Posted by: Isabel Hardman
29/07/2010So far in the What’s the Benefit? campaign, we have focused a great deal of attention on the direct impact that the government’s reforms to housing benefit will have on tenants themselves.
Those immediate drops in income from housing benefit are obviously the most pressing concern for private tenants who are terrified that as of April next year, they may have to leave their homes and communities because they can no longer afford their rent.
But there is another aspect to these reforms that housing organisations are concerned about: some of the plans may threaten social landlords’ viability. The National Housing Federation and Chartered Institute of Housing have warned that plans to dock housing benefit by 10 per cent for claimants who have been on jobseekers’ allowance for more than 12 months will cause a rise in arrears.
This will come into effect from April 2013, along with links between the amount of housing benefit paid and family size for social tenants.
Around 65 per cent of housing associations’ income is from housing benefit, and any drop in that income and subsequent rise in arrears could mean they have to cut back on key aspects of their work. Many have started conducting sensitivity testing, and have told Inside Housing that they may have to cut back on their development programme or on work on improving neighbourhoods. That’s not good news when one of the reasons the bill for housing benefit in the private sector is so high is a lack of available affordable housing.
More worrying still, the Tenant Services Authority warned back in February that attempts to cut the housing benefit bill could increase the risk of bad debt and undermine housing associations’ stability.
Talking about business plans isn’t as immediately emotive as families facing eviction within months, but if social landlords suffer as a result of these reforms, then their tenants will be the ultimate victims.
Housing minister Grant Shapps told Inside Housing shortly after the emergency budget that there was little chance of damage to housing associations. He insisted that because the changes would not come online until April 2013, the economy will have recovered by then and housing associations will not be in such a tight situation.
That remains to be seen, and it would be nice to be able to say so confidently that the economy will definitely be fighting fit in three years’ time. But anything that threatens the way landlords carry out their work for vulnerable tenants is a very serious business indeed.
Don’t forget to sign our petition expressing concern about the government’s plans for housing benefit, and to email your suggestions for other ways of reforming the benefit to editorial@insidehousing.co.uk
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From What's the benefit?
The blog for our What’s the Benefit? campaign, which is calling on the government to find a fairer way to reduce the £21 billion housing benefit bill than its current proposals.
Readers' comments (18)
Melvin Bone | 28/07/2010 3:48 pm
'Around 65 per cent of housing associations’ income is from housing benefit, and any drop in that income and subsequent rise in arrears'
Why would there be an automatic rise in arrears if HB dropped? They might have to chase tenants for arrears but they do that anyway?
HB will drop under current proposals, rather than moan about it they'd be better off getting systems in place to ensure that any arrears they think may be generated are kept in check, if they occur at all...
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Anonymous | 28/07/2010 4:06 pm
There is something very disturbing about a ‘business’ whose plans are part based on Housing Benefit income. An individual mortgage application wouldn’t be granted on HB income so what are RSLs doing including vast amounts in business plans? Although not nearly as bad as some of the BTL quotes, RSLs for some time have been increasing rents, service charges at very high rates, 30% and more in the knowledge that most tenants (HB recipients) won't question - this could be considered exploiting HB system too. These increases at times of hardship for the country general and non benefit claiming tenants are not comparable with any current costs - utilities, petrol, food.
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Joe Halewood | 28/07/2010 9:21 pm
Anon 4.06pm - Two obvious points. Firstly PSLs base their business on LHA rates so is that disturbing too? Check the figures and see that of the 690,000 additional HB claims in last 12 months that over 620,000 have been PSL ones! 90%!!!!
Secondly, are you really saying that HA services charges have risen faster than utilities or petrol? What planet have you been on these last few years?
Melvin - All landlords expect and have to figure in an amount for arrears. So if your customers income is known to be dropping then it is logical and correct to factor in a higher percentage for bad debt - in this case arrears. That is just obvious business practice.
HAs will also have to factor in greater costs for legal fees, evictions, higher turnover rates of tenants, higher repair costs and many others too due to these proposals. The net effect is that all rents will have to rise to recoup these extra costs and/or service levels will have to be reduced.
Anyone still think all tenants should pay for PSL greed and milking the HB system with 60%+ premiums?
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Chris | 28/07/2010 10:13 pm
Am I glad you pointed out the facts Joe.
There has been a theme of late that wlecomes taxpayer money going to private landlords and against any cut in rents, because the business is in a free market and can do as it pleases, plus has based its business plan on the benefit income so must reveive it. Equally there has been a theme that tenants are scrounging money they do not deserve and the public sector should be more like the private sector.
I think the attitudes and points made that you have countered really do expose a form of bipolar disorder in posters to this site.
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Melvin Bone | 29/07/2010 8:14 am
Due to extra allowances that the last regime tacked onto HB, awards have risen over the last few years, now it will fall due to cuts in overall HB. I'm sure the PSLs will cope.
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Chris | 29/07/2010 9:32 am
What an absolute pillock - the payments in benefit have risen to meet the increase in rent - no rent increase then no rise in benefit.
Stop trying to paint this as being the tenants fault for greedily pocketing more than there share - that has not been the case, and in terms of payments for housing, never have been. Greedy landlords however have been with us for many years, the difference over the last 30-years is that they've been state sponsored.
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Anonymous | 29/07/2010 10:04 am
Joe
The article was about RSLs / impact HB. We’ve all got your point about PSLs. 2 wrongs don’t make a right. I am an RSL tenant and live in London. My food bill, petrol and utilities have not risen like my RSL costs - *130% in the past year.
Let there be no doubt about this - *I’m happy to show documents to IH Editor.
My post does not ignore BTL but the fact remains that RSL rental has risen six-fold plus over the past decade or so on some properties - I do not think this has been the case for BTL types. I acknowledge the point about PSLs hiking the rent to the max LHA level but can only make reference to the boroughs in my surrounds and in the main, most of the RSL rents appear about 35% cheaper than PSL.
There are RSLs that actively pursued a policy of accepting the Rent Offices and ODPM rent settings rather than cost of living increases for a period of time thus allowing a great hike too. These settings were often at 30%, I’ve seen some for 40 + 50+. I repeat my point that HB tenants are more likely to ignore any excessive cost increase if they are in the position of being able to just pass on to the HB office which allows over inflation rent increases from RSLs to go much ignored.
The ‘service’ from RSLs remains the same - much of what tenants pay for is covered many times over in the rent which are on many properties purchased for peanuts. Therefore tenants rents are financing development plans more often than not because RSLs model has no income generation other than current tenant rent hikes.
I acknowledge the Gas company has announced huge profits yesterday reflecting weather - perhaps we’ll all get a rebate…………………
Christopher Webb - someone makes a point and you’re making reference to a mental health condition. Pathetic.
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Mr P | 29/07/2010 12:25 pm
Joe, You continually make the mistake of comparing RSL rent levels with the rent levels of properties owned by private individuals. If you do the same comparison on rent levels of private homes occupied by private tenants and HB claimants you will see that your 60% premium is much closer to 0%.
Private landlords are not gven huge amounts of grant funding to build or purchase homes so they don't have the ability to charge such low rents. Their properties are purchased with their own money (not the taxpayers!) so their rent levels reflect this. They obviously include a percentage for profit............why the hell would they spend their money and time on their investment if there was no return?
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Joe Halewood | 29/07/2010 12:57 pm
Mr P - PSLs determine their rent levels on a number of factors, yet the key to their rent setting is how much LHA is in payment in that BMRA.
This is not a chicken and egg situation either. If prospective PSLs are looking to move into the market the guaranteed figure that LHA represents drives their decision to enter the market or not.
The apologists for PSLs have often stated this cost of entry figure, yet fail to mention the much reduced ongoing costs they have compared to social landlords.
Social landlords have higher ongoing costs of management due to increased regulation, increased service levels that PSLs dont have. You conveniently seemed to have ignored this significant costing in your comparison!
You have also conveniently ignored that risk of removal of bad tenants is comparatively low for PSLs and high for RSLs (legal costs, cost of resources etc)
These additional costs more than mitigate any subsidy you discuss and yet RSLs still manage to make surpluses so presumably the leaner more uber-efficient PSLs can make even more surpluses (profits) from the same levels of HB.
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Harry Lime | 29/07/2010 1:02 pm
The rent setting and targeted rents for RSL properties are public knowledge and transferable. To hear many defending the PSL's (who fulfill an important function) you would think that PSL's set their rents by calculating their outgoings and adding on a % profit. If that was the case then PSL's who bought their property a significant time ago would be charging rents far less than LHA thresholds. Alternatively if they were "working" the system I'd expect to find their rates "conveniently" just under the LHA threshold. Which of those two scenarios is the more likely do you reckon??
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Harry Lime | 29/07/2010 1:03 pm
Sorry, I meant transparent, not transferable!!
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Mr P | 29/07/2010 2:40 pm
Joe,
I would argue that the main factor in setting rents is the current market rent in surrounding, comparable homes.
If an RSL is given £100k grant funding for a home which costs £300k please explain to me how a private landlord will be able to pay £300k for the property and charge the same rent. I would love to hear how an RSLs extra managment costs, over and above what a private landlord would pay, would exceed £100k for one home! How many years would it take for the PSL to catch up with this £100k if they were charging social rent?
The extra money PSLs have to find will also be attracting interest which they have to cover.
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Anonymous | 29/07/2010 2:50 pm
Again and again, evidence is mounting that Christopher Webb whiles away his time in a darkened room with a 20-year-old copy of Socialist Worker on his knees and an elephant for company.
Taxpayers fund public sector housing both at a capital and revenue level.
That funding is greatly in excess of any funding that is transferred to private sector landlords by a factor which makes private versus public arguments redundant.
Now could Mr Webb return to his cast of cartoon thoughts and characters in SW where he can be reassurred that he exists in a solipsistic fantasy of "fat-cat capitalists" to choose his latest phrase to explain what he learnt at the Institue of Contemporary Studies.
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Chris | 29/07/2010 5:20 pm
Being of such an old brain your comments have lost me - what point are you replying to Anonymous.
By the by - did you notice in recent news that companies continue to return record profits despite the recession etc. Well done them, but then British Gas' response to the record profit is to flag the need to increase charges in the near future. I'm glad that there are no fat cats about, or else costs to the consumer could be a real problem!
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Chris | 29/07/2010 5:28 pm
PS - did I offend you in a former life or only in this one?
If I did offend you in a former life, did you not have an identity then either?
If so, makes it very difficult to avoid offending you in the future is I can't recognise you.
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Joe Halewood | 29/07/2010 8:29 pm
Anon - I see its now £100k subsidy and no longer £50k.
Do we really want £300k homes as social homes? Or is such price inflation driven by the high levels of LHA in payment? Of course it is yet such LHA payment levels caused the BtL boom (as well those damned pesky bankers relying on such levels to fund BtLs too!!!)
Secondly - if "....Taxpayers fund public sector housing both at a capital and revenue level...." then PSLs are revenue funded at social housing rate plus 60% arent they?
and then the other economic costs to the public purse of high PSL rents... in benefit payments, dependency traps, worklessness, higher social and health care costs (and not just from the links between poor quality unregulated PSL accommodation and mental and physical health)
Carrying on with the status quo and this tinkering and inept proposals will see increased HB levels, increased worklessnes, increased other public purse costs - all while PSLs walk around like the Cheshire Cat personified...and all taxpayers pay for this nonsensical and morally and economically bankrupt system.
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Melvin Bone | 07/08/2010 2:19 pm
'Christopher Webb | 29/07/2010 9:32 am
What an absolute pillock - the payments in benefit have risen to meet the increase in rent - no rent increase then no rise in benefit.'
Do you have any idea how LHA works? Do you not understand the extra allowances that have been added into LHA leading to the increase in the amounts of LHA awarded.
No you don't!
LHA can rise without an increase in rents. You need to study the pillocks guide to LHA again my friend!
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Chris | 08/08/2010 9:27 pm
Sorry Mr Bone, but your previous positing was about Housing Benefit - never mind, just change the details to support a point why don't you - meanwhile,.no rent increased no increase in benefit.
Meanwhile - the amendments to LHA have had a miniscule effect compared to the year-after-year rise in private sector rent and the need to rent from the private sector (or perhaps you can come up with some facts that support your theories Mr Bone?)
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