Welfare Reform – what does it
mean for housing?
Laura Shimili, Policy & Practice Officer, CIH
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Expenditure on benefits
Expenditure on key benefits 1991/92 - 2010/11
30
Mobility Allowance / Disability Living
Allowance / Attendance Allowance / Carers
Allowance
25
20
Income Support (lone parents, sick,
disabled, other)
15
10
Unemployment Benefit / Income Support
(unemployed) / Jobseekers Allowance
5
Housing Benefit / Council Tax Benefit /
Discretionary Housing Payments
/9
19 2
92
/9
19 3
93
/9
19 4
94
/9
19 5
95
/9
19 6
96
/9
19 7
97
/9
19 8
98
/9
19 9
99
/0
20 0
00
/0
20 1
01
/0
20 2
02
/0
20 3
03
/0
20 4
04
/0
20 5
05
/0
20 6
06
/0
20 7
07
/0
20 8
08
/0
20 9
09
/1
20 0
10
/1
1
0
19
91
£ billion, real (2009/10 prices)
Sickness / Invalidity / Incapacity Benefits
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3
Welfare is too expensive
• “The explosion in welfare costs contributed to the
growing structural budget deficit in the middle part
of this decade... Costs are completely out of control.
We now spend more on housing benefit than we do
on the police and on universities combined” (June)
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4
Aims of welfare reform
Biggest shake up of the welfare system in a generation

Brings together all earnings-related benefits and tax
credits in one single payment the Universal credit
Aims:
• Cut costs
• Make it fairer

something for something
• Simplify it
• Use it to drive different behaviours
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5
Welfare benefits: old & new
HB
ESA
JSA
Universal
Credit
HB
IS
Tax Credits
PC
PC
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6
Key features
• A new single payment - a ‘surrogate’ wage
• Better off in work
• Individual responsibility

To make a claim and report changes

Presumption of payment to claimant

Monthly in arrears

Payment exceptions are a temporary position
• Automated system

Mainly on-line claims but face-to-face and telephone support
available (local Jobcentres/LAs internet access points)

Exceptionally possible to make claim face to face or by
telephone

Universal Credit helpline for online claims Mon-Fri, 8am-6pm
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7
The package of changes
• Introduction of Universal Credit
• Local Housing Allowance

Reduced & capped
• Non-dependent deductions


Increased in 2011/12/13 after a freeze
since 2001; by RPI thereafter
Replaced by flat rate £65/m under UC
• Shared Room Rate

Age increased
• Social sector size limits

Introduced
• Discretionary payments

Increased
• SMI (mortgages)

•
•
•
•
Continues although time limited!
IB claims to ESA or JSA
Total benefit cap
Tax Credit changes
Council Tax Benefit localised

And cut
• Social Fund scrapped

Local Welfare Assistance
• Benefit uprating

By 1% (less than RPI)
• DLA becomes PIP

Higher test for award
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Impact model: assumptions
XYZ Housing Association profile
•
Based East Midlands
•
General needs – one third elderly
•
5,000 tenancies
•
Stock:




•
•
1Bed (24%)
2 Bed (34%)
3 Bed (37%)
4+ Bed (5%)
Average weekly rent £72
Collection rates vary according to measure
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Impact model: size criteria
XYZ Housing Association: universal credit steady state
•
Estimated annual loss to tenants in HB
•
Number of losers 1 bed under
•
Number of losers 2 bed under
•
Average weekly loss 1 bed under
•
Average weekly loss 2 bed under
•
If 10% uncollectable
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£538,000
658
165
£11
£23
£54,000
10
Impact model: direct payments
XYZ Housing Association current
•
Total rent roll
•
Tenant payments as % rent roll
•
Rent roll covered by HB direct
£18.72 million
40%
£11.23 million
XYZ Housing Association: universal credit steady state
•
Tenant payments as % of rent roll
•
Rent roll covered by HB direct (30% vulnerable)
70%
£5.62 million
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Banking transaction costs
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12
The shifting timetable
Original UC/PC plan
• New claims universal credit (October 2013)
• Pension credit housing credit (October 2014)
Revised UC timetable?
• Pilots (April 2013)
• Non-HC only? Selected areas? (October
2013)
• HC start? Selected areas? (April 2014)
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Welfare reform – different pilots
• Universal Credit pathfinder
 Ashton-under-Lyne’s jobcentre first to accept
claims for Universal Credit from 29th April
 the rest of the pathfinder in Tameside,
Warrington, Oldham and Wigan will start in July
• The direct payment demonstration projects
 June 2012 – June 2013 testing out direct payment
of housing benefit
• Local authority-led pilots
 Autumn 2012 testing how local expertise can be
used to support people to claim UC
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Universal credit – local support
services
• Demand for support services from changes to HB and from UC




Advice with opening bank accounts
Debt and housing advice
Online assistance for UC
Money advice
• But significant withdrawal of the state from provision of services



Landlord run down of advice services? As a result from other costs
Local authority run down of HB departments? Much slow as UC take up is less
England, April 2013, Community Legal Service funding for welfare benefit advice
withdrawn
• Local support services framework published by DWP



Sets partnership construct to deliver support services for UC claimants
Based on a ‘single claimant journey’ from dependency to self-sufficiency and work
readiness
DWP, LAs, social landlords and Voluntary and Community Organisations aligned
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Universal Credit – help with housing
cost
• HB included in UC paid directly to claimants





Payment cycles (monthly vs weekly)
Different payment methods (DD, SO, pre paid cards, jam jar accounts,
cash, over the phone, cheque
Tenants prefer to be in control, use multiple payment methods rather
than automated methods
Has resource and cost implications for landlords
Opening bank accounts can be difficult
• Landlord reactions
Payment strategy – prioritise DD, SO, rent officers, other?
Attitude to arrears – suspend HB; provide intensive support
Support strategy for UC claimants – triage based on need; referral



• Payment figures from demonstration projects



So far (Dec 13) 6,220 tenants paid HB directly
Average arrear levels 8%; across different areas ranged from 12% to 3%
Next figures published Oct 13
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Universal Credit - Scale of change
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Universal Credit - Scale of change
• DWP 8 million universal credit cases when fully implemented

20% increase on existing combined caseload (ignoring tax credit cases)
• HMRC developing Real Time Information for collection of PAYE taxation

employers to provide salaries info monthly online about Oct

DWP use info from RTI to calculate UC
• DWP under Universal Credit

tax credits (moved from HMRC) – some staff expected to move to
administer UC

Help with housing cost (previously HB moved from LAs)
• Future of LA staff not clear

depends on arrangements for the local delivery and support of Universal
Credit

what impact from localised council tax support and localised discretionary
Social Fund
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Welfare reform - implications for
claimants
• Reduction in housing benefit from social size criteria, benefit cap,
benefits up-rating
• Shortfall between HB and rent
• Financial hardship
Other pressures on income
• Unemployment
• Underemployment
• Food / fuel prices
• Electricity / gas prices
• Childcare costs
• Reductions in public services
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Welfare reform - implications for
landlords
Landlords






Arrears
Work harder to collect…
A reduced income…..
With increased costs
Affects other aspects of business
Impacts ability to develop and secure finance
• Local authorities





Families moving will put pressure on other services;
education/social services
high demand for discretionary housing payments,
large number of queries
higher numbers of appeals
local knowledge of HB will be lost
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What’s out there?
• Pre-payment cards
 Not a credit card; no need for bank account; coupled with
reward schemes
• Mobile payment
 Deposit into an account stored in cell phone; branchless
banking
• Consumer reward schemes
• Bulk purchase

Which? / 38 Degrees - The Big Switch
• Tenant products

Consumer segmentation; Mosaic (Experian) used by local authorities
• Consumer bundles


Co-op Bank: payment card and bank account
Co-op store
reward
scheme
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us. Improve
with us. Influence with us | www.cih.org
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So what are organisations going
to do?
• Need for strategic planning

gather the data and assess impact

customer engagement and clarity of communications

support for tenants
• The pressure on welfare spending is long-term so needs to be built
into business plan assumptions
• Manage risk

Where is risk higher – bedroom tax; benefit cap; direct
payment

What strategies for income recovery - by far the biggest risk

Evictions; how will criminal justice system respond?
• Review policies and procedures
•
Rent arrears policy; lettings policy (difficult to let properties?)
• Review local support services
• Welfare advice / money management
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So what are organisations going
to do?
• Need for an organisational strategy
•
•
clarity on role, objectives and values to inform decisions
grow or withdraw from some services in order to meet
wider business objectives
• Working in partnership
•
•
•
Other landlords (common lettings/ shared services)
Financial institutions (banks credit unions)
Payment card providers
• There are some tried and tested approaches
• Innovate…
• Use and share the knowledge that is already out
there
• Adopt technology rather than self build
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Housing organisations trends
• Wider investment in housing - Increasingly moving towards relying
on private finance than government grant

Declining, but still sizeable govt grant - c.41% in 2008-11

Grant rates down - c15% 2011-2015

HAs borrow more – funded by higher rents
• Organisational impacts


Review purpose & mission
Wider market vs core product
• Greater commercial activity for cross subsidy?

Increased focus on reducing costs and improving business
processes/sharing services
• New world regulation focusing on protecting assets
• Source of finance crucial – debt and bonds, institutional
investment, reserves, but unlimited capacity?
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What does the future hold
• Uncertainty continues but need to stay positive

Spending review in summer

General elections

Slow recovery
• Welfare reform adds to it

Landlords and tenants
• Personal, targeted, time limited subsidy vs long term capital subsidy
• A new welfare settlement – whoever governs
• Focus on Value for Money for public purse – additional outcomes,
no extra resource
• Use change as opportunity to innovate
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Thank you
Questions?
laura.shimili@cih.org
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Get the latest news & advice on welfare reform
CIH Welfare Reform resources
We have developed a range of resources on
welfare reform in our website that keeps you
up to date with
• Essential information
• News
• Tools and briefings
–
•
For the very latest policy news
Welfare reform impact tool
Events and trainings.
@CIH_Policy
We are developing a range of ‘Need to knows’
on various aspects of welfare reform.
CIH administers and facilitates on behalf of
DWP/DCLG the Direct payment learning
network. to join email laura.shimili@cih.org or
david.pipe@cih.org
www.cih.org/welfarereform
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