Feeling the strain
Last week Inside Housing revealed that councils are stockpiling discretionary housing payments as they prepare for the full impact of benefit cuts on their residents. Keith Cooper examines whether pumped up funds can bear the weight of welfare reforms.
Ministers are weathering a hail of criticism as they roll out their controversial welfare reforms.
Their battery of benefit restrictions, cuts and caps risks forcing families from their homes, children from schools and dangerous ex-offenders into shared accommodation, critics claim.
The government has responded by beefing up a previously underused budget known as ‘discretionary housing payments’. Set up in 2001 to replace the exceptional hardship fund, DHP allows local authorities across Great Britain to provide short-term top-up payments to housing benefit recipients who suffer temporary financial hardship. The budget is split between councils each year by the Department for Work and Pensions.
Against a background of cuts, the DHP annual budget has trebled from £20 million in 2010/11 to £60 million in 2012/13 to help people cope with caps on local housing allowance. It will then mushroom to £165 million in 2013/14 as the pot is expanded to help people affected by other welfare changes. The DHP budget will be ring-fenced, with £75 million available for those affected by the £26,000 a year benefit cap and £30 million to help those hit by the under-occupation penalty commonly referred to as the bedroom tax.
Such a supersized budget will mitigate risks, acting as a ‘safety net for those who need it’, work and pensions secretary Iain Duncan Smith pledged last year. But how well placed is Mr Duncan Smith’s faith in the payment regime? Can this quick-fix hardship fund really withstand the weight of long-term welfare reforms?
An Inside Housing analysis of figures obtained from 370 councils in Great Britain points to several reasons to doubt Mr Duncan Smith’s belief.
Concerns about even the supersized fund’s capacity to fulfil its role as a safety net were raised during debates about the Welfare Reform Act’s passage through parliament last year. ‘[Discretionary housing payments] make the loaves, the fishes and the feeding of the 5,000 seem like a positively unambitious model of social policy,’ Labour MP Karen Buck told a Westminster committee.
Geoff Fimister, a social policy officer at Citizens Advice who helped design the hardship regime which DHP replaced, considers the biblical metaphor apt. ‘DHP is a tiny proportion of the overall scale of the cuts,’ he says.
‘This is just one-fortieth of the £1.6 billion cut in this area,’ Sam Lister, policy and practice officer at the Chartered Institute of Housing, adds.
Despite politicians’ and policy experts’ concerns, our analysis of figures obtained by consultancy Landlord Information Network reveals that last year’s £30 million was underspent by 25 per cent. Most councils - 65 per cent - spent less than they were awarded by the DWP. Almost 40 spent less than half their budgets. Wellingborough underspent by 76 per cent; Brent by almost 70 per cent and Brighton & Hove by 62 per cent.
At least three of the largest underspenders purposely stored up their 2011/12 budget to help tackle a predicted larger demand this year. The DWP agreed to this squirrelling tactic as a one-off. Last year’s £7.8 million underspend is being carried over to this year’s budget.
The central London borough of Westminster, which received the biggest DHP award in 2011/12, shifted almost two-thirds of its £1.1 million into this year’s budget, creating a grand total of £3.8 million.
‘The [housing benefit] caps are being implemented for those households affected during the calendar year 2012, although the increased allocation was for the financial year 2011/12,’ a spokesperson for the council says.
Brent, which spent less than a third of its £540,000 slice of DHP, claims 5,000 of its residents will be hit by housing benefit caps this year.
‘The council decided that it would best serve its customers by using its discretionary funding this year when the main impact of the changes would be felt,’ a spokesperson said. The authority emptied its DHP pot in the two years preceding 2011/13.
Brighton & Hove Council, which held back 62 per cent of its £387,835 allocation, also admits to a cautious approach to DHP in 2011/12.
‘It was considered prudent to have some contingency should there be an upsurge in demand later in the year,’ a spokesperson for the south coast authority says. ‘It was a reasoned financial decision. Some of the benefits reductions have not yet happened.’ Brighton & Hove exhausted its budget in previous years.
This cautious tactic is not favoured by all authorities. Almost 50 took advantage of a Whitehall rule which allows them to boost their DHP pot from their own coffers. These superspenders collectively poured in almost £800,000 of their own money as well as exhausting the government’s contribution. The DWP rewards superspenders with an increased allocation the following year. Such a tactic has earned Oxford Council successive year-on-year increases in its DHP budget.
‘Oxford has been very successful in increasing the amount of grant it gets as a result of ensuring it spends over its allocation each year,’ recent council papers state.
The authority trebled its £37,000 contribution to DHP in 2010/11 to £125,000 this year. It calculates that a £33,280 slice of DHP could save up to £600,000 in temporary accommodation fees. Enthusiasm for its DHP is also fuelled by both the authority’s commitment to tackle and prevent homelessness and its success in wearing away the traditional boundaries between its housing and benefits departments.
‘Going back five years benefits probably didn’t have a great relationship with the housing department,’ admits Paul Wilding, benefits manager at Oxford Council. ‘We have recognised that we were going to have to work in the same direction.’
The difficult relationship between housing and benefits departments is widely recognised as a fly in the ointment of the payment regime, according to Gill Leng, director of consultancy GLHS which advises authorities on DHP policy. Some of these rival departments are now locked in battles about which one should run DHP, adds Ms Leng, who thinks housing departments are well suited to the role, ‘bearing in mind that we’re working with people and not just numbers’.
Claire Turner, director of Landlord Information Network and a former benefits manager who oversaw DHP, points to another reason why benefits departments might struggle to spend their inflated budgets.
‘Housing benefit departments are paring down the numbers of staff employed, in preparation for universal credit,’ she says.
Union figures estimate that 20,000 benefits staff will lose their jobs before universal credit goes live next year.
Ms Turner, who trains social landlord staff to help tenants make DHP applications, predicts the regime will come under even greater strain as social tenants who have been hit by welfare changes begin to make claims.
‘Most social landlords’ staff aren’t trained up… to support tenants in making a successful DHP application,’ she warns.
Certainly DHP have been predominantly awarded to private renters, so far. Last year, 90 per cent of Oxford’s 377 claimants were private tenants, council figures show.
The way payment regimes are run by some local authorities is also beginning to raise alarm bells at housing advice agencies. As a discretionary scheme, it is council officers rather than Whitehall making decisions on who should get DHP and why. ‘Spending decisions should be made locally to reflect the fact that councils have the best understanding of local issues,’ a DWP spokesperson says.
Research by homelessness charity Shelter Cymru uncovered examples of both good and bad practice in Wales. It found that access to DHP was most difficult in the country’s most deprived areas and some councils failed to tell residents about DHP at all.
The charity Zacchaeus 2000 Trust, which helps Westminster residents apply for payments, believes some of its most needy applicants are losing out. Romin Sutherland, project manager at the trust’s ‘Next door’ project, claims Westminster is using DHP as a tool to push down private rents rather than focusing on those who need it the most.
‘[Westminster] is getting landlords to agree rent reductions by getting them to sign new contracts with DHP attached for 12 months,’ he explains. ‘But some people in extreme need such as those who are very unwell or who have disabled children can’t take advantage of Westminster’s DHP because it doesn’t cater for them.’
Families not being offered DHP include those forced out of their homes by landlords who want to sell up or with whom they have fallen out, Mr Sutherland says. Zacchaeus 2000 Trust wants Westminster to offer such families an ‘in principle’ DHP pledge with which they can seek alternative accommodation in the borough.
Residents who take on new tenancies are expected to find homes with rent levels under the £400 a week housing benefit cap, a Westminster Council spokesperson says. ‘Where households leave private sector tenancies, for example as tenancies are not renewed, then the household is entitled to make a homeless application to the local authority.’
Anonymised Zacchaeus 2000 Trust case files, seen by Inside Housing, reveal how DHP is being used in Westminster to push down rents. One family was awarded £12,000 of DHP for a whole year to help pay its annual £32,000 rent bill. Government caps had slashed housing benefit’s contribution to £20,000. The award was only made after the council negotiated a rent cut to £650 a week and to allow a family member finish their GCSE exams, the letter said.
In another case a woman was awarded £340 DHP a week to help foot the rent bill for her £795 per week home. The authority told the tenant she must negotiate her weekly rent down to £340 if she wants to stay on.
Such disagreements are likely to be played out between tenant advocates and councils across Great Britain as the welfare reforms begin to fully bear down on benefit recipients.
This year will be the true test of whether DHP can support the weight which Mr Duncan Smith claims it can. In a move which suggests the DWP is anxious about the spending of DHP, the department announced on 2 August it will for the first time monitor how councils are using the payments.
Whether it is the underspenders or superspenders who have adopted the right tactic is not yet clear.
Oxford’s Mr Wilding thinks one point is clear, however. ‘More people are now going to have to think about what they are doing with DHP. And be a bit more clever about it.’