Overwhelmingly, our members report that there are, as yet insufficient safeguards in place or on the horizon, to protect social landlords from financial harm arising from welfare reforms. Our evidence suggests welfare reform poses a substantial risk to a number of social housing providers particularly the smaller, more specialist and, potentially, more rural providers.

Many claimants are simply not used to handling rent and monthly payments and there is still a real concern among landlords on this issue. This is a particular issue for private landlords (outside the scope of this inquiry) who feel they are not receiving any indications from Government about how they will be paid should their tenants not receive the right benefit payment or withhold part or all of their rent for any reason. For this reason, we believe new claimants should have a choice as to whether their payment is made to them or their landlord in the first instance. For new claimants this is a period of considerable change and potential additional stress; having choice to pay the landlord direct would remove some of the difficulties of new claimants and ensure they are able to adjust to a new system more gradually.

The DWP Select Committee report in 2012, Universal Credit Implementation: meeting the needs of vulnerable claimants,2 recommended to delay the default option of direct payments to tenants. This delay would give time for the learning from the demonstration projects to be understood and practice amended prior to universal credit rolling out nationally. This would in turn ensure appropriate safety nets are developed especially for the most vulnerable. However, without an agreed definition of “vulnerable”, landlords are finding it increasingly difficult to plan services for the future based on uncertainties in the system. Consequently, one of the safeguards that should be developed imminently is the definition of vulnerability, which will need to include a range of risk factors including previous arrears history, credit/debt history—not simply a narrow indicator such as mental health or disability.

Additionally, our members report that having certainty for the claimant and LA/social landlord through the safeguard of a switch back or “trigger” mechanism would be welcomed. This would ensure rent is paid direct to the landlord where arrears build up. We are still waiting to see the detailed design of such a trigger but we believe it should be available where there is proven vulnerability, where the tenant agrees they may fall into the trap of paying the most demanding but lowest priority creditor first, or where high levels of arrears are likely to risk tenant eviction.

The credit rating agency Moody’s,3 in their December 2012 release, recognise housing providers face a number of challenges going forward. In particular, they note the introduction of universal credit will add risks in terms of rent collection for a share of housing associations’ total rental income.

Moody’s assess this risk as manageable but that the loss of income from weak rent collection could exert downward pressure on ratings. Furthermore, Moody’s estimate welfare reform will expose one third of rated housing associations’ revenue to collection risk—assuming no precautionary measures are taken from now until the full implementation of the reforms in 2017–18. Additionally and, perhaps more crucially, linked to the need to safeguard social landlords from financial harm, Moody’s argue that while the Autumn Statement measures on welfare will not impact on the majority of housing benefit recipients directly, they recognise that the real cut in non-housing related benefits will exacerbate housing associations’ overall reliance on tenants’ ability to pay, leading to higher arrears and bad debts.

Conclusion

The implementation of welfare reform by local authorities and the introduction of universal credit provide the opportunity for a simpler system which better meets claimants’ needs. However, we remain concerned that the cumulative impacts of the reforms are still unknown and the mechanisms by which effective support and administration is to be provided are still unclear. Without these elements being known, the implementation of welfare reform remains guesswork jeopardising the ability of housing providers to ensure the right levels of support, services and advice are offered to tenants and claimants. We remain committed to working with DWP and DCLG in highlighting implementation challenges and to ensure the welfare system operates to provide an effective mechanism for those who need help with housing costs.

January 2013

1 DWP press release, 30 October 2012, www.dwp.gov.uk/newsroom/press-releases/2012/oct2012/dwp112–12.shtml

2 DWP Select Committee: Universal Credit Implementation: meeting the needs of vulnerable claimants, 22 November 2012 http://www.publications.parliament.uk/pa/cm201213/crnselect/cmworpen/576/576.pdf

3 Moody’s sector comment: English Housing Associations: Lingering downside risks despite positive 2012 results, 11 December 2012 www.moodys.com

Prepared 28th March 2013