Welfare reform – are you prepared?

Posted: 15th May 2011

The Bill is slowly and quietly working its way through parliament and there is a danger that some may have taken their eyes off the ball, of what these reforms will mean for affordable housing providers’ business plans.

Below is a helpful reminder of the main provisions of the Bill which include:

  • The abolition of Housing Benefit (HB), Job Seekers Allowance, Income Support and Child Tax Credit etc and the creation of a single Universal Credit to be introduced for new claimants in October 2013, with current claimants being migrated across to the new scheme over 4 years
  • Support for housing costs in social sector tenancies will “in the short to medium term” be based on the actual rent charged. However, there has been talk from Government (not in the Bill) that in the longer term support will be set at a percentage of the Local Housing Allowance for private sector tenancies
  • Cuts to housing benefit for families living in social housing accommodation which is too big for their needs
  • Local authorities to develop their own Council Tax Benefit schemes according to local priorities, but with a 10% cut on current funding
  • An annual benefits cap for households of £26k with responsibility between 2013 and 2017 with local authorities to adjust HB awards to meet the capped amount for affected households – thereby with a direct impact on tenants and rent arrears. This heralds a substantial change in the relationship between local authorities as benefit administrators and their claimant population.
  • Stricter sanctions for those refusing work which could lead to those who refuse work 3 times, losing their benefits for 3 years
  • Benefit increases to be linked to CPI rather than RPI
  • Changes to the way benefits are reduced when people accept work – after accepting work people will retain 35p of benefits for every extra 1 pound earned, reducing as income increases
  • Disability Living Allowance to be replaced by a Personal Independence Payment in 2013 which will require regular assessments
    The end of crisis loans, community care grants and budgeting loans that were payable by DWP. Instead, “new locally administered assistance will be provided by local authorities”. The detail of the funding for this or the basis for decision-making is not clear at present

Importantly for social housing landlords, the proposal to reduce housing benefits payments by 10% for those who are unemployed for more than 12 months, has not been included in the Bill.

However, other substantial reforms planned for HB will soon come into effect and may have an adverse impact upon residents. Capping HB on the bedroom size, disadvantages the provision of larger homes.

There is lack of clarity from the DWP at present on what the exact approach to payment will be. Latest indications suggest that only payments from vulnerable tenants will be provided directly to landlords. This is likely to be an area subject to intense discussion and lobbying from the sector as the Bill progresses through parliament.

Proposals to make cuts to the benefits received by families who under occupy homes are also likely to have significant ramifications for the sector. The Government’s own estimates suggest the introduction of a size criterion will impact on 670,000 people in social housing, with many seeing payments reduced, because they are in properties deemed to be too Large for their needs. There is a perverse upside to this because of course the sector has long struggled to tackle under occupation – this may do it.

The combined impact of all of these proposals alongside those on the affordable rent programme will see the sector needing to significantly alter the way it delivers services to tenants in coming years.

Organisations will need to place a greater emphasis on supporting tenants in managing a possible reduction in their income/squeeze on disposal cash. Many will need to help unemployed tenants return to work and encourage involvement in the wider community and local services.

There are already good examples of organisations in the sector diversifying their services to meet these needs. Many now support residents through the front line, advising on routes into work. There is a role for housing providers to explore how they can work with the Single Work Programme Prime contractors and link into the ‘Get Britain working’ measures such as work clubs, volunteering and work placements.

Social enterprises are being set up for a specific need such as providing employability training or running a local service such as a community centre. There is scope and already some appetite for expanding such initiatives.

There are also opportunities for social housing landlords to go further by supporting local tenants to set up their own social enterprises to run services (e.g. ground maintenance services), with contracts being awarded by local social housing landlords or other organisations. Many will also become more active in working with their contractors to provide opportunities through apprenticeships, training and employment. Third sector providers will also have a key role to play, as they will be called on to provide more services in partnership with local organisations.

What is clear is that is that some of these initiatives will need to become mainstream activities if social housing landlords are to be adequately prepared for the most radical reform agenda faced for a generation.

Dr Fiona Underwood is a Partner with Altair.

Michael Appleby is a consultant with Altair.

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