Latest HB figures – lies, delusion and the future of the PRS

Last week saw the release of the latest Housing Benefit figures which includes details of the national position at November 2011.  It will be no surprise to reveal that the overall HB bill has increased by a further £50m or so to reach £22.4bn.

The DWP official figures reveal the last 3 full years from November 2008 to November 2011 and make interesting reading.

Chart 1 – HB cost Nov 2008 to Nov 2011

As we can see Chart 1 above shows that HB has risen every month since November 2008 and is still rising every month.

So when Cameron said at PM Questions last month that Housing Benefit had gone down he was wrong and he misled Parliament?  Sorry you say reader didn’t Cameron say that it was just rents that had reduced as after all that was what Labour Shadow Housing minister Jack Dromey challenged him on at yesterday’s PMQ’s?  No.  Cameron said Housing Benefit had reduced too and he clearly misled Parliament.  What Cameron said on 11 January 2012 was:

“All parties are committed, as I understand it, to reform housing benefit. That was Labour’s commitment before the last election. The housing benefit bill is completely out of control. Labour’s own welfare spokesman said last week that at £20 billion, it was unacceptable and it had to change and what we’ve seen so far, as housing benefit has been reformed and reduced, is that actually we have seen rent levels come down. So we’ve stopped ripping off the taxpayer.”

Cameron said “…as housing benefit has been reformed and reduced”

Housing Benefit has indeed undergone reform and as some of the HB changes have become operational it is correct to say that HB has been reformed. Yet has Housing Benefit has been reduced? No it has not.  The above Chart derived from the official DWP figures shows that clearly and unambiguously, meaning that it must be a knowing lie by Cameron.  Either that or he is incompetent in not knowing his own government’s official figures, or both. The fact that the January 2012 known HB figure when Cameron made this comment was £22.3bn shows his comments (attempting to blame Labour) on the ‘£20bn’ figure was inept politicking too.

Further to this the Tories immediately after their budget in June 2010 in which they announced the HB reforms Cameron talks of says these reforms will achieve a reduction in the overall HB bill of “nearly £2bn” of the inherited £20.8bn HB bill by 2015.  As such the Tory-led Coalition government’s target for the overall HB bill is £19bn.  Yet currently it is £3.4bn above this target or in percentage terms 18% above target and rather than fall, it has risen by over £2.5m every day since they took office.

“Ministers are clear that the overall cost of HB, forecast to be around £20 billion this financial year, must be controlled and reduced. The package of reforms will save nearly £2 billion by 2014/2015.”

The above is from the DWP published Housing Benefit Direct circular and more comment on this is here from my post in September 2011.

However to return to yesterday in Parliament we have to ask why Jack Dromey didn’t ask Cameron to apologise to the House and put the record straight on this Housing Benefit point?  Would he have been so easily deflected if he had? An article on Inside Housing recounts the question Jack Dromey asked yet it is titled “Cameron rejects calls to correct private rent claim.”  But as we can see from the verbatim quote above Cameron also said HB had reduced.  So why didn’t Jack Dromey ask about this and why did Inside Housing just limit this to the private rent claim?

They are rhetorical questions but provide a link to a key aspect of the Housing Benefit cost, the rise of the private sector landlord (PSL) and the rise of the private rented sector (PRS) in relation to Housing Benefit and its cost.

Let’s look at the interesting cost and percentage rises in the Housing Benefit bill that are from the PRS and of course let’s bear in mind that the Housing Minister Grant Shapps has ruled out regulating the private rented sector.

Chart 2 – The November 2008 HB position

As we can see the private rented sector accounted for a quarter of the total number of HB claimants in November 2008.  Yet as Chart 3 reveals they were paid one-third of the total HB bill.

Chart 3 – The November 2008 HB position by Cost

Its like having 3 houses to rent but being paid for 4 of them such is the HB largesse the taxpayer and public purse has to the private landlord and the private rented sector that I remind you Shapps refuses to regulate.

The overall HB cost in November 2008 was £16.7bn and the PRS received in total £5.523bn per year consisting of 1,054,810 claimants each on average receiving £100.53. The remaining £11.2bn consisting of 1,493,080 council tenants claiming HB at an average of £65.23, 54% less than PRS, and 1.616,290 HA tenants receiving £71.73 on average, or 40% less cost to public purse than a private tenant.

So what has has happened in the last 3 years?

Chart 4 – the November 2011 HB figures

The PRS has increased its percentage from 25% of all HB claimants in 2008 (in Chart 2) to 32% by 2011.

The numbers of PRS tenants claiming HB has increased from 1.054,810 to 1,587,720.

This is an increase of 532,910 new private tenants claiming HB in the last 3 years – a rise of 51%!

Chart 5 below reveals that the HB cost of private renting has increased from £5.52bn per year to £9.03bn over the 3 year period – a rise of 63% in that time!

Chart 5 – November 2011 HB claimants by cost

The cost of the PRS has increased as a proportion of all HB cost from 33% to 41% while the combined social rented sector has reduced from 67% of total cost down to 59%.

There can be no doubt that we have seen a seismic shift in Housing Benefit over the last 3 years from the social housing sector to the private rented sector both in terms of overall cost and in proportion of HB claimants. The simple charts above show that transition clearly and show that ‘letting HB take the strain’ has been the position of the latter end of the last Labour government and the current Tory-led Coalition.  Yet this is the same Tory-led Coalition that vowed and promised to reduce the Housing Benefit bill by nearly £2bn and the same one that wont regulate the problem of that inexorable public purse cost – the private rented sector.

Yesterday also saw a must read article from Jules Birch in the Guardian in which he comprehensively looked at the rise and rise of the private rented sector.  He covered all of the reasons and views from all quarters on why it has risen so much such as the availability of buy-to-let mortgages and many more.  The numbers of PRS properties is soon to eclipse the number of social rented housing is a key fact from this obviously, but the reasons why are covered so comprehensively that I simply urge you to read the article.

He ended the article with:-

Private renting has in a sense come of age but it’s clear that there are still some growing pains to come. A future based on individual investors and six-month tenancies hardly looks sustainable. And yet for the foreseeable future it looks like private renting will be the only tenure that is expanding. Could social landlords be best placed to help?

I differ from Jules only in the interpretation of ‘foreseeable.’  We cannot create new social rented housing out of the ether, even if that definition of social rented housing includes the appallingly named “Affordable Rent” model of social housing that I maintain to be a con and will cost even more than the private rented sector largesse.  So yes I agree that the PRS will hold sway in the immediate and short-term.

Yet, it also means the private sector landlords (PSL) hold all the aces as well and the DWP planned changes to Local Housing Allowance (LHA) – the variant of Housing Benefit paid for PRS properties – will dictate a fundamental shift in PSL behaviour and practises.  The DWP unbeknownst to the hapless Grant Shapps announced that LHA will be frozen in 2012/13 and each year thereafter will rise at just 2% during which time the DWP expect the market rent to rise at 4% each year.   I maintain  (here and here and here) that this is unsustainable for the private landlord and the private tenant.  A principal reason being that now in 2011/12 LHA accounts for 66% of the average private rent meaning that the private tenant on average has to find £57 or so each week from earnings, savings or benefit to just make up the rent.  The DWP have issued rent inflation projections which show this £57 per week rises to £74 per week by the end of this Parliament in 2015 and to £104pw by the end of the next in 2020 (and up to £190pw by 2030!)

Private tenants on benefit are frankly too much of a business risk for private landlords in the real foreseeable future under my view of ‘foreseeable.’ If the DWP holds firm and freezes LHA in the next financial year and then pegs increases to 2% and market rent increases by 4%, or in other words holds firm and projections are correct, not only will PSLs refuse to accept any new benefit claimants, they will systematically evict current benefit claimants.  Given too that we are informed Universal Credit will come online in 2013 and the overall benefit cap within that will reduce Housing Benefit and Housing Benefit alone, then the financial risk to EVERY private sector landlord big or small, is far too great for them to accommodate benefit claimants in the foreseeable future.  PSLs will flee that market in droves.

speye@hsmonline.co.uk

The Great Affordable Rent Con

The Great ‘Affordable Rent’ Con 

I’ve started using graphs in my blogs and judging by the views, which have increased significantly you like them.  Below is the graph (Chart 1) that shows Coalition policy is one of social housing and private housing rent convergence. It has the added point that HB for social housing is on such a marked trend that it will overtake LHA paid to private landlords, which as it starts from about two-thirds of it is a very significant trend.

Chart 1

Using blog views as the benchmark you clearly like the graph below that shows how much private tenants will have to make up their rent and how LHA will pay less and less of the rent level. “If a picture paints a thousand words” indeed as Chart 2 reveals!

Chart 2 – How much more private tenants will have to pay each year for rent

Or put as in Chart 3 below what percentage of private rent will LHA pay the ‘picture’ the graph reveals is starker:

Chart 3 – Diminishing LHA as a percentage of gross market rent

The use of graphs or pictures really does hit home and I imagine the Housing Minister Grant Shapps’ face will be a real picture when he looks at the picture on his ‘Affordable Rent’ model. This you will recall is the grand plan of Grant Shapps to solve the crisis in supply of social housing (aka real ‘affordable’ housing) – a form of housing his political dogma dislikes so much he is attempting to sell ‘up to’ 100,000 of them off cheap. Although it must be said this is less than his plan to sell ‘at least’ 100,000 of them off which he tweeted at Tory conference in October 2011. Shapps believes and is on record as stating that private tenants will move from private renting to his new ‘affordable rent’ model which is set at up to 80% of gross market rent levels. I have posted many times before on how this will cost the public purse so much more in HB with the latest being here and this refers back to many previous posts that it could cost as much as £1.3bn per year more.

When he announced this in 2011 I argued immediately that it would cost more to the public purse yet Shapps denied this. The graph above shows that currently in 2011/12 LHA pays 66% of the gross market rent (GMR) which of course means that his misnamed “Affordable Rent” model at up to 80% of GMR will mean a higher HB bill. 80% is more than 66% whichever way you look at it Mr Shapps.

Ah but hold on I hear you say didn’t Shapps reveal in the Housing Strategy that some of the AR models were at 65% of GMR? He did you are right, well in part. It was only some of them of course but Shapps would retort that 65% is less than 66% and that is correct. What he said on page 24 of the Housing Strategy was :-

“The new homes created under the Affordable Homes Programme will be offered at a range of different rents up to 80 per cent of market levels, according to local circumstances. Affordable rents in London are on average 65 per cent of local market rents, and 95 per cent of Affordable Rent properties in London will be made available at rents lower than 80 per cent of market level”

So in London which is 16% of the housing stock nationally average AR levels will be 65% but not in the rest of the UK. So in the other 84% of the country in housing terms they will be 80%. [Bizarrely if 95% of London AR levels are below 80% then 5% are above 80%!!!]

However, since the Housing Strategy we have seen DWP cut Shapps plans off at the kneecaps by announcing a freeze in LHA in 2012/13 and then each year after LHA to increase by 2% while GMR levels will rise by 4%. Confused with all this talk of numbers? Don’t be dear reader rest assured I have a simple picture for you!! Yes its worth waiting for!!

Chart 4 – Affordable Rent with LHA freeze and below inflation increases included

Notes to Chart 4 above:

The above lines on the graph represent benefit levels.

So the blue line which is highest and represents Affordable Rent at 80% of GMR pays out the most benefit.

That blue line (ar 80%) is way above the purple LHA line and so ar80% pays out far higher housing benefit.

The ar80% (blue) line rapidly climbs well above the purple (LHA) line Eventually even the normal common or garden social rent line (green) climbs above the LHA line

Even on Shapps best case scenario (ar65%) or the red line, we see this rising way above the purple LHA line and so costing the taxpayer and public purse far more in HB.

Sorry did I say Shapps face will be a picture? Personally I prefer ‘the face that blanched a thousand Shapps” (it seems Kylie has become Helen of Troy!) Now the housing reader will also recall that each new Right to Buy sale (aka RTB2) that is another of Shapps and Cameron’s plans sees every RTB2 sale replaced with an affordable rent replacement….at 80%. So look again at the gap between the blue line (AR80%) and the green line (existing social housing soon to be RTB2). How much more will we pay out in HB? A significant amount and the figures are (2011/12) £70.95 for social rent: £135.09 for AR80% and this is a 90% increase for a RTB” property sold today. Yet still Shapps maintains this will cost less!!!

There is an easy way to confirm the above and guess what its in a graph!  Chart 5 below plots AR at 80% and AR at 65% against the LHA cost and shows the extent over time over the excess HB that will be paid to AR properties over private properties receivng LHA.

Chart 5 – added cost of AR over LHA

As you can see both the afforable rent models, AR at 80% (AR80) and AR at 65% (AR65) exceed the LHA figure which is zero in the above with the graph just representing the excess potential HB to be paid. Chart 6 below puts a monetary value on this excess cost to the public purse.

Chart 6 – Added cost of HB bill of Affordable Rent

Over the period that we have the DWP /CLG projections for the AVERAGE excess cost of AR at 80% of gross market rent is £1.2bn per year and it reaches £2.3bn extra by 2030.  The AVERAGE excess cost of AR at 65% of gross market rent  is £480m per year and rises to £1.25bn by 2030.

But of course Grant Shapps denies it will cost more, he is after all a consummate politician!   And note well that this is the best case scenario for Shapps with the new AR tenants being in their ‘affordable’ properties rather than the costly private ones!

Chart 7 below looks at the excess between AR80 and AR65 against social rent levels

As is apparent the excess of HB paid out is more initially and close to £1.3bn per year I stated in previous blogs for AR80 on the issue yet rises to £2.2bn per year by 2030.  This is due to the huge increases in social rent levels that Shapps and this Coalition plan.  Yet it still has an average excess HB cost per annum of £1.53bn over that time. So the AVERAGE excess cost each year till 2030 is between £1.2bn and £1.5bn at AR80.

The AR65 figure is always higher than social rent figure from a current figure of £750m extra per year rising to £1.15bn extra per year by 2030.  The AVERAGE increase to the HB bill here is £800m per year and so the AVERAGE increase to the HB bill at AR65 is between £480m and £800m per year.

Note that all of the above assume the AR model does NOT continue after 2015.  If it does then more numbers of AR properties will mean even greater cost to the public purse in higher HB payments!

I leave you with the words of that consummate politician Grant Shapps from an article in the Guardian on 31st March 2011.  He said in this question and answer session:

@indigoshrimp

QUESTION

Please can you explain what the understanding is between yourself/CLG and Iain Duncan Smith/DWP on how the total housing benefit bill will stack up in the future?

Affordable rent will inevitably mean housing benefit payments will rise, and yet IDS seems set on reducing the HB bill. How do you square that circle?

ANSWER FROM SHAPPS

I appreciate that at first sight your logic seems sensible. Build affordable rent, allow all of the up to 80% rent to be covered by Housing Benefit (HB) and surely the bill must rise.

However, this misses out an important factor from the equation. Many of the people likely to move into Affordable Rent homes are living in the Private Rented Sector and may be receiving HB for all of their current higher rent. Therefore in HB terms there isn’t much impact through our Affordable Homes programme.

There isnt much impact Minister?  I somehow think that the figures and graphs above show we differ on the definition of ‘much impact’ as we do on the definition of ‘affordable!’

Joe Halewood (speye@hsmonline.co.uk)

Shapps resigns and Jim Hacker takes over

Imagine for a minute that Grant Shapps the Housing Minister has moved on. You are Jim Hacker, the new Housing Minister and your first meeting on day one is to be briefed on the facts of the housing crisis that all sides admit we are undoubtedly in. If you can sort this out you are destined for higher office you think. Yet in these austere straitened times with the benefit system and cost out of control you know it won’t be easy.

Your civil servants put a graph in front of you and inform that private landlords charge and receive £2.7bn per year more in Housing Benefit than social landlords do for the same number of properties (and £3.3bn compared just to council properties). You look up and beckon him to continue. The civil servant continues and a few of his comments cause you to raise your eyebrow, yet each time you beckon him to carry on. He qualifies his previous statement and says he is talking about unregulated private sector landlords (PSLs) who charge the public purse £2.3bn more per year than the regulated private sector landlords charge. These are huge yearly sums you realise and rising each year.

You recall that in June 2010 the Coalition promised in the mini-budget to reduce the Housing Benefit bill from £20bn by ‘nearly £2bn.’ You are also informed this £18bn per year target currently stands at £22.4bn and rising. The DWP you note are expecting claimant numbers to rise 5% in 2013 adding to this.

Your civil servants then turns directly very simple graph (Chart 1 below) and you are told, correctly, that it represents the Coalition plans and that the CLG in whose ministry you sit, has revised its own rent inflation projections it published on 22nd December 2011 with the DWP policy on Housing Benefit that the DWP announced in October 2011 and then again on 6 December 2011. Your civil servants having to admit, without quite admitting it in so many words, that they never knew about the DWP plans, for these are consummate civil servants.  It must be the case as there is no other explanation.

Chart 1 – Government Housing Benefit Plans

Do you as the new Housing Minister shake your head or would that show weakness and convey to your civil servants that your predecessor was so incompetent? Perhaps not you think and then you see straight away that the graph means two things.

Firstly, your predecessor and the Coalition plan to bring council rents up to unregulated private rented ones. But aren’t we meant to be reducing the burgeoning benefit bill you think. This shows we are increasing council rent costs to meet private ones and this is not the rent convergence you had previously read a little about or indeed is mentioned in the Coalition Housing Strategy. That convergence is all about getting council house rents up to housing association rents by 2015. This graph shows both council rents and housing association rents converging with private sector rents. Won’t this send the HB bill spiralling? Of course it will you reassure yourself you have got this right you think.

Secondly, you think this can’t be right as you notice that not only is this social to private rent level convergence what the graph shows clearly, it also shows that HB paid for the average council rent will exceed the LHA paid to the average private tenancy by 2029. What the hell was my predecessor doing? Grant always looked so convincing, as though he knew what he was doing, a consummate politician, so much so he’s been promoted to a full cabinet minister. You take a second, look up from the graph which thus far you have had to look at numerous times to believe it. It can’t be true surely. You turn to your civil servants and say:

“Can you please walk me through the data you have to arrive at this graph?”

“Yes, Minister” is the response.

You go to say you feel like Jim Hacker but you resist.

“Please do so” you say.

Sir Humphrey says he will explain this in a number of logical bullet points.

• The starting point is the national average housing benefit in-payment in the latest figures. £76 or so per week for the average social housing property and social housing is the name given to council and housing association properties.

• The current average figure for private rented properties (called Local Housing Allowance or LHA) is £111.69 per week.

• For the sake of completeness Minister we also have a small amount of regulated private tenancies getting HB of £79 per week

“Sorry to interrupt you there, just checking I have got this right” you interject “The unregulated private tenancy gets £111.69 per week and the regulated one gets less at £79 per week?”

“Yes, Minister, that’s correct” Sir Humphrey replies.

“OK, please carry on” you say.

• We at the CLG produced rent inflation plans for council and housing association rents to converge by 2015. This will see council rents rise 41% and HA rents rise by 24% by that time.

• Each year after we anticipate social rents to rise by RPI+0.5% which we assess as being 3.7% per year after 2020 with a range of rates before as we published in December.

• This RPI+0.5% formula has been in place for a number of years now Minister • Originally we planned at the same time to raise private rents (LHA) by RPI+0.5%

• However, DWP unbeknownst to us imposed a LHA rent freeze in 2012/13 and then each year after LHA will rise at CPI which we both forecast to be 2% each year and rents charged by private landlords will rise by 4% per annum

“So this explains the graph” You say

“Yes Minister”

You continue: “The graph shows social and private rent benefit convergence and also that social levels of HB will be higher than private rents. Is that the policy?”

“Policy is for you to decide Minister” is the reply.

“But I thought our policy intention is to reduce the Housing Benefit bill this will add massively to it and spiral out of control?”

“Indeed Minister, but successive governments have had a policy of what has become known as letting ‘HB take the strain’” he says.

“Your predecessor wanted initially to change this having attacked the previous government on that basis. Yet he changed this as the DWP insisted on including HB in the overall benefit cap and as you are probably aware, it is the level of private rents that takes benefit claimants over the cap limit.

Sir Humphrey goes on:

Your predecessor was aware of how successful the strategy of ‘work must always pay more’ and that strategy implies strongly that Housing Benefit and LHA are only claimed by the out of work, when in fact 75% of new claimants since the election are in work. Letting HB take the strain became a most viable option Minister”

You need to say something and can’t let the civil servant continue as if he’s the one in charge!

“I see. But the Housing Benefit bill will continue to rocket.”

He has that knowing civil servant smile on his face but you let him continue..

“Yes Minister, however the overall benefit cap part of Universal Credit will capture more and more benefit claimants and offset a small part of this rise. More importantly, Minister, when the HB bill rises this will be blamed on the feckless and out-of-work and not on you Minister.”

You are slightly cheered by this. You realise that in the way the OBC works it is HB that will be the only benefit to be cut. Unemployment, sickness and disability benefits will stay the same and still be paid at the same national rate. Housing Benefit is the only variable benefit and not really a welfare benefit as it goes to landlords. Furthermore, HB being cut will mean I can say I was responsible for more cuts than my colleagues that is appealing for my future prospects.

“You began by explaining the difference between the unregulated and regulated private properties and landlords and the huge differential in what we pay them in benefit. Now it seems the policy is to bring social rents up to and then exceed private rents. It doesn’t seem to make sense. Surely we are exposed on this issue?” You say.

Sir Humphrey smiles that smile that only civil servants can smile then says:

“That is the policy you inherited Minister but the exposure angle has been covered by you predecessor, a most consummate politician if I may say. Mr Shapps was strongly against regulating the private rented sector as I am sure you are aware and converging social rents up to meet private rent levels takes away calls for such regulation.”

“My predecessor seems to have done well Sir Humphrey” you say.

Maybe Grant did have this all boxed off you think. He did appear to be a consummate politician maybe he really was after all. Lord knows the Housing Minister is a bit of a poisoned chalice and didn’t the last lot have about 9 of them. Your thoughts are interrupted as Sir Humphrey coughs…

“Ahem Minister.” You look up and Sir Humphrey passes you another graph entitled Chart 2.

Oh shit you think as you look at it and you notice he has a few more and that knowing look on his face that you know isn’t good news.

They are for later in the week dear reader as surely “Yes Housing Minister” needs a series and not just a one-off episode!

Rented Housing RIP

Last week I revealed that Local Housing Allowance (LHA) – the form of Housing Benefit paid for private rented properties – was to be frozen from April 2012 to March 2013. This policy will have devastating consequences for the entire housing rented sector.  Later last week I revealed that LHA will be set annually from 2013 onwards as well and that government plans were for LHA to rise at 2% per year while it expected private rents to rise at 4% per year.  This argued that the devastating consequences for housing were exacerbated and I represented this on a simple graph which showed just how much a private tenant will have to make up the private rent from earnings, savings or benefits.

The post was viewed widely and many readers were not aware for example that the average private tenant currently has to find £57 per week on top of the LHA housing benefit to meet the rent.  That £57 per week figure will increase significantly making private rented housing unaffordable and unsustainable for the tenant and for the private landlord.

I also commented that the Housing Minister and his department the CLG were not aware of the LHA freeze and subsequent LHA policy that was imposed by their colleagues in the DWP.

The DWP imposed LHA policy changes the CLGs version of the rent inflation policy and below I represent this revised policy in a further graph that will stagger all those in the housing sector.

Take a look at the chart below that represents government policy on rent.  It shows that government policy is one of convergence of social housing rent levels with private housing rent levels.  It also demonstrates that social housing rent levels will eventually overtake private rented levels.

Chart 1 – Coalition rent inflation policy

Private rent benefit in-payment levels (LHA) have always been considerably higher than council or housing association benefit levels (HB).  As the graph above shows the current position according to the latest official DWP statistics is £76.42 per week for HB in social housing (council and HA rent average) and £111.69 per week for LHA in private renting.  LHA average payment is 46% higher than HB payment. I have many times reported before that LHA paid to private landlords costs the public purse £3.2bn per year than we pay for equivalent social housing properties in housing benefit.  Additionally the majority of private sector landlords are unregulated and we pay these unregulated PSLs £2.3bn per year more than we pay the regulated private sector landlords whose HB payments are similar to what we pay housing associations.

Frankly I don’t know where to begin on the unbelievably devastating consequences for the housing sector the above graph reveals.  I could easily scribe 6 doctoral theses on the impact this policy will have and that’s without the impact of the ‘Affordable Homes’ programme and the impact Universal Credit will have in a few years time.  It’s without the impact of the 5% increase in numbers the DWP foresees in 2013 which now surely must be a significant underestimate.  I am not even sure I can see all the major consequences this policy will have – all of them will be hugely negative on tenants (social and private), landlords (social and private) and the taxpayer.

The comments I made on the LHA freeze last week and how private renting is unaffordable for the tenant and unsustainable for the private landlord and both of these for the UK public purse and wider economy are now a chronic understatement.

Evictions of current private tenants will rocket leading to hugely increased homelessness and homeless cost. Private landlords will definitively no longer accept tenants on benefits placing huge strains on the already overstretched social rented sector. If you thought the rented housing sector was in crisis now, which it is, then this is nothing compared to the effect and impact the Coalition’s benefit rent policy will have. Britain won’t be able to work as it won’t be able to house it workers is not an overstatement of the severity of this DWP-imposed Coalition policy.  The 3-day week and the winter of discontent will seem happy memories compared to the consequences of this and, unfortunately, that’s not hyperbole!

No doubt I will return to this and develop many of the specific arguments as to the impact of this inept policy in the coming days and weeks.  But for now just look at the graph, rub you eyes, repeat that process, go and make a coffee and come back and look again.  Then make a simple spreadsheet using the Coalition rent inflation figures then create your own graph.  It will look exactly the same as the one above!

Private Tenants Beware – Coalition plans to shaft you

Some people just don’t do numbers.  I am that annoying sod that does see patterns in numbers and can still do long-division in my head. It’s a nice skill to have but can work against you as I should know.

To explain – look at Chart 1 below:

Chart 1

The chart shows what percentage of the market rent that LHA pays now at 66.14%.  National average market rent now (2011 above meaning 2011/12 financial years) is £168.86 per week (LTS) and national average LHA actually in payment is £111.69.

[LHA is the main form of Housing Benefit paid to private tenants]

The chart also shows what the government plan to happen to it until 2020 as they expect private market rent to rise by 4% each year and LHA to rise by 2% each year with a zero increase next financial year (2012/3).

By the end of this Parliament in financial year 2015/16 LHA will reduce to 60.06% of the average private rent and by 2020 will reduce to just 54.50% of market rent.

The chart above can be seen by all as to what it means that private tenants will have to make-up more of their rent each week through other sources whether that is savings, earnings or benefits.  The graphical nature of the chart takes away the number blindness or tedium some find in looking at numbers.

So what does this means in money terms for the private tenant?

Chart 2 below puts a monetary figure on this average

Chart 2

As we can see the amount of money the average private tenant will have to pay toward their rent rises starkly in the government’s plans.

Currently it is £57.17 per week on average.

By 2015 and the end of this Parliament it will be £78.90 per week.

By 2020 it will rise to £109.35 per week.

Forgive me reader if this appears patronising, it’s not meant to be.  What it does is explained the apparently small difference between the government plan to limit LHA rises to 2% while expecting the private market rent to rise by 4% each year.

On Monday I brought to everyone’s attention that LHA will be frozen next year and a bit of a scoop and the blog views were 20 times more in one day that I expect and been used to in a week.  Yesterday I published this detail above of the 4% rise in rent and only 2% for the LHA and that it will move to an annual rate set in April each year.  This had never been reported before either and was sourced from an impact assessment the DWP issued in October 2011.  I naturally anticipated a similar number of blog views.  Yet I published it in an unacceptable way if my use of the blog viewing figures is a benchmark and I forgot the first rule of a consultant and the first rule of any communication – to get that message across in an accessible way.

In summary it was my communication error.

I commented on both the above blogs in some detail what this will mean and it has very significant negative consequences for the housing sector.

1. Private landlords will not accommodate new applicants who are on benefit
2. Private landlords will evict existing tenants on benefits as arrears will grow
3. Homelessness will rise.
4. Homeless hostels and other temporary accommodation costs the HB bill much more than private rent so HB bill will rise
5. More homeless families will be moved to other areas and vulnerable adults and children will suffer because of this
6. Homeless hostels will have to turn more people away
7. Homeless hostels will be threatened financially by this
8. Domestic violence refuges will have to turn more people away
9. Domestic Violence / Abuse refuges will be threatened financially
10. Massive demands will be placed on social housing which already has chronic shortages

The above are just a few of the direct consequences of this government policy.

Finally and for the occasional reader another mistake I made is assuming most people are aware that private tenants have to make-up a significant proportion of their rent.  The above figures dispel that and reveal just how much on average this is.

The housing professional reader, many of whom dont realise the extent of this tenant make-up, will look at the percentages above and wonder whether the Coalition’s plans for so-called “Affordable Homes” with rents set at up to 80% of the market rent are really ‘affordable’ as they will mean higher levels of HB being paid than is currently paid by LHA for the private tenant.  Many previous blogs from September 2011 onwards I have issued contain this point on ‘affordable rent.’

Further note that the DWP figures I revealed yesterday (in the poorly accessible form) also reported that DWP expect LHA claimants numbers to rise by 5% by 2013 – the impact on the overall HB bill will be significant and increase by a further £370m or so per year

For the regular reader you will notice the blog page has changed style – because this numerate so and so couldnt work out how to do it in the original wordpress one!

To all readers who have been very kind in their comments emailed to me and those who have retweeted my numerous blogs thank you as always

Joe

LHA rent freeze will be annual – a further new and important update

On Monday this week I confirmed and revealed the LHA rent freeze that will take place from April 2012 to March 2013 which was released to Parliament on 6 December 2011 but up until this week hadn’t been discussed or covered in the national or the housing media.  LHA is the amount of help private tenants get towards their rent.  It is a contribution toward the rent as it typically covers two-thirds of the rent with tenants having to find an average of £57.17 per week from savings, earnings or benefits.

One impact of this freeze would see tenants having to find a further £9 or so per week during 2012/3, from £57 to £66 each week as their rent rises but the LHA benefit remains static – a near 16% increase.  One easy way to measure this is that currently as a national average LHA covers 66% of the rent and by March 2013 it will cover 63% of it.

Well it’s only a one-off isn’t it as my blog reported the DWP Minister who said that?

No!  This is going to happen every year and so the devastating consequences of it I discussed in my blog Monday will happen every year.

I have been alerted to a further announcement by the DWP (I’m very grateful and you know who you are) from back in October 2011.  Again this was not discussed or mentioned (or picked up by me) in the housing media at the time which is worrying.

If my post this week worried the sector then this confirmation today is going to increase those worries far more as it reveals that LHA will be an annual figure every year and not change monthly as it does now.

This annual LHA rate is revealed on page 6 when it says:

“Under the proposed changes all Local Housing Allowance rates in GB will be set annually on a common date and will apply for the whole of the following year.”

The impact I discussed on Monday said just the 2012/3 change would lead to;

(a) Private sector landlords increasingly refusing to take benefit claimants;

(b) Private sector landlords increasingly evicting current benefit claimants by ending ASTs – already the largest cause of homeless presentations

(c) A huge increase in demand for social housing

All the consequences of which will create significant change and significant worry.  I then issued a follow-up post which specifically looked at the 2012/3 LHA rent freeze consequences for supported housing  and this also attracted 20 times the views in a day that a post typically attracts in a week.  This argued that:-

(d) Homelessness would increase just at the same time when homeless services would have to turn more people away

(e) Domestic Violence and Abuse services would also have to turn more people away

(f) The significant decrease in availability of ‘move-on’ from all supported housing would destabilise all accommodation-based supported housing services such as hostel and refuge, and

(g) The impact of the LHA freeze would penalise hostel and refuge services through the SP outcomes and SP contracts and commissioning terms and decisions would have to be renegotiated

Again setting an annual LHA rate exacerbates these threats to supported housing. The problems have become far worse.

The DWP rationale for this annual LHA rate setting change is also explained on page 3 when it says:

“In the longer term, some landlords may not be able to increase the rents that they charge to Local Housing Allowance claimants by as much they would have done in the absence of this measure “

DWP clearly recognise from the above that private landlords, the only ones where LHA applies, will seek to increase rents year on year.  Yet some landlords conveniently could be 1% or 99% and some is used very conveniently by the DWP here! And elsewhere in the document they forecast this to be 4% per year and above the CPI rate of inflation which they will apply to LHA after 2013.

What this means is that LHA that typically covers 66% of rent now will cover just 63% of rent at March 2013 and may well only cover 61% by March 2014 and 59% by March 2015.  The impact is therefore that private tenants will have to make-up a higher proportion of their rent year on year from savings, earnings or benefits.

That is unsustainable of course as that trend which is the Coalition policy not only sees private landlords viewing benefit claimants as a risk too far, it sees benefit claimants seeing private tenancies as a risk too far.  It is a double whammy and the policy of effectively freezing LHA rates annually as will happen from 2013/14 makes this so much worse.

Further I previously discussed that Coalition plans for private landlords reducing rent are nonsense.  The PSLs have the goods the market wants but Grant Shapps is trying to deny that despite being an advocate of the free market and how it works.  The PSLs are in the driving seat in simple terms.  But yet again this annual setting of the LHA rates being year on year makes the PSL position even stronger. I called Shapps plans toward PSLs bizarre and unworkable: they are even more bizarre and more unworkable because of the annual LHA rate setting.

Moreover, because we know 75% of all new HB/LHA claimants since the election in May 2010, 127,000 out of 170,000, are in work it makes working private tenants see private tenancies as a risk too far as well. As they receive less and less of their rent in LHA payments they too will see private renting as a risk too far and further increase demand on social housing.  Despite many more reports recently stating ownership is less costly than renting and even one from the Halifax yesterday that said BTL is cheaper than renting the lack of mortgage availability means that renting will continue to be the only choice for many.

So this annual LHA rate setting will in summary:

• Further increase homelessness
• Further increase demand on social housing
• Increasingly make private landlords even more reluctant to accept benefit claimants
• Increasingly make private landlords end more ASTs of existing private tenants on benefits
• Further increase the numbers of roofless people turned away from hostels
• Further increase the number of (mainly) women and children being turned away by refuges
• Lead to a seasonal huge private rent increase ahead of every April
• Cost the public purse ever more as private landlords increase market rents at a higher rate

Yet the DWP expect to save £125m per year from this annual change!  They say in the impact assessment that these are ‘notional’ changes that will force private landlords to reduce rent levels.  Delusion writ large.

But, finally let me argue against all of the above.  Let’s say the DWP are correct and this will save £125m per year in LHA which they do in this impact assessment.  I ask you note that the DWP also say they expect 1.4m LHA claimants by 2013.  They say:

“Cost relate to the notional reduction in benefit income received by these households. It is estimated that there would be around 1.4 million HB recipients on the Local Housing Allowance in 2013 and they may experience a notional loss in their benefit due to it being uprated by the Consumer Prices Index rather than market rents.”

Currently in the latest official figures for October 2011 there are 1.24m LHA claimants and this is rising by 6,000 per calendar month as the ever reducing private tenants on HB are switched to LHA.  BY April 2013 we can add another 96,000 to the 1.24m LHA claimants making 1.336m.

The 1.4m DWP expect is a rise of 5% in the number of LHA claimants.

The LHA bill is at October 2011 £7.23bn comprising 1.24m claimants at an average £11.69 per week.  A 5% increase in numbers and LHA remaining at £111.69 will see a net increase in cost of around £362m per year.  Yet the DWP insist it will fall £125m.  Hence even if the DWP are correct there will still be a £237m increase in the yearly LHA public purse bill!

Those of you who read my post that the overall HB bill will be over £30bn by 2015 which also detailed the Coalition’s target figure at £18bn should know I hadn’t factored in the 5% increase in claimants the DWP estimates!!

How remiss of me!

Heres the real privilege Mr Shapps

Yesterday I posted a blog which included the detail of how Local Housing Allowance (LHA), which is the form of Housing Benefit for tenants in private rented accommodation, will be frozen from April 2012 to March 2013.

This came about as there had been a few comments on Twitter from private landlords late last week about a freeze on LHA payments yet this remained rumour until I found the official announcement from DWP buried in Hansard on 6 December 2011.

It read:-

“On local housing allowance, at the emergency Budget in June 2010, the Government announced that from 2013, local housing allowance rates will be calculated annually by using the lower of the rent at the 30th percentile of local rents or the previous year’s rate uprated by reference to CPI. This will end the monthly uprating of LHA rates and bring the system into line with the uprating of other pensions and benefits. As part of the preparation for this change, we need to fix LHA rates, to establish a baseline from which they will be uprated in future. As the new cycle for uprating LHA will be annual, we have decided that the baseline should be one year ahead of the first uprating event. Therefore, LHA rates will be fixed from April 2012. This approach means that there will be no reductions in ongoing awards as a result of this change”

Nice last sentence which also means there will be no increase as well as no reductions in LHA rates from April 2012 to March 2013.  Of course it also means in relative terms it will be a reduction as no account has been made for inflation.

The number of blog views went haywire. The last couple of months I had been happy with 500 blog views per week which had increased from 150 or so per week when I started blogging in late August 2011.  By 5pm Monday evening I had received 719 views alone yesterday. By midnight rising to 789 and at 11am this morning by a further 131 making 920 in all.

I commented briefly on some of the obvious direct consequences of this freeze, for example:

• Private Sector Landlords (PSLs) will seek to increase rents significantly between now and April 2012
• PSLs will inevitably seek to issue more evictions to tenants in receipt of benefit as the LHA level pays much less of their total rent
• It will lead to an increase in homeless presentations because of that (PSLs ending assured shorthold tenancies is already the biggest reason for homelessness)
• It will lead to increasing demand for social housing

All of the above will impact on general needs housing and rightly many social landlords and large housing associations viewed and commented or retweeted it on Twitter.  Yet my area of expertise is supported housing and the above obvious implications I’m sure will be commented upon by general needs housing experts.  Instead I discuss below the specific areas of interest to supported housing providers, the consequences of which are far greater than an increase in national demand for housing and will interest the general public.

Homelessness – The problem with LHA freeze

A homeless hostel is emergency accommodation and people leave them to go to their own newly arranged accommodation.  This process is known as ‘move-on’ and those moved-on often go to private sector accommodation.  Yet private landlords who are often reluctant to accept such persons will now be more reluctant.  Obviously, this means spending more time at a hostel as the ‘move-on’ is harder to arrange.

That basic explanation hides the fact that if you can’t get people out (move-on) you can get people in (the roofless).  Hostels will become even more bed-blocked.

Staff members who work at hostels supporting homeless people are funded by Supporting People (SP) and this is in the form of a contract with the local council.  In return for the funding the local council expect ‘outcomes’ or targets.  Some councils have gone a stage further and linked SP funding to targets – payment by results or PBR.  Some contracts only pay 80% of total funding and the other 20% on attaining performance targets and these are usually throughput – ie a target number of how many successfully moved-on. So what is going to happen when SP providers can take fewer homeless persons in because of bed-blocking and have fewer ‘successful outcomes’ because the cant move-on existing residents?  They will lose funding and this may in turn threaten their survival.

So at a time when the need and demand for homeless hostels rises with the LHA freeze directly creating more homelessness, existing homeless hostels are threatened financially with closure due to councils and commissioners naive belief that PBR will work in such a dynamic environment as hostels.

Domestic Violence and Abuse Refuges

The exact same bed-blocking issue described above for homeless hostels applies in exactly the same way for refuges.  If you can’t get people in you can’t get people out and so will lead to many fleeing violence and abuse being refused entry as there is no space.  Perhaps Iain Duncan Smith, the Secretary of Work and Pensions and self-described committed Christian, whose department made this change, will look leniently on allowing all refuges to build annexed stables to overcome this ‘no room at the inn’ inevitability.

Last week many reports came out citing that DV refuges had to turn away more and more women fleeing domestic violence and abuse.  That figure is going to rocket.

The same DV refuges will also be in receipt of SP funding and will probably have the same performance targets.  Yes, here we go again, DV refuges are now financially threatened just at the time we need more provision

What is less well known and less obvious to deduce is the fact that many DV refuges have many women without children residing there.  A quick telephone survey of some of the refuges I advise put this at about 30%.  Of these lone women about 70% of them are under 34 meaning they comprise about 1 in 5 of all refuge residents.  The relevance here is that the HB reform changes to the shared accommodation rate (SAR) mean that those 34 and under will only receive HB at the shared room rate.  This was introduced in January 2012 and refuge residents are not exempt from this yet perversely sex offenders are – see here and here for full details in my previous blogs.

What this means is that PBR or other forms of contractual performance measures will be harder to achieve also as will move-on be harder and take longer to arrange by support staff as private landlords will begin to increase not admitting benefit claimants.  Again refuges are threatened financially just at a time when more are likely to be needed.

I also blogged yesterday about a real sneaky change the same DWP are intending to apply to group homes and supported living services. The DWP are seeking to reduce HB spending by about £20 per week per person or £1000 per year in these schemes.  Group Homes or SLMs are small houses typically accommodating 3 – 10 persons who have learning difficulties, mental health or physical or sensory disabilities.

DWP has been defeated by the courts previously (Upper Tribunals) and while they have appealed against this they are determined to legislate to bring in this change.  The change means those residents in group homes / SLM will have to pay this £1000 or so per year personally out of savings or other benefits.  It amounts to a £1000 per year tax in simple terms.

Ignoring the outrage of this intended legislative change and even ignoring the outrageous 9 working day consultation period they gave, the practical issue is one of the cost and especially as this has been paid for by HB up until now.  Why should I pay £20 more per week when I have got this for nothing previously will be the refrain from these vulnerable residents.  This is especially likely given that residents in group homes and SLM have been told for the last few years that they have choice that they are in-control and other superficial nonsense that’s all part of the ‘Personalisation Agenda’ – which I maintain is a heap of theoretical nonsense that reduces choice and increases cost.  This proposed change amplifies that nonsense.

Undoubtedly many will be upset if not irate at this.  Many may want to move and many may refuse to pay this tax.  Given that these are ‘service charges’ and not rent payment such payments are difficult to enforce.  The support providers may well like not to enforce payment and suffer the debt yet if you are a charitable support provider  with say 20 group homes accommodating 120 people then it’s a £120k per annum loss.  That can’t happen for obvious reasons.

Support providers will have greater financial risk from this propose change and will seek to mitigate it – they have little choice.  This means services will be cut and/or costs of service go up and in overall terms a lesser quality of service is received by the vulnerable resident or tenant.

Group home providers will also have SP performance targets and maybe even care performance targets too.  Yet when you have disgruntled ‘customers’  it goes without saying that such targets are harder to achieve and if these are PBR targets then there is further financial risk for support and care providers.  That same truism applies with hostel and refuge residents who will need to stay in such provision longer thus creating difficulty for support staff to maintain current performance let alone increase it as these outcomes and performance targets seek.

In summary:

• More homeless hostels will close
• More homeless persons will be turned away from hostels
• More Refuges will close and/or struggle financially
• More Refuges will have to turn away more women and children fleeing violence
• More group homes and supported living models will become less financial viable
• Choice and supply of all forms of accommodation base supported housing will decrease
• Achieving successful outcomes in all forms of supported housing becomes much more difficult
• The vulnerable are being shafted yet again

Support providers need to challenge these latest cuts and changes. 

If they don’t they will not survive. 

Yet I know  - because 95% of my work caseload since SP was introduced in April 2003 has been challenging local authorities on their plans to reduce SP funding to small specialist providers or SSPs  - that there the mindset of “we can’t bite the hands that feeds us” pervades.  That has to change.  Some of the larger housing associations will challenge as they always do but that is a more equal power struggle, and of course larger HAs tend to have their own marketing departments unlike small specialist providers.

Many of these SSPs don’t realise how needed they are for the general good and for local authorities strategies.  They are very ‘strategically relevant’ and far more so than they imagine. Yet many are hamstrung or constrained in challenging because they are the managing agents of larger social landlords – they deliver support in properties leased to them by Has – who don’t want to ‘fall out’ with the local authority.

Challenge is not easy and always very sensitive to such considerations.

For those providers think on how local authorities use the term ‘challenge.’  It is they say one of the 4 ‘C’s of Best Value and they have to ‘challenge’ you as they are the ‘guardians of the public purse’ and other such comments you will have heard.  They are right of course but they can, and often do, take umbrage if you ‘challenge’ them.  That can’t be right can it, local authorities want their cake and eat it and cannot be allowed to act in this duplicitous way.

Easy for a consultant to say I hear you cry!  Yes it is on one level but it’s a very superficial level and I wouldn’t be a consultant very long if I ignored those concerns would I? It’s also a lot more difficult to challenge these days as many authorities don’t have SP teams as a separate identity and department but have subsumed them into ‘procurement teams’ or other such fancy titled departments.

Yet, that said, think back and ask yourself not why you got into this incredibly rewarding line of work, but why you have stayed there.  Lord knows it’s not the financial rewards, it’s the simple fact that you stay in this line of work because vulnerable people deserve better.  They need you to fight on their behalf and you remain in this line of work because your altruism is deep down and part of your make-up.  It’s that innate sense of doing what’s right that brings unbelievable levels of stress in these austere times, that brings little financial reward, but unbelievably high levels of job satisfaction that you can’t get in any other job. Being a support worker is a vocation not just a job.

This is why you have to challenge the chronic ignorance of central government policy and local government commissioning.  Whether that’s ignorance of what you do or just because you are a comparatively easy target compared to the larger providers.  Your residents are not ‘units’ as SP like to label them, they are people, real people and you are in the people business when you work in supported housing, whereas the other 95% in general needs housing deal with bricks and mortar.

The Housing Minister Grant Shapps would have us believe that living in a council house is a privilege. Working with and for vulnerable people is so much more of a privilege than that.  Yet it’s the same poor vulnerable sods that you get out of bed for each morning (or night) that will have no services if you don’t challenge the HB or SP cuts.  It also explains my moniker – Speye – keeping an eye on SP matters as I was once many years ago working on the same frontline and challenging the ignorance and fighting the cause of vulnerable people that the system shafts on a daily basis.  If you don’t challenge, don’t finally say enough is enough and don’t stand up and fight, then you don’t deserve to be called a support worker.

Go and work in Tesco….. It probably pays more anyway!

Arses and elbows – LHA rent freeze for 2012/13 HAS been announced

Arses and Elbows – with a title like that you’re right it’s another Housing Benefit story from the hapless Coalition!

This latest one shows that when it comes to Housing Benefit matters you can’t believe a word that comes out of the CLG and that Pickles as Communities Minister and his Housing Minister Grant (Kylie) Shapps simply don’t talk with the DWP.

The latest cock-up concerns Local Housing Allowance (LHA) which is the Housing Benefit paid for privately rented properties which the Coalition have announced in Parliament will be frozen in 2012/3.

I was alerted to the freezing of LHA by a number of tweets from private landlord organisations which I thought strange for two reasons.  Firstly, none of them mentioned or referenced an exact source, and secondly the CLG announced in the draft impact assessment that accompanied the RTB consultation on 22nd December that the policy for rent inflation was:

” Policy

• RPI      + 0.5% beyond

• •      Local Authority rent = RPI + 2.5% to 2015 as part of the Local Authority      rent convergence criteria,

• •      Local Housing Allowance rent = RPI + 0.5% 2012, beyond, CPI 2013-15
• •      Market rent = RPI + 0.5%“

It says clearly that LHA will increase by RPI+0.5% and the date here is significant as the RTB consultation was issued 16 days after the following speech on 6 December 2011 in Parliament by Steve Webb at the DWP. The announcement says:

“On local housing allowance, at the emergency Budget in June 2010, the Government announced that from 2013, local housing allowance rates will be calculated annually by using the lower of the rent at the 30th percentile of local rents or the previous year’s rate uprated by reference to CPI. This will end the monthly uprating of LHA rates and bring the system into line with the uprating of other pensions and benefits. As part of the preparation for this change, we need to fix LHA rates, to establish a baseline from which they will be uprated in future. As the new cycle for uprating LHA will be annual, we have decided that the baseline should be one year ahead of the first uprating event. Therefore, LHA rates will be fixed from April 2012. This approach means that there will be no reductions in ongoing awards as a result of this change”

It is therefore clear that DWP announced a LHA freeze on 6th December 2011 yet obviously CLG were not listening as 16 days later they say LHA will increase by RPI+0.5%

I have highlighted two separate parts of the above statement of the 6^th December.  The first says correctly that the June 2010 emergency budget did say LHA will be uprated annually and from April 2013.  It said nothing at all about the financial year 2012/13 however. The second highlighted part shows the clever (ie sinister and devious) use of the 2013 ‘annual’ uprating to say that this is conditionality and justification for a LHA rent freeze during 2012/13.  “Therefore, LHA rates will be fixed from April 2012”

There is of course no such conditionality.  Instead this means that LHA rates, which have changed monthly since it began, will now remain the same from April 2012 right through until March 2013 – an increase of zero and in real terms a below inflation position.

On the one hand this is good you may think.  It reduces in real terms the HB paid to private landlords.  Yet given that LHA only pays part of the rent all it means in reality is that tenants in private rented housing will have to pay a higher proportion of their rent out of other income, earnings, savings or benefits.

Currently national average LHA in-payment is £111.69 (see tab 5) and current national average rent charged by private landlords is £168.86  So currently private tenants have to make-up £57.17 weekly to meet their contractual rent or in percentage terms the tenant top-up is 34%.  IF private landlords put up their rents as CLG envisage by 3.8% in 2012/13 the average rent charged will rise to £175.00 per week yet LHA will remain at £111.69.  The tenant top-up out of earnings, savings or benefit will therefore be £63.32 and a rise to 36%.

That figure assumes PSR rent levels increase by just 3.8% which is hugely optimistic given the December 2011 RPI figure is 4.8% alone. If it remains at 4.8% then the increase is likely to be 5.3% which sees national average rent rise to £177.81 and the PRS tenant top-up averages £66.12 per week or 37% of the rent having to be topped up.

The tenant top up going from £57.17 to £66.12 is a 15.66% increase!

Moreover, once private landlords realise that LHA rates are to be frozen in April 2012 and at the April 2012 figure you can rest assured that they will seek to increase rents over the next two months to make the April 2012 rent figure as high as possible to mitigate the LHA freeze. That is not a slur on PSLs rather it simply reflects reality or as the Coalition would say the market responding to this very sneaky and very ‘cloak and dagger’ LHA freeze.

Furthermore, this makes my comments about Shapps plans for private landlords even more incredulous as it makes private and social rent level convergence even sooner and far more quickly than he plans.

Note well that the above calculations don’t include the benefit capping of the Welfare Reform Bill as this doesn’t come into operation till 2013.  But as I have commented on these the only benefit to be capped or cut will be Housing Benefit and this will see the average tenant top-up increase by far more than the 15.66% stated above.

This means even more evictions will happen and an even greater HB diaspora will result as the ending of private landlord ASTs – already the largest cause of homelessness – will increase even further. And of course cost the public purse far more in temporary accommodation on a national basis.  LB Southwark announced last week that average cost of temporary accommodation is £18,000 per year and temporary accommodation stay is 3 years on average.  The 3 year length of stay in temporary accommodation after homelessness is a London phenomenon mostly, yet the £18k per annum cost is a national one with plenty of provincial towns and cities paying much more than the £49 per night this figure represents.

To return to private sector landlords and the housing minister.  Why has Shapps kept this freezing of LHA quiet?  Does he know about it?  I would be highly surprised given all the criticism the housing minister receives over PSL rent levels that he would knowingly not tweet about it.  Either he doesn’t know which makes him incompetent or he does and he knows that PSLs will increase rents significantly before April 2012 (the rational market responding argument) and has chosen not to publicize this freeze hoping that PSLs don’t realise? So which is it Grant?  Are you incompetent or just plain devious?

There are so many other aspects to this such as if PSLs are said to be reluctant now to take on benefit claimants how much more reluctant will they be in 2012/13?  Is Shapps hoping the inevitable PSL rent increases can be blamed away on the Olympics with many stories emerging of landlords putting rents up significantly and issuing notice to current tenants ahead of that?  Or perhaps it’s just the Grant Shapps is not privy to cabinet as the Coalition took the Housing ministry out of the cabinet and so decisions made by DWP don’t filter down to him.  Yet of course Shapps can read Hansard just like you and I can’t he so it can’t be that.

What did you say last week Minister?

“But with the prime minister putting housing centre stage on the road to economic recovery, I am determined that we shall not repeat these mistakes of the past.”

At this rate your naively high housebuilding assumptions need to be increased significantly and incorporate far more hostels and temporary accommodation as PSLs will evict benefit claimants far more rapidly won’t they? After all that’s just the (rational and unregulated!) market reacting isn’t it?

Disabled to pay £1000 per year extra in rent

What is ‘Sheltered Accommodation’ with regards to Housing Benefit eligibility?

This is the core of a very important current argument and one that will have significant consequences for the sustainability of accommodation-based ‘supported housing’ and the many vulnerable and disabled people residing there if the DWP gets its way.  The DWP’s way here is contrary to the legal opinion as detailed in an Upper Tribunal case from 2011.

The issue concerns HB payments for communal areas and whether they are eligible or not. If they are not then many services that accommodate vulnerable people will see a reduction in HB funding and this shortfall will need to be met by the vulnerable people directly.  The argument hinges on the legal definition of the term ‘sheltered accommodation’ which is contained in the HB regulations.

Note from the outset regulations doesn’t say sheltered housing, a term with which all are familiar, rather the regulations say sheltered accommodation, a very unusual term that is not in common parlance.

The terminology is much more than semantics and ‘supported housing’ (SuH) has a different meaning to ‘sheltered housing’ (SH) as does the ‘group home’ or ‘supported living model‘(GH/SLM) which are all forms of Sheltered Accommodation’ or (SA).

Briefly I have put these ‘semantic’ variants in a table below which may help before I look at the issue at hand with a view to help understand what is a complex and muddling problem

Model	Typical examples	Comment
Supported   Housing (SuH)	Hostels,   refuges, group homes, supported living model, sheltered housing	SuH is a   generic terms for all the housing with support models delivered to vulnerable   people
Sheltered   Housing (SH)	Accommodation   for older persons in a variety of forms or categories	Cat 1 is   non-resident warden Cat 2 is a   resident warden Cat 2.5   now called ‘extra care’
Group Home   / Supported Living Model (GH/SLM)	Typically   smaller shared housing used for ALD, MH and vulnerable persons with   disability	Supported   Living Model of care that has become very popular and replaced the disempowering, institutionalised and   costly registered cared model
Sheltered   Accommodation (SA)	Upper   Tribunal view says all of the above (excepting ‘hostels’ which has its own HB   meaning) are forms of SA or more correctly what the HB regulations say was   meant by the term SA	???

The issue at hand is that the Upper Tribunal decided that a group home (GH/SLM above) was sheltered accommodation (SA) and therefore HB should pay the costs of communal heating and cleaning.  The DWP now wishes to legislate to equate sheltered accommodation (SA) ONLY with sheltered housing (SH) and therefore make communal heating and cleaning costs ineligible in GH/SLM.

What the Judge said is this: -

“35. There are some types of accommodation that are clearly not “sheltered accommodation” – such as (and these are only examples) (a) accommodation of the type that most people probably occupy which is not designed for any kind of vulnerable person or where there is absolutely no special provision, (b) residential or nursing care homes, (c) standard student accommodation and (d) other types dealt with by other provisions of the housing benefit scheme. However, unless accommodation is excluded by virtue of being in one of those categories, a broad view should be taken of the meaning of “sheltered accommodation” for these purposes and, in my opinion, it certainly includes the type of accommodation occupied by the claimant”

So in the above the judge says that sheltered accommodation is NOT:-

(a) general needs housing

(b) residential care (excluded from HB anyway)

(c) student accommodation (also mostly excluded)

(d) hostels – hostel is a very specifically defined term in HB regulations

However the judge is saying the group homes and the supported living model IS sheltered accommodation within the meaning of the regulations, and because of that communal heating and cleaning charges are HB eligible.  Whereas, the DWP has issued circular G1-2012 to say they are not and the DWP is calling for providers of supported housing to inform them by 8^th February 2012 of the impact of the propose change DWP wishes – simply to make such charges ineligible.

Chris Smith the foremost leading expert on HB matters has summarised the issues in his usual concise way here. As always this is an essential read and always objective.  Yet by being objective it doesn’t state the political, social and technological issues just the economic ones from a PEST analysis and these are significant.

For example the recent DWP paper on HB in exempt and supported accommodation highlighted and even advocated the rise of the personalisation agenda.  Housing costs are higher in specialist housing provision for those with disabilities (GH/SLM) than for conventional housing (hostel, refuge and sheltered), yet now the DWP wants to reduce HB eligibility for specialist housing that it says costs more!!  That is a huge contradiction.

The Personalisation Agenda is ‘sexy’ politics and lauded by this government and seeks to increase choice it claims – always a politically strong Tory choice.  Yet the perversity here is the DWP wants to increase only the personal cost of vulnerable and often disabled people by limiting their access to what is eligible in HB.  That is a huge contradiction and after the disability lobbies huge outcry last week in the Welfare Reform Bill will (rightly) attract further condemnation.

Let me say in no uncertain terms this is an attack on disabled persons and a further cut being attempted to disabled persons housing benefit entitlement.  Yet it is a very sneaky one that DWP hoped would come in under the disability radar with in effect a consultation of just 9 working days!!!

The HB case in point concerned a vulnerable man with learning disabilities living in a shared house with 4 others.  The local council refused to pay £19.50pw in these communal costs and at the Upper Tribunal were joined in this by the Secretary of State for the DWP.  This £1000 per year reduction in HB means the vulnerable disabled man will have to pay an extra £1000 per year.  The DWP has appealed but even ahead of that appeal, which I agree with Chris Smith the DWP believe they will lose, are legislating to get their own way and increase the HB bill for this disabled man by £1000 per year.

I summarise this by using the Judge’s words as above and the last sentence of section 35:-

“However, unless accommodation is excluded by virtue of being in one of those categories, a broad view should be taken of the meaning of “sheltered accommodation” for these purposes and, in my opinion, it certainly includes the type of accommodation occupied by the claimant”

The Judges view is that the disabled man is entitled to have HB pay this £1000 per year and that is what the law says.  The DWP are seeking yet another tax on disabled and vulnerable people and that needs to be stopped.

joehalewood@msn.com

Is Grant Shapps a Kylie fan?

Had a bit of a spat with Grant Shapps on Twitter last night as he did his usual trick of re-announcing announcements of his announcement about alleged progress and action of the Housing Strategy that he announced earlier in the week.  Following so far?  In short Shapps was spinning on Twitter the nothing new he announced earlier in the week.

I’m debating whether to call Shapps ‘Kylie’ as in I’m Spinning Around or Elsie as in Lazy Consensus (LC- geddit!) Sorry I digress.

Shapps said new RTB would create UP TO 100,000 new RTB sales and ‘up to’ here is more than a semantic point.  The exchange began after Shapps said up to 100,000 new RTB sales would happen (so Kylie would fit better with this level of optimism) and went:

SpeyeJoeJoe Halewood @ 2realspeak @grantshapps UP TO (?) 100,000 RTB sales? what happened to 200,000 PM lauded at conference? #ukhousing

@grantshappsGrant Shapps MP @SpeyeJoe @2realspeak you recall incorrectly. 2 jobs per house so it’s 200k jobs. Or you may have added in the 100k homes on Govt land too

As you can see the housing minister didn’t answer my point of ‘up to’ rather than the definitive number of 100,000 that I recalled.  He also tried to point out that the 200,000 figure I ‘recalled’ was 100,000 RTB sakes and a further 100,000 new build from other initiatives as in ‘100k homes on government land.’

[Note: These 100,000 homes ‘on government land’ are homes for sale direct to private ownership for which the land cost is payable back to government by the housebuilder when the sales are completed. So these are not rented units]

Let’s look closer shall we?

On the first morning of the Tory conference Cameron gave an interview to Andrew Marr in which he did say 100,000 RTB sales and a further 100,000.  This was the PMs way of announcing a policy that of course he couldn’t leave to a minister who is not in the cabinet.  So it seems Shapps recall is better than mine.  Or is it?

Later on that same week Cameron raised this figure to 200,000 RTB sales.  You don’t recall that?  Perhaps the Daily Mail report can jog your recall when it said of RTB:

“It helped Mrs Thatcher win over the upwardly-mobile working class but will a rekindling of the right-to-buy boost David Cameron’s fortunes? Last week the Prime Minister announced that he would help an extra 200,000 people to buy their council homes by increasing the discount available. The money raised from the sales, he said, would be ploughed back into building more social homes, one new one for every property sold.”

Or perhaps Shapps would prefer his own comments on Twitter from the same conference on the same day as stated in The Spectator:-

“Labour killed Right To Buy by lowering discounts. We will raise them. We intend to help at least 100k council tenants buy their homes” (My emphasis)

So at best Shapps comments last night on ‘up to’ 100,000 new RTB sales is a climb down from ‘at least’ 100,000 RTB sales he so effusively stated back in October.   It also shows that at the Tory conference announcement on 2 October 2011 by Cameron,  Shapps believed that the new RTB did not have a limit of 100,000 which is now his position from his tweet last night and even then he’s downplaying that new ‘limit’ with his use of ‘up to.’  Although Shapps is at least consistent as he has never mentioned WHEN these 100,000 new RTB sales will come off or if the one for one replacements will be like-for-like and not replace a 4 bed house with a 1 bed flat.

On balance I think Kylie fits better don’t you? Thankfully Shapps is usually found in hot water rather than hot pants!