Refuges and hostels will still close – DWP still dont see issues

Many in supported housing are reassured over Lord Freuds words about how HB payments will be treated in Universal Credit following the Work & Pensions inquiry committee meeting on Monday this week. I have emphasised Universal Credit for (good?) reason.

Talking about hostels and refuges Freud said:

 “That hostel is very concerned that setting up the whole Universal Credit system for them would just carve them out, particularly as their costs  may be very different in structure to the normal housing costs. So we’ve heard  that and we will look to a system which does not rope them into Universal Credit. We’re looking at how best to make sure that support for those hostels – and all support accommodation – is kept on an even keel.”

You will not I have emphasised a few other words Freud actually said.  Firstly “we will look” is pretty self-explanatory and says he recognises the proposed plans – (a) service charge reduction in eligibility and (b) the consultation paper on exempt accommodation from 2011)  – wont fit in with Universal Credit.

What he doesn’t say anything at all about is the treatment of higher rents and housing benefit payment of exempt accommodation in the overall benefit cap (OBC) changes due in April 2013 and 6 months ahead of Universal Credit.

This is very significant.  If you have watched the inquiry you will note how carefully Freud chooses his words throughout the entire 2.5 hours.  Freud says nothing at all about how hostels, refuge and all exempt accommodation will be treated under the OBC with its £500pw cap for families and £350pw cap for single persons.

As I have stated on numerous occasions before the OBC is the key reform issue in exempt and supported accommodation rents and what payments will be received and not the reduction in service charge applicability (HB eligible costs) which only make hostels and refuges unsustainable as a delivery model.  The necessarily higher rent levels in exempt accommodation being included in the OBC make such services financially unsustainable for both provider and resident.

So what happens between April 2013 when OBC begins and October 2013 when Universal Credit starts its 4 year implementation?

What we know is that many hostels and refuges will be putting in new rent figures to HB departments.  The same people who will be operating and making decisions upon the overall benefit cap.  We also know from a 2010 DWP issued report that formed the basis of last years consultation paper that “Software systems do not allow LAs to report the numbers of claimants in ‘exempt accommodation reliably” and “Software systems do not include flags for supported accommodation status” (both on page 79).

So the decision maker for OBC and the decision maker for exempt accommodation rents is the same yet that person will not know whether the rent in question is an exempt accommodation rent and should be disregarded for OBC purposes or the OBC should apply to the individual claimant.  If the HB software systems don’t know which rents are exempt accommodation then how can the system port that unavailable data into the OBC system?  It clearly cant.

To date and in practical terms local HB officers may have some local knowledge of what addresses in their locale are hostels or refuges and are therefore clearly “exempt accommodation” – Yet how many know that 123 Acacia Avenue, Anytown is a supported living scheme housing 3 vulnerable persons with ALD and is also exempt?  A problem that will be made worse when OBC decisions are taken at some remote call centre facility when the current 20,000 HB decision makers across local government are not TUPE’d across to these remote call-centre back office facilities who will administer the OBC!

From April 2012 when OBC is introduced there will be mayhem and a huge number of wrong decisions being made and all because the HB software systems don’t allow exempt accommodation to be recognised.

Anyone who has ever worked in exempt accommodation provision knows that when a residents benefit is stopped, capped, cut or delayed the proverbial hits the fan. A resident in a single homeless hostel becomes more ‘chaotic’ when this happens.  A resident in a refuge who will have their benefit decisions (housing and welfare) delayed post April 2013 will not be happy either nor will the providers of such services.  What impact on support need will the inevitably errant letter arriving at 123 Acacia Avenue saying benefits have been cut, capped or delayed have for the vulnerable supported living resident with ALD or MH issues?

What if exempt accommodation rents are included in the OBC?

This could be accidentally or errantly as I touch on above OR it could well be the case that exempt accommodation rents ARE included in the overall benefit cap.  As I say above Freud did not say anything on this at all and so the ‘welcome’ given to comments such as exempt accommodation will not be ‘roped into Universal Credit’ is not the same as saying they will not be roped into the OBC and hence any welcome has to be a very cautious one indeed.

If may well be that the net rent element of exempt accommodation will be included in the OBC and it wouldn’t surprise me if this is what Freud, IDS and DWP come up with when they issue guidance on this (which we know will be after the UC regulations are issued which we know is after the Autumn Statement which we also don’t know the date!)

An exempt accommodation supported rent includes (a)Net Rent, (b) HB eligible services and (c) HB ineligible service charges which go together to make (d) Gross Rent.  HB pays for (a) and (b) and resident pays for (c).  So in a refuge for example, the costs of hard and soft furnishings, staff attendance for security and supervision, and others right down to Childrens playground equipment are HB eligible service charges (b) which the proposed service charge reduction reform would not pay for but currently do.

The net rent element is similar to a general needs rent and so could be £100pw for example and it is this element I imagine will eventually have to come under the OBC and may well do so from April 2013.  Yet even that assumes DWP will have found  way to get an ‘exempt accommodation’ address flagged up in their HB systems nd will have found a way to port this information to any individual claimant residing at that address, nd all by April 2013!!

It also presupposes that supported housing providers (landlords and managing agents) have set their gross rent figures out correctly.   This is a huge and errant assumption as most have not got them set proportionally and transparent correct AND many significantly underclaim on HB.  From personal experience it is not unusual for me to see HB claims in exempt accommodation that underclaim by a much as 50% – that is they could be doubled under existing HB regulations.

Much of this is to do with provider and HB officer ignorance of what the HB regulations state can (and should) be claimed for and pragmatically this is because (a) 95% of HB regulations deal with general-needs accommodation and so HB officers only receive training on these 95% or HB regulations, and; (b) provider ignorance of them too.

Another practical issue is timing.  The landlord / managing agent model is the most typical model of exempt accommodation.  Simply the owner of a hostel or refuge building is the landlord who (sadly decreasingly!) lease this on a peppercorn rent to a charitable organisation to deliver the support.  The timing issue is that social landlords wish to have an input into rent setting AND want exempt accommodation rents in hostel and refuge to be changed in April each year when the rest of their general needs rents tend to change.  Yet because we wont know how exempt accommodation rents are to be assessed in the OBC until after the Universal credit regulations are published, which in turn if going to be after the Autumn Statement Freud states, then there will not be enough time to ensure exempt accommodation rents are correct and ready for their assessment in April 2013 under the OBC!

Every ‘exempt accommodation’ rent is scrutinised to the hilt by HB officers.  That is correct and they should be fully transparent.  Yet this process can take a long time and I mean long.  I am aware of exempt accommodation rents that take over 2 years to finally settle – partly to do with complexity and interpretation of regulations and mostly to do with ‘resistance’ from local government as they do not get all of the rent back from central government for this in some circumstances – highly complex to explain here but in simple terms a systemic problem known for many years.  Now that Freud, IDS and DWP are looking at this area they would do well to look at this issue too.

In summary, a very cautious welcome of the apparent intent not to rope supported housing into Universal Credit.  Yet a huge amount of work to do vis-a-vis how supported housing rents are treated under the (more pressing) OBC reform and some further investigation into the systemic constraints and problems of HB funding supported housing and exempt accommodation services.

UPDATE 26 September

Late yesterday the National Housing Federation issued a news release on this and I quote the summary with some emphasis:

25 September 2012

The Government has set out in broad terms their approach to the future of paying for housing benefit in supported and specialist housing. Following Iain Duncan Smith’s statement to the DWP select committee on 17 September, the DWP have clarified that,

  • Additional housing costs for supported and specialist housing,‘exempt accommodation’, will be managed outside the Universal Credit (UC) when it is introduced in 2013.
  • In the short-term, there will be an interim system that is broadly similar to current arrangements. People in supported and specialist accommodation with higher housing costs will continue to be eligible for housing benefit from their local authority.
  • In the medium term, DWP will design, develop and potentially pilot a more localised system for managing these costs outside the Universal Credit

The first bullet point is very worrying indeed.  It confirms my view that net rent is to be included in UC when it says that “additional housing costs” which must mean the HB eligible charges I discuss above permissible in exempt accommodation.

It goes on to say that such HB eligible charges will be managed outside UC meaning the ‘normal’ or ‘non-additional’ charges (ie net rent) WILL be included in Universal Credit from October 2013.

However, as I stated above the overall benefit caps of £350pw for single pesons and £500pw for families comes online 6 months earlier than this in April 2013, so how are supported housing and exempt accommodation gross rents to be treated in the period April to October 2013?

Does it mean, as it certainly could mean, that in this period the full gross rent is included in any OBC determination?  This is a potentially huge issue as I explain below.

A) Single Persons exempt accommodation

Lets assume a single person ONLY receives one welfare benefit such as JSA/IS (dole) at £71pw.  This means that the maximum gross rent payable is £350 – £71 or £279pw.  Anything above this figure becomes an arrear for the tenant.

I am personally aware of many single homeless hostels and DV refuges (30% or so there are single without children) that have weekly gross rents higher than £279pw.  These are across the country and dont just occur in the capital.  Lets say for the sake of argument the gross rent is £330pw.  The single resident there will need to pay £51pw out of their £71pw dole to make up the rent!!

B) Family cap of £500pw

Take the same rent of £330pw in a refuge and a woman with 3 children who if claiming full welfare benefits (and if not one major aspect of supported housing providers is to ensure full benefit take-up) of £325 at April 2013.  This leaves the OBC making a maximum payment towards rent of £175pw [£500 – £325] towards a gross rent of £330pw!  The woman fleeing violence and abuse has to make up £155pw to pay the rent!!!

I could carry on but the above two simple and not untypical examples reveal the severity of the issues involved.  I could have mentioned many vulnerable people with ALD or MH issues but the hostel / refuge issue is easier to describe. How can any of the above pay the rent?  They simply cant.  So even with this DWP climbdown on taking exempt accommodation rents out of UC does absolutely nothing to solve the problem of the inclusion of rent in the overall benefit cap regulations.  And that goes for the period April to October 2013 AND BEYOND.  As I said above in original post the inclusion or exclusion of exempt and supported housing rents in the OBC has NOT been mentioned.

I first started saying hostel and refuges would close as a result of the OBC back in August 2011 and a good 9 months or more before Refuge and other DV lobbies began to take up the issue.  DV providers cannot survive with having to suffer such huge reductions to rental income and will close.  Back in September 2011 I modelled some existing provision of clients we have advised and found that reductions of between 24% and 65% of total income would happen – no service can survive such cuts.

I said above in the original post that supported housing providers can only give the 17 September promouncements of Freud and IDS a very very cautious welcome.  That was on the basis – now seemingly confimed by NHF above – that these said nothing about how the OBC would apply and the DWP didnt recognise the real problems of this, which they clearly still do not!

One final point has changed from my original post.  I advocated (and still do) that landlords and managing agents get their rents extremelt transparent and apportioned correctly and QUICKLY.  That still holds.  Yet how can rents be set for 2013/14 when such providers dont know how rents will be treated under the OBC whether that be just from April to October or indefinitely?  They cant is the simple answer.

The DWP needs post haste to come out and say how exempt and supported accommodation rents will be treated under the OBC regulations.  That is the immediate concern and the primary lobbying need for all forms of supported housing provision.

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