1. cipfa.org.uk CIPFA Housing Advisory Network 03 February 2012 Welfare Reform & Universal Credit / Affordable Rents / Supported Housing

2. cipfa.org.uk CIPFA Housing Advisory Network Welfare Reform & Universal Credit The economics of supply and demand

3. cipfa.org.uk CIPFA Housing Advisory Network Welfare Reform & Universal Credit Government Proposals for future support for those living in Supported Housing The economics of supply and demand apply just the same here

4. cipfa.org.uk CIPFA Housing Advisory Network Welfare Reform & Universal Credit 8 Major Changes 1.Changes from 50th percentile to 30th percentile 2.Caps on the Maximum Local Housing Allowance Payable, By Property Size. 3.Increasing non-dependent deductions 4.Increasing upper age limit for Shared Accommodation Rate (single room rate) from 25 to 35 years old. 5.Change to using CPI to up-rate benefits rather than RPI 6.Limiting HB Payable to Working Age Tenants, By Property Size 7.Limiting total benefit payable to non-working households of working age 8.Increasing amounts available for discretionary housing payments

5. cipfa.org.uk CIPFA Housing Advisory Network Welfare Reform & Universal Credit 8 Major Changes 1.Changes from 50th percentile to 30th percentile 2.Caps on the Maximum Local Housing Allowance Payable, By Property Size. 3.Increasing non-dependent deductions 4.Increasing upper age limit for Shared Accommodation Rate (single room rate) from 25 to 35 years old. 5.Change to using CPI to up-rate benefits rather than RPI 6.Limiting HB Payable to Working Age Tenants, By Property Size 7.Limiting total benefit payable to non-working households of working age 8.Increasing amounts available for discretionary housing payments

6. cipfa.org.uk CIPFA Housing Advisory Network Local Housing Allowance (LHA) rates will be calculated on the 30th percentile of local market rents rather than the mid-point. This means that in each market area if there were 100 properties available for letting of the appropriate size, the LHA will be based on the 30th lowest rent of those 100 properties. In other words – access to the bottom 30% of the market instead of the bottom 50%. Tenants in private rented housing who claim LHA will have access to fewer properties in their area where their full rent will be covered by their benefit Tenants who cannot find a property in the first 30th percentile will have to make up the difference in rent DWP estimates that 775,000 will be affected across the UK. DWP estimates in 81 Local Authority areas the average loss will be £10 or more per week.

7. cipfa.org.uk CIPFA Housing Advisory Network Movement of low income tenants from more expensive rental market areas to cheaper ones Households struggling to access PR accommodation. Increased hardship, greater demand for debt counselling services, rising rent arrears Concentration of tenants in receipt of LHA in cheaper, poorer quality PRH Greater demand on homelessness and housing options services Increase in temporary / B & B demand if tenants evicted are considered intentionally homeless Greater levels of overcrowding Increased applications to the housing register Landlords less prepared to let to known benefit claimants Increased applications for discretionary housing payments

8. cipfa.org.uk CIPFA Housing Advisory Network Welfare Reform & Universal Credit 8 Major Changes 1.Changes from 50th percentile to 30th percentile 2.Caps on the Maximum Local Housing Allowance Payable, By Property Size. 3.Increasing non-dependent deductions 4.Increasing upper age limit for Shared Accommodation Rate (single room rate) from 25 to 35 years old. 5.Change to using CPI to up-rate benefits rather than RPI 6.Limiting HB Payable to Working Age Tenants, By Property Size 7.Limiting total benefit payable to non-working households of working age 8.Increasing amounts available for discretionary housing payments

9. cipfa.org.uk CIPFA Housing Advisory Network Deductions from the claimant’s eligible rent where other adults with the claimant but are not part of their family for benefit purposes (e.g. adult children) who are either working or claiming in their own right are set to increase. 27% increase in April 2011 and further increases in 2012 and 2013. Tenants sharing their home with other adult(s) to contribute towards rent. N.b rates of deduction are severe where the adult occupier earns more than £200 per week. Intended as an incentive for tenants to encourage children to leave home and a disincentive to ‘voluntary sharing’. Estimates at this stage suggest that approx. 213,000 households will be affected. Of these, 160,000 will be on HB of which 142,000 will face increased deductions in both their HB and CTB

10. cipfa.org.uk CIPFA Housing Advisory Network Higher demand for debt counselling Higher demand for homelessness & housing options services Potential impact on temporary and/or B & B if tenants evicted are considered ‘intentionally’ homeless Increased applications/demand from younger people Increased transfer applications & bidding via CBL Private landlords more reluctant to let to families with older children Increased applications for discretionary housing payments Increased demand for independent housing from people who previously shared Higher incidence of adult children being asked to leave family home due to financial strain Disagreements amongst families over liability for payments Tenants less willing to care for elderly parents in their own home Increased risk of increasing arrears Need for additional staff/resources to collect shortfall from tenants Increased pressure from HB departments on landlords to conduct tenancy audits/notification of changes

11. cipfa.org.uk CIPFA Housing Advisory Network Welfare Reform & Universal Credit 8 Major Changes 1.Changes from 50th percentile to 30th percentile 2.Caps on the Maximum Local Housing Allowance Payable, By Property Size. 3.Increasing non-dependent deductions 4.Increasing upper age limit for Shared Accommodation Rate (single room rate) from 25 to 35 years old. 5.Change to using CPI to up-rate benefits rather than RPI 6.Limiting HB Payable to Working Age Tenants, By Property Size 7.Limiting total benefit payable to non-working households of working age 8.Increasing amounts available for discretionary housing payments

12. cipfa.org.uk CIPFA Housing Advisory Network April 2013 – the 30th percentile LHA rate will be set by uprating April 2012 LHA rates in line with CPI inflation: LHA rates will no longer be based on real local market rents. Over the period 1991-2008 rent increases outstripped CPI. If this trend continues the change will mean that the purchasing power of the LHA will gradually be eroded. The effect will be to shrink the 30% of the market that is at least theoretically available to tenants claiming benefit. In the long term there will come a point at which the cheapest property which is available in a given market area is more expensive that the full LHA rate.

13. cipfa.org.uk CIPFA Housing Advisory Network By 2023, 2 bedroom houses in 34% of local authorities outside of London will be unaffordable for people claiming LHA, including working households on low incomes and those unable to work such as pensioners, carers & people with disabilities. There is a link between areas which will become unaffordable and those regions with the biggest proportion of claimants in work and the highest rates of employment. Meanwhile regions that remain affordable in 2023 – the North East, North West, Yorkshire & Humber are those with above average rates of economic inactivity and unemployment. This suggests that benefit claimants will be ‘forced’ to live in areas which further exclude them from the labour market. Tenants who do not (or cannot) move to a cheaper home will gradually have to make up more of the rent from other sources of income.

14. cipfa.org.uk CIPFA Housing Advisory Network Movement of low income tenants from more expensive rental market areas to cheaper ones High cost regions accom. affordable to benefit claimants will become increasingly confined to isolated low cost ‘islands’ which may become a magnet to benefit claimants from surrounding areas Households struggling to access private accom. Increased hardship, greater demand for debt & counselling services, rising arrears Concentration of tenants in receipt of LHA in cheaper, poorer quality private rented housing Greater demand on homelessness & Housing Options services Potential impact upon temporary and/or BB accom. If tenants evicted are considered intentionally homeless Greater levels of overcrowding Increased applications to Housing register Landlords less prepared to let to known benefit claimants Landlords making more stringent income checks on potential tenants Increased applications for discretionary housing payments Higher demand for social housing from tenants who currently live or intended to live in PRS accommodation

15. cipfa.org.uk CIPFA Housing Advisory Network Affordable Rent Policies Affordable Rent Policies ? As set out in the Housing Strategy… For each property now offered – 40 families chasing By 2015 homeless demand will equal a city the size of Birmingham Primary legislation not required to make flexible tenancies mandatory.. Likely to be re-visited by Government in the Autumn New way of funding affordable housing – and will result in a new type of Housing Association Business drivers frame choices of the HA, not ‘need’ Two tier system – perverse incentives Role of HCA as ‘economic regulator’ View of ‘experts’ – unsustainable as it is too debt hungry

16. cipfa.org.uk CIPFA Housing Advisory Network CIPFA WEBINARS 08 & 09 FEBRUARY WELFARE REFORM & UNIVERSAL CREDIT – THE IMPACT ON LOCAL AUTHORITIES AND HOUSING ASSOCIATIONS To register your interest in these events: Louise.Dunne@cipfa.org.uk

17. cipfa.org.uk CIPFA Housing Advisory Network the provision of high quality events, advice, publications & training to the social housing sector 98.9% customer satisfaction 2010/2011 A national reputation for excellence Why Not Join Our Growing National Network? www.cipfanetworks.net/chn Louise.Dunne@cipfa.org.uk