Welfare Reform and Work Bill Committee

Written evidence submitted by Sovereign Housing (WRW 78) About Sovereign  

1. Sovereign Housing Association owns and manages 37,825 homes for more than 88,000 residents in the south and south west of England.

2. The majority of our stock (71%) is social rent; 9% is housing for older people, 3% is Affordable Rent and 3% is private rent. The balance comprises more than 4,000 shared ownership homes.

3. Since 2011 we have developed 3,500 new homes across all tenures – more than 2,100 of which were built without funding from the government’s affordable homes programmes. We were the ninth largest developing HA in 2014/15.

4. We hold the top ratings from the Homes and Communities Agency for viability and governance, as well as having some of the highest ratings in the sector from Moody’s (A1) and Standard & Poor’s (AA).

5. This year we embarked on a sector-leading strategy, re-asserting our purpose to provide truly affordable housing and support residents’ aspirations. We aim to build around 1,000 homes a year, across a range of tenures, but to achieve this without converting vacant social rent homes to the more expensive tenures. This investment is enabled by our cash surpluses together with private funding (borrowings currently total £1.1bn).

6. Last year we invested £3.1m in resident and community initiatives. One initiative, our self-funded employment and training service, supported 113 residents into sustainable employment and helped a further 413 through work related activities.

Our response 

7. We welcome the opportunity to respond to the Public Bill Committee’s request for comment and suggested amendments to the Welfare Reform and Work Bill. This response is specifically focused on the reduction in social housing rents and the benefit cap threshold.

8. We assert that the reduction in social housing rents will reduce our capacity to contribute to the government’s priority of delivering the new homes that are so badly needed.

9. At the same time, we recommend that the overall household benefit cap for the south east should be set in line with the proposed level for London, reflecting the similarity in social housing costs.

Rent reduction 

10. The reduction in social housing rents, proposed in the Bill, will substantially reduce our income, reduce the value of our assets and limit our borrowing and development capacity. Although we remain fully committed to developing new homes, the rent reduction will undoubtedly reduce our ability to do so.

11. We would like to support the comments and suggested amendments made by the National Housing Federation (NHF) with regard to the reduction in social rents.

12. The NHF highlights that the sudden reversal of the government’s ten-year commitment to rent setting has damaged both the sector’s and lender’s confidence in government’s support for the sector and will impact our ability to deliver much needed new homes.

13. Due to the reduction in social housing rents, and other policy changes announced in the summer Budget, our development strategy is currently under review while we model the combined impact on our business plan. We are planning substantial reductions in operating costs, including cuts to the added-value services developed with our local authority partners. Despite these cost savings, we will see a reduction in our ability to provide new homes, and our core programme is likely to reduce by 600 units over the next four years.

14. In practical terms we are concerned that the Bill may not receive Royal Assent in the appropriate time to provide the required notice of rent levels to our residents. Providing us with more autonomy over the phasing of the reductions would allow us to manage this risk more effectively.

15. At Sovereign we have a number of households whose rent remains significantly below target rent levels, and we support the suggested amendment that housing associations should be permitted to continue to up-rate these rents to target levels.

Reduction of the benefit cap threshold 

16. Our major concern is the reduction to the overall household benefit cap introduced in the Bill. We believe that this will mean considerable hardship for many of our residents, but we recognise that this was a Manifesto pledge that the government is duty bound to implement.

17. However we would challenge the subsequent decision to reduce the benefit cap from £26k to £20k outside London, and £23k in London. While the previous household benefit cap level was linked to median incomes, it is not clear how the £23k and £20k figures have been decided; what analysis they are based on; or what the potential levels could be in the future.

18. The impact that this change in legislation will have on Sovereign’s residents is of real concern, with the number affected likely to rise to approximately 2,426 households, containing 6,301 children. Our 2 parent, 2 children families affected by the £20k cap will lose an average of £60 per week of their welfare benefits.

19. We are very concerned about the disproportionate impact the £20k cap level has in the south east of England, which is the highest cost area outside the capital. Recent research commissioned from the London School of Economics, on behalf of a number of housing associations operating in the south east, found that households in the region were worse off under the £20k cap compared to households in London under the £23k cap.

20. Their analysis based on the average rents in London and the south east, showed that a household paying a social rent in the south east will be more than £40.89 a week worse off than the same size household in London.

21. This disparity is due to the fact that the £23k cap applying in London is £53.38 per week higher than the £20k cap in the south east. However, the average three-bed social housing rent in London is only £12.49 per week more than the same sized property in the south east. This means that the family in the south east would be disadvantaged at the rate of £40.89 per week.

22. As this analysis is based on an average rent figure in the south east the disparity is likely to be greater in in the most expensive areas in the region such as Oxfordshire and Surrey.

23. As currently proposed, the benefit cap does not sufficiently account for the similarity in housing costs in London and the south east. We therefore suggest that the benefit cap in the south east should be set in-line with London, at £23k.

October 2015

Prepared 20th October 2015