Housing Benefit & Welfare Reform 11 October 2011

1. Housing Benefit & Welfare Reform11 October 2011 Sam Lister Policy and Practice Officer

2. Setting the scene

3. The Context • Work and Pensions is largest budget • more than entire NHS spending • More than twice education spending • HB spending £18 billion • second largest social security item after retirement pensions • third largest item if you include tax credits

5. Expenditure on benefits

6. Cause of rapid rise? • DWP Minister: Due to LHA rate inflation and feedback • Increases in caseload • Caseload composition • Rent increases – but not LHA rate inflation (i.e. LHA rates broadly follow the wider PRS market)

7. Caseload composition

8. Projected savings Budget Red Book & Spending Review Policy Costings 2014/15* • LHA abolish £15 excess £550M • Social sector size limits £490M • LHA 30th percentile £425M • LHA CPI cap £390M • Non dependent deductions £340M • Household benefits cap £270M • Increase age limit for shared room rate to 35 £215M • Time limit HB to 90% for JSA awards £110M • LHA award caps and 4 Bed limit £ 65M • Discretionary housing payments -£ 40M • Additional room for carers -£ 15M • Total annual saving (steady state) £2800M • Other welfare benefits £7500M

9. Looking to the future Help with housing costs • Short-term • Medium-term • Long-term

10. 2013 and beyond HB is a dead benefit • Terminal decline starts October 2013 • Working age claims go to Universal Credit • Pension age claims to Pension Credit • HB reforms will be baseline for UC • Legacy caseload to Universal Credit completed October 2017 • Help with housing costs paid together with out of work benefit

11. Working age benefits: old & new

12. This cant happen can it? What will happen • HB PRS changes (have done already) • Universal credit • Universal credit timetable What might change • Some adjustments to the household cap • LHA CPI indexation (two years only) • Some concessions to under occupation • Payment and splitting universal credit

13. Overview of reforms

14. 2013 and beyond HB is a dead benefit • Terminal decline starts October 2013 • Working age claims go to Universal Credit • Pension age claims to Pension Credit October 2014 • HB reforms will be baseline for UC • HB legacy caseload transferred by October 2017 • Further ahead – move to a much more ‘rough and ready’ assessment

15. Happening now Private rented sector • £15 excess abolished (April 2011) • Set local housing allowance at 30th percentile of rents (April 2011/ January 2012 or next review date) • LHA Caps (April 2011/ January 2012 or next review date) • Extension of shared room rate to under 35s (January 2012 or review date)

16. Happening 2013 All claims • Overall benefit cap (2013-14) Social rented sector • Limit working age entitlement to reflect family size (2013-14) Private rented sector • Local housing allowance: switch to CPI indexation (April 2013) Homeless – temporary accommodation • Temporary accommodation subsidy (April 2013)

17. Housing support welfare cuts Budget Red Book & Spending Review Policy Costings 2014/15* • Social sector size limits £490M • LHA 30th percentile £425M • LHA CPI cap £390M • Household benefits cap £270M • Shared room extension £215M • Other private rented sector £ 650M • Other social rented sector £ 240M • Other housing cost support (e.g SMI) £ 130M • Other welfare benefits£7500M

18. Other welfare benefits • Benefits up-rated by CPI • Abolition of income support (migration of lone parents etc to JSA • Transfer of IB/SDA caseload to ESA • Contributory ESA limited to 12 months • disability living allowance replaced with personal independence payment (ESA style medical test) • Social fund • Community care grants disappear

19. Private rented sector

20. LHA £15 Excess • Affects 47% of LHA claimants (Great Britain) • Average loss £12.00. 68% of losers in the £10-15 range of losses • Proportion of claimants losing increases with property size (range 30%-82%) • From April 2011 • DWP Estimate: 438,000 claimants in Great Britain lose £11.00 p.w.

21. LHA Caps • Regulations already laid • Absolute weekly limits: • 1 Bed £250.00 • 2 Bed £290.00 • 3 Bed £340.00 • 4 Bed £400.00 • 4 Bed cap outside London 3,620 losers • 4 Bed cap 1,940 losers in London • All other sizes 15,470 in London) • No mechanism for up-rating caps (Government can choose index and timing)

22. LHA 50th percentile (median)

23. 30th percentile impact • Transitional protection • Problems where evidence base is poor makes 30th percentile more problematic. • 47% of losses in £5-10 per week range (Great Britain) • DWP Estimate: 775,000 claimants (83%) losing average £9.00 per week

24. Transitional protection • Applies to existing or new clams made before 31December 2011 • LHA caps • 30th percentile • Shared accommodation rate • For existing claims for nine months from anniversary date (starting from April 2011 to March 2012) • For new claims made 1 April 2011-31 December 2011 for 12 months from anniversary date

25. Shared room rate • Upper age limit for single claimants being increased from January 2012 • Transitional protection • Two new exceptions: • Has at anytime lived in homeless hostel for 3 months (whether or not continuously) and has accepted support services to resettle/rehabilitate • Offenders who are the subject of multi-agency management arrangements • DWP Estimate: 62,500 claimants in Great Britain lose £22 p.w. circa 20% of 1 bed caseload

26. LHA CPI Cap • LHA rates set by CPI rather than real rents • Effect will be overtime to squeeze the 30% of the market that is theoretically available • Rent inflation almost always outstrips CPI • Only 5% of CPI is housing costs • In theory there will come a point at which the lowest real rent is higher than the 30th PC up-rated by CPI • Breaks the link between help with housing costs and actual housing costs

27. CPI indexation The impact of Welfare Reform Bill measures on affordability for low income private renting families Sam Lister (CIH), Liam Reynolds and Kate Webb, Shelter • Date at which very unaffordable • Red – 2023 • Orange – 2025 • Yellow - 2030

28. Social rented sector

29. Social sector size limits • Requires primary legislation – will be in Welfare Reform Bill – then subsequently detail made by regulations • Does not apply to pension age claims (age 61½ -62 by 2013 and rising) • Deductions for under-occupation • 1 bedroom (15%) • 2 or more bedrooms (23%) • In Great Britain almost one-third of social sector tenants on HB • Average loss £13 per week

30. All tenants

31. Non-dependant deductions • Previously frozen since April 2001 • Unfreezing in three staged increases starting in April 2011 • By April 2014 back to where they would have been(??) • Indexed to eligible rents (2001-10) then RPI thereafter (80% to 90%?) • CTB (24%) as well as HB (27%)

32. Rent charges 2010-12

33. Household benefit cap • Based on national average earnings • Applies to all tenures • Only applies to out of work households • Doesn’t apply to households on disability living allowance, working tax credits, war widows pension or retired • Impact on large families in high rent areas • HM Treasury estimate average loss £93.00 per week

34. Household benefit cap • Part of Spending Review • Overall cap of £350 /£500 per week • Add together all out of work benefits: • JSA/ESA/IS, child tax credits, child benefit, • council tax benefit, (& others) • Any room left over can be used for HB (rent) • Any excess is shaved off HB (rent) • Mainly affects couples with large families • Circa £228 per week left over for couple with two children decreasing by £62.50 for each extra child

35. Household benefit cap

36. Household benefit cap: PRS Household benefit cap: impact on 3 child families in London and the south east.

37. 2013 & Beyond – Universal Credit

38. Universal Credit • Potentially much wider reaching implications than the Budget 2010 reforms • Combine all means-tested benefits for working age claimants into single working age benefit (already under way) • Single income assessment (most effective way of dealing with deepest part of poverty trap) • Incentives to start work and increase hours build up over time • HB changes will form the baseline

39. The policy vision • DWP view universal credit as a surrogate wage

40. The poverty trap Couple with two children. £80 pw rent. 2010/11 Rates

41. Universal Credit: structure Couple with two children. £80 pw rent.

42. Administration and changeover • Reduce structural complexity ….but one very complicated benefit • Administered by DWP centrally • ‘Real time’ weekly adjustments • ‘Challenging IT and administration reforms’ • Starts in October 2013 transfer of legacy caseload completed by October 2017

43. Centralised system • Contact points will be DWP local office • Initial claim either on-line or by telephone with some local office back up

44. Support systems 2013 • Local authorities already cut grants to voluntary sector • Landlord run down of advice services? • Local authority run down of HB departments • England Community Legal Service funding for welfare benefit advice withdrawn

45. Scale of change • DWP taking on 4.8 million housing costs cases and 2 million working cases • Taking over administration of in-work benefits (employed /self employed) • 8.0-8.5 million universal credit cases (ignores tax credit caseload) • 2.1 million pension credit cases • 20% increase on existing combined caseload (ignoring tax credit cases)

46. Payment issues • But currently DWP have no way of splitting off the housing costs element • Starting point will be LHA payment rules with some modifications (probably broader) • Eight weeks • Rent arrears direct (including hostels) • Vulnerable • Unlikely to pay rent • Payment slowed down to the slowest part of the process (JSA, tax credits, housing costs)

47. Direct payments as rent roll Non HB rent roll • Working age 22% • Pension age 8% Pension age HB rent roll • Pensioner direct payment 11% • Pensioner tenant payment 5% Working age HB rent roll • Working age tenant payment 16% • Working age direct payment 38%

48. Demonstration projects • Demonstration projects not pilots • Circa 6 projects at least one each in Scotland, Wales, and London • DWP will be inviting bids by local authorities (by benefit authority not by landlord) • Start June 2012 for one year • Researchers involved in the design • Aim to identify risk indicators to take out cases for landlord payment early on and find what works in terms of support • Procedure for review

49. Conclusions & Action

50. Conclusion • Landlord need to start planning for this now • It is not good enough to rely on lobbying for changes • This is not just about training front-line staff it goes right through the organisation • Board and senior management to develop strategy and make resources available • Ideally to pilot some initiatives before the change takes place