welfare reform – what does it mean for housing?

Learn with us. Improve with us. Influence with us | www.cih.orgLearn with us. Improve with us. Influence with us | www.cih.org

Welfare Reform – what does it mean for housing?Laura Shimili, Policy & Practice Officer, CIH

Learn with us. Improve with us. Influence with us | www.cih.org 3

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Mobility Allowance / Disability LivingAllowance / Attendance Allowance / CarersAllowance

Sickness / Invalidity / Incapacity Benefits

Income Support (lone parents, sick,disabled, other)

Unemployment Benefit / Income Support(unemployed) / Jobseekers Allowance

Housing Benefit / Council Tax Benefit /Discretionary Housing Payments


Welfare is too expensive

• “The explosion in welfare costs contributed to the growing structural budget deficit in the middle part of this decade... Costs are completely out of control. We now spend more on housing benefit than we do on the police and on universities combined” (June)


Aims of welfare reform

Biggest shake up of the welfare system in a generation Brings together all earnings-related benefits and tax

credits in one single payment the Universal credit

Aims:•Cut costs•Make it fairer

something for something•Simplify it•Use it to drive different behaviours


Welfare benefits: old & new


Key features• A new single payment - a ‘surrogate’ wage• Better off in work• Individual responsibility

To make a claim and report changes Presumption of payment to claimant Monthly in arrears Payment exceptions are a temporary position

• Automated system Mainly on-line claims but face-to-face and telephone support

available (local Jobcentres/LAs internet access points) Exceptionally possible to make claim face to face or by

telephone Universal Credit helpline for online claims Mon-Fri, 8am-6pm


The package of changes• Introduction of Universal Credit • Local Housing Allowance

Reduced & capped

• Non-dependent deductions Increased in 2011/12/13 after a freeze

since 2001; by RPI thereafter Replaced by flat rate £65/m under UC

• Shared Room Rate Age increased

• Social sector size limits Introduced

• Discretionary payments Increased

• SMI (mortgages) Continues although time limited!

• IB claims to ESA or JSA• Total benefit cap• Tax Credit changes• Council Tax Benefit localised

And cut

• Social Fund scrapped Local Welfare Assistance

• Benefit uprating By 1% (less than RPI)

• DLA becomes PIP Higher test for award


XYZ Housing Association profile• Based East Midlands• General needs – one third elderly• 5,000 tenancies• Stock:

1Bed (24%) 2 Bed (34%) 3 Bed (37%) 4+ Bed (5%)

• Average weekly rent £72• Collection rates vary according to measure

Impact model: assumptions


XYZ Housing Association: universal credit steady state• Estimated annual loss to tenants in HB £538,000• Number of losers 1 bed under 658• Number of losers 2 bed under 165• Average weekly loss 1 bed under £11• Average weekly loss 2 bed under £23

• If 10% uncollectable £54,000

Impact model: size criteria


XYZ Housing Association current• Total rent roll £18.72 million• Tenant payments as % rent roll 40%• Rent roll covered by HB direct £11.23 million

XYZ Housing Association: universal credit steady state• Tenant payments as % of rent roll 70%• Rent roll covered by HB direct (30% vulnerable) £5.62

million

Impact model: direct payments


Banking transaction costs


The shifting timetable

Original UC/PC plan • New claims universal credit (October 2013)• Pension credit housing credit (October 2014)Revised UC timetable?• Pilots (April 2013)• Non-HC only? Selected areas? (October

2013)• HC start? Selected areas? (April 2014)


Welfare reform – different pilots • Universal Credit pathfinder

Ashton-under-Lyne’s jobcentre first to accept claims for Universal Credit from 29th April

the rest of the pathfinder in Tameside, Warrington, Oldham and Wigan will start in July

• The direct payment demonstration projects June 2012 – June 2013 testing out direct payment

of housing benefit• Local authority-led pilots

Autumn 2012 testing how local expertise can be used to support people to claim UC


• Demand for support services from changes to HB and from UC Advice with opening bank accounts Debt and housing advice Online assistance for UC Money advice • But significant withdrawal of the state from provision of

services Landlord run down of advice services? As a result from other costs Local authority run down of HB departments? Much slow as UC take up is less England, April 2013, Community Legal Service funding for welfare benefit advice

withdrawn

• Local support services framework published by DWP Sets partnership construct to deliver support services for UC claimants Based on a ‘single claimant journey’ from dependency to self-sufficiency and work

readiness DWP, LAs, social landlords and Voluntary and Community Organisations aligned

Universal credit – local support services


• HB included in UC paid directly to claimants Payment cycles (monthly vs weekly) Different payment methods (DD, SO, pre paid cards, jam jar accounts, cash, over

the phone, cheque Tenants prefer to be in control, use multiple payment methods rather than

automated methods Has resource and cost implications for landlords Opening bank accounts can be difficult

• Landlord reactions Payment strategy – prioritise DD, SO, rent officers, other? Attitude to arrears – suspend HB; provide intensive support Support strategy for UC claimants – triage based on need; referral

• Payment figures from demonstration projects So far (Dec 13) 6,220 tenants paid HB directly Average arrear levels 8%; across different areas ranged from 12% to 3% Next figures published Oct 13

Universal Credit – help with housing cost


Universal Credit - Scale of change


• DWP 8 million universal credit cases when fully implemented 20% increase on existing combined caseload (ignoring tax credit cases)

• HMRC developing Real Time Information for collection of PAYE taxation employers to provide salaries info monthly online about Oct DWP use info from RTI to calculate UC

• DWP under Universal Credit tax credits (moved from HMRC) – some staff expected to move to

administer UC Help with housing cost (previously HB moved from LAs)

• Future of LA staff not clear depends on arrangements for the local delivery and support of

Universal Credit what impact from localised council tax support and localised

discretionary Social Fund

Universal Credit - Scale of change


Welfare reform - implications for claimants

• Reduction in housing benefit from social size criteria, benefit cap, benefits up-rating

• Shortfall between HB and rent • Financial hardship

Other pressures on income • Unemployment• Underemployment• Food / fuel prices• Electricity / gas prices• Childcare costs• Reductions in public services


Welfare reform - implications for landlords Landlords

Arrears Work harder to collect… A reduced income….. With increased costs Affects other aspects of business Impacts ability to develop and secure finance

•Local authorities Families moving will put pressure on other services;

education/social services high demand for discretionary housing payments, large number of queries higher numbers of appeals local knowledge of HB will be lost


What’s out there?• Pre-payment cards

Not a credit card; no need for bank account; coupled with reward schemes

• Mobile payment Deposit into an account stored in cell phone; branchless

banking • Consumer reward schemes• Bulk purchase

Which? / 38 Degrees - The Big Switch• Tenant products

Consumer segmentation; Mosaic (Experian) used by local authorities • Consumer bundles

Co-op Bank: payment card and bank account Co-op store reward scheme


• Need for strategic planning gather the data and assess impact customer engagement and clarity of communications support for tenants

• The pressure on welfare spending is long-term so needs to be built into business plan assumptions

• Manage risk Where is risk higher – bedroom tax; benefit cap; direct

payment What strategies for income recovery - by far the biggest risk Evictions; how will criminal justice system respond?

• Review policies and procedures• Rent arrears policy; lettings policy (difficult to let properties?)

• Review local support services • Welfare advice / money management

So what are organisations going to do?


• Need for an organisational strategy • clarity on role, objectives and values to inform decisions • grow or withdraw from some services in order to meet

wider business objectives • Working in partnership

• Other landlords (common lettings/ shared services) • Financial institutions (banks credit unions)• Payment card providers

• There are some tried and tested approaches• Innovate…• Use and share the knowledge that is already out

there• Adopt technology rather than self build

So what are organisations going to do?


Housing organisations trends• Wider investment in housing - Increasingly moving towards relying

on private finance than government grant Declining, but still sizeable govt grant - c.41% in 2008-11 Grant rates down - c15% 2011-2015 HAs borrow more – funded by higher rents

• Organisational impacts Review purpose & mission Wider market vs core product

• Greater commercial activity for cross subsidy? Increased focus on reducing costs and improving business

processes/sharing services• New world regulation focusing on protecting assets • Source of finance crucial – debt and bonds, institutional

investment, reserves, but unlimited capacity?


What does the future hold• Uncertainty continues but need to stay positive

Spending review in summer General elections Slow recovery

• Welfare reform adds to it Landlords and tenants

• Personal, targeted, time limited subsidy vs long term capital subsidy• A new welfare settlement – whoever governs• Focus on Value for Money for public purse – additional outcomes, no

extra resource

• Use change as opportunity to innovate


Thank you

Questions?

[email protected]


CIH Welfare Reform resources We have developed a range of resources on welfare reform in our website that keeps you up to date with•Essential information •News •Tools and briefings

– Welfare reform impact tool

•Events and trainings.

We are developing a range of ‘Need to knows’ on various aspects of welfare reform. CIH administers and facilitates on behalf of DWP/DCLG the Direct payment learning network. to join email [email protected] or [email protected]

www.cih.org/welfarereform

For the very latest policy news

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welfare reform – what does it mean for housing?

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