Welfare Reform and Work Bill Committee

Written evidence submitted by the Scottish Federation of Housing Associations (WRW 67)

Welfare Reform and Work Bill 2015–16

1. Introduction

1.1. As the national representative body for housing associations and co-operatives in Scotland, the SFHA welcomes the opportunity to submit its concerns regarding the Welfare Reform and Work Bill to the House of Commons Public Bill Committee.

1.2. Housing associations and housing co-operatives in Scotland own and manage 46% of the country’s affordable rented housing stock. This represents 274,996 homes across Scotland, concentrated in some of the poorest communities in our country. Many are registered charities and our members have had first hand experience of advising and supporting tenants who have for one reason or another had to seek assistance from the benefits system and the challenges tenants face in order to survive.

1.3. Housing associations and housing co-operatives are:

· Independent businesses providing and managing high quality affordable accommodation and housing related services;

· Responsible for accessing and managing public and private resources for house building and reliant on rental income to cover operating costs;

· Able to demonstrate added value through care and support, wider role and financial inclusion activities;

· Managing businesses imaginatively and inventively to benefit housing and communities through their not-for-profit ethos;

· Regulated by the independent Scottish Housing Regulator.

1.4. Our sector is extremely diverse, with organisations formed from a variety of different circumstances and in varying shapes and sizes. They range from large ex-local authority stock transfer organisations with tens of thousands of properties to small community controlled organisations owning a couple of hundred homes. Whatever their shape or form, all have seen the effect of recent welfare reforms on a significant number of their tenants.

1.5. We estimate that 61% of all rental income of all housing associations and cooperatives in Scotland currently comes from Housing Benefit (with about two thirds relating to people of working age). It is therefore vital to the financial stability and capacity of associations that this income stream is not undermined.

2. Reduction in Social Housing Rents

2.1. Housing is a matter devolved to Scotland under the Scotland Act 1998.The proposals for a 1% rent reduction and the introduction of "Pay to Stay" do not therefore directly impinge upon Scotland. Nevertheless, the operation of the Barnett formula, by which the Scottish block grant is currently configured, alongside proposals to change the UK fiscal framework as it may apply to Scotland via the Scotland Bill, currently making its way through Parliament, give rise to a concern that there may be consequences for Scotland as a result of the proposals. The SFHA understands that it is perhaps too early to say what they may be with any degree of certainty but accepts that, in some quarters, it may appear superficially attractive to promote rent reductions in devolved administrations also.

2.2. In the Scottish context such reductions or any related consequential ‘cuts’ would be undesirable. Housing association rents in Scotland are lower than those in England by some way; 2 bedroom and 3 bedroom properties are on average more than 26% cheaper and are among the lowest in the UK – for example the weekly rent for a 3 bedroom property in Scotland is £73 compared to £100 for a similar housing association (social rent) property in England [1] . Yet for a family of 3 dependent on JSA [2] a rent in excess of £53 per week would put them in breach of the benefit cap. If that family was living in private sector rented accommodation their situation would be even worse: even in the lowest Broad Rental Market Area (BRMA) in Scotland [3] (North Lanarkshire) the Local Housing Allowance is £114 for a 3 bedroom property, so that family would have to find £61 per week from their personal allowance to cover a housing benefit shortfall. The most expensive BRMA, Aberdeen, with a LHA for £185 for a 3 bedroom property, would leave the family with a shortfall of £132 per week.

2.3. The SFHA is of the view policies that would hamstring housing associations’ abilities to address what is commonly acknowledged to be a housing crisis are to be resisted in any jurisdiction. Consequently, the SFHA would broadly agree with the case put forward by the National Housing Federation in its submission [4] .

3. Benefit Cap

3.1. Where there could be a serious impact in Scotland will be the reduction in the benefit cap.

3.2. The SFHA is concerned that the reduction of the benefit cap from £26,000 to £20,000 will impose acute hardship on affected households – even those in standard housing association accommodation which offers some of the lowest rents in the UK.

3.3. In May 2015, 769 households in Scotland were subject to the benefit cap: when the reduction is introduced those households will be £6,000 per annum worse off. All but 99 of those cases are households with dependent children; in the UK as a whole, of those cases with dependent children over 80% will have children aged 5 and under [5] .

3.4. The reduction of the benefit cap will catch many more families leading to a significant increase in child poverty: CPAG have estimated that the number of children in Scotland living in poverty could increase by 100,000 [6] between 2012 and 2020: this was before the proposed welfare changes had been taken into account.

3.5. According to the Red Book [7] , the annual saving from the reduction of the benefit cap will be £100m in 2016/17, rising to £495m by 2020/21. The Institute of Fiscal Studies estimate that the saving will be a lot lower - £200m by 2020/21 after other benefit changes have been taken into account [8] . It is open to question whether these savings can be achieved without causing increased expenditure in other areas thereby cost shunting rather than cost saving. The pressure on families from the lowering of the benefit cap will significantly undermine tenancy sustainment and would put exceptional strain on a family staying together, cancelling out any saving to the public purse should child care services be obliged to intervene.

4. Conclusion and Recommendation

4.1. The reduction in the benefit cap is a measure that attracts popular support; it is also a measure where, arguably, the perceived benefits are outweighed by increasing expenditure elsewhere and by the human cost to families. It is therefore the recommendation of the SFHA that the cap should not be reduced.

October 2015

[1] Sources Scottish Housing Regulator Annual Report on Charter returns and HCA Statistical Data Return

[2] Family of with 3 dependent children in receipt of JSA: JSA £114, Child Tax Credit £170, Child Benefit £48.10, totalling £332. Benefit cap weekly limit £385, leaving £53 per week for housing costs.

[3] http://www.gov.scot/Topics/Built-Environment/Housing/privaterent/tenants/Local-Housing-Allowance/figures

[4] http://s3-eu-west-1.amazonaws.com/pub.housing.org.uk/NHF_WRW_Bill_response_2015.pdf

[5] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/451595/tables-benefit-cap-statistics-to-may-2015.xls

[6] http://www.cpag.org.uk/scotland/child-poverty-facts-and-figures

[7] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/443232/50325_Summer_Budget_15_Web_Accessible.pdf

[8] Andrew Hood, Benefit changes and distributional analysis, IFS presentation, 9 July 2015

Prepared 16th October 2015