Thursday, 24 April 2014

Industry bodies argue single parents will be hit hard by welfare proposals

171,000 single parents could lose their homes

More than 171,000 single parents could be forced to move home if housing benefit is axed for under-25s.

The startling figure emerged as social landlords warned chancellor George Osborne’s plan to cut a further £10 billion from the welfare bill by 2016 will hit their businesses and the communities they serve. Mr Osborne’s plan includes cutting housing benefit for people under 25, which the government hopes will save around £1.9 billion.

Mr Osborne told delegates at this week’s Conservative Party conference in Birmingham: ‘How can we justify giving flats to young people who have never worked, when working people twice their age are still living with their parents because they can’t afford their first home?

‘Figures from the Department for Work and Pensions reveal that 45 per cent of the 385,000 under-25s who receive housing benefit are single parents and 65,770 are in employment.

Kate Webb, policy officer at housing charity Shelter, which opposes the move, said: ‘The way [the government is] positioning it is that it’s all about young school leavers but the statistics show that a lot of these households are young families.

‘It’s very hard to see how moving back to their parents can work.’

Caroline Davey, director of policy at charity Gingerbread, which helps single parents, said: ‘The government is describing this as single under-25s not in work but these are adults living on their own raising children. We think it’s really unacceptable and lacks the understanding on the ground for families like that.’

David Orr, chief executive of the National Housing Federation, said the move could make many young people homeless while landlords such as Moat warned an increase in arrears could reduce associations’ capacity to build homes.

The government is expected to find the remaining £8.1 billion cuts by restricting additional benefits for people who have children when they are not in work, and implementing a two-year benefit freeze.

In April 2011, it switched the measure for calculating benefits from the retail prices index to the consumer prices index - a move which will save the government around £11 billion a year by 2015/16.

Sam Lister, policy and practice officer at the Chartered Institute of Housing, warned the government could also be forced to cut benefits for older people to achieve the savings it is targeting. ‘The government has to start making inroads into payments for older people - any slack in the working-age households has been driven out already,’ he said.

What the industry thinks

‘You’re talking about taking housing allowance away from a young person with a child - I can’t see that not being challenged somewhere over human rights or protecting children.’ Nick Atkin, chief executive, Halton Housing Trust

‘Every organisation has to be extremely aware and cautious in its business planning. If this is the policy going forward the government needs to make it clear so we can get on with the management of it.’ Pat Brandum, chief executive, WM Housing

‘It is desirable that welfare reform sees people treated as adults, but on things such as the direct payment of housing benefit, is this going to cost us huge housing capacity in the future?’ Brian Johnson, chief executive, Moat

Readers' comments (85)

  • Tony Cook - yes world population exploding resources depleting fast and notions of world trade and economic expansion assume infinite supply of manpower and material resources to keep the pyramid growing up continuously and the invisible hand to do its work unhindered by governments, national barriers, or collusion between producers. Ever expanding consumption based economics has come to an end - no point blaming the Tories, or bankers - bankers and businesses look at maximising their immediate profit - but the fundamentals are all gone haywire.

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  • I think that restricting housing benefit to under 25s is a positive move.
    Obviously there are cases of vulnerability, abuse and genuine need which needs to be assessed separately but this suggestion will reduce young adults having children and moving straight into social housing. I think providing mother and baby hostels instead of social housing would reduce teen pregnancies and promote young adults seeking employment and independence. Housing young adults should only be considered where there are special circumstances.

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  • Gavin Rider

    Pamella - I see, you are using a "progressive housing blog" website as your source of accurate historical information, are you?

    Have you read any transcripts of contemporaneous accounts of these alleged "promises" being made? I searched through Hansard last time this allegation was made in here and could find no evidence of Margaret Thatcher having said any such thing.

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  • Progressive Solutions Required

    If it helps, the policy document actually stated that the proceeds from house sales could be used to build new homes, but only after debt was repaid. The Act stipulated that proceeds must be used to clear debt before being used to fund new building. Thus the Treasury made all the receipts.

    The question left though is have sold over half the housing stock, and the original build debt was taken out at very low interest a considerable time earlier, it is reasonable to expect even the discounted sale value to vastly exceed the outstanding debt level on the property. Indeed, I'd argue it would not be unreasonable to estimate that the proceeds from each RTB sale could refund at least two-homes worth of debt (e.g. a 1950's home built at under £2,000 sold in the 1980's for £60,000 even discounted at50% would raise a reciept 15 times the original borrowing - which would be a rate of interest even Wonga would find a little large if that failed to clear the debt). So, how was such an extraordinary high value of housing debt transferred by government this year to those councils still owning housing, and thus for the few remaining tenants to fund the cost of?

    The RTB fraud is not so much that new homes were not built from the proceeds, but that not only were new homes not built, housing debt was not cleared - thus the funds were 'evapourated' into the pot of tax reductions for the higher paid, and to fund borrowing of the scale that ended with the economic mess we are now in.

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  • Progressive Solutions Required

    I'm not normally a 'wiki' fan, but there brief history is fairly spot on:

    "Individual local authorities have always had the ability to sell council houses to their tenants, but until the early 1970s such sales were extremely rare.

    The Labour Party initially proposed the idea of the right of tenants to own the house they live in, in its manifesto for the 1959 General Election which it subsequently lost. Later, the Conservative-controlled Greater London Council of the late 1960s was persuaded by Horace Cutler, its Chairman of Housing, to create a general sales scheme. Cutler disagreed with the concept of local authorities as providers of housing and supported a free market approach.

    GLC housing sales were not allowed during the Labour administration of the mid-1970s but picked up again once Cutler became Leader in 1977. They proved extremely popular, and Cutler was close to Margaret Thatcher (a London MP) who made the right to buy council housing a Conservative Party policy nationally.

    In the meantime, council house sales to tenants began to increase. Some 7,000 were sold to their tenants during 1970, but in two short years that figure soared to more than 45,000 in 1972.

    After Margaret Thatcher became Prime Minister in May 1979, the legislation to implement the Right to Buy was passed in the Housing Act 1980. The sale price of a council house was based on its market valuation but also included a discount to reflect the rents paid by tenants and also to encourage take-up.

    The legislation gave council tenants the right to buy their council house at a discounted value, depending on how long they had been living in the house, with the proviso that if they sold their house before a minimum period had expired they would have to pay back a proportion of the discount.

    The sales were an attractive deal for tenants and hundreds of thousands of homes were sold. The policy is regarded as one of the major points of Thatcherism.

    Proceeds of the sales were paid to the local authorities, but they were restricted to spending the money to reduce their debt until it was cleared, rather than being able to spend it on building more homes. The effect was to reduce the council housing stock, especially in areas where property prices were high such as London and the south-east of England.

    I think what people are remembering is the spin around the policy - suggesting the declining availability and affordability was all the fault of those nasty loonie left councils misusing all the money from the housesales when they should, of course be building new homes for people - rather than the detail of the policy itself.

    Across both arguments I'd come back to the real fraud being that neither new building nor debt clearance was the outcome of the massive income from the sale of the social assets, rendering the now scarce social assets subject to a disporportionate debt. That may actually prohibit new RTB proceeds from leading to new homes being built because of the debt levels now being funded from the rents acting as a barrier to the new borrowing to supplement the small amount of the RTB receipt allocated for new building.

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  • Gavin Rider

    Chris - it would have been so much more economical on space in here if you had simply posted a link to the Wiki page. (You have been critical of me using up so much space with my own original comments in the past).

    Anyway, you have confirmed my recollection, which was that RTB proceeds were used to reduce LA debts and Thatcher never made any promise that replacement homes would be built with the proceeds.

    So Pamella and her RedBrick blog were both wrong.

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  • Gavin Rider

    Chris - as usual, you are talking nonsense about the transferred debt.

    All homes sold through RTB had their debts cleared. No tenants in present social housing are paying anything whatsoever towards the debt associated with homes sold under RTB. I would appreciate it if you would not continue to propagate this misinformation.

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  • Progressive Solutions Required

    Are you seriously suggesting the debt transferred to stock holding councils reflects the remaining cost of those few units Gavin - really?

    I don't know, try to help and just get more abuse and personalised attacks - what's a guy to do to please this most angry pussy?

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  • Gavin - I am old enough to remember when Thatcher spoke, on television, about using the money from the RTB to build more council housing!!! I actually heard her spout those lies, and I shall trawl the internet to track down a clip, or interview, for the proof of this!

    So, please watch this space!

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  • Gavin Rider

    Chris - the debt transferred to local authorities reflects the net present valuation for the properties currently held. It contains no amount that relates to homes that have already been sold through RTB or any other disposals.

    I suggest you check out the calculations of the debt transfers - they are very detailed indeed and there is no mention whatsoever of any historic debt relating to previously held stock.

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  • Gavin Rider

    Pamella - saying that the local authority could use any left-over money from the RTB sales to build more social housing is one thing - but promising that all the money would be used for that purpose (which is the way you have presented the statements of Thatcher and Heseltine) is something else.

    I think you have perhaps twisted events in your mind to reinforce your opposition to the policy, and over the years you have formed what you take to be a "memory" of this perception that is as strong as if it had actually happened. Of course, that view is reinforced by others doing the same thing, as on RedBrick, so the whole thing becomes a sort of self-generated mass delusion.

    But have fun looking for the evidence... and do try to remain objective.

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  • Melvin Bone

    The government has now confirmed that this proposal is just a Conservative Party proposal rather than government policy...

    Lets hope it stays that way.

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  • Progressive Solutions Required

    Not quite Melvin - they have confirmed that it may apply to new tenants, and those identified as vulnerable will still be protected. Considering the policy to make everyone reapply for their tenancies every couple of years this will very quickly convert everyone into being new tenants. Thus the statement today offers no additional clarity or assurances either way.

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  • Gavin Rider

    Chris - just to clarify the situation regarding the calculation of the debt for the existing housing stock transferred to local authorities under the new Self Financing Model that has replaced the Annual Housing Revenue Account, this is an extract from the explanatory notes downloaded from the DCLG website:

    "The number of dwellings in 2012-13 is taken from information provided by authorities on the 2012 Base Data Return. It is the number of dwellings including PFI schemes and shared ownership properties that were available for rent as at 1 April 2011 (recorded at cell F001DP on the Base Data Return) and excluding properties to be demolished, disposed of or appropriated in 2011-2012 before the implementation of self financing as entered by authorities on the base data return at cell SF000SR".

    This very clearly identifies that the debt is calculated on the basis of the Net Present Valuation of the current housing stock, i.e. stock that was available to rent at 1 April 2011. Housing that has previously been disposed of, or which was expected to be disposed of before the Self-financing scheme came into operation was EXCLUDED from the calculation.

    Is it any clearer now?

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  • Joe Halewood

    Time to put this matter to bed once and for all! Here is the text of a short blog I posted today because the story on here doesnt yet allow comments.

    ******************

    An article today appears in Inside Housing stating that DWP are in fact considering banning HB to those under 25 but only for new cases.


    “A spokesperson said: ‘We’re looking at a range of options for future reforms to the welfare system – changing the eligibility criteria for housing benefit is one of these. ‘Any changes would affect future claimants only and we would still ensure that vulnerable people remain protected.’

    Joe Halewood, a housing benefit consultant, said restricting the measure to future claimants would only save a small amount of money, around £90 million a year after 10 years.”

    I have no idea where this £90m per year comes from though I spoke with the journalist over this issue which I said was a non-runner and maintained my view that this won’t happen and reiterated my long maintained view that its a smokescreen for the introduction of SAR to social housing.

    Some facts from the official HB data
    •Since the election in May 2010 the HB claimant count has increased by 11,208 claimants per month.
    •7.62% of HB claimants are under 25
    •Therefore 855 under 25 HB claimants would be new each month / 10260 per year and DWP would ‘save’ by not paying them in this idea
    •Average HB payment to under-25’s is £93.94 pw.

    Hence restricting HB to all new under 25s (even including those working those with children, those entering single hostels or DV refuges) would save just £50.29m per year and a far cry from the nearly £2bn Cameron said this would save back in June in yet another attempt to blame young people as welfare scroungers and conveniently forgetting that pensioners receive £2 of every £3 in welfare benefits.

    The DWP are in polite terms talking through their hat. As I have always maintained the ban on HB for under-25s is a non-starter and it is kite flying and a smokescreen for the introduction of SAR to social housing.

    This (the SAR application to social housing) by comparison would save about £40pw on the 894,200 under 35s who claim HB and even if just restricted to all under 35s with no child dependents these reduced 433,630 claimants getting £40pw less sees the government saves £905m per year. Take away the fact that a third already have this reduction as PRS tenants and it still saves £600m per year!

    This is a no brainer! Ask yourself will the DWP make a contentious policy proposal the norm and save £50m per year or take the politically easy sell and save £600m per year? A real no brainer even for the DWP who yesterday released new figures for the OBC which sees 3 times the number of tenants affected than its final release figures of just 3 months ago!

    My view is SAR will be applied to social housing as this completes the levelling of the playing field of HB eligibility in the SRS to LHA in the PRS that the bedroom tax does in all cases excepting SAR! This will cause mayhem and have horrific consequences as I said when I first mentioned this yet it is only levelling the playing field for HB eligibility with the private sector in political terms – an easy sell.

    By the way I’m a supported housing consultant not a HB consultant who just happens to be able to read official data and work a calculator and hence I clearly could not work for DWP!

    I have no idea where the £90m pa comes from in the article

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  • Gavin Rider

    Well, Chris, do you understand the debt calculation better now?

    It has nothing to do with debt associated with homes sold through RTB being paid for by current tenants.

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  • Progressive Solutions Required

    You misunderstand the point you once understood Gavin - I'm not saying that the price tag this government put on the housing in order to justify transfering a large portion of the national debt onto social tenants includes the historic debt for the Right to Buy, but that it did not reflect that debt on the basis that no such debt existed on any of the housing stock. With over half the stock sold and the debt so old, clearly any build cost was long ago paid off. The only reason such a debt remained to be distributed was that the government did not use the reciepts from RTB to either reinvest in housing or clear housing debt.

    By not using the proceeds to clear debt or invest in housing what I am saying is that technically current tenants are now paying the cost for the original building of all social housing, including those sold under right to buy. That the calculation is based on current market values for a tenanted property across those remaining socially rented homes is neither here nor there when the simple fact is that no debt should justifiably exist had the government been true to its word and cleared the debt with the RTB receipts (you will remember in your discourse with Pamela that this is what the government were legally required to do with the RTB receipts - clearly they did not do this, or what was spun at the time, to invest in housing).

    Once again the Tory-boys are having in both ways and tenants are paying time and time again as a result, whilst the taxpayer still gains not benefit either.

    But I'm sure you will still want to argue the toss, in which case please continue to do so with your favourite person.

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  • Gavin Rider

    Chris - you are amazing. When it comes to social housing being sold off to a RTB tenant you insist that it should be valued at full market price and you whinge at the tenant receiving any discount off this nominal value in return for having paid rent for years.

    But when it comes to the valuation of the housing stock as is transferred to the local authority, you want it to be valued at the original build cost. I'd say that was glaringly inconsistent and hypocritical of you.

    "The only reason such a debt remained to be distributed was that the government did not use the reciepts from RTB to either reinvest in housing or clear housing debt."

    Wrong.

    Significant amounts of public money have been invested in the provision of new affordable housing since RTB began, and the debt associated with the homes sold through RTB is always paid off. Since money from RTB sales was also used to pay off council debts and reduce public sector borrowing in general terms, the money that has been invested in new affordable housing provision has effectively been available thanks to the injection of money into the coffers from RTB sales.

    Admittedly, the new housing provision was not on a one-for-one replacement basis, but it was never promised that it would be. I think it should have been, but that is a separate issue.

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  • Progressive Solutions Required

    Not so Gavin - I am 'whinging' about the massive transfer of general national debt to the responsibility of social housing tenants. These debts have been run up by all types of citizens, not just by one tenure - indeed the argument about build cost has been negated by the proceeds of the Right-to-Buy (there is no build cost debt left to pay!)

    You are correct that there has been State funding to build new affordable housing - yet the portion of the national debt concerned has not even been transferred onto those tenants living in such housing, but only to those living in Council Housing who's debt proportion mathematically if not actually has been repaid many times over.

    There is no supporting your argument that this massive imposition of national debt upon one group of people of one particular tenure is either moral or just. It is an abomination that has gone through on the nod and will be a drain on social tenant's resources for decades to come.

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  • Gavin Rider

    Chris - no "national debt" is being "transferred to the responsibility of social housing tenants" as you put it, only the debt associated with that social housing.

    You have previously claimed that social housing is self financing, i.e. that it does not receive subsidy from other taxpayers.

    That is clearly false, because the "national debt" associated with social housing construction has hitherto not been repaid to "the taxpayer" (Treasury).

    So the huge positive net subsidy from the taxpayer over many years of operation of the HRA remains a debt that has to be repaid before it can be claimed that social housing is paying for itself. That debt that has been transferred to LAs relates ONLY to the provision of social rented housing, not to any other tenures, so I fail to understand what you mean by saying "these debts have been run up by all types of citizens, not just by one tenure".

    Furthermore, when the housing asset is transferred from the ownership of the general taxpayer (the state) to the local authority that is operating the housing, the value of that asset is transferred using the "Net Present Value", not simply the cost of the initial construction.

    Note that the NPV used for this calculation is significantly lower than the current market valuation used to set RTB sales prices, with the average transferred debt per property being in the region of £20-25k. So if the LA disposes of a property at £100k it clears the debt several times over and receives a significant net cash sum.

    Any such money (over and above the amount already budgeted for RTB sales in the 30-year self-financing calculations) can be used by the LA to pay for new housing, the only restriction being that it cannot completely pay for it - it has to be supplemented by other LA financing. This is to ensure that the LA does not stop its own investment in new housing and rely entirely on selling off older properties to raise the funds for new housing.

    I fail to see where in any of this you perceive that social tenants are being expected to repay anyone else's debts - they are simply paying off the debt associated with the housing they are living in through the rent they are paying. This is just the same as people who hire a car paying towards the cost of the hire firm buying the car. What is wrong with that?

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