Tuesday, 21 October 2014

Money and resources set aside as Welfare Reform Bill receives royal assent

Landlords braced for impact of benefit reform

Social landlords are preparing to commit significant amounts of extra cash and resources to ready themselves for the impact of the Welfare Reform Bill, which was expected to receive royal assent yesterday.

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The legislation was branded a ‘historic step in the biggest welfare revolution in over 60 years’ by prime minister David Cameron, who claimed the government had made ‘work pay, while protecting the vulnerable’.

However, landlords have warned the reforms will lead to displacement of tenants, increase homelessness and rent arrears, and reduce lenders’ confidence in the sector.

The changes, which begin to come into effect from April 2013, include a total household benefit cap of £500 a week and the controversial introduction of under-occupancy penalties for social tenants deemed to have spare bedrooms. Another change will see housing benefit rolled into the universal credit, which will be paid directly to tenants as opposed to landlords.

Providers expect the so-called ‘bedroom tax’ to have a dramatic impact on anticipated levels of arrears and are already diverting resources to mitigate their losses.

Riverside has doubled the amount of money set aside for ‘bad debt’ in its 2013/14 business plan to £5 million after collecting data on the under-occupancy rates of its tenants.

Hugh Owen, director of policy and communication for the 50,000-home, north west-based landlord, said: ‘We’ve doubled the provision but it is money we could have spent on other things, such as new housing.’

In the north east, Gentoo Group has predicted the under-occupancy charges will result in an annual loss of £4 million for its 30,000 tenants.

Affinity Sutton has allocated more than £500,000 for extra staff to handle rent arrears and to run an awareness campaign.

Ruth Cooke, who will take over as chief executive of 32,000-home Midland Heart next month, said the introduction of universal credit was ‘unhelpful’ in attracting funding for new development. She added: ‘The one thing that makes funders most nervous is direct payment.’

Glyn Hall, head of housing at Durham Council, said he expected an increase in people approaching homelessness services and in rent arrears. ‘We haven’t got money or extra staff for mitigating against the changes because of cuts to our budget. But we might have to redirect resources if the problems are worse than we think.’

A spokesperson for the Department for Work and Pensions said it was working with the Chartered Institute of Housing and the Communities and Local Government department on the implications of the changes for local authorities and housing associations.

Inside Housing has been calling for fairer welfare reform through our What’s the Benefit? campaign.

The fallout: how the Welfare Reform Act will affect social landlords and tenants

Universal credit: housing benefit will be combined with other benefits into one monthly payment

Total benefits cap: £500 per week for couples and single parent households and £250 per week for single households, from April 2013

Under-occupation penalty: working age tenants will be hit with a tax of up to 14 per cent of their housing credit if they have a spare room

Direct payments: there are concerns rent arrears will increase and lenders will hike borrowing costs as a result of benefit being paid to tenants rather than to landlords. Pilots begin in June

Single room rate: as of January, people under 35 can only claim benefits for a room in a dwelling, rather than a one-bedroom property

Local housing allowance: from April 2013 LHA will be linked to the consumer price index instead of the higher retail price index, and it will be capped

What the sector thinks

‘We’ve employed a support worker to work with homeless people and we’re reviewing the incentives we can offer to encourage landlords to take people who are on housing benefit.’
Mark Hughes, head of housing, North Somerset Council

‘The main concern is that people don’t understand the changes. There is still lots of confusion over who it will impact and what we can do
about it.’
Michael Hall, coordinator, Leeds Tenants Federation



Lord Richard Best

Welfare reforms will have a deep impact on social landlords and their tenants

The Welfare Reform Bill will simplify the benefits regime by introducing the universal credit and it will try to make sure ‘work pays’. But it is also about cutting public expenditure, with a special emphasis on cutting the housing benefit bill. That means cutting the incomes of poor tenants. In turn, that has consequences for landlords.

At one extreme - which usually means ‘in London’ - caps on rents to be covered by housing benefit and caps on total benefits paid to tenants, will require possibly some 50,000 household to move. A lot of disruption and upset lies ahead.

Concessions during the bill’s progress have not been dramatic. There is the pot of cash for discretionary housing payments, enabling local authorities in a limited to way to bail out some of those who are hardest hit.

And welfare reform minister Lord David Freud has committed to proper evaluation of the impact of the housing benefit changes.

We all recognise that deficit reduction is the government’s number one priority. But what the House of Lords has been asking is: ‘Is this really the most humane, the most sensible, way to cut the deficit?’

Read this article in full

Readers' comments (26)

  • Good to see that some of the differences between benefits available to social housing and private sector tenants are being equalised i.e. under-occupation. The lucky few in housing need have social housing - the rest have to take their chances in the private rented sector. Why should some people get benefit to under-occupy properties and others in similar financial circumstances cannot? Should be taken further and apply to pensioners who have more than one extra bedroom as well - in many cases it is pensioners who are tying up the 3, 4, 5 bedroom properties - why not limit their benefit entitlement to two bedrooms maximum? They would only be allowed benefit for one bedroom if they were private rented sector tenants. They would not necessarily have to move - they could make choice of paying additional rent (or their relatives could help them) or moving to smaller property e.g. 2 bedrooms which are more readily available. We need some creative thinking to get the churn in the stock that's needed to address housing need given that there's not a lot of development funding available

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  • It's a good policy and there are safeguards in place e.g. discretionary housing benefit in the interim to allow those who are claiming ridiculous amounts of housing benefit more to move to more affordable areas - alternatively they could get a job and pay for the properties they are living in themselves.

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  • munchboss

    on form rick ,well done couldnt say it better , the under - occupancy tax , wil breal down comunities that have been established over several years and have the oposite affect to camerons so called goals of the big sociaty, what happens if you are in a property with the extra room and youre H/A wants to snatch it but doesnt have a void in the same area to put you in , this means you may be put miles away from family friends and the comunities that you just spent 10yrs building , it will destroy these, creat a far higher demand on the housing sector for smaller properties cause lets face it you may cure the need for 3 bed houses but god is the need for 1 and 2 bedrooms gona increase 10 fold we seem to be heading to a state of fix 1 problem to create 5 more , and how come my H/A has already said this will affect anyone on benefits yet i know of 3 people at my H/A whom occupy 3 bedroom places on their own , just cause there working and can pay then rent doesnt mean they shouldnt be forced to move and release the 2 spare bedrooms they have

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  • Chris

    At last, the Tories have achieved growth - in rent arrears officers, debt collectors, and homelessness services - what a wast of resources!

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  • patatwirra

    i have 2 spare bedrooms, children have flew the nest, i want to free up my 3 bedroom house for smaller acc Can anyoneomodation, but alas none available in my local area, i need to stay in area as i have caring responsibilities to my disabled parents. answer my question "will i lose 28% of my housing benefit because i have 2 spare bedrooms

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  • patatwirra

    apologies for mistakes on my previous posting, should read, i have 2 spare bedrooms, children have flew the nest, i want to free up my 3 bedroom house for smaller accomodation , but alas none available in my local area, i need to stay in area as i have caring responsibilities to my disabled parents can anyone answer my question will i lose 28% of my housing benefit because i have 2 spare bedrooms

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  • Rick Campbell


    Rick Campbell's comment | 09/03/2012 8:23 am

    The Welfare Reform Act is an insidious piece of legislation.

    In order to move forward, Nick Clegg has told his mob to 'move on' after rows on the NHS and tuition fees.

    I would proffer similar advice to them in relation to the Welfare Reform Act except I'd use two different words -- "jog off".

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  • This is the most inhumane piece of Legalisation is nothing but Social Cleansing

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  • So it is not longer Social Inclusion back to Social Exclusion

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  • Also does it mean if you our on JSA, with your Council Tax and Rent its all under the Universal Credit of the single household of £250.00 per week

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  • So, this is how the Big Society works.......' We can't be bothered with you anymore'

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  • Also people in flats have the budgen or Service Charges payments too

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  • The phrase "make work pay" sounds like classic doublespeak in much the same way "affordable housing" does not in anyway equal affordable housing!

    People who say that persons should just go and find a job are not in touch with reality. What sort of job can most people find that will earn £60k plus becasue this is the amount you will need to earn to take you off benefits if you have a family of 2 and live in the south east.

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  • Rick Campbell

    Nora -- 2 points.

    1.The Big Society doesn't work.

    2. This is the way the Coalition works ... 'We can be bothered woth you anymore'. (assuming they were bothered about anyone but themselves in the first place).

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  • "Social landlords are preparing to commit significant amounts of extra cash and resources to ready themselves for the impact of the Welfare Reform Bill, which was expected to receive royal assent yesterday"...
    Oh, yes?... and which are the services the landlords will deny and refuse to tenants for them to get all this extra cash?...

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  • It is irresponsible scaremongering without giving the full breakdowns of this new Welfare Reform Act and has no Eurpeon Courts got something to say about this inhumane Act

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  • munchboss

    the answer to the 28% loss in basicaly yes ,,,, it seems not matter what flavour governs the country ,they enjoy there big houses while a common person endures the rubbish ,,THE MOST ANNOYING THING IS WE VOTE FOR THEM TO DO IT

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  • Rick Campbell

    Her Majesty's Opposition didn't exactly pull out all the stops regarding the Welfare Reform Bill ... one wonders why.

    We are all responsible for our actions and inactions.

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  • munchboss

    agreed rick we do need to acept responsibility for our actions ulless you come under an excemption bracket ,and come on the goverments we have had for the past 15yrs have all come under the mental health act of not being resposible for any of there actions , not even for the lovely homes they have, that we pay for ,the long sun soaking holidays they have or any side winder payments they care to give to family or friends and as we all know they most definately dont except responsebility for the state they all seem to leave us in at the end of there terms

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  • I also wonder if the £250 for single people includes rent and disability premiums as my daughter as landed on benefits after becoming unwell

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  • Joe Halewood

    Susan Emmerson - the overall benefit cap for a single person is £350pw not £250pw and it includes rent and welfare benefits.

    Way to look at it is start with £350 then take away all welfare benefits and reliefs and the whats left is the maximum HB that can be paid

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  • MJA is disingenuous to claim that a difference between social housing and private sector tenants is being removed. The impact of the so-called "bedroom tax" on social housing tenants is invariably a percentage reduction in benefit. Although it might be difficult, a private sector tenant can underoccupy without penalty if they can find a property with a low enough rent (I know, I have done it). The social housing tenant has no such option - any underoccupation and their HB is cut.

    The change would be far less objectionable if it only applied to people who had been offered and refused an appropriately sized property.

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  • These reforms will affect genuine people of whom i have sympathy with as it will be tough times, and affect people who have no intention of geeting out there to seek employment, of which i have no sympathy with. Somebody very close to me pulls in around 50k a year on benefits with his 8 kids, shocks me that they are exploiting the system to gain more money, they are both (parents) being paid as carers to look after their own children (ADHD).... come on people, lets get a grip hey.

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  • "there are safeguards in place e.g. discretionary housing benefit"

    As someone who once attempted to claim DHB I always tell people not to bother. Council's ask the most intrusive of questions and treat claimants of it as people trying to con money out of them.

    When we enquired about it after one council failed to give proper information when we first mover from LA to private rented (don't worry about the slight difference in rent, just move in and we will sort it out then. Yeah, I'm stupid for doing as they suggested) we had some snot-nosed little git come out on our second day in our new home and tell us "it's best you actively start looking for somewhere else to live".

    This isn't the "Welfare Reform Bill" this is "Welfare Cuts Bullsh*t"

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  • The con dems are punishing TWICE OVER the 670,000
    unsuspecting council tenants who have extra space in their homes,
    as firstly they are cutting housing benefit by £490 million p.a ,
    and then secondly for this exact same reason of having the extra
    space , they are having council tax benefit cut by £500 million p.a
    This means these council tenants are facing a collassal shortfall
    of £ 1 Billion p.a which they have to meet themselves out of their
    other benefits which are also being reduced !!!!
    This is £1 Billion out of the £18 Billion of benefit cuts that are being imposed onto poorer communities in the near future.
    The tories said that by cutting housing benefit they expected rents
    to then fall, but they are also telling councils to push their rents
    up by 8% this year , and they also want hugh rent increases in the future to pay off old debts that are attached to these councils.
    Why is it only the poor are being targeted for punishment for
    having extra space in their home , for example british farmers
    get hundreds of millions in benefits subsidy tosupport them,
    Its one law for the rich and one law for the poor.

    companies get hundre millions

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  • How are people that are not working or on very low wages, expected to pay for the additional room charges? Surely they cannot force you to live with less than enough for food and bills, so that people are starving just to be able to pay their rent. Some people also, such as myself have the extra room for when my child visits. Where is the child supposed to stay if there is no spare room?

    This is incredibly unfair, is there a chance this will be overturned with enough complaints to the Eurio Courts or anything? Where do we even start with complaints?

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