Welfare Reform and Work Bill Committee

Introduction

We are a registered provider of affordable housing for rent and low cost sale. We own, manage or have an interest in almost 25,000 homes in the South East and South West. We also provide support services to nearly 500 people with disabilities. We are based in communities which enables us to understand key local issues and invest in activities which positively impact individuals and communities, helping them to succeed.

Summary

We have concentrated our submission around the areas of the Bill which will significantly impact our customers and our organisation; the benefit cap, the social security and tax credits freeze and the reduction in social rents.

1 Benefit Cap proposals

The proposed cap on benefits of £20K outside Greater London and £23K within Greater London fails to take into account differences in individual and household circumstances and unequal living costs and employment opportunities. Where we operate - Berkshire, Buckinghamshire, Dorset, Hampshire, Surrey, West Sussex and Wiltshire – people are likely to face more significant negative outcomes from the proposed cap than in some other areas of the country.

The exemption from the cap for disabled people is welcome, but claimants in affordable and social three and four bed homes living in areas with high rents will be negatively affected by the proposals. They will, in many cases, face continuing and potentially increasing social and economic inequality, resulting in a loss of personal dignity. We would like to see exemptions from the cap for people in supported and temporary housing, not only because costs are higher in these types of accommodation due to the extra management requirements, but also as this is where some of the most vulnerable people are housed and as it would minimise the use of even more costly options such as B&B accommodation.

Housing is a fundamental requirement for accessing and remaining in employment. It has substantial effects on issues such as mental health and social inclusion. Capping benefits at the proposed levels threatens those seeking housing and a lack of suitable and affordable housing could lead to people struggling to find and maintain employment.

We are also disappointed the proposals remove the annual review of the cap that has so far been required; the proposed omission also removes regular scrutiny of the situation and any decisions as to the most appropriate amount of maximum benefits available to a household. Having this review and scrutiny perhaps only once in a five-year Parliament is not in the best interests of either claimants or taxpayers. Given the dynamic and fluctuating nature of the complex economic and social factors involved, it seems unwise to not review the issue on an annual basis and have any decision scrutinised by appropriate parties. Although there is provision for more regular reviews we suspect this is unlikely given the proposal to freeze most benefits for a four year period. Also, as any review must not only take into account the effects on claimants but also the wider economic situation and any other factors that are seen as being fit to include, it is possible that political factors may be part of any decision rather than purely economic and social ones.

For many households, particularly larger ones, the £26k benefit cap is already causing financial hardship, with choices required between eating and paying rent etc. With rents for large households becoming unaffordable and arrears increasing the proposed further reduction in the benefit cap is potentially significant for these families and has already resulted in a reduction in the production of new four bedroom homes and of three bedroom homes in higher value areas. Modelling the impact of the reduction of the benefit cap to £20k shows it impacts on couples with two children in social rent properties (55-65% of market rent) and we believe evictions (already doubled in the last 12 months) and abandonments will continue to increase as households are unable to pay their rent. Our monitoring of termination reasons already shows that affordability is increasingly cited as one of the reasons why our tenants leave their homes.

2. Social Security and Tax Credits proposals

The proposed freeze of some social security benefits and tax credits for four years may not enable continually changing fluctuations in the economy and therefore in household income and expenditure to be properly taken into account; a shorter period for the freeze would be preferable. The proposed lack of any check on whether or not these benefits have retained their value for the four years of the freeze implies a lack of consideration for future economic factors and individual household circumstances. Any cost of living increases and continued wage stagnations will effectively make the freeze a cut to benefits, although four years of rent reductions for those in HA and council homes will ease this.

The freeze to working tax credits is not congruent with the aim of sustaining people in employment, especially where the work may be part-time or low paid, and the loss of credits cannot be covered by increased pay. Moving to cheaper housing will not be viable where they already live in the cheapest housing available. While economic recovery continues, the reality for many is a non-existent or minimal wage increase over the past few years, which, coupled with the benefits freeze, is likely to cut income to a level that will be unmanageable for many households.

The freeze of child tax credits proposed for the vast majority of families with more than two children where those children are born after April 2017 will damage the living standards of some of the most vulnerable families and groups in society with costly implications for the welfare bill in the longer term. The added requirement for carers with dependent children receiving Universal Credit to take more action sooner in their children's lives to find work may mean those with larger families who are already affected by the changes being further affected by higher childcare costs.

Removing the work related activity components of Employment Support Allowance and Universal Credit for future claimants treats them in the same way as those on JSA when the two groups are not comparable. The first is not capable of, nor required to look for, work while the second is deemed capable and is required to do so. The proposals make no allowance for this difference and may result in increased health and social spending as those receiving ESA require increased levels of support for physical and mental health issues caused by the changes. Systems that determine capability for work must be reliable and consistent to ensure people unable to work are not disadvantaged by the loss of this component of ESA or UC.

Reducing or removing benefit for young people will increase financial pressure on this group and make the prospect of independent living remote; restricting HB will substantially impact lives and exacerbate the effects of the chaotic backgrounds many of them come from. The ability to access settled accommodation affords opportunities for employment and other support and if young people fall into rent arrears they may end up being evicted, leading to a rise in homelessness and potential increases in anti-social behaviour and crime.

3. Reduction in Social Housing Rents proposals

The cancellation of the year old regulatory agreement on rents has reduced investor confidence in the sector, resulting in increased financing costs and reduced income for housing associations at the same time as we are being required to maximise new home production. We do need to re-establish the certainty provided by the previous rent policy. Whether that means returning to a ten year agreement with government, or freeing us to set rent in our local market (subject to certain assurances to ensure housing benefit costs are controllable), the current arrangement is not sustainable.

In particular we believe sheltered and supported rents and rents for temporary housing should be exempted from the proposed rent reduction regime as in both these tenure types management costs are higher and the vulnerability of the tenants means they are ill equipped to cope with pressure concerning their housing.

October 2015

Prepared 14th October 2015