The Benefit Cap makes social landlords financially toxic

The £500 per month cut to the overall benefit cap limit means the benefit tenant is financially toxic to the cheapest form of rented housing provider in the social landlord. 66,000 existing social households will be at acute risk of eviction and homelessness from this policy (and 91,000 private tenant households.)

Yet it also means that social landlords are financially toxic as 36% of all social housing is the 3 bed and larger properties that become HB claimant no go zones due to the overall benefit cap.

There are 66,000 existing households affected yet there are also 104,000 new benefit tenant households who will be denied social housing each year because of the benefit cap. 104,000 who will be refused social housing because social landlords cannot afford to house the tenant on Housing Benefit.

Social housing has 385,000 new tenancies per year.  75% or 288,750 is the benefit tenant number yet, nationally, 36% of social housing stock is the financially toxic 3 bed property which the benefit tenant will be denied or 103,950 per year and each and every year.

In short social landlords have a huge problem.  They cannot fill their vacancies with the benefit tenant that they have always done and they need new tenants who can afford the rent which the benefit household cannot do.

The problem is bad enough for social landlords who have the average 36% of their stock being the 3 bed or larger property.  Yet some social landlords have well over 50% of their stock being 3 bed+ and so more than half of their stock is financially toxic to their usual customer.

The housing association in London or other high rent areas may have little problem in finding existing private tenants who will bite their hand off for a social tenancy at a much lower rent an the greater security a social tenancy offers.  Yet in areas of low demand and low rent levels a huge problem, one that can even threaten the survival of some social landlords emerges. When that is combined with more than 50% of all social housing in a given area being 3 bed+ the problem intensifies further.

Merseyside is one such area with the combination of no council housing and 100% total housing association stock that has over 50% being the financially toxic 3 bed and larger property.

Who will housing associations rent to is a question that adds to the where the hell will the benefit tenant live question in areas such as Merseyside with its low rent levels and its total absence of any council housing.

And as I pointed out in part 1 of this series of posts as to benefit cap impacts called benefit tenant no go zones the North West region sees 36 of 39 councils have no council housing and there are areas all over England without any council housing with the added factor of housing associations there having a higher than average 36% of stock being the toxic 3 bed and larger properties.

All types of housing associations will be affected.

The LSVT housing associations, those who took over the former council housing stock and tend to operate in just one council area is an obvious example and Liverpool has three LSVT’s:

  • Liverpool Mutual Homes has 55.67% being the 3 bed+
  • South Liverpool Homes has 62.8%, and
  • Cobalt Housing has 75.10%.

Yet Liverpool also has Riverside Housing with a high number of homes and 54.73% of them are 3 bed+ and Riverside has 80.2% of its stock in Knowsley in Merseyside being 3 bed+ yet a much lower percentage across the rest of Merseyside with 41% in Sefton, 37% in Wirral and 37% in St Helens … and nearby Halton part of the Liverpool City Region it has 52% of its 2200 or so stock being the financially toxic 3 bed+ properties.

The same goes for many of the ‘super HA’s’ such as Riverside with many of the top 20 housing associations by size having more than 50% of their stock being the toxic 3 bed and larger properties in areas right across England.

Liverpool Housing Trust has 38.3% in Liverpool, 72.3% in Knowsley, 58% in Sefton, 65% in Wirral, 66% in St Helens and 64% in Halton of their considerable stock profile being 3 bed+ and an example of not just their own survival risk but a threat to the Symphony Housing Group structure to which they belong?

A simple look at the housing regulators statistical data return (SDR) from which the above facts originate sees hundreds of English local authority areas in which large housing associations have more than 50% of their stock being the 3 bed+ – and as the SDR is the detail of what housing associations provide themselves to the housing regulator there is no moot points over the numbers and percentages.

The threat of the overall benefit cap to social landlords becomes readily apparent when we look at stock profiles.

Note when I say above this occurs in hundreds of cases I do not mean 4 properties in an isolated 7 properties a housing association may have in any area that can easily be addressed; rather I am talking about housing associations who have a minimum 200 properties in each area with more than 100 of them being the 3 bed+ or a considerable presence that forces proper due diligence in terms of stock swaps mergers and takeovers.

For a sector that is blithely going about mergers as a panacea and with unhealthy haste and zeal this becomes a huge problem as real and proper due diligence will now need to to include the overall benefit cap impact as a key if not THE key priority.

Regardless of the zeal for growth by acquisition within the sector who in their right minds wants to take over financially toxic stock?

I winder how many of the any merger (and de-merger) talks going on currently have factored in the financial toxicity of the 3 bed and larger properties? Cue many more upcoming announcements that the mergers are off due to ‘cultural differences’ anyone?

As I have named Liverpool and Merseyside landlords above to explain and detail the argument it is only right that I name other housing associations who have financially toxic stock profiles and directly because of the overall benefit cap -yet I would be here all day – and for example ALL of the G15 London members have financially or OBC-toxic stock profiles and outside of London.

Everyone of the top 20 housing associations by size in England have financially toxic stock profiles in many local authority areas.  As does almost every LSVT housing association who largely just operate in the local authority area in which they took over the former council stock.

In short, I could name almost every housing association in England who have a serious financial sustainability problem with their stock profiles and their typical target customer in the benefit tenant.

75% is the national average with 3.2 million social tenant households getting Housing Benefit and the latest figure of 3,211,262 social tenants getting HB excludes those getting its replacement in housing payment in Universal Credit so the real figure is a touch higher than 75%

If as I posit above that 104,000 prospective HB tenants will not get allocated a social housing property due to the OBC then that is 2.4% per year of the current 4.3 million social housing properties.  Over a 5 year period that equates to 12% fewer HB claimants in social housing which is a huge cultural and operational change for the sector.  Of course it also says where the hell will these 12% live!

The above is more than enough to make near-sighted housing people realise that the OBC is not just an existing housing benefit cut and it has very real impacts for social landlords.

66,000 OBC affected out of 4.3 million social housing properties is just 1.53% of all social tenants and just 2.11% of  social tenants on HB; yet as the above arguments reveal it is a seismic issue for social landlords despite those seemingly innocuous percentages.

In summary it does read as perverse that a policy which affects just 1.53% of all social housing tenants can have such potential devastating impacts on the survival of housing associations.  Yet the above shows starkly that it does and will.

There is more to come about the multi-dimensional implications, impacts and consequences of this ideologically driven superficial nonsense of a policy and I have barely scratched the surface in my many posts on the issue that, regrettably, some in housing errantly call scaremongering or even polemics.

Water off a ducks back to me and I have been researching this policy since before the Tories admitted that the benefit cap doesn’t save money, in fact increases housing benefit cost and increases homelessness significantly … which the Tories admitted in the leaked Pickles letter of July 2011 and over 5 years ago that I discussed here.


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