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Welfare Reform – what does it mean for housing?

Welfare Reform – what does it mean for housing?. Laura Shimili, Policy & Practice Officer, CIH. Expenditure on benefits. Welfare is too expensive.

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Welfare Reform – what does it mean for housing?

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

  2. Expenditure on benefits

  3. 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)

  4. 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

  5. Welfare benefits: old & new

  6. 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

  7. 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

  8. Impact model: assumptions 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

  9. Impact model: size criteria 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

  10. Impact model: direct payments 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

  11. Banking transaction costs

  12. 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)

  13. 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

  14. Universal credit – local support services • 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

  15. Universal Credit – help with housing cost • 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

  16. Universal Credit - Scale of change

  17. 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

  18. 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

  19. 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

  20. 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

  21. So what are organisations going to do? • 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

  22. 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

  23. 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?

  24. 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

  25. Thank you Questions? laura.shimili@cih.org

  26. Get the latest news & advice on welfare reform CIH Welfare Reform resources For the very latest policy news 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 laura.shimili@cih.org or david.pipe@cih.org www.cih.org/welfarereform @CIH_Policy

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