Communities and Local Government CommitteeWritten evidence from Shelter

Summary

The changes to welfare will have a profound and potentially devastating effect on many local authorities. Coping with the implementation of these reforms may be the biggest challenge they face over the next few years.

Shelter welcomes the opportunity to submit evidence to the Communities and Local Government Select Committee on these significant reforms. More than one million people a year come to us for advice and support via our website, helpline and national network of face to face services. Our evidence is rooted in the experiences of the people we help every day, many of whom will be deeply affected by these changes. Given our area of expertise, this response focuses on the housing aspects of welfare reform.

The greatest danger is that local authorities will no longer meet their duty to homeless people by finding them a home in the local area. With many fewer homes being affordable for vulnerable families under the benefit cap, local authorities will be forced to send them to unfamiliar towns, many miles away from families and support networks.

The decision to include Temporary Accommodation in the overall benefit cap will burden local authorities with unmanageable costs, at a time when funds are already stretched, as well as increasing the disruption for families in an already precarious situation.

We support the creation of a simplified Universal Credit which incentivises works, so are therefore deeply concerned that the localisation of Council Tax Benefit will undermine the Department for Work and Pension (DWP)’s aims for this policy. Localisation of this benefit stands to create a complex bureaucracy incomprehensible to families trying to find their way through the system.

Local authorities have been rushed into these changes without adequate time to prepare. We need to make sure the timescales for Universal Credit are flexible enough to be adjusted if it becomes apparent that key functionalities are not in place. A more staggered approach rather than implementation of a range of reforms to large groups of claimants over a shorter period of time would give local authorities and households reasonable time to adjust.

How effectively are the Department for Work and Pensions and the Department for Communities and Local Government working together to implement welfare reform?

1. We would highlight the following areas of concern, where Department for Work and Pensions (DWP) policy is forcing local authorities to implement harmful policies which contradict signals sent by Department for Communities and Local Government (DCLG):

The Inclusion of Temporary Accommodation Costs within the Benefit Cap

2. In the Welfare Reform Act debates MPs and Peers repeatedly pointed out that local authorities would struggle to re-house homeless households if benefit payments used for Temporary Accommodation (TA) were included in the cap. In January 2012 the Welfare Reform Minister promised to avoid a “ludicrous go round”1 of homeless people moving into TA which then proves unaffordable because of the cap, making them homeless again. The Minister said that the review of the Housing Benefit subsidy for TA would address these concerns.

3. The proposals for how the Housing Benefit subsidy for TA should be reformed were repeatedly delayed as the DWP and DCLG were unable to reach a decision. The outline of the new subsidy scheme was only announced in October 2012, leaving too little time to formally consult stakeholders.

4. It has now been confirmed that the cost of TA will be included in the overall benefit cap. The DWP suggest that under Universal Credit, the management costs of TA will be paid directly to local authorities (and therefore not included in the cap). This will reduce the household’s benefit income, making it less likely the cap will apply. However, the reduction in their income will only be £60 per week (£40 if inside of London), meaning the benefit cap will still affect many households in TA, particularly those in London. Based on the available detail, a family in TA will still, therefore, be as likely (if not more likely) to be affected by the cap as a family claiming Local Housing Allowance in the mainstream private rented sector. Also, the proposals set out by the DWP will do nothing to reduce the impact of the cap on homeless households prior to the introduction of Universal Credit, as the existing rules will remain in place until households move onto the new scheme between 2013 and 2017.

5. The decision to include TA within the benefit cap sits poorly with homelessness policy and guidelines from the DCLG, leaving local authorities with a serious dilemma. According to the government’s Homelessness Code of Guidance, local authorities have a legal duty to ensure that any accommodation procured meets the affordability and suitability needs of the household. In order to meet the affordability needs, it must be considered “whether the applicant can afford the housing costs without being deprived of basic essentials such as food, clothing, heating, transport and other essentials.” Guidance sets out that income support levels (equivalised for household size) should be used as a proxy for this, meaning households cannot be expected to cross-subsidise housing benefit shortfalls with income replacement benefits. Once the cap is implemented, TA in most places will be unaffordable under this definition.

6. In order to meet the location needs, The Homelessness (Suitability of Accommodation) Regulations 2012 require the local authority to take into account the distance of the new accommodation from the applicant’s previous home, and the disruption a move would create for the household’s employment, education or health. While this does not prevent homeless households being placed a long way out of their local area—as long as this is done on a case-by-case basis and not as a matter of course—data from the DCLG shows that the percentage of households placed in out-of-area TA increased from 11% to 16% between 2008 and 2011. As local authorities look for cheaper TA out of borough removals are likely to increase further.

7. Without the exemption of TA from the cap, in order to meet their legal duty local authorities will either have to meet the cost of TA out of their own stretched budgets, rely on the very limited Discretionary Housing Fund, or face no choice but to send homeless families to live in cheaper boroughs far away from their local area. The movement of households out of pressurised areas into areas with cheaper accommodation will impact on other services and infrastructure, for example, schools and social care departments will face increasing pressure in importing boroughs. In light of this, and in absence of an outright exemption, we query why New Burdens funding has not been released for local authorities.

Private Rented Sector Offer

8. New powers offered by the DCLG to local authorities allow them to house people who present as homeless in the private rented sector, rather than find them more settled, stable accommodation. This allows local authorities to discharge their legal duties to homeless households without making them an offer of social housing. Local authorities could previously re-house homeless families in the private rented sector, but only if the household agreed this met their needs. Removing the need for consent increases local authorities’ options for re-housing homeless households.

9. But these new powers will be constrained by the DWP-led changes to housing benefit, especially the introduction of the benefit cap, which will reduce the affordable housing options available for local authorities to offer to homeless households. This has been clearly evidenced by the Cambridge Centre for Housing and Planning Research, and the CAB’s survey findings in Hackney.2 There is a risk that the reforms to Local Housing Allowance will increase the number of families in the private rented sector that are made homeless. Recent Government data shows an increase in the number of homelessness acceptances that are arising as a result of the loss of an Assured Shorthold Tenancy.3 Therefore, while the DCLG has expanded the options available to local authorities in homelessness cases by allowing increased use of the private rented sector in principle, the DWP has reduced these options by creating a system which makes further stock in the private rented sector unaffordable.

10. As local authorities struggle to find affordable accommodation in the private rented sector, more are using bed and breakfasts to house homeless families for longer. Recent figures show a 184% increase from September 2011 to September 2012 of families living in bed and breakfast accommodation over the DCLG’s six week limit. This is particularly true in areas of high housing pressure, such as London which saw a 216% increase over the same time period.

11. In addition, private rented sector access schemes, such those that Crisis fund across the country, have reported that they are increasingly struggling to find accommodation within the rates. In Sunderland, Shelter’s access scheme is reporting that it is particularly difficult to find accommodation for under 35’s as there is a severe shortage of affordable shared accommodation. With the loss of future value to Local Housing Allowance stemming from the Autumn Statement up-rating announcement, we are increasingly worried that landlords will refuse households on benefits, reducing the available accommodation even further.

The Removal of the Council Tax Benefit from Universal Credit

12. The localisation of Council Tax Benefit (CTB), advocated for by the DCLG, contradicts the primary aim of Universal Credit of simplifying the benefits system. Shelter supports the rationalisation of the different benefits systems so that claimants only have to report personal information and changes in circumstances to one agency. Localising CTB will re-introduce complexity into the system, which is likely to make many households much more liable to become confused and increase the chance of mistakes being made.

13. If changes in circumstances are not reported this can lead to over or under-payments and demands for repayment that put the household at risk of debt or arrears. We would like assurances that publicity materials produced by the DWP to promote Universal Credit do not over-sell the extent to which the benefit system has been rationalised. The original intention that claimants will only need to report changes in circumstances once cannot now be met and it would not be appropriate to promote this as a major benefit of Universal Credit.

14. In addition, the localisation of Council Tax benefit will mean that households will not benefit from a single taper, which was central to the original design of Universal Credit because it is what makes work pay—something which Shelter has warmly supported. A single benefit would avoid the overlapping tapers that can reduce the financial returns from work and make it easier for claimants to work out how much better off they will be by increasing their earnings. However, removing Council Tax Benefit undermines this aim. In addition, as Council Tax Benefit eligibility and withdrawal rates are now at the discretion of each local authority, it is possible that a local authority could come up with a detrimental scheme that risks undermining work incentives, for example causing claimants to rapidly lose all their Council Tax Benefit when they move into employment.

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

15. It is important that the Government’s timetable for implementing welfare reform is practical rather than strictly adhered to. Timescales may need to be adjusted if it becomes apparent that key functionalities are not in place. Our main concern is that families will be moved onto Universal Credit before the system has been fully tested, including for more complex cases. Universal Credit will represent some households’ entire incomes and any delays or breakdown of the system will leave households destitute. Local authorities must be provided with regular updates on the progress of Universal Credit implementation to allow them to plan ongoing capacity in housing benefit offices.

16. We are also concerned about the scale of the welfare reforms being introduced in April, particularly as each of the proposed reforms will hit all the affected caseloads on the same day. These include the benefit cap, the under-occupancy charge, the localisation of Council Tax Benefit, the localisation of the Social Fund, and the Universal Credit pilots in selected geographical areas. We would welcome a more staggered approach—for example, the way in which the new Local Housing Allowance rates were introduced across a 12 month period as claimants’ circumstances changed or were reviewed.

17. Finally, we are also concerned about lack of time local authorities have to prepare for the implementation of the Social Fund and the transfer of CTB responsibilities.

Are local authorities being allocated sufficient resources to deliver services such as localised Council Tax Support and advice to claimants on Universal Credit? Are there financial risks to local authorities from welfare reform changes? Are such risks being adequately addressed?

18. The costs of welfare reform at a time of reduced resources for local authorities are undoubtedly challenging and present a range of risks. The benefit cap is likely to create many more homeless families: a leaked letter from the DCLG in July warned that as many as 20,000 people could be made homeless as a result of the benefit cap. There are numerous costs incurred by local and national government when a household presents as homeless including the costs of advice and support, the cost associated with the completion of the homelessness application, and the costs of the rent arrears, eviction, and re-letting. With a complex eviction the cost could be over £6,000 to the local authority.

19. Discretionary Housing Payments (DHP) cannot be used for these costs as the fund is only intended to cover direct housing costs. In addition, the leaked letter from the DCLG warned that instead of creating savings the benefit cap will “generate a net cost” because, as described above, local authorities will have to cover the costs of increasingly accommodating homeless households in TA. The DWP has said local authorities can use DHPs to fund TA shortfalls, but it is unclear whether the allocation to individual local authorities will be sufficient for this and it will also divert funds away from other households affected by welfare reform. DHPs can only be used to fund rent liabilities and will not compensate local authorities for their own additional costs.

20. Discretionary Housing Payments are unlikely to be able to cover these increasing costs because the additional funds released are significantly below the level of the cuts being made. In addition, DHP is a limited annual funding stream; local authorities can only provide payments to claimants until their budget runs out. As claims are awarded on a time-dependent rather than needs basis, the budget is unlikely to meet the huge extra demand that will be generated by the forthcoming welfare reform.

21. In addition, where social tenants will now be required to pay rent due to the under-occupancy cut or benefit cap it is likely that local authorities will increasingly need to chase small amounts of rent arrears which can be a costly process.

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

22. Universal Credit was intended to simplify the benefits system into a single agency. The separation of the administration of Council Tax Benefit undoes that positive intention as households will still have to report changes of circumstances to two agencies across different tiers of government. As described above, this can lead to over or under-payments and demands for repayment that put the household at risk of debt or arrears.

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

23. Shelter understands the policy intentions behind the design of Universal Credit, which is intended to mimic a monthly salary and end the differential budgeting challenges for households in receipt of Housing Benefit and those who are financially independent. However, given the legitimate challenges facing households on low incomes, we argue claimants should have a choice as to whether support for housing costs are paid directly to their landlord or not.

24. Direct payments for private tenants are now well-established, although their introduction in 2008 caused considerable teething problems. The DWP should ensure that the lessons from the introduction of the Local Housing Allowance are carried through into the design of Universal Credit. It is vital that triggers are in place to pay the housing component direct to landlords if the tenant is in arrears or genuinely unable to manage their finances, for example because of vulnerability or debt.

25. The extension of direct payments to social tenants should be carefully reviewed as the roll-out of Universal Credit progresses. The findings from the 2012 Demonstration Projects must be incorporated into the final policy detail to ensure adequate safeguards for tenants who will genuinely struggle to manage their budget or who are already in arrears. Shelter is very happy to work with the DWP on this.

26. Ultimately housing benefit is a tool which allows low income households to afford adequate housing and this core aim should not be lost in the pursuit of the wider welfare reform agenda. The DCLG should ensure that Housing Benefit’s role in implementing housing policy, including delivering new affordable housing, is not undermined by this process.

January 2013

Further Reading

Universal Credit and housing (Shelter, 2012)
http://england.shelter.org.uk/professional_resources/policy_and_research/policy_library/policy_library_folder/briefing_-_universal_credit_and_housing

Response: Discretionary Housing Payments good practice manual (Shelter, 2012)
http://england.shelter.org.uk/professional_resources/policy_and_research/policy_library/policy_library_folder/response_discretionary_housing_payments_good_practice_manual

Research briefing: Immediate costs to government of loss of home (Shelter, 2012)
http://england.shelter.org.uk/professional_resources/policy_and_research/policy_library/policy_library_folder/briefing_immediate_costs_to_government_of_losing_a_home

How will changes to Local Housing Allowance affect low-income tenants in private rented housing? (Cambridge Centre for Housing and Planning Research, 2010)
http://england.shelter.org.uk/professional_resources/policy_and_research/policy_library/policy_library_folder/how_will_changes_to_local_housing_allowance_affect_low-income_tenants_in_private_rented_housing

No DSS: Locked out of the private rented sector in Hackney (CAB, August 2012) http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&cad=rja&ved=0CDMQFjAA&url=http%3A%2F%2Fwww.hackneycabcrowdmap.com%2Fwp-content%2Fuploads%2FLocked-out.pdf&ei=RSbHUPGOHozL0AXG7ICwAQ&usg=AFQjCNHTT921U__DB00l20-DIWOx8pBJHQ&sig2=izYtdTvpLHxphQFvyr3EFg&bvm=bv.1354675689,d.d2k

1 HL Deb, 23 January 2012, c893

2 How will changes to Local Housing Allowance affect low-income tenants in private rented housing? (Cambridge Centre for Housing and Planning Research, 2010)
No DSS: Locked out of the private rented sector in Hackney (CAB, August 2012)

3 DCLG Housing Live Table 774, www.gov.uk

Prepared 28th March 2013