‘Welfare Reform’ – is there a chronic social housing knowledge deficit?

I’ve been blogging for just over a year and in that time said:

  • SAR will apply to social housing
  • Exposed the LHA freeze in 2012/3 that Shapps didn’t know about
  • Argued that affordable rent is a chronic financial mistake
  • Developed the systemic flaw theory in the OBC which nobody has yet disproved or argued against
  • Said the OBC is the worst ‘welfare reform’ as it will cost more to tenant, landlord and to the public purse and will displace 500,000 persons next year.

…amongst others!  A lot of controversial stuff when first argued and some which can get up the noses of social landlords too and having re-read some of them I can see how despite the conversational style in which they are drafted that I can come across as an arrogant, conceited pain in the arse!

I’m not (of course I would say thet…er…) but I’m conscious I can give that impression and especially conscious of this before I address an audience in person for the first time.  Will he come across in person as arrogant as he can appear here?  At times it’s almost palpable the audience is thinking who the hell is this bloody supported housing consultant telling us (general needs) housing professionals that we have missed the elephant in the room by ignoring the OBC?

Last week I delivered a presentation to a social housing conference about the ‘welfare reforms’ and concentrated on the systemic flaw in the overall benefit cap.  That’s a difficult argument to present as the OBC involves lots of numbers to explain and as I have said before telling an audience of social housing professionals they shouldnt be focusing on the bedroom tax but the OBC is akin to telling them they havent been doing their job.  Not easy and to be fair to the audience they comprised housing performance specialists (from whom I learned a lot especially about the Green Deal which aint gonna happen because of the reforms and will become just another victim of them) and not housing strategy specialists.

Building up to that OBC argument involved setting the context for the OBC as an integral part and I was surprised at the apparent lack of recognition of some basic aspects of ‘welfare reform’ such as Housing Benefit is the ONLY benefit to be cut for all families with 5 children or less and so ‘welfare reform’ is a misnomer as it is not welfare benefits being cut but just housing benefits.

Moreover as ‘reform’ means to improve then that is also a misnomer as the lot of the tenant, the landlord and the public purse will not be improved as each will have to pay more.

Explaining the systemic flaw in the OBC by the use of tables as is needed as I did here and this was met with comments such as (and I paraphrase) ‘methodology sound but it wont happen’ and others like ‘social landlords will always house the most vulnerable’ despite the clear changes the systemic flaw will mean for tenant profiles and social landlords being financially unable to accommodate large families in 2013 and incrasingly smaller sized families as the systemic flaw kicks in over time.

A concurrent theme I included in the presentation was that social landlords had focused almost exclusively on the bedroom tax and/or direct payment and by implication not looked enough at the OBC was simply met with but we have looked at it ….but nothing further to substantiate those comments (A sure sign my intention to challenge the audience meant I had gotten up someones nose!).  This left me thinking how many articles have we all read about the bedroom tax and direct payment from social housing sources….and how many have we all read about the OBC – very few by comparison and the point is made, though I decided not to make it at the time!

I restate, the audience primarily consisted of ‘performance’ professionals and were not strategists or policy makers.  Yet many were of a level of seniority that I argue should have known the dangers of all aspects of the ‘welfare reforms’ and while very aware of the bedroom tax and direct payment issues, on the OBC or the fact that HB is the only benefit to be cut were much less knowledgeable.

One of the key ‘messages’ I wanted to get across was that as the OBC will change the tenant demographic over the next 5/10/15/20/30 years – to smaller family sized tenant compositions – then this was necessary to factor this in to any projections on all aspects of social housing management including performance / customer satisfaction which was the principal concern of the audience.  Quickly, it’s no good building 4 bed houses now if no one can afford to live in them in 20 years time was one obvious consequence to me of how the OBC will radically change social housing and time constraints didn’t allow such lesser issues as if you have smaller family sized units then do you have lesser repairs bills?

As anyone who presents will know after each presentation you get introspective.  I should have said that, I should have explained that better, did what the bloke in the red tie means I should change that aspect, etc.  I scribbled furiously on the train making notes revising some of the presentation, but overall felt there was a knowledge deficit on the part of social housing professionals and in part an unwillingness to accept the radical changes the OBC will bring, on top of the fact that I should have articulated my arguments better and with more clarity.

Then, over the weekend Sarah Teather the Lib Dem MP came out with a ferocious attack on the OBC in the Observer, calling the OBC immoral.  She only mentioned a tiny percentage of the OBC impacts yet this was the main political and housing story of the weekend. Encouraging I thought.

Then earlier this week I published a blog stating that the risk to arrears from the bedroom tax will at most be £2.75bn over the next five years yet the OBC presents a greater than £4bn risk to arrears and will increase every year – a simple extrapolation showing that the OBC is a bigger financial risk to the social landlord.  This simple calculation started to get discussed.  Suddenly comments from social landlords began to accept this and some admitting that the OBC is a bigger financial risk than the bedroom tax, notably those in the higher rent areas of the South East.

When I published a related blog which said from the revised DWP figures on OBC – which could explain the lack of attention the OBC has had from social landlords as the numbers affected triples! – which said one OBC impact next year alone could see a city the size of Liverpool displaced (500,000 persons) the reality has hit home with social landlords judging by twitter comments and my inbox. My systemic flaw in the OBC issue I raised many months ago was beginning to be recognised for the importance it deserves (Ok that does sound arrogant I know but you get my point!)

However, while the events of the last week suggest that social landlords have woken up and smelled the coffee over the OBC there is still a knowledge deficit amongst social professionals of the real impacts on the ‘welfare reforms’ and more importantly what they mean. I summarise some of these below

1. Housing Benefit is the ONLY benefit to be cut in the OBC process

  • The OBC works by taking away the level of welfare benefits received from the cap figure leaving a residual amount as the maximum to be paid towards rent.
  • Hence any cut occurs to Housing Benefit and not to welfare benefits which remain at the same level.
  • Note as JSA is the same rate whether the tenant lives in London or Liverpool we already have a welfare benefit cap and the OBC merely cuts housing benefit
  • The HB superficial saving is more than outweighed by higher public purse cost elsewhere such as homelessness as in the Pickles letter

What the first bullet point means is that the days of full HB being the norm in social housing will soon be over.  That is a huge shift with huge problems flowing from it.  The second bullet point also I argue have a profound effect.  The tenant will recognise that the government can cut his housing benefit but can’t and wont cut his dole.  Paying rent can therefore be seen as less of a priority in the tenants mind and while that is entirely speculative an a bit ‘touchy-feely’ I am convinced it will happen.  The third bullet point shows that ‘welfare reform’ is a huge misnomer as we already have a welfare benefit cap and a national pay rate, the only variable in the benefits system and the only benefit to be cut is housing benefit – on which the social landlord gets £14.6bn per year and relies upon for survival – and so the OBC IS a definitive attack on social housing nothing more nothing less! The fourth and final bullet point means that the OBC is political and not economic as the overall benefit cost to the public purse increases!

The fact that HB is the only benefit to be cut which is the process of the OBC (excepting 2 parent 6 child + families who get more than £500pw in welfare benefits) has huge consequences for social housing and will radically change the face of social housing. The sector needs to evaluate precisely what this will mean in my view.

2. Direct Payment to tenant of HB

The decision to make payment to the tenant the default position has rightly seen social landlords argue that this will increase arrears.  Many have increased their provision for bad debts by doubling this amount.  I would argue this is nowhere near enough. I’ve seen figures this week which suggests the total amount of social housing arrears stands at £491m which equates to about 2% of the total rent-roll and by looking at the impacts of all the ‘welfare reforms’ I can envisaged this rising to 7%, 8% or even 10% within a few years (that a future blog will detail) but more importantly increasing every year because of the systemic flaw in the OBC.

Direct payment to tenants is a shift in responsibility and the coalition says it is a deliberate behavioural change they seek.  And it is.  The pilots have already shown 3 weeks rent paid instead of 4 when it is school uniform time  and other practical matters (the best article I’ve read in Inside Housing for years!) and I envisage the same will happen at Christmas and other higher cost times in the calendar.  I also state above that tenants will see their dole and welfare benefits maintained and only see a cut in HB.  Tenants perceiving paying rent as a lower tenant priority will happen but like school uniform and Christmas time rent payments is incredibly difficult to quantify.  We all suspect and I would argue ‘know’ it is going to happen but we can’t put a figure on it.

Direct payment to tenant hold dangerous and significant unknowns at least in the short term which for now we can’t quantify.

3. The systemic flaw in the OBC

This is not just a higher risk to arrears at £4bn in first 5 years than £2.7bn for the bedroom tax, it gets worse every year as rents riser faster than welfare benefits and especially much faster than the cap figure.

Getting worse every year and looking at the OBC impact in 30 years time is often dismissed as being speculative and comments such as governments will change in that time which they will or social landlords will always accommodate the most vulnerable its our ethos and other in part dismissive comments such as the cap is £500pw our rents are only £90pw so why should we worry are some of the reactions received whenever I present or write about the systemic flaw.  Yet that is a dangerous way for social landlords to view the systemic flaw. Even when snappy titles are given to blogs such as “The OBC will displace a city the size of Liverpool” there is still an element of that’s more of a LA problem than a RP issue!

All social landlords have to look and plan 30 years ahead and even longer into the future. If as the systemic flaw in the OBC reveals that in 30 years time a family with 2 children in the lowest cost social housing areas such as Hull or Stoke or NE Lincolnshire will not get full HB because of the systemic flaw then it obviously impacts on whether a developing social landlord should build 3 or 4 bed houses today!  What’s the point if your customers wont be able to afford such properties? If social landlords will always house the most vulnerable as is now maintained then that is not financially viable is it given the likely arrears build up?  Social housing professionals in part don’t want to see this reality of allocation being restricted yet the OBC makes that inevitable!

Undoubtedly tenant demographics will change as social landlords are forced to accommodate smaller families – it is a financial imperative and necessity! Yet how many social landlords have built-in to their business plans such a change in tenant demographics!

Finally, a huge number of impacts the welfare reforms have emerge almost every week and are not yet seen by social landlords (and even by smart-arse know-it-all, arrogant condescending supported housing consultants!!)  Some excellent articles recently by noted housing commentators have looked at social housing in 20 years time and included some elements of the OBC but not the significant changes in tenant demographics it will produce.  Others including an otherwise very good 42 page report called Homeless Bound by the NHF on the massive impact the welfare reforms will have on homelessness failed to even mention the systemic flaw in the OBC and the direct causal impact it will have!

So if the last week or so has seen a greater understanding and recognition of the systemic flaw in the OBC by social housing professionals then great, but don’t stop there.  Go back and revise any plans you have already made in the past few years and see how the OBC will impact. Yesterday I issued a blog which hardened my view that SAR will be introduced to social housing after Cameron’s curious comments in PMQs.  Additionally we still have no idea whether the OBC will apply to DV refuges and homeless hostels and in supported housing in general and we will have to wait until after the Autumn Statement for an announcement by Freud and IDS.  This is a result of the lack of pre-thought with all of these policies and proposals by the coalition – an easy yet valid political point – yet given how radically these affect all areas of social housing we need to move beyond cheap political points.

The entire welfare reform (sic) agenda of this coalition changes rapidly and will continue to change (hopefully as we know it will in Northern Ireland but don’t hold your breath!) even after implementation begins.

There is a knowledge deficit amongst social housing professionals at all levels and if a consultant approaches you saying they know it all then they are fibbing through their teeth as nobody knows it all.


If social landlords do not know the impacts the welfare reforms (sic) will have and are not encouraged to discuss, think or be trained upon them, then how the hell can they ‘advise’ or inform tenants of the impacts on them of these ‘reforms?’  We have already seen many articles on tenants believing the bedroom tax is not a HB cut but landlords putting up rent, or in simple terms landlords are being blamed for what is government policy and outside their control.  Tenant (or customer?) dissatisfaction will be expressed by an even lower proportion of rent being paid and rent being seen as even less important as a priority payment.

However, when the tenant / customer sees more social tenants being evicted for arrears which will inevitably have to happen next year because of the OBC the direct payment issue will diminish over time as tenants make paying rent a priority payment again.  As the systemic flaw kicks in more evictions will be inevitable and again the direct payment of HB to tenant threat will further diminish as tenants see more evictions.

Yesterday a Chief Executive said on Twitter that direct payment is the biggest threat to social landlords closely followed by the OBC and both ahead of the bedroom tax.  I maintain the OBC is a bigger risk than direct payments.  Yet on a personal and professional level this begins to see social landlords place OBC with the importance it deserves.  Yet the OBC is a bigger threat to social landlords than direct payments as I anticipate the impact and real threat of direct payments will diminish over time as the OBC impacts and evictions rise.  That is a behavioural change in which I could be wrong as just who can project such changes, but I argue is a valid and substantiated opinion.

The only thing I am absolutely certain of is that there is a real knowledge deficit about the impact of the entire raft of ‘welfare reforms’ (especailly by government) and social landlords, those most at risk from such reforms need to do so much more about preparing for them.  Not doing so is not an option.


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