Will direct payment cost social landlords £1.27 BILLION PER YEAR?

This week Moodys, the ratings agency, getting very twitchy and saying that Universal Credit with its monthly payment of benefit to tenants and its direct payment of housing benefit to tenants rather than to social landlords as now, will see costs increase by 6.6%.  In a piece in Inside Housing it said that Moodys…

“…warned that the payment of benefit for housing costs to tenants ‘is likely to increase the risk of non-payment or underpayment of rent’. It pointed to an average 6.6% fall in rent payments recorded under Department for Work and Pensions demonstration projects trialling the payment of direct benefit.”

6.6%?

Inside Housing didn’t comment on this (now there’s a surprise!!) but they should and everyone involved in social housing should sit up and take notice. The national rent roll, the sum of all social housing rents is about £19.5 billion per year (4.1m rents at circa £90pw) so 6.6% of that is £1.27 BILLION PER YEAR

Welfare reform (sic) policy will directly lead to £1.27 BILLION less paid in rent to social landlords each year!!

When I first started writing about the welfare reform (sic) policies I said they were an attack on social housing itself and they are a radical attack on the social housing model, the social landlord and the social tenant.  They require a radical response and all social landlords and social landlord lobbies (who frankly are getting money for old rope) need to grow a set and tell the coalition precisely where it can stick its welfare reforms.

IF as is widely reported the bedroom tax has seen about £140 million or so increase in arrears tol landlords then direct payments risk at £1.27 Billion is more than EIGHT times a greater financial risk

Social housing receives £1.125 Billion per year in subsidy as the last settlement was £4.5 Billion over 4 years and so we see that Universal Credits direct payment alone is likely to cost social landlords more than that each year.

capital funding

UK Social landlords provide much cheaper rents in return for this subsidy which if they only charged the same in rent as private landlords get in LHA the overall HB bill would increase by £4.2 billion.  Yet UK social landlords do not put forward this correct argument that ‘subsidy’ is an invest to save programme for which government gets a bloody good deal in return.  They should be putting forward this economic argument and should also be saying that they are the only sector which is prepared to take in the SODS as well (Sick, Old, Disabled, Supported) as the private rented sector doesn’t do this by and large.

Social Housing provides a phenomenally good economic and socio-economic return to the taxpayer and government….yet they never ever make that point.  They couldn’t lobby their way out of a wet paper bag and because of this successive governments have taken advantage of their lack of influence and ‘power’ and none more so than this coalition who are shafting social housing at every turn.

The private landlord lobbies such as the NLA in response to any suggestion that a new proposal would cost them thruppence more over 50 years lobbies like the the one thing social housing is not, a sector, and they tell government where to go.  Yet inflict direct payment and cost UK social landlords £1.27 billion per year and lets give the tenant a cheap tablet computer is the response.  And even when those landlords reveal that the simplest form of direct payment costs them an additional £1500 per year per tenant as Peter Fitzhenry of Golden Gates Housing Association in Warrington did, the rest of the UK’s social landlord and their woeful lobbies simply ignored.

I have been criticised as being cynical over social housings woeful efforts at influence and lobbying from within social housing.  That just about sums up UK social housing – blame the messenger while burying its head in the sand and ignoring the message which is a wet fish slapping them in the face!  Plus ca change!!

***************************

On a related point of rental income the Statistical Data Return (SDR) was published last week.  This is the annual dataset of all rents by housing associations by the Homes & Communities Agency, or HCA the social housing regulator.  This revealed that housing associations or as the HCA correctly calls them PRIVATE Registered Providers charged and received £130 million MORE in rent through the Affordable (sic) Rent model with almost 80,000 properties let out at an average £31.38 more in rent each week.

SDR2014

This is why so many social landlords are reporting much increased surpluses presumably yet £130 million more income pales into insignificance given that direct payment alone will cost £1,270 million more – and that doesn’t include social landlords other increased costs of rent collection or the much increased arrears from the bedroom tax and benefit cap.

68% of these AR properties were not new build properties but existing properties which were vacated by tenants and then simply relet to a new tenant at the much higher AR level.  The amount of AR units doubled, up 102%, last year and while this varies from one social landlord to the next, does represents a cultural shift of HAs moving away from their founding ethos which will reignite that internal housing debate, yet is also a typical social housing issue – Social landlords don’t lobby they merely reactively adopt  the follow whatever funding is available strategy.

The two issues are very much linked as social landlords, collectively, do have huge potential influence given how much they save the taxpayer and the exchequer and as I discussed here the tenant is about to become a real customer with direct payment and not a captive one as they are now; yet social landlords never proactively attempt to wield or unleash that latent power.  It is time they did and, for once, meet a radical set of proposals which we have in the welfare reforms (sic) with a radical response and finally start to lobby.

Finally, I am not advocating that HAs do become FULLY private organisations by telling the coalition to shove their meagre capital subsidy for which they give so much back in return to the taxpayer: Rather they need to impose the latent ‘power’ they do have and remind this coalition government (and the next) of what a bloody good deal social housing provides in economic terms to the exchequer.

Why not top slice 2p a week off every social housing rent and put into a £4.25 million per year fighting fund charged with lobbying for the sector; a simple and cheap way of flexing their muscles and buying top lobbyists for the sector which currently they are not and stop playing at games with campaigns which look good and are the ‘sectors’ needs and wants yet have little to no influence.

Social housing needs, like every other industry, a powerful proactive lobby in order to survive. Yet all it has is latent power and individual and collective leaders tugging their forelocks at the latest attack on the social housing model.  Though I doubt not even the threat of a further £1.27 Billion per year cost to them will make them wake up and smell the coffee.

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6 thoughts on “Will direct payment cost social landlords £1.27 BILLION PER YEAR?

  1. The issue is really simple, am keeping it simple without boring people with management, leadership and business theory. The problem lies with the ineffective leaders in social landlords and the ‘sector’ its self, its just simply the case of replacing them with competent leaders to deal thoses challenges!

  2. “The national rent roll, the sum of all social housing rents is about £19.5 billion per year (4.1m rents at circa £90pw) so 6.6% of that is £1.27 BILLION PER YEAR

    Welfare reform (sic) policy will directly lead to £1.27 BILLION less paid in rent to social landlords each year!!”

    Excellent point, but is this calculation not slightly flawed in that not all of that £19.5 billion pounds comes from housing benefit payments. I live in social housing and pay my own rent, as do many others. I used to work for a medium sized housing association in the North West and their rent income was split circa %70 housing benefit 30% tenant pays own rent.

    1. Possibly as circa 70% is paid through Housing Benefit would suggest ‘only’ £890m per year. Yet the pilots showed a 6.6% reduction in rent paid across the board and so could also include self payers.

      Lots of quite complex reasons why this could happen which I will address in a separate blog but the key point was to get the message out there of why direct payment is so much worse than the bedroom tax and why it is much bigger threat to the social housing model. All of the welfare reform attack the social housing model and act singularly and collectively in doing this

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