Benefit Cap and its cataclysmic impacts for all rented housing

The overall benefit cap reduces to £20,000 per year in the regions (87% of UK) and to £23,000 per year in London (13% of UK) from 7 November.  That is a 23% cut in the regions and 11.5% cut in London.  It will have the following impacts:

  • Half a million more homeless children
  • No DSS becomes the norm for all PRS landlords
  • Ground 8 evictions becomes the norm for all housing associations
  • 3 bed SRS properties become financially toxic to the benefit tenant
  • Current bedroom tax tenants in receipt of a DHP will not get another one (= arrears = eviction =more homeless)

I rarely start with a summary as in the explosive one above yet the 5 impact points are cautious ones in terms of numbers and consequence and they focus the mind correctly on impact rather than number.

I chose to give the 5 bullet point abstract above as this post is necessarily long because all five points are closely interlinked and you can’t consider any one of them without consideration of the other four bullet points.

Read on …

Numerous research has focused on the numbers yet the discussion and consideration has WRONGLY been on the numbers and the numbers alone, as it detracts from the hugely significant impacts which are horrific and a seismic change for rented housing right across the UK and nothing less.

Controversy still reigns over what can always only ever be estimates of numbers and that includes the scans of the HB data DWP has used and we have seen scant consideration on the inevitable impacts such as the PRS landlord finally fleeing the benefit tenant market like a rat up a drainpipe!

Dwell on that for a few minutes while I discuss the numbers and back in July 2015 Jules Birch in Inside Housing touched on the numbers which included reportign but not commenting on the DWP view that “.. while those already capped at £26,000 would lose £64 a week..” Given  the additional cut of either £57.69 per week in London or £115.38 gives could not ever make mathematical sense!

But are the numbers right to begin with? Judging from estimates by Savills for Inside Housing last week, private and affordable rents in whole swathes of the country will be unaffordable under the new cap.
An impact assessment of a £23,000 cap by Citizens Advice earlier this month put the numbers much higher at 150,000 adults and 395,000 adults – and that did not include the further reduction outside London to £20,000 
The National Housing Federation estimates that 205,000 households will be affected, including 68,000 in housing association homes, and that the tipping point will be having more than two children.
Crisis argues that the cap will also affect some single person households for the first time. 
Joe Halewood has used the DWP housing benefit statistics to come up with an even higher estimate. He puts the numbers at 198,000 households and 654,000 children – and that is just outside London and using pretty conservative assumptions about the number of households that will be exempt them from the cap.

[All in red text above are my emphases]

As you can see the NHF estimated 205,000 households the CAB 150,000 and I said it would be 198,000 outside of London alone. The DWP, at this time, were saying 134,000 households.  Now the DWP is saying in its impact assessment of 25 August 2016 it will between 88,000 and 107,000 and that came two weeks after a claimed scan of the HB data which gave a figure of 120,000 households affected!?

Confused yet? I could bamboozle you with more numbers and statistical analyses and methodologies yet let’s assume the best case scenario of the lowest estimate which is between 88,000 to 107,000 in the DWP impact assessment of August 2016 (and despite this being based on chronically out of date November 2015 data!)

The current number of capped households is 20,124 at the latest May 2016 figures and so the best case scenario is that this increases to between 88,000 and 107,000 and the numbers increase in the best case scenario by between 4.4 to 5.3 times the current level!

The impact of that scale of increase of 440% to 530% which I remind is the best case scenario on for example homelessness means that all the current talk of policies aimed at eradicating it – whether by Owen Smith or Tim Farron or campaigns at eradicating it by anyone  – are 100% fatuous and meaningless and a waste of time.

Homelessness is going to rocket and that means the current 100,000 children who are homeless and the 20,000 social landlord evictions per year are going to rocket too.  If you seek to eradicate homelessness you have to abandon the benefit cap reduction end of! It is that clear cut.

Whereas if you don’t abandon the benefit cap reduction and given the scale of cuts to Housing Benefit they give then homelessness will increase by at least five-fold which in genuinely apolitical terms means that Owen Smith says he both supports the reducing benefit cap yet wants to ‘eradicate’ homelessness clearly has no idea what the hell he is talking about!

The fact that Labour had the reduced benefit cap level in their 2015 GE manifesto while offensive in political terms (at least to me) gives the much bigger apolitical point that the Benefit Cap policy has had no opposition or challenge which has permitted this impending shit-storm and Frank Field the chair of the APWG on work and pensions is also on the record as saying he is happy with the policy!

A few days ago I lambasted Corbyn too by saying it is no good merely ‘wanting’ to get rid and in very short where the f*ck is the policy!  Comments to that from all sides say its hard to opposes a policy that 72% of the general public support. Indeed it is  yet how conveniently people forget that in April 2013 the bedroom tax policy had a near 70% public approval rating that became a 62% disapproval rating by October of 2013!

The dangers of not opposing something that is allegedly popular is a much much bigger issue on top of that as in this case it means allow hundreds of thousands of children to suffer irreparable damage to their life chances without any challenge to that policy because the Benefit Cap policy that creates this is popular!!

Back to figures of those affected and recently the DWP has made households in receipt of Carers Allowance and Guardians Allowance exempt so all projected numbers will reduce from the figures of last year and with some significance as the DWP current data reveals that 7.5% of all households affected currently receive Carers Allowance.

Yet more important is the same DWP data reveals that MORE current capped households are in receipt of ESA at 15.5% (formerly called Incapacity Benefit) than who are in receipt of JSA at 14.4% (formerly called dole!)

The significance is that ESA households receive £29.05 more in base benefit per week than JSA households (£102.15 per week as opposed to £73.10 for single and single parent households) and thus receive £29.05 per week LESS in the maximum housing benefit they can receive.  Note well that even though these ESA households will lose that £29.05 per week from Monday 3 April 2017, there are 21 weeks of it between 7 November 2016 and when they lose it – an increased arrears risk of over £600 per household in that time!

Let’s look at what the reduced cap means and note that the one thing all are agreed upon (even the DWP!) is that the current capped households that now see 46% in London and 54% in the Regions will move to 20% in London and 80% in the Regions – itself hugely significant and the view that the Benefit Cap only affects London and/ or high rent areas soon will be shown to be a very dangerous myth indeed.

Q) What do Brighton, Crawley, Chilterns, East Thames Valley, Guildford, Oxford, Reading, South West Hertfordshire, Walton (Surrey) and Winchester have in common?

A) They are all the places additional to those in London in which a single person on ESA will see their housing benefit cut and be unable to afford to rent a 1 bed property in the private rented sector in 7 weeks time due to the reducing Overall Benefit Cap.

The figures used are the official VOA figures for the 30th percentile LHA rates and for 2015/16 and many rent levels will be higher than this.  This is single people not families and so the assumption that the benefit cap only affects families is a falsehood and the PRS landlord will take flight.   Ask yourself how will business cope with this and what impact it will have on employment too?

A similar question would be:

Q) What do Ashford, Aylesbury, Basingstoke, Bath, Bristol, Bournemouth, Canterbury, Chelmsford, Cherwell Valley, Chichester, East Thames Valley, Eastbourne, Harlow, High Weald, Maidstone, Milton Keynes, Newbury, North West Kent, Oxford, Portsmouth, ReaDing, Solihull, South East Hertfordshire, South West Essex, South West Hertfordshire, Southampton, Southend, Stevenage, Warwickshire South and Worthing have in common?

A) In additional to the previous areas they are all places in which a couple with 1 child on ESA will see their housing benefit (LHA) cut if they live in a 2 bed private rented property due to the reduced benefit cap that starts in 7 weeks.

So the smallest family in the private rented sector gets capped … and in many more areas outside of the capital …. and these areas stop becoming just the South East and hit the South West and the West Midlands too.  Will the PRS landlord thus not let to the benefit tenant in his or her 2 bed stock?  Yes!

By the time you get to a lone parent with 2 children on ESA which again is hardly a large family and living in a 3 bed private property you find that they will have their housing benefit cut in 81% of England (as well as London obviously) and in short and by direct consequence of the reducing benefit cap the private landlord will exit the benefit tenant market like a rat up a drainpipe!

All of this in just 7 weeks time!…and only those who read Jonathan Swift too literally can believe any other direct consequence than fleeing like the rat up the drainpipe and chief among those inhabitants of Cloud Cuckoo Land is Lord Freud the DWP minister.

Three weeks ago the latest DWP estimates said 88,000 to 107,000 that statistically will put a further 294,000 to 357,000 children into poverty and at acute risk of imminent eviction and homelessness … UNLESS as the impact assessment said they change their ways!!

Aside from no credibility as to number and from blaming those the DWP offensively calls ‘workless’ – the current capped households see over 60% with children under school age thereby not expected to work and 16% unable to work as being in receipt of ESA – Freud and the DWP only consider the behavioural responses aka nudge theory of tenants and not any other actors such as the private landlord who will flee the benefit tenant market.

The 23% cut in the Benefit Cap is the catalyst to flee the benefit tenant market and they will issue section 21 notices to all benefit tenants including those who are not hit by this cut out of  good business sense to mitigate unacceptable financial risk.

Not to put too fine a point on it if a PRS landlord continues to accommodate and let to benefit tenants then (s)he is a fool!

A very strong and plausible argument also exists that more private tenants will be evicted than affected and directly because of this policy; e.g. a practical circumstance such as the tenant becoming pregnant or have a partner move in will see the non-affected household become an affected household.

No private landlord can take that risk and as over 90% of UK private landlords are reportedly individuals with less than a handful of properties the reasoning behind fleeing the benefit tenant market becomes self evident as 1 case affects 20% of more of the total business.

It has been said many times before that private landlords will flee the benefit tenant market and it has happened but in piecemeal form and relatively slowly and of course the private landlord who crams in 5 bedsits to a former 3 bed family home will just about remain.

However, the Benefit Cap is THE catalyst and the policy that will see this en masse flight as everyday issues such as a pregnancy or a new relationship forming will see the PRS tenant have their housing benefit cut and get into an arrears position that the private landlord cannot afford to risk.

The benefit tenant becomes a financial risk too far for the UK private landlord … and how strange that the inhabitants of Cloud Cuckoo Land at the DWP wholly failed to consider the behavioural responses of the key actors called private landlords!!

Social Landlords and Ground 8?

I am also strongly convinced that the swingeing Benefit Cap reductions of 23% will see social landlords taking very severe actions that Lord DAFT and co also failed to consider as they believe nudge theory only applies in the tenant vacuum and again no mention is made of SRS landlords behavioural response in the DWP Benefit Cap impact assessment.

Social landlords will see a fully occupied 3 bed 5 property, which make up 36% of total SRS stock according to the English Housing Survey, receive as little as 50 pence per week in HB.  As a reliable statistical average social tenant households will have a cut of £76 per week which is £3950 per year or about 4 to 5 times the HB cut in the unaffordable bedroom tax and my post on the impact in Leeds of the DWP scan here gives much more in-depth detail of that.

The response from housing associations will be they will not only have to evict which they will (as the DHP route provides no mitigation see below) but will do so using the mandatory Ground 8 and out of their financial necessity.

Simple equation for housing associations is can we allows a £3950 per year arrears risk to continue and be subject to repeated suspended possession orders on the discretionary arrears grounds or do we limit the arrears element of total eviction cost to around £1000 – £1200; and reduce other eviction costs such as legal, less void time and so on?  There is only one answer to that and however much social housing believes the use of Ground 8 is anathema.

Those pesky facts, the numbers, show that for example low rent Liverpool will see the housing benefit cut in the city more than double the current amount cut through bedroom tax and benefit cap, yet will still have largely the same amount of DHP awarded to mitigate such cuts.

In short, the DHP system that is now a sticking plaster on an open wound is not even a finger in the dyke during a tsunami of HB cuts. In numbers the £2m pa DHP pot in Liverpool deals with a £7m per year combined bedroom tax and benefit cap HB cut, yet will move to a £2m DHP pot and a £14.26m pa HB cut to mitigate!

That lack of DHP funding an it being unable to mitigate the arrears risk is another reason why Ground 8 will be used.  Further, given that the use of Ground 8 will become a financial necessity of housing associations due directly to Benefit Cap arrears, its increasing use will become normalised and used in non Benefit Cap arrears cases with greater regularity – Ground 8 will very quickly become the norm in housing association evictions in simple terms.

Tub thumping from Cloud Cuckoo Land?  Regrettably not and the only pertinent Swiftian analogy is that it took 37 wheelbarrows to cart away the faeces of Gulliver in Lilliput yet the reduced Benefit Cap policy would need at least 370,000 wheelbarrows … which is less than 1 per child this policy will evict and make homeless.

There is always speculation involved with any form of future response such as nudge theory.  Yet in the past I correctly predicted that SAR would be imposed on social housing, the homeless diaspora from the capital (hardly rocket science that one) and was particularly accurate when I said the pre 1996 bedroom tax issue would affect 40,000 households not the 4,000 the DWP estimated or the up to 15,000 both the CIH and NHF estimated.

Without blowing my own trumpet I have a far stronger track record on projecting what these HB reforms will manifest than the DWP or the ideological buffoons who develop these policies and the detailed analysis of the HB data and the Benefit Cap I have looked at for over 6 years and which I said from day one will be the worst and most damaging ‘reform’ of the lot. I am confident of the 5 bullet points and my best and most up to date estimate is:

189,866 households affected containing 634,152 children all at an acute risk of eviction and homelessness. Of which 77,204 will live in social housing and 112,662 in the private rented sector.

There are many notes or caveats to the above though the figures above are the minimum I estimate and are I maintain cautious figures as for example they do not consider the ‘affordable’ (sic) rent model which means the 170,000 or so AR properties that makes a 1 bed unaffordable to a single person in many parts of London and also means that the vast majority if not all 2 bed AR properties right across the UK cannot be let to in the future or currently tenanted by the benefit tenant and  that is probably now a significant statistical factor and becomes an increasing one as more AR units become available.

My estimates also do NOT assume that more PRS tenants will be evicted than affected though I strongly believe this has a high probability.

I hope to God I am wrong on the above as when the PRS flees the benefit tenant market the impacts will be catastrophic and multi-varied and will make the undersupply issue often called the housing crisis – as if there is only one crisis – really hit home for every landlord, every tenant and every local authority.

 

So to recap:

  • Half a million more homeless children
  • No DSS becomes the norm for all PRS landlords
  • Ground 8 becomes the norm for all housing associations
  • 3 bed SRS properties become financially toxic to the benefit tenant
  • Current bedroom tax tenants in receipt of a DHP don’t have a cat in hell’s chance of ever getting another one (= arrears = eviction =more homeless)

There are many other almost as catastrophic impacts for rented housing in the UK and all associated areas that will become apparent very quickly when you take 10 minutes to consider just what the 5 issues above WILL mean.

 

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6 thoughts on “Benefit Cap and its cataclysmic impacts for all rented housing

  1. Half a million more homeless children.

    To add to the 100’000 plus that are already in the homeless system. The damage this does to children is beyond belief. Many ‘homeless’ children have already been in the system for years. They are moved from city to city school to school, doctors to doctors. They have no scene of security or any stake in making friendships or excelling at school. Long term they are far more likely to become young mothers, in the penal system, form addictions or find themselves in psychiatric/LA care. The cost of all these services to the tax payer is way beyond the cost of providing housing in the first place. For the children such a chaotic broken childhood lessens their life chances and they become the next generation caught in the poverty trap.

    No DSS becomes the norm for all PRS landlords

    PRS have picked up the slack from where local authorities failed (for whatever reasons) to maintain the housing stock needed. They have set up all sorts of schemes and incentives to entice PRS to let to those on the lower end of the economic scale. Many LA’s use the PRS to refer their homeless to so as to discharge their duty of care to them. Local authorities will have to house these families once evicted but where? Caravan parks, Beach huts, shipping containers, ships out out sea, Days Inn hotels on motorways? Up until now if you have lost your home through rent arrears then you are deemed intentionally homeless. You can only be referred to the PRS. How will these families now be classified?

    Ground 8 becomes the norm for all housing associations

    Ground 8 can be sought after 2 months rent payments are not made. The slightest change in circumstances sets off the whole system with claims often getting stopped. I was a the local housing benefit office recently and the worker at the desk was telling every visitor not to follow up their claim for 28 days. No claims will be discussed before this time. People will easily fall through the system in an 8 week time frame. With housing benefit paid in arrears it can only take 1 month for 2 months arrears to build up and before the claimant may even be aware of the arrears and section 8 can be triggered.

    3 bed SRS properties become financially toxic to the benefit tenant

    These properties will be vacated and along with them high numbers of secure and assured tenancies lost to the social sector tenant. They will then be re let on short term “affordable rents”. Once the lower rents of social housing are removed from an area the overall rental market rents will substantially increase in line with market forces. It also means that house prices will increase as well. The removal of social housing from an area will effect every one sooner or later.

    Current bedroom tax tenants in receipt of a DHP don’t have a cat in hell’s chance of ever getting another one (= arrears = eviction =more homeless)

    LA’s will prioritise the homeless families who are going to cost them the most in temporary accommodation.

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