Below are a number of tables which show the reality of the Overall Benefit Cap (OBC) and what it will mean for social housing, in short its demise.
The tables are self-explanatory as they detail the anticipated levels of the cap itself (A) using wage inflation (AWE) currently at 1.5%; the anticipated welfare benefit rates using CPI inflation (2.2%); and rent inflation RPI of (3.1%) + £2 is used for rent figures.
The way the OBC will work is CAP less WELFARE BENEFIT equals the maximum amount of HB payable
Table 1 looks at a 2 child family living in a 3 bed social housing property and as we can see at row E that the family can afford to live there at the inception of the OBC in 2013 and indeed are £118pw under the cap limit. Yet note that by 2035 and because of the systemic flaw the same family will have a cut in their HB of £18pw.
However this is a small family and note that a family with 5 children in 2013 will receive £463pw in welfare benefits leaving just £37pw from the £500pw cap as Housing Benefit.
A 6 child family will get more than £500pw in welfare benefit and therefore will not get a penny in Housing benefit and will have to find their rent from their welfare benefits. That is the fundamental flaw.
Table 1 – 2 parent 2 child London in 3 bed SRS property
|D||All Ben £||382||405||469||542||626||701||807||881|
Table 2 below looks at a 3 child family in a social housing property in London. As can be seen as early as 2020 the 3 child family starts to get a HB cut in the OBC. This cut rises alarmingly because of the systemic flaw and this again not-large family will soon be priced out of affording the cheapest housing available there.
We are beginning to see the impact this will have on evictions for arrears and homelessness from social housing and remember this is so much worse in the private rented sector. This will apply from 2013 right across the country as the welfare benefit level of £324pw leaves just £174pw for rent. The average private rent for a 3 bed property nationally is £182pw.
So all 3 child and larger families in the PRS are likely to get evicted for arrears in 2013/14
In London the average 3 bed PRS property costs £324pw so even a 2 child family will likely be evicted in 2013/14 for arrears. There is no denying that homelessness applications will rocket in 2013/14 and directly because of the OBC.
Table 2 – 2 parent 3 child London 3 bed SRS property
|D||All Ben £||450||476||555||631||724||809||926||1011|
Table 3 below is for completeness and uses average provincial rents and simply reveals that the systemic flaw will kick in later due to lower provincial SRS rents.
Table 3 – 2 parent 3 child Provincial family 3 bed SRS property
|D||All Ben £||410||433||498||563||657||732||837||914|
Table 4 below shows just how punitive the OBC is and right from the outset for a 4 child family in the SRS (and of course in the SRS). This is where the problems really emerge for me and in terms of rehousing especially after being made homeless.
Arrears will accrue due to the OBC and eventually leading to priority need homeless decision if only becuase of the children. The family will have to remain in temporary accommodation as ALL options are unsuitable. The family cant be placed in the PRS as they only have a maximum £108pw to pay towards rent from the cap against an average £182pw and means that any 4 child family anywhere in the country will not find an affordable PRS property. They will struggle to pay for a 3 bed SRS property anywhere in the country so where will they live?
Table 4 – 2 parent 4 child London family 3 bed SRS property
|D||All Ben £||518||547||627||719||822||916||1046||1141|
Table 5 below again simply reveals that the systemic flaw will take longer to kick-in in the provincial SRS but does so dramatically over time.
What it reveals is:
- The social housing model will disappear
- The days of full HB are gone for social tenants and social landlords
- Social landlords will face far higher arrears from the OBC than the bedroom tax
- Social landlord financiers will panic when they see these figures
- Large families from 2013 will have nowhere to live
- Increasingly smaller families will have nowhere to live over time with the systemic flaw
- Homeless figures are going to rocket and increase every year as the OBC will hit 171,000 families in its first year and rising by 102,000 every year thereafter according to DWP latest figures
- PRS landlords will flee the HB claimant market in ever-increasing droves
- The affordable rent (sic) model is dead in the water
ALL AS A DIRECT CONSEQUENCE OF THE OVERALL BENEFIT CAP
Social landlords may try to hide behind the excuse that it is only in the last few weeks that the DWP figures have been tripled. Yet that is not excuse for a failure to see the systemic flaw in the OBC which I first reported months and months ago. Some have made comments that ‘our rent is only £80pw that leaves £420pw left out of the cap so whats the issue!” These are incredibly short-sighted comments and misguided. What if the same RPs stating this are developing organisations? Surely they want to know if their new properties will be affordable and free from arrears risk in the next 30 years?
Note well the tables only reveal ordinary SRS rents and do not include the 65% higher affordable rent model units which make the situation so much worse. As I also said months back any landlord (social or not) that has developed affordable (sic) rent units will also realise the extent of the financial risk to which they put their organisation in.
The tables also reveal that the PRS landlord will flee the HB claimant market in droves as they are a risk too far. This leaves families with 2 children or more only having social housing as the ONLY option.
In terms of RPs helping out LAs with their homeless duties is it ‘reasonable’ for any RP to take a LA homeless nomination for a 4 child family in 2013? In 2020? No it is not as the risk of arrears is far too high!
For developing RPS what size properties are you going to develop? The OBC makes it financially incompetent to develop 3 bed or higher sized units!
SO WHY THE HELL HAVE SOCIAL LANDLORDS IGNORED THE OVERALL BENEFIT CAP?
The reality is the OBC directly eradicates the social housing model as we now know it. The systemic flaw creates massive problems in all areas of social housing, allocations, development, finance and every other area.
Where has the lead been on the OBC from CIH or NHF? Where has the outrage and lobbying from homeless organisations such as Shelter and Crisis? Where has the opposition to this policy come from in political circles? Why wasnt any of this in the coalition’s impact assessment on the OBC?
As I said when I developed the theory of the systemic flaw I must have something wrong here; my figures must be wrong. Yet they are not. Even if the coalition ties the CAP to welfare benefits or vice versa, the systemic flaw still applies as rents rise higher than both these variables and social rent levels will continue to rise because the ‘welfare reforms’ only cut HB, and HB accounts for 60% of social landlords income which is already under threat from direct payments and the bedroom tax so rents there will rise by the maximum permissible and have to do so.
All of the recent comments that Universal Credit is a car crash waiting to happen (and it is) pale into insignificance compared to the impact the OBC will have with its systemic flaw.
The OBC is an attack on social housing and one which social landlords can no longer ignore!
Table 5 – 2 parent 4 child provincial family 3 bed SRS property
|D||All Ben £||478||504||577||661||755||839||957||1044|