Shapps Private rent plans – bizarre and unworkable

The consultation paper on RTB issued late December had a draft impact assessment (DIA) attached and it contains some serious implications for rented housing. I blogged about the 41% increase this holds for council tenants a few days ago which is three times the RPI inflation rate by 2015.  Here I look at the impacts on the private sector which has massive implications for social housing.

The DIA is a turgid document, written in economic jargon and with as much technical data and tables as possible. On Page 15 we find Table 3 ‘Macroeconomic assumptions’ – the expected rent increases from now until the end of this Parliament in 2015 and beyond till end of next Parliament in 2010. The inflation figures adapted to current national average rent figures are in a simple table below incorporating the policy the DIA states.

” 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%“

HB   FIGURES	COST	2012	2013	2014	2015	2020
COUNCIL	£70.95	£77.07	£83.23	£89.89	£99.44	£119.25
HA	£80.32	£85.37	£90.27	£95.52	£99.44	£119.25
LHA	£112.01	£116.27	£118.71	£121.08	£123.50	£136.36
GMR	£168.86	£175.28	£181.24	£187.76	£195.46	£234.40
PTMU	£56.85	£59.01	£62.53	£66.88	£71.95	£98.04
LHA   % GMR	66.33%	66.33%	65.50%	64.49%	63.19%	58.17%
LA   % LHA	63.34%	66.28%	70.11%	74.24%	80.52%	87.45%

GMR – gross market rent:

PTMU – Private tenant make up – the difference between LHA benefit and the gross market rent figure

LHA % GMR – what proportion of total rent the LHA benefit will pay as a national average

LA % LHA – council and HA rent HB as a proportion of LHA which is HB paid to private tenants /landlords

Comments:

The rent inflation assumptions are all about convergence of rent levels.  The forced convergence of council rent up to housing association rent levels are well known yet what isn’t and id new in these official government plans is the convergence of social rent with private levels, albeit on a much slower basis.

By 2020 social rent HB levels will move from 63% of private HB levels (LHA) to 87% and this is planned by keeping LHA levels below market rent inflation and increasing social rent benefit levels way above inflation.  This is a significant trend of increasing social rent to meet private rent levels in simple terms and something that the publicity hungry housing minister Grant Shapps has kept very quiet about.

However, what the table above exposes is the fact that these government plans or rents won’t come to pass as if they did private sector landlords would stop taking tenants on benefits.  They may like to do this but with the latest official HB figures showing nearly 1.6 million HB/LHA claimants in the private sector they can’t suddenly stop taking them.  If they did it would see many more properties being sold yet this would have to be at below the already depressed market rates.

Maybe that catch 22 situation is the coalition government’s cunning plan for their oft-stated assertion that private rent levels will come down.  I doubt it as while they are that cynical, they are not that clever.

One of the factors in the current rental system that is not often discussed is private landlords maintaining a cost differential between their rent levels and that of social housing ones.  The above government rent plans show that differential being wiped away and PSLs will be seeking to maintain or even increase that differential.  Yet for all government power or influence the fact remains that PSLs have the supply of property that government and the country needs and so I fully expect PSL rent levels to increase by far more than the government plans, which in reality is a wish list that can’t and won’t be achieved.

Even arguing against myself here look at the PTMU in the table above.  Currently as a national average the private tenant makes up £56.85 of the market rent, the difference between the market rent and what HB or LHA pays.  This is planned by government to rise to almost £72pw by 2015 and to a staggering £98pw by 2020.  It’s as much as case of tenants not being able to afford to live in private rented properties as PSLs not wanting to accommodate them.

Private sector landlords (PSLs) will not allow these official coalition plans to come to pass as they are incredulous and beggar belief in the ‘market’ they laud on a daily basis.  The market will always win out is another of the governments dogmatic mantras so why is their plans for rent levels and the benefits they attract the exact opposite in thinking?

I do expect an increasing percentage of PSLs will stop accommodating benefit claimants yet it would be a stampede and mass fleeing of that market if these plans come to pass.  Even if they do the increased pressures it would place on social housing landlords, already pressed, will be astronomical.

In summary, the rent inflation projections and attempts to limit LHA to below market rent figures just won’t happen and this just exposes that the government plans are built on sand and have no credulity whatsoever.

Rent cuts of 24% – 65% for hostels and refuges

The proposed changes to rent payments in supported housing are a real concern.  I have detailed 5 examples below and these reveal that even on a generous interpretation of the proposals that cuts range between 24% and 65% and all services become non-financially viable and will close.

All of these services currently receive less than the national average ‘exempt and supported accommodation’ rent or ESA rent of £184 per week and so those that are on average or above the national average ESA rent will lose even more.

I give worked examples below of five real services comparing their rental income now and what is proposed by these imposed DWP changes.  The scale of these reductions is stark and these huge cuts are additional to reductions in support income, the only other funding stream in all these cases, through SP cuts.

Existing payments are based on a transparent and highly scrutinised look at the costs of running hostels and refuges such as the furnished accommodation and other expenditure costs not lest being staffed on a 24/7 basis for emergency admissions and resident safety.

Proposed changes the DWP wants to implement are a flat-rate payment based on local housing allowance (LHA) to take away the complexity and ease of understanding they claim the current system has.  The options include LHA alone or LHA and a percentage on top and I have used 20% and 40% enhancements in the table below.

Table 1 – Worked examples

	Service A	Service B	Service C	Service D	Service E
Current £	£158,000	£281,000	£179,000	£552,000	£124,000
LHA only	£68,000	£153,000	£73,000	£252,000	£43,000
LHA + 20%	£82,000	£183,000	£88,000	£303,000	£51,000
LHA + 40%	£95,000	£214,000	£102,000	£353,000	£64,000
Min cut	£63,000 (40%)	£67,000 (24%)	£77,000 (40%)	£199,000 (36%)	£60,000 (52%)
Max cut	£90k (57%)	£128k (59%)	£106k (59%)	£300k (54%)	£81k (65%)

All of the above services are either homeless hostels or refuges for women fleeing violence and are necessarily furnished and have staff on duty 24/7 as they are all emergency or direct access services.

The DWP paper on ESA rent changes states that overall the impact will be cost neutral and this must mean that DWP wish to sweep money away from what it calls ‘conventional’ supported housing, which the above are, to what it labels ‘specialist’ supported housing such as provision for those with disabilities.

Yet that is perverse.  According to DWP these ‘conventional’ supported  housing services have higher (intensive) housing need than the ‘specialist’  services which have higher support and care needs.  So DWP is intent on paying higher housing funding to those services with lower intensive housing management need!

Intensive housing management (IHM) is the term used to describe the higher housing management services and its higher expenditure cost and temporary provision such as hostels and refuge provide a simple explanation.  These need:

• To be furnished – you don’t flee violence with the kitchen sink strapped to your back,
• To have each room furnished and communal areas including kitchen and laundry,
• Often open 24/7 to admit on an emergency access basis and hence need staff 24/7,
• To have shorter repair response times due to health and safety and according to HCorp guidelines
• To have higher decoration and wear and tear budgets due to turnover of residents
• To have higher all-round housing management input due to turnover of residents.

So what the DWP labels as ‘conventional’ supported housing has much higher intensive housing management costs than ‘specialist’ supported housing such as disability services (Supported Living) which doesn’t need such furnishings and are a long-term provision.  Note that under Housing Benefit Regulations (HBR) anything that becomes  the property of the resident is not claimable and only furnishings that don’t  become the residents property (such as in a hostel and refuge) are claimable and paid for.

Why will (‘conventional’) hostel and refuge provision close – It’s not just the severity of the financial reductions to rental income, or even the  added cuts such services face in its only other funding which is SP for support.  It’s the fact that even if they remodel drastically and scale back staffing they can’t fulfil their purpose.

Hostels and refuges can’t meet their purpose if they are unfurnished, if they are not open 24/7 and if they don’t have staff attendance it’s that simple.  Cuts of 24% – 65% in their housing income mean they can’t operate and  function as they need to do.  Some refuges do operate without 24/7 staffing using on-call systems out of hours I hear you say.  Yes they do but these 24% - 65% cuts to such services definitively mean savage cuts to Monday to Friday ‘office hours’ and so such refuges become non-functional.  Residents would spend longer there and so bed-block those wanting and needing to go there.  How many more would be forced to continue to be abused due to non-availability?

The DWP proposals to replace ESA rent with LHA simply can’t work for hostels and refuges (and a refuge is a hostel under HB regulations.)

The DWP’s own LHA website www.direct.gov.uk/en/Diol1/DoItOnline/DG_196239) even says that LHA is not suitable for hostels when it says “LHA direct is not suitable for everyone” and goes on to mention in a bullet point “someone living in a hostel.”

While the DWP paper on ESA rent says that a percentage may be needed on top of LHA to ensure that such services have the income they need to function reasonably the table above shows this would need to be LHA+84% in Service B right up to LHA+188% in Service E – not the figures that DWP care to admit or will pay, and remember all these services are currently BELOW the national average ESA rent of £184pw so higher levels would be needed than these!

Unless hostel and refuge providers rally together and fight this perverse and offensive and ill-thought through set of proposals from DWP they will close.

Why hostels and DV refuges will close (2)

I have blogged on here that the changes the DWP wishes to impose on exempt and supported accommodation (ESA) rents are wrong and will have negative consequences particularly for hostels and refuges.

An update to other proposed HB reforms was issued yesterday, by way of an Explanatory Note, concerning the move from under-25s to under-35s now getting the shared room rate and not the 1 bed rate. This made two exemptions to this change these being (some) rough sleepers in limited circumstances and to high-end ex-offenders such as arsonists and sex offenders covered by MAPPA.

These exemptions cast some light and strong inference on those who will be exempted from the DWP move from ESA rent to LHA-based rent, and of course who won’t be exempted.

Those single people who won’t be exempted and we must assume only be guaranteed the shared room rate of LHA in the future include the following:

1. Single women fleeing domestic violence and abuse
2. Offenders not covered by MAPPA arrangements (ie the less serious ex-offenders)
3. Single homeless persons with no offending history
4. Single homeless persons aged under-35
- And many others

All of the above tend to inhabit hostel and refuge and receive ESA rent which averages £184 according to the DWP research paper. Note that as they are entitled to this under current law that is HB regulations, then payment of this is a mandatory entitlement. They will in the future receive the shared room rate of LHA which ranges nationally from about £55pw in the West Midlands to £79pw in Brighton in the South East. (The London rate is £124.)

So excepting the London rate the client groups mentioned above including a single woman fleeing domestic violence and abuse will receive less than 50% of their rent. That is all they will be guaranteed under the DWP imposed LHA replacement plans. Rather than discuss emotive arguments that a serious sex offender has more chance of accommodation than a single woman fleeing violence and abuse, however valid a reality that is, let us look at the implications and the consequences of this policy.

A refuge provider will have little choice but to change policy and not admit any single women without children fleeing violence and abuse. This is because such clients only attract between £55 and £79 in rent payments against a rent of £184. Even if the DWP decide to replacement ESA rent with LHA+25% – one of the options – then they still ‘attract’ a rent benefit of between £69 and £99 and this is still woefully short of the rent figure of £184.

What this paper does is replace a mandatory entitlement that is based on very transparent and actual costing with one that is on average at £67pw a whopping 64% less than is now paid. As an aside imagine if this was applied to all single persons in ESA and we would see pensioners all having to find extra money each week to put towards rent and the outrageousness of this imposition from DWP in put in context.

I’m sure many will say that the young single people are mostly miscreants that riot and why should we care that ex-offenders aren’t given another handout from the state and similar arguments that NIMBY client groups often attract. But as we can see this affects only the least dangerous ex-offenders and the serious offenders are better looked after, AND critically single women fleeing violence and abuse – the antithesis of a NIMBY client group – will have nowhere to go.

The DWP expect or rather hope that local authorities will decide to top up this LHA replacement for single women fleeing violence and abuse. Aside from this being ‘localism’ in action it flatly contradicts one of the key drivers for the change to LHA that the DWP attempt to make in the consultation paper.

The last bullet point at 11 entitled “The need for Reform” states:-

• It is costly to many local authorities who often have to meet some of the Housing Benefit costs for expensive properties themselves.

Well it’s a hell of a lot more costly to local authorities in this DWP imposed solution!

Further this is imposing a 66% on average reduction to a mandatory benefit entitlement and replacing it with a ‘hope’ or expectation that local government tops this up with some discretionary funding.

This recycling of the chopping of ESA rents is the purported funding for this ‘discretionary’ top-up system for local government. So all the 64% reductions they take off single people are to be given to local government to decide who should receive them. I return now to the 4 client groups listed earlier in this paper:

1. Single women fleeing domestic violence and abuse
2. Offenders not covered by MAPPA arrangements (ie the less serious ex-offenders)
3. Single homeless persons with no offending history
4. Single homeless persons aged under-35

None of the above client groups is likely to have care funding or be part of a mandatory duty for a local authority. Yet some others will including all of the ‘supported living’ model of care clients such as those with learning disabilities or mental health issues. Deserving groups of course but that is not the issue. If local authorities pay these groups that they have mandatory spend duties for more in housing payments, it reduces the amount of care funding from existing LA care budgets they have to put in.

Are LA commissioners going to fund those they have mandatory duties to support and care or are they going to use this recycled ESA HB to fund discretionary client groups such as single women fleeing violence or NIMBY groups? That’s a rhetorical question of course as the funding will be use for mandatory spend client groups and NOT on single women fleeing violence or single groups entering homeless hostels and foyers.

The result is inevitable and hostel and refuge provision will close, or more correctly will be forced to close as it will be chronically underfunded.

 

The inadvertant return of the resident warden?

I have blogged vociferously against the DWP paper as it will have a massive negative effect on supported housing and especially hostel and refuge provision (see elsewhere on here.)  I can easily foresee 20% of hostels and refuges closing within 12 months if the DWP proposals are brought in to replace exempt accommodation HB with LHA.

Yet could the DWP paper on rents in supported housing inadvertently bring back resident wardens into sheltered housing?

The DWP paper bizarrely labels ‘purpose-built’ sheltered housing – which I presume means cat 2 and extra care (see below for definitions) - in with hostel and refuge as similar and for all of these services wishes to pay LHA as a
replacement.  Yet LHA rates tend to be at least 25% more than existing sheltered housing and so resident wardens could be affordable and funded this way.

Nationally average HB payments to the over 60s (ie sheltered) is £77pw and with average LHA of £114 pw.  The DWP recognises the higher housing management cost of ‘purpose-built’ sheltered housing and so could this
scope for rent increases on social rent to match the LHA rate be used to bring back resident wardens?

Using the above figures the scope for an increase in rent payment is £37pw and a small 20 bed ‘purpose-built’ sheltered scheme would cover all costs of a resident warden. The LHA based flat-rate that DWP wishes to introduce (inadvertently) sets a target increase in one respect and its inclusion by DWP can be seen as a political priority of this government – It’s ok to increase purpose-built sheltered rents up to the LHA rate is in effect what this government is saying. Given that 40%+ of the electorate is the ‘grey vote’ the idea is not as strange as it sounds.

Social landlords may well have noticed that current sheltered rents are below LHA and seen the (inadvertent) permissible scope for rent increases from the DWP in this paper.  Increasing rents in sheltered housing is a political hot potato yet if social landlords do increase rents and do use this extra revenue to bring back resident wardens then much of the political and reputational risk goes away.  Note too that as such an increase would be seen as what the DWP paper calls the ‘added cost’ of housing management in supported housing it would be akin to a service charge which is not restricted or constrained by RPI+0.5% or other core rent restriction.  So such an increase is possible.

What the DWP has done inadvertently here is present an opportunity to all social landlords to declare all their sheltered units as ‘purpose-built’ and give them the opportunity to receive the additional funding that would pay
in most cases for resident wardens.  If this is done the HB bill will rocket and that confirms the inadvertent tag in this analysis.

The DWP estimate there are just 170,000 people who reside in and claim exempt and supported accommodation (ESA) rent levels.  Yet we know there are 750,000 older persons getting support through SP so there are many more that don’t claim sheltered housing as ‘exempt.’  The DWP also maintains that the overall ‘added cost’ of ESA for these 170,000 is between £70m and £130m per annum.  Add on 250,000 new sheltered claims at £37pw and we see an increase of more than £480m.  Something I’m pretty confident this government didn’t expect from this stated ‘cost-neutral’ imposed change to LHA.

__________________________________________________________________

Terminology:
- Sheltered housing has 3 principle models of non-resident wardens (cat 1), resident wardens (cat 2) and extra care (that had the stupid name of cat 2.5).
Sheltered housing is often (wrongly) seen as the same as supported housing, which is in fact an umbrella term for supported housing, sheltered housing and the Supported Living model of care. So the umbrella term “Supported Housing” includes hostel, refuge and others, 3 variants of ‘sheltered’ housing and ‘supported living’ services

DWP paper on rents – The Need for Reform is bunk! – Updated 2 Sept 2011

The DWP has issued a purported consultation paper on reforming the way rent is paid for in supported housing.  This is in reality a nonsultation as the DWP is seeking to impose quite radical change that will severely threaten the financial viability of many supported housing services and especially hostel and refuge.

This paper looks at the DWP claims as to why the current system should change – what DWP calls the ‘need for reform.’

At points 10 and 11 on page 10 under the section entitled ‘The need for reform’ the DWP paper states the current system isn’t working and goes on to give numerous reasons for this.  It says:

10.       The Government is committed to supporting vulnerable, older and disabled people to exercise choice and control and lead independent lives. We believe that, with the right levels of support, everyone including disabled people can play a full part in society

 11.        The current Housing Benefit system for people in supported housing no longer works:

It is time to look at the validity of the claims that the current system isn’t working and each of these 5 purported reasons will be looked at below.  However, the DWP allude strongly to vulnerable, older and disabled people ‘exercising choice and control’ and this is nonsensical as my previous blogs have stated:  see  http://wp.me/p1vuvL-k, and http://wp.me/p1vuvL-o and http://wp.me/p1vuvL-q and especially http://wp.me/p1vuvL-i.  Choice and control depends upon there being an adequate supply of hostel and refuge provision and doesnt apply to that aspect of supported housing.  Choice and control may apply to the supported living schemes set up where care provision and care funding is in place but not in supported housing services that are only funded through HB and SP payments.

The DWP paper focuses exclusively upon the demand side of the equation and assumes the supply side – simply the continued supply of accommodation for all in supported housing need – remains constant or increases.  The supply of accommodation will however reduce and reduce markedly with the imposition of the Personalisation Agenda which the DWP wishes to impose in this paper.

I now turn to look at the DWP 5 reasons and why it says the current system isn’t working

Firstly, DWP claim: “The processing of these benefit claims has become too complicated often resulting in time consuming and intrusive investigation of a person’s care and support needs, as well as the provider’s status and how the care and support is delivered.

The process involves the reasonable, realistic and justifiable intensive housing management need of the service.   And so it should be transparent, accurate and reflect what is needed for the service itself.  The current process does not include any investigation, let alone an intrusive one of an individual’s care and support need.  Even if it did in error the individuals personal needs are (a) only looked at after the provider’s status is determined, and (b) after the care and support delivery of the provider is looked at, to determine no care or support cost is sneaked into the housing management claim.

Further it only applies to the supported living model of care and those services in which mandatory care payments are made.  As such the DWP wishes to change housing provision to meet the housing needs of those with mandatory care payments and impose this upon the majority of supported housing residents who dont have care needs or get care payments.

The needs of the small minority being imposed on the vast majority is what this paper seeks!

The DWP has simply got it wrong and there is no intrusive personal aspect of the claim and decision-making process.  Yes, it is complex and can be time-consuming, but the end result is a justifiable and reasonable cost that is accurate and has been very closely scrutinised.  In short, the current system works very well.

Perhaps the best way to emphasise this is by looking at the HB decision-maker.  He or she agrees to a rent level that is likely to be higher than normal – to reflect the added costs of furnishing or staffing or whatever – knowing that this will be flagged up when the council is audited.  Why is that rent so out of kilter will be the external auditor’s first question?  The decision-maker knows in agreeing the rent figure to be reasonable and justifiable that he or she will need to be able to justify this ‘added cost’ to the external auditor.  Would any HB decision-maker simply agree a high rent level if he or she wasn’t convinced it was justifiable and accurate?  Of course not!

Secondly, the DWP state: “It is incompatible with other government policies as linking housing with care provision in legislation mirrors that for care homes where residents are ineligible for Housing Benefit. It does not fit with the Government’s wider objective of personal budgets, where individuals are enabled to exercise choice in commissioning their own care.”

As explained previously and as the DWP’s own research paper states only 40,000 of the 170,000 resident in exempt and supported accommodation can access a personal budget (PB).  Currently, less than 50% of those with assessed care need receive a PB and even if all 40,000 did, this would mean that the current system is incompatible with just 24% of those residing in ESA, which of course means that it is compatible with the other 76%.

Again we see the DWP wishing to impose change on the vast majority for the alleged benefit of the small minority!

Unless the DWP is going to make PBs accessible to all in ESA – and it can’t do that without assessing the care needs of the other 130,000 at a rough cost of £390m (3k each) just for assessment costs!! – Then this DWP rationale for change is truly bizarre and unwarranted.

Thirdly, the DWP states “It can be unfair in that it does not provide extra help to those requiring personal care or support whose landlord is not one of the prescribed types, but who have additional housing costs because of their condition. These claimants currently face the same rent restriction rules as other private sector tenants in mainstream housing.”

Yes, it can be unfair in such circumstances and the specific circumstance is the definition of provider type in exempt HB regulations.  In simple terms DWP maintains private landlords cannot deliver ‘exempt accommodation.’  The obvious answer is to do away with what seems to be discriminatory and so allow private landlords to deliver what is now called exempt provision. A simple solution that would also see private landlords delivering support and care services and remove the constraint.

The reality however is different. A private landlord can lease a property to a charity or not-for-profit support provider and the lease costs include many of the ‘intensive housing management” costs such as furnishings.  In fact a private landlord could set up his or her own ‘not-for-profit’ company and deliver both the intensive housing management and support – the support costs being met from
elsewhere.  So it is not accurate to say that claimants must face the same rules as other private tenants.  In summary this could be changed quickly by the simple change of one HB regulation so that PSLs can deliver exempt provision and so the objection and rationale is a false one.

Fourthly, the DWP state “It creates unnecessary risk as specialist housing providers are said to be reluctant to invest in this housing sector due to uncertainty around how help with their rents will be determined. There is the potential for schemes to become financially unviable, which would leave vulnerable people without the specialist provision they need.”

If ‘so-called’ specialist housing providers are not aware of how ESA is treated under HB regulations then that is their fault!! Excuse the harshness of how that reads but it must hold.  I would not develop any business model without knowing and finding out all I could as to my income!

I cannot figure out what the DWP means by saying “There is the potential for (existing) schemes to become financially unviable.”  It must mean existing schemes and hence my emphasis, yet how can they or will they become financially unviable under the current regulations?  That by definition is an oxymoron!

Far greater financial unviability is created by the proposed reforms of this paper which I restate are geared toward the maximum 24% of services to which PBs can apply and are detrimental to the other 76% – who currently comprise 88% (as only half of the 24% have taken up PBs)!!

Fifthly, DWP state: “It is costly to many local authorities who often have to meet some of the Housing Benefit costs for expensive properties themselves”

Read these words carefully!!  Currently, local authorities do HAVE to meet some of these costs.  Yet this paper proposes that they no longer have to, but can choose whether to!!

I restate my argument of above – the costs are only met once the LA HB decision-maker is happy that the costs are accurate, reasonable and justifiable to the external auditor.  So these costs have already been approved and are known to the local authority.  This is not a fault or flaw within the existing system it is a very well scrutinised asset of it.

Yet the change of emphasis here is a critical change as this makes a higher proportion of supported housing rents will be discretionary spend for local authorities.  That creates massive risk to financial viability and will not just see those curently in the ‘market’ review their position, it would actively discourage those seekign to enter the market from doing so.

In summary, the 5 principal rationales given by the DWP as to why the current system isn’t working don’t hold scrutiny. There is little reason of fault or inadequacies in the existing system that would drive such radical change as the DWP proposes in this paper.

This paper – which only seekd to consult on the design of the new system and not of the decision to impose a LHA based solution – is severely misguided in its rationale and in its direction it wishes to impose upon the sector.  I have no issue with radical change at all, but not for its own sake and not when it does throw the baby out with the bathwater as this paper does.  The emphasis and huge priority of the supported living model (those with assessed case needs) which accounts at most for 24% of those in all supported housing is ridiculous.  Even if it helps them it most definitely penalises and makes it far worse for the 74% of supported housing that isn’t the supported living model.

Or to put that in numbers, it may benefit 40,000 vulnerable people but it will penalise and negatively affect 130,000.  In fact it puts all 170,000 at risk of existing providers fleeing the market like crazy due to the uncertainty and massive financial risks it creates.  New (social landlord) entrants to the market won’t happen because of this and new PSL entrants are hardly likely to enter a market where their returns as the same as now but for much higher cost and risk.

The DWP simply doesn’t know what it is doing.

Personalisation reduces choice in supported housing

The latest ‘great and good’ theory is called ‘Personalisation’ and as the name suggests it is intended to place more power and specifically choice in the hands of the person.  Personalisation is lauded and actively promoted by this government as a good thing and it even accuses local government of hindering the increased choice it says it gives to vulnerable service users.  It also has its own quango called ‘In-Control’ to advocate this great and good theory and again we see its name being synonymous with (the purported) increased choice.

The easiest way to explain the theory is that instead of social services finding and arranging suitable accommodation and care for those with assessed care needs, social services give money to the individual in the form of a personal budget or PB.  The individual then chooses what to spend this PB on and purchases the services he or she chooses and hence the ‘Personalisation’ and ‘In-Control’ tags of its advocates.

At this stage I should mention the discussion site on CommunityCare had an in-depth discussion on whether it was acceptable for a disabled service user to spend his PB on twice yearly visits to a prostitute in Amsterdam.  They concluded it was acceptable.

However, while the theory of personal budgets and personal choice is hard to argue against, the reality of personal budgets in practice in supported housing reveals it will and must reduce the provision of supported accommodation and therefore reduce choice – the exact opposite of its aims as the scenario below explains:

Scenario

A 10 bedded house for residents with disabilities (Sometimes called the Supported Living Model);

1. Landlord is a social landlord who also provides support
2. Service User chooses his care provider
3. Entire service is thus funded (a) Rent through HB; (b) support through SP funding; and (c) PBs for each user with assessed care needs

1. The social landlords funding model is dependent on 10 lots of (a) rent and 10 lots of (b) SP funding.  The care element is of no financial consequence as the landlord doesnt deliver care.  This is the typical model across the UK since the advent of the Supported Living Model of care (SLM) became de rigeur after the Community Care Act.

Landlord charges £100 pppw in rent and £100 in support and so the entire service generates 10 lots of £200 each week which is £2000pw and £104,000 per annum.  This £104k per year equates to the housing management cost, the intensive housing management cost (higher costs of supported accommodation such as staffing for security, furnishings, communal facilities etc) and support services and is a break even figure.

Under Personalisation residents could choose to stay in the accommodation but choose another external provider to deliver support services – after all Personalisation advocates state why should a vulnerable person only get the support if he or shes goes into specific accommodation.  Another good argument that works well in theory but not in practice.

Two of the 10 residents decide they want another support provider.  The existing provider still has the same staffing cost as it still provides housing management and intensive housing management to all 10 and support to remaining 8.  Yet the income has reduced by £200 pw and £10,400 per annum, a 10% reduction on the ‘break-even’ income it needs.  The service is thus non-financially viable and may need to close.

In that scenario 20% of residents get choice which negatively impacts on the other 80% and in fact on all whne the service closes.  That is not real choice at all and it is reduced choice for all.

The point the advocates of Personalisation conveniently lose is that the provision of an accommodation-based supported housing service is sustainable at the whim of every service user.  That is a risk too far.

The DWP paper on Supported Housing

The first and critical point is that this is not a consultation.  Under the title ‘Purpose of this consultation’ on page 6 it says: -

“The Government proposes to change Housing Benefit for those who live in supported housing within the social and voluntary sector. The consultation document seeks your views to inform the detailed policy design”

The responses sought are on the design of the new policy but NOT on the decision to change the policy.  As such the decision to change the policy has been made and it is just the design of the replacement that is sought from : -

“This consultation is primarily aimed at people who live in supported housing and those who represent their views, as well as those involved in the commissioning, funding and providing of supported housing with an interest in how Housing Benefit assists their tenants to pay their rent.”

This is also on page 6 under ‘Who this consultation is aimed at’

So we see a change is to be made and the government is seeking the views of tenants and residents in all forms of exempt and supported accommodation (ESA), ESA providers, and commissioners.  Yet to ask anyone for a replacement it is necessary to first understand (a) what is being given up and (b) to give enough information on its replacement, and neither of these are evident in the paper.

(a) What is being given up?

Existing rents are incredibly transparent between the provider setting them and the experienced decision maker – the HB department – who only agree to pay the rent level if all items of provider expenditure can be proved to be ‘reasonable, realistic and justifiable.’

(b) What is the replacement?

A hodgepodge of vague and indeterminate funding streams based on Local Housing Allowance (LHA) the private sector funding variant of Housing Benefit currently paid to private tenants.  Three variants are seemingly proposed each of which is not costed and so ESA tenants and ESA providers and ESA commissioners can’t know what they will get in replacement funding terms!

Of course this means that all those whose views are sought in this purported ‘consultation’ cant give any semblance of the design of this new replacement system.  This creates a huge amount of unnecessary instability in the entire ESA sector, vulnerable resident, provider and commissioner.

(c) How did we get here?

A research report was commissioned and published by DWP in 2010 called “‘Exempt’ and supported accommodation” ( http://research.dwp.gov.uk/asd/asd5/report_abstracts/rr_abstracts/rra_714.asp) and this 100+ page report is referenced many times in the paper.

The research ‘found’ that (i) there are 170,000 people in ESA; and, (ii) it cost between £70m and £130m more than general needs housing. “…although there is considerable uncertainty associated with this estimate” on page 80.

This is after stating on page 79 that “Software systems do not allow local authorities to report the  number of claimants in ‘exempt accommodation’ reliably…..It has proven even more difficult to estimate the numbers of claimants living in other types of supported accommodation.”

So the best that can be said of the above figures including cost is that they are the best guess made from limited information but yes ESA provision does cost more than a rent officer determination (ROD) on what would be paid in general needs housing!

Significantly, on page 70 of the research report it derives this figure from what ROD would agree to pay compared to the 1 bed LHA rate.  And while the governments own LHA page says LHA is not suitable for supported housing - (see http://www.direct.gov.uk/en/Diol1/DoItOnline/DG_196239) - LHA now forms the basis of the 3 new proposals as replacements for HB in ESA

These 3 proposals are: -

1.   LHA alone

2.  LHA plus a standard percentage (LHA+%), or

3.  LHA plus a fixed cost for each added service cost (LHA+FC)

All of the above presume that the £70m – £130m per year ‘added cost’ of ESA rent is correct.  That may not be the case at all as not all ESA provision would receive the 1 bed rate.  For example the under 35s may only receive the shared room rate, which is lower, and as LHA is based on composition of family size, those in homeless families units and DV refuges could receive the 2,3 or 4-bed LHA rate which is much higher.  Single people with disabilities who require overnight attendance are also entitled to the 2-bed rate which is significantly higher.

It could be the case that just replacing all ESA rents with LHA will see the overall bill rise as the figures claimed of the added cost of ESA are just estimates. The research paper itself says on page 70 “Where LHA is very high, even supported RSL accommodation has a much lower cost than local private rents..” – and that finding is based on the 1-bed LHA rate.

So how did we get here?  The DWP must believe that overall ESA rent is higher than the equivalent private sector LHA rent, yet it can only suspect this and can’t know this.

Yet the ‘consultation paper takes this as a given despite the research report and states on page 6 at 4 that “We want to understand what makes rents in this sector higher than for those in the private rented sector and whether it is reasonable to meet these rents through benefit.”

To radically change the funding system and create so much uncertainty and instability to vulnerable people based on a suspicion and to impose a new system on that hunch  (which it rewrites as a definitive statement!) …..hmm!

Let’s not forget that LHA is paid for general needs housing as private landlords cannot use the ‘exempt accommodation’ HB provisions and so the government is seeking to replace social housing ESA funding provision that includes the costs of staffing and furnishings in a refuge or hostel for example, with the standard rate it pays private tenants and private landlords for unfurnished and unstaffed accommodation

In a separate discussion on this I show with real figures from hostel and refuge providers that even with LHA+40% these will see a loss between 24 and 65%  – seehttp://wp.me/p1vuvL-P

Bizarrely the ‘consultation’ paper wants private landlords to enter the market yet why would any PSL take on board the extra cost and extra risk of ESA provision at the rate it now gets for unfurnished and unstaffed provision? At 46 it states “We want to include private sector housing as we look to target help more by accommodation type rather than type of landlord.”

Anyone thing a PSL would find it reasonable to accommodate higher housing management risk residents, have higher repair cost with shorter repair resonse times, furnish a property, provide staff on-site for safety and security purposes etc…. all for the same income they get know for none of this?  Clearly the DWP think this is reasonable!

In summary, this ‘consultation’ paper creates massive uncertainty and change to vulnerable people based on the highly spurious rationale that paying HB to social landlords for exempt and supported accommodation is not reasonable.

The death of supported housing?

The DWP has issued a consultation paper on how Housing Benefit is to be paid in future to exempt and supported accommodation, or ESA.  It proposes to replace the existing ‘exempt accommodation’ HB regulations and payment process with flat-rate payments.

The flat-rate payments all centre on Local Housing Allowance (LHA) and for ease of reading I use the 3 key proposals as expressed by Martin Hilditch on Inside Housings website.  These are:

1. A flat rate of benefit paid to all. People who live in hostels, refuges, sheltered housing and suchlike would get a separate payment – enhanced by a set percentage or a broad average of costs – to cover the extra management costs of supported housing.
2. Disabled people with more intensive support needs to receive the same housing benefit as those in mainstream housing. They would then apply to a separate supported housing fund to meet their additional housing costs.
3. All supported housing residents receive the same housing benefit as people in mainstream accommodation. They then apply to a separate pot for the additional management cost – but would be free to decide where and how it should be spent.

The ‘consultation’ paper asks for supported housing providers comments on the design of the new flat rate system and not on whether it should be changed.  The decision to change is not up for consultation only the design of the change itself. That is why ‘consultation’ has inverted commas around and the term is used very loosely

LHA is the variant of HB paid to private tenants and landlords and its amount is based upon occupancy.  In its simplest form a single person qualifies for the 1 bed rate and a family for the 2, 3 or 4 bed rate of LHA. To this we can add the shared room rate which is much lower than the 1 bed rate and currently applies to the under 25s and this is to be widened to all under 35s as part of the governments HB reforms. Additionally the HB reforms allow a vulnerable person who needs overnight care or support to have an extra room and so this would be the 2-bed rate of LHA.

One provider I advise has a 35 room provision for homeless persons with disabilities and at present all the rents are the same having been worked out in full with the HB department using the exempt accommodation regulations.  Like all such HB claims these are very highly scrutinised and to be in payment means the HB dept has agreed that the costs involved in formulating the rent claim are ‘reasonable, realistic and justifiable.’  The current rent there paid for by HB in full is £184 per person per week and this includes the costs of fully furnished provision and an element of housing staffing cost on waking night duties.  The national average ESA rent according to DWP in the research paper released 2010 is £180 -£185 per week and hence this scheme is right on the average.

The 35 residents comprise, 11 under 35s (5 of which have assessed care needs) and 24 over 35s (16 with assessed care needs).  Currently they all receive the full HB of £184ppw and the total HB income for the provider is 35 x £184 or £6440 per week and £336k per year.

Under LHA this would realise:

(a) 11 @ £63pw  (shared room rate) plus (b) 24 @ £93 (1 bed rate) totalling just £2925pw or £152k per year – a reduction of £184k per year.  This is a 55% reduction.

Alternately, if LHA to all those with disabilities was paid at 2-bed rate it would be:

21 @ 2bed rate (£121) plus 6 @ SRR of £63 and 8 @ 1 bed rate of £93 making £3663pw or £191k per year. This is a £145k reduction and a 43% reduction.

All of these changes propose massive reductions to the provider in income terms and threaten the entire schemes viability.  Even if the replacement is LHA+25% and using the most generous application of LHA above would give £239k in HB income – still a massive shortfall on the current ‘reasonable, realistic and justifiable’ rental income of £336 – almost £100k per year and a 29% reduction.

Such a reduction would mean closure and that’s on the most generous application of LHA and adding 25% to it.

A few other points to note.  This provider has an overall hourly cost that is less than the domiciliary care rate and its rate is roughly 20% lower than the average support rate.  Its rent costs also compares favourably with anything in the council area according to the HB department and it therefore considered very cost-efficient by HB department, SP team and Social Services.  It has achieved all ‘A’ in the SP QAF and its quality is therefore highly regarded too.

It has a constant waiting list and overperforms on its outcomes and all other performance measures. The council admits it saves them in excess of £750k per annum in alternate costs and recognises it save other aspects of the public purse such as health care and criminal justice costs on top of this.

Yet it is faced with a massive reduction in income that means it will almost certainly have to close.

It cant reduce staffing levels as to do so would put it in breach of its SP contract and if it did reduce waking night staff then it would lose more than this £100k per year in reduced rental and care income.

It could charge tenants there an extra £3k each per year, about £60pw or so but its vulnerable tenants clearly couldn’t afford that.

The outcome of these DWP proposals being implemented is that 35 vulnerable people will lose the accommodation support and care they need and love.  The council will have to find new provision for the 21 with assessed care plans and in the locale this would have to be residential care as no alternate provision exists and this would cost about £770k per annum at current rates assuming it was available.  Additionally the council would have a further 14 persons that would be owed the full homeless duty and incur higher costs than they pay now.

Alternatively the DWP could and should realise that these proposals are highly dangerous, they dont realise the full implications (no impact assessment on this consultation either) and the vague proposals need so much more detail and especially cost detail.

This scheme is not in isolation in these massive reductions.  Over the last 11 years I have worked with scores of hostel and refuge providers in SP and have their costs.  Everyone of them will lose a minimum of 37% and the maximum loss is 68%. This is based on LHA+25% and applying the 2-bed LHA rate to all those with care needs, even the under 25s.

Based on such huge reductions all of which are non-financially sustainable a very conservative estimate is that 20% of hostel and refuge provision will close within 12 months of these proposals being implemented.

Am I just a scaremongerer?  Well I was labelled that on numerous occasions in 2005 and 2006 when I predicted that the SP savings and cuts local government rushed into would see 1 in 10 vulnerable people lose their support after the first three years.  When the CLG finally published those figures in 2007 they revealed that those supported under SP had fallen from 1.23m to 1.04m – almost a one in six fall and far more than even this ‘scaremongerer’ predicted.

SP – The failures come home to roost 1

Late last week Eric Pickles released a consultation paper that was widely reported as an attempt to prevent local authorities disproportionally cutting funding to vulnerable groups and third sector providers. 

Why should Cornwall for example issue an across the board 40% cut when they have had an increase in SP funding was the claimed rationale. In isolation a very good question.  Yet in the real world it has a simple answer and is the first in a series of the failures of the Supporting People programme.

The original SP paper issued by central government stated in its opening paragraph that it will create a “secure legal and financial framework” for vulnerable people.  It didnt create any such framework and SP is discretionary spend for local authorities and as such councils have little choice but to prioritise mandatory spend aspects such as ‘care.’

It is precisely because SP remains discretionary spend, ie that is has NO legal or financial framework, that councils across the UK will find other ‘priorities’ for their SP funding allocations