The overall benefit cap (OBC) will create massive and divisive tension between councils and housing associations and the OBC is an unwitting divide and conquer strategy by the coalition for social landlords.
I have touched on this lightly before but in light of an article in Inside Housing today in which Birmingham City Council dumped a problem case on a housing association needs further consideration. BCC in short dumped a problem tenant on a HA without informing them of that tenants previous anti social behaviour record.
The basic issue
The OBC which begins in April 2013 sets an overall benefit cap of £500pw for families. It works by deducting the level of welfare benefits and tax credits from the cap and what is left, the residual, becomes the maximum that can be paid towards rent through Housing Benefit (HB and LHA). When that residual doesn’t cover the rent level then the tenant will build up arrears which leads to eviction and then to homelessness and a duty of temporary accommodation (TA) on councils.
Note that as the OBC will cap families then because children are involved local councils have little option but to deem the family unintentionally homeless and in priority need and have (a) a full homeless duty to accommodate in TA and then (b) the council has to find permanent accommodation to discharge that duty.
It is the second stage issue (b) above, the sourcing of permanent accommodation, that will reveal the tension and this is a systemic tension directly created by the OBC. That tension is that the larger-sized families that have been through this cap to arrears to eviction to homelessness route will still not get enough in HB to pay for social rent levels and so the process starts again of arrears build-up to eventual return to TA.
The DWP issued a final estimate in July 2012 saying that 56,000 families will be caught by the OBC and 44% of these would be in social housing (SRS) and 56% in private rented housing (PRS). Yet last week and just 3 months after this final estimate from July the DWP released a new estimate which sees the figure increase threefold to 171,000 families in 2013/14 leading to 3 times the arrears risk. So we will see local councils have much higher numbers of homeless presentations and the same councils housing so many more families in TA and then seeking to find much more permanent housing in the SRS to discharge the full homeless duty.
In summary the OBC systemically and directly creates a huge increase in homeless cases and a correspondingly huge increase in local councils needs for discharging such families into the social rented sector.
Because of stock transfer over the last 20 years we know that two-thirds of the SRS are registered providers – RPs such as housing associations, ALMOs and all other stock transferred organisations (STOs). Typically, these RPs are ‘duty-bound’ to help councils with their housing and homeless needs and do so by way of nomination agreements. Councils may have nomination rights for 50%, 80% or even 100% of all HA lettings. Yet because many of these families will NOT get enough HB to cover the RP rent these families become a huge risk of arrears and a huge risk to RP’s bottom lines. Throw in the context of the bedroom tax and direct payment of HB to tenant and not landlord and that risk increases and puts such risks in the correct context.
RPs are by necessity, going to become more risk-averse in who they allocate properties to at the same time that councils will have a hugely increased need to offload high risk cases to RPs and the systemic tension emerges.
The OBC is a crude cap and will capture two-parent two-child families in London living in the PRS and two-parent four-child families living in the SRS. In the provinces this becomes two-parent three-child families in the PRS and two-parent 4 and 5-child families living in the SRS. All such families will have such a high risk of arrears that they will be evicted and become homeless and enter into TA.
So we see a situation in which councils will have families in TA that they will want to move into housing association properties BUT the HAs will know these families won’t get anything like full HB (and some will get no HB) meaning the HA will have to accept a huge risk of financial loss. We will see, as now, central government pressurising local authorities (LAs) not to have homeless families in temporary B&B hotels for more than six weeks, LAs in turn pressurising HAs to accommodate these high risk of arrears families and HAs saying to LAs no chance, or in the vernacular go f##k yourself!
Nomination agreements will become huge sources of tension as LAs seek to ‘dump’ high arrears risk cases onto RPs. Central government no doubt through the LGA will be pressurising RPs to take such cases, yet let’s not forget that RPs as they are known are correctly termed PRPs or private registered providers and there is no legal duty on them to accept such cases they are merely ‘duty-bound’ – a term of no legal substance whatsoever – to help LAs with their housing and homeless strategies.
Look a bit deeper and we see ALMOs and those LAs with retained stock will have little choice but to accept these high arrears risk cases from LAs. Yet the traditional housing associations will be able to say no to their LAs and will renegotiate nomination agreements and will be more circumspect and risk averse on who they accommodate by this referral route. Divisions will undoubtedly open up between HAs and LAs over this issue, which again I restate is a systemic issue created directly by the OBC and its inherent crudeness.
HAs may in fact like this idea. If you accept the idea (that some hold) that all social housing is the housing of last resort and the reside of the benefit scrounger, then the traditional HAs can move away from that notion and in business terms this makes sense. The affordable (sic) rent model needs to be seen in this context too as HAs develop AR but councils don’t! HAs becoming one step above the lowest of the low and creating a gulf between them and council housing and ALMOs which will become the preserve of the benefit claiming large sized family.
A schism will appear within social housing and become the divide and conquer strategy of the coalition.
Will LAs start to bring ALMO’s back in-house too out of necessity as this is the only way they can discharge their high-cost full homeless duty? Possibly yes. That’s an interesting and perhaps unintended consequence of the OBC and reversing the trend of LAs getting rid of council housing which has been the norm over the last twenty years.
Again I restate (bang on or rant?) about the systemic flaw in the OBC which will see more and more smaller sized families getting caught by the cap as the cap fails to keep pace with the rise in welfare benefit inflation and especially with rent inflation. Again I rant (?) about the OBC being far and away the most important and most dangerous of all the welfare ‘reforms’ that will affect social housing.
Yet none of the above is disingenuous in any way and the OBC will change the face of social housing in the UK and will do more to change it than the bedroom tax of direct HB payment to tenant or any of the other ‘reforms.’ It really is time that social landlords and the social housing sector (or is it a movement?) does wake up and smell the bloody coffee.