Housing associations bearing the brunt of welfare reform

As government attempts to reduce the benefits bill through welfare reform, housing associations are left dealing with the fallout, as Alex Stevenson reports

‘It’s a cruel pill.’ That’s how one housing association chief sums up the coalition’s welfare reforms, which are already hitting tenants hard – and threatening to get much worse in the future.

Policies like the unpopular ‘bedroom tax’, the benefit cap and the flagship universal credit are designed to drive down the overall welfare bill – and the early figures suggest they are making a difference. But speak to housing association bosses and it quickly becomes clear there’s a heavy human price to be paid.

The ‘most severe’ impact on the households affected comes from the benefit cap, which prevents any family receiving more than £26,000 a year. Across the country 8,000 households have been hit, and it’s mostly housing associations in the south-east which are having to help deal with the consequences.

‘The majority of our residents affected by the cap have a large number of dependents,’ explains Andrew Sodje, head of revenues at London housing association Peabody.

‘In looking for employment, these tenants also need to factor in childcare costs, putting additional pressure on household budgets.’ The Department for Work and Pensions (DWP) has made discretionary housing payments available to some of these families. But as Sodje points out, ‘these payments do not offer a long-term solution to residents’.

A reform with a much broader, more worrying impact has been the under-occupancy charge, which sees 25% or 50% of a housing benefit payment deducted for each vacant spare room. This ‘spare-room subsidy’, as the government calls it, has come as a shock to housing associations. For years, registered social landlords were told to build two- or three-bedroom homes to provide their tenants with flexibility. That prompted Symphony, a housing association with properties across the north-west, to cut back on the number of one-beds in its portfolio. So when the bedroom tax arrived, they were stunned.

‘While the numbers are low we can cope,

but there’s no way we could provide that level of support for many more.’

‘The change of government policy has left an awful lot of people in a difficult position,’ says Judith Winterbourne, the managing director of Symphony subsidiary Contour Homes. Providing all of those who want to downsize with a smaller home – assuming no-one new gets off the waiting list – will take five years.

The DWP is convinced its approach is making a difference. ‘Tenants are taking action in a number of ways from moving and using home swap services to finding work or increasing earnings,’ a spokesperson said. But only a ‘tiny number’ of people have actually registered to move to a smaller home, Peabody’s Sodje claims. ‘To be honest,’ he says, ‘it shows the policy is not working and needs reforming.’

Others tasked with handling the changes are more pragmatic. ‘We’re managing it,’ says John Baldwin, housing and neighbourhood services director at Thames Valley Housing Association. His problem is the extra resources being poured into helping people aren’t ‘scaleable’.

‘We’ve put in a lot to try and manage the situation for relatively small numbers of people,’ he says. ‘While the numbers are low we can cope, but there’s no way we could provide that level of support for many more.’

And that is what is leaving so many housing associations gritting their teeth at what’s still to come. Each is dealing with tens, occasionally hundreds, of households hit by the benefit cap or bedroom tax. When universal credit goes nationwide, they will have to deal with thousands of struggling families.

That could threaten housing associations’ plans to build more much-needed properties. Unlike the reforms implemented so far, universal credit’s wider roll-out could endanger housing associations’ business models.

For instead of receiving a single monthly payment from their local authority, rent will have to be collected from each individual household directly. That means ’30 paydays a month’, sending admin costs spiralling upwards. ‘It’s a genuine concern that if the money doesn’t come in, the business has to adapt in some way,’ Julie Vickers, director of business support at Greater Manchester’s New Charter, worries.

Worse still are the implications for revenue. Most housing associations currently enjoy rent collections ‘somewhere around the 100% mark’. But those involved in the universal credit pathfinder schemes say they’ve seen rent collection rates plummet to as low as 50%.

‘The language they use is that once a claimant

is in universal credit, they’re in the “lobster pot”. They can’t get out.’

When tenants are forced out it’s bad news for the business. Rising void rates mean money has to be spent renovating and refurbishing properties. ‘It’s hugely labour-intensive,’ Winterbourne points out. ‘This is all money that we can’t spend on building new homes.’

In Warrington, Golden Gate Housing Trust’s director of housing management Peter Fitzhenry is deeply worried. ‘We’ve got about 30 of our tenants on universal credit – and one or two people are spending all their week managing it,’ he says. ‘We can’t sustain that.’

Fitzhenry sounds deeply disillusioned with the system – and who can blame him, after one payment was sent to the Driving and Vehicle Licensing Agency? Golden Gate has begun sending its mail to the DWP by recorded delivery, because it doesn’t trust the department’s internal admin systems. ‘You couldn’t make it up,’ Fitzhenry says. When he asked a government official whether it was possible for tenants to abandon universal credit, he was told the answer was an absolute ‘no’. ‘The language they use is that once a claimant is in universal credit, they’re in the “lobster pot”. They can’t get out.’

Housing associations are doing their utmost to mitigate the impact of these changes. Lowering rents isn’t an option, though, because changes to capital funding rules actually mean ministers want them to increase rents. Instead their approach is to provide intensive, personal support – what Baldwin calls ‘a lot of hand holding’.

Housing associations have been leading the fight against poverty for decades. What now seems strange to them is the source of that poverty is the government. ‘It’s in our interest to invest our time in making life better for everybody,’ Vickers says. That’s what the DWP is counting on.

As ministers focus on reducing the overall cost of the benefit bill, it’s housing associations who are left dealing with the human cost of the reforms – and bracing themselves for the bill to jump upwards in the years to come.

 ‘A lot of hand holding’: Housing associations’ efforts to alleviate the impact of welfare reforms involve:

• Running pre-tenancy courses for all those about to move into social housing

• Surveying tenants to understand which are at risk

• Employing more staff to communicate the changes

• Providing basic IT literacy training for tenants
  

  Housing providers such as Peabody provide IT training for residents

• Supporting credit unions

• Running job clubs and apprenticeship schemes to help residents get into work

• Administering home swap schemes (as requested by the government)

• Providing new budgeting tools to help tenants manage their finances

• Running food co-ops or referring tenants to existing food banks

• Setting up schemes with retailers to make household goods cheaper