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The Chartered Institute of Housing is the independent voice for housing and the home of professional standards

Welfare reform


What will the Welfare Reform Bill mean for tenants and housing organisations.

Housing benefit reform sometimes has the feel of a failed perpetual motion machine. If the amount of hours spent and energy invested in it over the last couple of decades had translated into forward movement we’d have a remarkably good system by now. Instead, having gone round in circles the machine is in danger of grinding to a standstill.

So it’s time for another attempt, this time promising the most fundamental changes since the welfare benefits system was established. The question is: are we going forward, backward, or round in circles again?

The government’s Welfare Reform Bill starts its debate phases in the House of Lords this month (September), having made its way through the Commons last spring. Some of its provisions are radical, living up to the ‘fundamental change’ billing it has had. First then, let’s take a look at what is proposed.

The government says it has two main aims: to simplify the welfare benefits system, and to ensure that work incentives are built in. The provision that has caught the headlines most is the introduction of universal credit. This will be a single benefit to replace a variety of existing ones for people both in and out of work. So Working Tax Credit, Child Tax Credit, Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance – and Housing Benefit – will all be folded into the new benefit. Applicants will make just one claim, and the tapers that see some people lose up to 95 pence in the pound when they start work will be reduced.

The proposal has generally been welcomed as a principle: it is, as one professional put it, the holy grail of benefit reform. As many have noted, however, simplicity and fairness are not generally found together, so a range of detailed provisions to take account of people’s circumstances will still be needed. Moreover, when it comes to how the universal credit will be implemented, the problems multiply.

Many of the detailed provisions of the Welfare Reform Bill will be decided by ministers under broad powers to set regulations. The power with perhaps the widest consequences is to set a cap on the total amount of universal credit a household can claim. The government plans to set this at median earnings after tax and National Insurance for working families – currently projected at £500 a week in 2013 (with some tightly drawn exceptions).

It is this cap, rather than the stated principles of simplicity and incentive, that carries the government’s ideological intent, according to some. As FamilyMosaic Group chief executive Brendan Sarsfield comments, the cap means changing the face of our capital city to a new model in which only the well-off can live in the centre. The poor, especially those living entirely on benefits, will be consigned to the outskirts – if they can afford to live even there. ‘London is mixed, and has a vibrancy because rich live next to poor. With this measure, you are fundamentally changing the nature of London and I would like the government to say that is the strategy, and that they understand the implications also for schools, communities and so on,’ he says.

A big issue is that once a household has reached the £500 limit, it is the housing element that will be cut. In London, social housing tenants in larger homes will be worst affected, while the cap could affect even those living in two-bedroom homes in the private rented sector. Combined with the proposed ending of direct payment to landlords, the result could be alarming, with tenants forced to look for cheaper accommodation if it exists, landlords denied the security of payment they need, and those in the private sector especially looking to end the tenancies of those in arrears.

For several reasons though, the mood among policy specialists is that the very worst will probably be averted. As the government’s support on benefit cover for the new affordable rents in England has shown, it recognises the need to avoid instability in the social sector and to ensure landlords can satisfy their multi-billion pound lenders. Nor does it want to see sharp increases in homelessness figures. For similar reasons, the smart money is on some continuation of direct payments of rent to landlords being retained.

In between, though, is a large area of uncertainty. The administration alone will involve upheavals that carry the potential to make previous housing benefit calamities look like a stroll in the park. By 2017 when the scheme is fully implemented for all claimants, there will be no housing benefit specialists based in local councils. There will be a single centralised service, with as many claimants as possible expected to complete their applications online.

It is the familiarity of the scenario that worries experts such as Steve Jones. The Tai Ceredigion chief executive previously worked in the benefits sector, and remembers only too well the collapse of the system a decade ago. At that time, backlogs built up for months, people were threatened with eviction while waiting for their housing benefit, and some efforts to sort out the longstanding claims only worsened the problem for new applicants.

Jones sees two main issues over implementation this time around. The first is drawn from painful memory: ‘We’ve seen too many government IT project disasters.’ The second is the law of unintended consequences. ‘The government thinks that if HB is reduced, landlords will reduce rents. I don’t believe that is the case. People who might have been first time buyers will take up the best rented accommodation. So people in the lower paid sector will follow down, and people on benefits will be at the bottom. Under-35s will have to live in a HMO.’

It is this concern about the effects in the private rented sector that has led campaigners in Wales to lobby for Welsh Government support. They want to see extra funds directed to ensuring standards and controlling or mitigating the ‘unfortunate consequences’ of the changes underway.

Scotland is also attempting to track the changes and anticipate impacts via a multi-organisation HB Reform Impact Group led by the Scottish Government. Among their concerns are the speed of implementation of welfare reform, and the combination of the various cuts, changes and new legislation happening in parallel.

Convention of Scottish Local Authorities policy manager Jonathan Sharma says the reforms are putting enormous pressure on local government: ‘COSLA is undertaking considerable work together with the Scottish Government and others to assess the full impact of the proposed changes and to find ways of mitigating the impact.’

There are still questions, for example, over the future of council tax benefit and whether it too will become part of universal credit; and the likely devolution of the social fund, which could also end up with local authorities. ‘We are clear that the proposed changes to the benefit system will lead to a substantial increase in demand on local government services, at a time of budget cuts everywhere,’ Sharma notes. ‘There is for example research that welfare reform could lead to around 3000 new cases of homelessness in Scotland. And this is just the tip of the iceberg.’

There is a widespread feeling that too much emphasis is being placed on cuts and not enough on achieving the laudable aims of a simplified single benefit. As Steve Jones puts it, ‘pull back the wallpaper and you find the Treasury.’

So what can housing professionals do to prepare for the changes heralded in the Welfare Reform Bill? First and foremost, says Brendan Sarsfield, is the duty to prepare tenants by raising their awareness of what is happening as soon as possible. Beyond that, landlords will need to develop their existing data on customers so that they know what benefits each is claiming, if any. Then the active support many will need can be better targeted.

FamilyMosaic has also undertaken a significant resource shift to support residents. There will be more welfare rights officers to help residents, and the patch sizes of neighbourhood managers have been reduced to give stronger support. Sarsfield believes this type of action is essential: ‘I’m prepared to increase costs for the next few years as this work is needed, but in the event we have met the cost by taking out layers of management.’

What's in the bill

The bill returns to parliament from September for further debate. Its main provisions include:

• Universal Credit will replace most of the benefits and Tax Credits that currently provide means-tested support apart from Council Tax Benefit (the future of which is still under discussion). Universal Credit will consist of a basic personal amount with additional amounts for housing costs, disability, caring responsibilities, and children.
• Younger people will receive lower rates of Universal Credit. The maximum award of Universal Credit will be set on the basis of median earnings after tax and National Insurance for working families – currently estimated at £500 a week in 2013. Disability Living Allowance recipients and War Widows will be exempted.
• The introduction of a single taper. The taper (the rate at which benefit is reduced to take account of earnings) will be set at a withdrawal rate of 65 percent so that the Marginal Deduction Rate for low-earning workers would be reduced to 65 per cent (currently at 96 per cent) for those earning below the personal tax threshold and to around 76 per cent for basic rate taxpayers
• Changing income disregards. Some groups will be allowed to earn significantly more before their benefit starts to be withdrawn, although these are sharply reduced for anyone who receives help with their housing costs so most tenants will not benefit. The level of earnings disregards will reflect the needs of different families. "". 
• Universal Credit will introduce more stringent levels of ‘conditionality’, where claimants of certain benefits are expected to meet particular requirements in exchange for benefit payments. Non-compliance will lead to tougher sanctions.
• The Department for Work and Pensions will be responsible for delivery of the Universal Credit. The internet will be the main administrative vehicle. Claims will be made on a household basis, with couples required to claim individually.
• Universal Credit will involve reform and change in other parts of the welfare system including contributory benefits, the social fund, passported benefits and Disability Living Allowance.
• Implementation will begin from October 2013 with new claimants and be complete by 2017.

A wide group of campaigning organisations including the CIH has joined forces to press for changes to the bill. The issues for debate include:

- Taper rates and disregards. Despite this being a key component there is little mention of it in the bill. Campaigners want explicit recognition of differing family circumstances.

- Calculation of housing costs within universal credit. Campaigners want annual reviews of the extent to which provision is keeping track with actual rents, and provision to ensure that at least the bottom 30 per cent of private rented housing is affordable.

- Housing cost run-ons (extended payments). The bill contains no provision to help people moving into work. Campaigners want payments to continue for the first four weeks when a claimant moves into work, as now.

- Conditionality and sanctions. Campaigners want DWP to recognise each claimant’s barriers and well as their support needs. Maximum higher level sanctions should be reduced from three years to 26 weeks.

- Under-occupancy. The bill would penalise people in social housing who are deemed to have a spare bedroom, cutting their benefit by 13% (or 23% for under-occupation by two rooms). Campaigners are concerned at the lack of attention to local market conditions, costs of disabled people having to leave adapted housing, lack of recognition for the need for carers and a raft of consequences for people forced to move.

- The benefit cap. This is being imposed on top of cuts to Housing Benefit already implemented from 2011. Campaigners say the provision is ‘unworkable and extremely punitive’ and are lobbying hard for more flexibility with recognition of household circumstances.

- The new IT system. There are widespread fears that the short timetable for implementation will bring technical problems. Campaigners want assurances that no reforms will be implemented until the system has been tested and guaranteed to work.

CIH is campaigning hard on the administration side of the bill, not least because memories of the previous Housing Benefit administration collapse are still fresh. Back in 2001 the average wait for payment was 58 days and some claimants were waiting much longer. Today it’s down to just 26 days despite more claims and a more complex system. CIH policy and practice officer Sam Lister said: ‘We are concerned that if one element in the universal credit is delayed, the whole payment will be held up. We are pressing the DWP to allow payments to be split so that the housing element can still be paid separately. We feel this would not undermine the principle of universal credit.’

You can find full details of the bill and CIH briefings on the website.

 This article by Janis Bright first appeared in Housing magazine September 2011

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