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.
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
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?’