Thomas Sutton investigates the impact on social housing of the changes to housing benefit contained in Iain Duncan Smith’s welfare reform bill.
By Thomas Sutton
It has long been fashionable for politicians to introduce competition to the provision of public services, the logic being that competition based on the market economy will inevitably produce the services that are needed as efficiently and cost effectively as possible.
However, in one sector it has become clear that the government does not wish to introduce competition whilst preserving the rights of the receivers of the service but merely to destroy the not for profit and public sector provision that a massive chunk of the nation’s population relies on.
Iain Duncan Smith may base his welfare reform bill on the aim of simplifying the benefit system and incentivising work but in reality, although these aims may be admirable, it doesn’t take too long to look beneath the sound bites to see the horrible truth that is facing the social housing sector.
The social housing sector and its reason for existence – to ensure people have roofs over their head – will be made untenable by the reforms within IDS’s master plan.
The universal credit is structured with the aim of encompassing all current benefits into one individual payment.
In relation to social housing, those tenants who are claiming housing benefit currently due to unemployment or underemployment have their monthly rent paid by the local authority’s housing benefit department to the relevant social landlord on a monthly basis when the tenant is four weeks in arrears.
Under the universal credit (pdf; chapter 2, paragraph 30), the tenant will now be paid directly by the DWP the amount they are entitled to in the housing component of their overall benefit package.
This means that instead of the housing associations receiving a massive cash flow injection of all their housing benefit, with a cheque from the local authority’s housing benefit department, now the housing benefit will be paid to each individual tenant at the point where they are already four weeks in arrears to the housing association.
It is then the responsibility of each tenant to pay their rent and even if they paid as quickly as possible, it would still leave an extra week gap of cash flow problems for registered social landlords.
Not only will there be a cash flow problem. If all tenants are responsible with their benefit but with the implications of the reform being that it is up to each individual tenant to pay their rent out of the one-off monthly payment of the universal credit, what happens when tenants are pressured by other concerns and so do not see paying their rent as a priority?
Although the government does mention certain stop gaps in this case, the reality is that some housing associations will have to go from collecting 20-30% (doc) of their rent direct from the tenant to near-enough 100% of their working age residents.
And the costs of this collection could be huge and with those tenants who do not meet their rent payments due to them not being used to their new found responsibility, registered social landlords could see their role become more of a rent collector at the expense of their added value work that they perform within their relevant communities to produce social cohesion and mobility.
The squeeze on registered social landlords’ income base is further amplified by the various money-saving exercises the government are pursuing to reduce the housing benefit bill. Within the welfare reform bill, IDS and his chums have opted for a very politically expedient attack on those social tenants who are seen to be under-occupying their properties.
It may seem all well and good to reduce a person’s housing benefit entitlement based on how many bedrooms they require but this is only really feasible if the social housing stock can fit everyone’s needs perfectly so no one in the country will under-occupy their properties.
The logistics of getting every single family unit in this nation into a property that fits their needs perfectly in what the government views as necessary is a massive task, even on the level of a local housing association, and so to penalise residents with an average £11 weekly reduction (pdf) for every under-occupied room in their housing benefit component of their universal credit.
The emphasis on forcing them to move or work may seem harsh as it is logistically impossible to move everyone into a perfect fitting property and employment may not be easy in a lot of the areas affected by this in the current economic climate. Evidence (pdf) shows this will impact those social landlords in northern England most which are usually based in areas where private sector growth has not been sufficient to provide abundant opportunities of employment.
Tenants will be forced to make the shortfall up between their rent and what they receive in housing benefit within the universal credit by using other benefits they receive and in turn accept a massive reduction in their disposable income.
In reality, not every tenant is going to make up this shortfall with other components of their universal credit payment and may build up arrears, which in turn could lead to evictions and bad debts for registered social landlords across the country.
There will be similar impacts felt from the £500 household benefit cap which will also be problematic for both families and their social landlords.
If housing associations become mere debt collectors rather than community innovators, and housing associations do not even provide accommodation that is more affordable than the private sector then what exactly is the point in social housing, especially as homeless people will not (pdf) have the right to remain in the social sector if they desire?
And how long will housing associations be able to last without going bust, especially if interest rates were to rise which in turn would affect their borrowing capacity?
Although there are certain aspects of the welfare reform bill which the Lords have amended to reduce its severity, the DWP are insistent on getting their way and whoever wins this battle could decide the future and feasibility of social housing in this country.
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• Five reasons to oppose the welfare bill – Daniel Elton, December 12th 2011
• A-list Tory ‘asks’ how we can stop the poor from having too many kids – Alex Hern, November 18th 2011
• Social housing needs a ‘New Deal’ – Kevin Gulliver, September 28th 2011
• Yet another nasty in the welfare bill: Means testing support for the disabled-since-youth – Declan Gaffney, September 22nd 2011
• Boris fighting London’s corner on housing benefit cuts? Really?! – Jenny Jones AM, July 5th 2011