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When averages don’t have to be so mean

With the Tories on the proverbial housing policy ropes, Labour must continue to focus on progressive policies that result in more support for households at lower parts of the income distribution. To roll with the punches Labour must call for an increase in the Local Housing Allowance (LHA) to the median 50th percentile, scrap the discriminatory age restrictions to the Shared Accommodation Rate (SAR), and put those most in need at the heart of any emergency coronavirus plan and comprehensive vision for the future.

Shelter have announced we have a public health crisis on top of an already existing housing emergency. This is because millions of tenants, whether they be private, social, or intermediate, are presently not working due to the fact society has lost confidence in our ability to move around without catching a killer infection. This has happened in the middle of an existential housing emergency that has been significantly exacerbated by the Tories over the past decade.

Vicky Foxcroft, Lewisham Deptford MP, brutally exposed this in the Commons in Julylast year:

“Local housing allowance is supposed to cover the lowest 30% of market rents, but research by Shelter found that that is not possible in 97% of England. For example, in south-east London, local housing allowance will cover only the bottom 10% of rents. We have a housing crisis across the country and local housing allowance is not fit for purpose. Does the Minister agree that it must be raised to reflect the true cost of renting?”

House of Commons | Hansard | 01 July 2019 | Local Housing Allowance

Virendra Sharma, Ealing Southall MP, also explained how a staggering number of members in his constituency had a very real risk of homelessness as they struggle, month after month, to make up the shortfall between their rent and the level of LHA.  

For example, a single young person under the age of 35 in Ealing Southall would have found just 1% of shared properties affordable with the SAR available in 2018. A family with children looking for a two-bedroom property would find the LHA rate covered just 6% of the private market. This would mean they would have to find an extra £150 per month to afford a property within the cheapest third.

In 2019, 88,330 households in England found themselves living in temporary accommodation, a figure tragically up from 48,010 in 2010. That is equivalent to the size of a town like Grimsby, Guildford, or St Albans often having to live in bed and breakfast accommodation in the first instance, until something more suitable can be found.

Figure 1: Total Number of Households in Temporary Accommodation 31st December 2019
Source: https://www.gov.uk/government/statistical-data-sets/live-tables-on-homelessness

The Tories have at least attempted to unwind the horrendous consequences of their own bad policy through reforming “no fault” evictions, removing Section 21 of the Housing Act 1988, and making changes to the grounds for possession. Yet much of this will be a mere sticking a plaster over what are much deeper structural issues, with pressure on the housing benefit system having been exacerbated from years of weak wage growth and domestic price rises

The severity of the impact on households’ living standards has been to an extent normally associated with a severe recession, which has left the huge shortfalls between LHA and the true cost of renting one borne by the poorest.  The result has left the country ill-prepared to face such a crisis, particularly as it braces itself for the biggest economic slump in over 300 years. This was not what Labour had it mind when it introduced LHA back in 2008 following evidence based research.

After an initial three-year pathfinder Labour set the LHA rate at the median 50th percentile of the local private market. Shared Accommodation Rates were applicable for those under 25, which meant that single claimants under 25 were forced to share with others rather than live on their own. It had an aim to give a flat fair allowance for the local area and enabled people to have choice. LHA was argued to increase incentivisation to work, namely through greater clarity of in-work benefits, and most importantly it was simple.

LHA was slashed in 2011 to the 30th percentile by the Coalition government, with the Liberal Democrats crooning it in, like mice singing in the cats choir. A year later LHA rates were delinked from market rents and increases there forth capped by CPI. An uncaring cap on benefits was further introduced in 2012 following George Osborne’s famous Conservative Party conference speech where he asked “where is the fairness?”.

Three years later George Osborne thought it was still not fair enough and pushed the benefit cap even lower in his Summer Budget of 2015.  He brought this alongside an extension of SAR up to the under 35s, with a 5-year freeze to LHA announced in 2016.

Turns out George’s idea of “fairness” leaves poor families with mounting debt and pushes children into deeper poverty, with many families financial circumstances having worsened following the introduction of the policy. In large part having been left with an average gap between rent and housing benefit of £3,750 per year.

That said, evidence from Crisis identified that investing in LHA rates to cover 30% would prevent 6,000 households from becoming homeless over a three year period. It would also lift 32,000 households out of poverty, which would include 35,000 children. Off the back of this research, and vociferous campaigning by Labour Party politicians the Tories buckled, and ended their very own LHA freeze one year early.

Hurrah!

Announced in January 2020 under The Social Security (Coronavirus) (Further Measures) Regulations 2020 the Government stated it would relink the LHA to the 30th percentile, which was set at the same level seen in the 2019 Labour Party manifesto.

But was this rate high enough?

The Liberal Democrats thought not. Their manifesto included a call to increase LHA in line with average rents in an area. Though fell short on whether this was the mean average, or the more robust to statistical outliers mean average. In any case nobody was going to believe that commitment with the Liberal Democrats having been the hand maiden for such cuts in the first place.

Yet their policymakers did have a point, as a move back to the average rent level for LHA is one backed by credible research. In August 2019 Crisis demonstrated a higher cost benefit could be achieved if LHA was restored to the 50th percentile rate in areas where the rates fall behind rents the most, and to 30th percentile everywhere else. The research also gave a nod to restoring all the rates to the cheapest half, which would bring the highest overall benefit. In effect restoring LHA to the progressive median average, not seen since the last Labour government, would be more equitable and more cost effective.

This begs the question why previously Labour only sought an increase to the 30th percentile when, under the previous Labour Government, the median average left fewer people choosing between eating or paying rent. Shelter have recently joining the ranks call for an increase in housing benefit to cover the cost of average rents and to lift of the benefit cap.

Labour’s recent announcements chime well. Thangam Debbonaire’s emergency five-point plan echoed such calls through laying out increases to LHA rates and an improved provision of Universal Credit. Shadow Secretary of State for Work and Pensions, Jonathan Reynolds, also called for urgent action on social security. Through a suspension of the benefit cap and removing the savings and two-child limit to Universal Credit.

At least now renters can take comfort both Labour and the experts are on their side.

Sadly, the Tories will be difficult to move on from the below average LHA rate and age discriminatory SAR policy, which will remain unfair and incredibly impudent towards those on the breadline. Yet Labour must continue to be bolder than its Tory counterparts on housing. For it to work effectively for a just society, it must call for an increase in LHA to the median 50th percentile rate, not the mean, and in the interest of fairness push for the abolishment of age discriminatory housing benefit criteria.

<strong><span class="has-inline-color has-accent-color">Chris Worrall</span></strong>
Chris Worrall

Co-Editor of Red Brick. Non-Executive Director of Housing for Women. Labour Housing Group, Executive Committee. Exploring innovative new models in housing with care in the for Guild Living. Previously Investment and Finance Manager at Quintain and Thor Equities.

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Cuts in wages cause surge in demand for HB

It’s amazing how many people think that only those who are economically inactive can claim housing benefit.  But then again all the rhetoric about cuts to HB and to Local Housing Allowance (HB for private tenants) has been about tenants living in something called ‘benefit dependency’, being feather bedded and given so much money that they can afford to live in places that ‘hard working families’ couldn’t afford to live.

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Budget: the danger for housing lies in the fine print

When the Daily Mail turns against the Chancellor for ‘picking the pockets of pensioners’, accusing him of making four million elderly pay for his tax giveaway to the rich, you know that the budget was a failure at least in PR terms.  It’s amazing the difference a smart phrase makes: the ‘bedroom tax’ made headlines and now the ‘Granny tax’ will haunt George Osborne.

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Homelessness and the Total Benefit Cap

As the Welfare Reform Bill returns to the House of Lords, it is becoming ever more obvious that the Tories and LibDems have no idea what they are doing and the damage they will cause.
We have covered the Bill before on Red Brick, for example here and here, but it is emerging that the total Household Benefit Cap will possibly be the most damaging change of all.  And it is the least well understood.
In theory the cap is, according to DWP’s impact assessment: ‘a cap on the total amount of benefit that working-age people can receive so that households on out of work benefits will no longer receive more in benefit than the average weekly wage earned by working households.’  The limit, expected to be around £350 a week for a single person and £500 a week for families with children, not only includes out-of-work benefits like Jobseekers Allowance but also benefits which are available in and out of work like housing benefit and benefits that are available universally like Child Benefit.
The comparison with ‘the average weekly wage’ immediately falls down because in-work benefits are excluded from the calculation.  It is not a like for like comparison of household income.  It’s a crude and vindictive policy that can only have been invented by drunkards after a bad night on the ale, which makes it all the more regrettable that Liam Byrne has supported the principle.  The only defence of his position is that the line that people on benefits shouldn’t get more than people in work spins well.
However the real disgrace is that Iain Duncan Smith and his Department are not able to say what impact the policy will have and on whom.  Their estimate is that around 50,000 families will receive less benefit because of the cap (it only applies to those of working age).  They admit, as with many of their tax and spending cuts policies, that the biggest impact will be on the larger families – over 80% of those affected will have 3 or more children.  On average, household losses are expected to average £93 per week.  35% will lose more than £100 per week.
DWP estimated, in response to Parliamentary Questions, that 70% of those affected would be social tenants leaving 30% (around 15,000) as private tenants.  These estimates are counter-intuitive and extraordinary given the importance of housing benefit in the calculation of the cap and the huge difference between private and social rents, and they led frontbencher Karen Buck MP on a voyage of discovery about the statistics and the relationship between the new cap rule and other statutory duties.  Well, given the lack of answers, it has been more of a voyage of non-discovery.
Eric Pickles has already accepted that the cap will cause about 20,000 extra homelessness acceptances on top of the 20,000 extra expected due to the other housing benefit changes.  That’s a lot.  Homeless households placed in temporary accommodation in the private sector by their local authority are subject to the cap.  Their rents are high and they are often unable to work because of the disruption caused by homelessness.  Previously they may have been waiting for a social rented flat, now more likely they will be waiting for their local authority to discharge its duty by finding them a suitable letting in the private sector.  There are 49,000 households in TA in England, nearly 36,000 in London.  Many of these are likely to come up against the cap.  However DWP cannot even say if such households have been counted in the 70% (social tenants) or the 30% (private tenants). If it is the latter, the figures just do not add up, given how many ‘ordinary’ private tenants in inner London will also come up against the cap – after all, unemployed people living in mansions in posh bits of London are supposedly the primary target of the policy.
My understanding of the homelessness legislation is that any shortfall between housing benefit receivable and the cost of temporary accommodation is met by the council concerned.  So any existing homeless household in TA that falls foul of the cap would have the excess charged to the council’s General Fund rather than to the housing benefit budget, not something that councils will welcome.  And when the council is seeking suitable accommodation for the family, it will only be able to discharge its duty if the accommodation is affordable.  If the family is subject to the cap, the council might have real difficulty in making such accommodation available.
Similarly complicated considerations will apply for any private tenant falling foul of the cap.  If they can no longer pay their rent, they are threatened with homelessness for arrears.  If the reason for the arrears is the withdrawal of housing benefit, the council would seem unlikely to me to be able to argue intentionality.  The household will have to be accepted as homeless and the same complicated arrangements for TA and for the discharge of the council’s duty will ensue.
The Government does not yet seem to have decided, if a household is subject to the cap, which benefit they will actually lose.  Until Universal Credit comes in, the cap system will be administered as part of the housing benefit system.  But could they decide that, to make up the average £93 loss, the family is effectively losing its Child Benefit, thereby protecting its housing benefit?  That would effectively end Child Benefit as a universal allowance.  Or will housing benefit always be the variable sum? In which case how will councils discharge their homelessness duties where they have to secure accommodation that is affordable?  The Government’s belief that ‘affordable rent’ properties will be offered to the same profile of people as ‘social rent’ properties is now even more questionable.
The implications of all of this seem to be lost on the Government, at least in their public pronouncements.  There would seem to me to be new incentives for households to seek the limited protection offered by the homelessness legislation and, for example, always insist on making a formal application under the legislation rather than accepting an informal arrangement though the prevention and relief of homelessness duties.
Finally, it will come down to money.  There seems a risk that the impact of the cap will bear down only on housing.  For households in TA this would seem to imply a transfer of cost from the national HB budget to the local General Fund – not welcome.  There will be many more people moving through the homelessness system and councils will find it exceptionally difficult to secure accommodation for families subject to the cap.  For some  families with children facing the cap there will be strong pressure to resort to s17 Childrens Act payments to maintain the family in their accommodation rather than face the prospect of taking children into care.  Many councils will face the possibility that the only way to find affordable housing for a family subject to the cap will be to move them a long way away.  And that will pile costs on to the receiving councils.
I can find no evidence that any of these complexities have been considered by Ministers, at least in public, and they divert any attempt to pin them down because statistics aren’t available.  As they pursue the little ideological tantrum that produced the idea of the cap in the first place, they have a responsibility to do some research and explain who will be affected and what will happen to them.

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Social Tenants' Bedroom Tax: now it’s up to Lib Dem MPs

Yesterday’s defeat of the Government in the House of Lords on the ‘Bedroom Tax’ – the punitive proposal to remove benefit from social tenants deemed to be underoccupying their homes (on very strict definitions) even when they have no possibility of being able to move to a smaller home – gives the Coalition a decision to make.  They can either accept the amendment agreed by the Lords or seek to overturn it when it goes back to the Commons.
The electoral arithmetic is such that the Government will not be able to get this nasty little proposal though the Commons if all Lib Dems MPs oppose it and threaten to join Labour in the voting lobby.  This is what should happen because there is nothing in Lib Dem policy or in the coalition agreement that would suggest they are required to support the Government on this.  Given that Cameron’s favourite game, no doubt learned at his educational institutions, seems to be the ritual humiliation of his fag, it is time for Clegg to make a stand on a matter of principle.
The amendment means that the bedroom tax – loss of £13 per week on average for some 670,000 working age social tenants on housing benefit – would not apply to social tenants with only one bedroom additional to their needs and would not apply unless they had been made an offer of suitable alternative accommodation.
The bedroom tax proposal aims to save some £500m a year on the housing benefit bill, a figure that seems unachievable given that a proportion of households would inevitably become unintentionally homeless at considerable expense to the public purse and a proportion of those having to pay the tax would move into private rented accommodation at higher rents and higher benefit costs.  It has also been argued that it would be counterproductive in tackling underoccupation because it excludes older tenants who are more likely to underoccupy.
Many examples were given during the debate of households that require additional space for entirely justifiable reasons.  Lords also quoted the work done by the National Housing Federation which showed that the number of hosueholds needing to move to one bedroom accommodation to escape the tax would far exceed the total supply of one bedroom properties available to meet all needs.
The whole debate can be found in the House of Lords Hansard .
The amendment was moved in the Lords by Lord Best.  He said:

Under the fierce new test, a family would be counted as underoccupying if, for example, two teenage girls were not sharing the same room, or if an older couple, one of whom is below pension age, have a two-bedroom flat. All those deemed to be underoccupying will have to move and downsize to somewhere smaller. If they do not, even if there is simply nowhere smaller for them to move to, then they must pay the new penalty.
Six hundred and seventy thousand households receiving housing benefit will be caught in this trap, rising to some 740,000 in the years ahead. If they do not move out, they will be charged an average of £13 per week, which will have to come out of their low earnings or their other benefits, which are meant to cover food, fuel, clothing, and specifically not housing. These areby definition very poor households, and the new tax will represent a significant reduction in their living standards.

Speaking in support, Lord McKenzie of Luton said

No one doubts that underoccupation is a problem. We have a chronic shortage of housing stock and a huge demand for affordable housing. Yet the Government’s policy is the wrong way to go about tackling the problem, as it punishes people for housing choices over which they have little control rather than enabling the best fit between the available properties and the needs of households.

Also speaking in support, Baroness Hollis of Heigham said

Grant Shapps said that we should not bully people out of their homes. He is right. Yet in this Bill we are saying to people who have lived in their homes all their lives, done what was asked of them and behaved responsibly-two-thirds of them having some disability-that their benefit is being cut from underneath them through no fault of their own but just because we in Westminster are changing the rules. We tell them to downsize while knowing that they cannot do so, so we fine them instead for what is not their fault and for what they cannot change. It is morally wrong to punish people for something that is not their fault and to punish them when they are innocent. That is not decent, it is profoundly unfair, and we should not do it.

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Week of Action on Welfare Reform Bill

The Welfare Reform Bill returns to Parliament this week and this may be the last
opportunity to kill or seriously change this unpleasant measure.
To mention just 2 of the proposals:

  • The new benefits cap will heavily penalise larger families and those living in parts of the country with higher rents.
  • The plans to introduce a penalty for under occupancy will mean that any tenants deemed to have one or more spare bedrooms will see benefits slashed.

Congratulations to the National Housing Federation for organising a National Welfare Week of Action starting today.  There are a lot of proposed activities during the week.
Each day has its own theme and many of the activities are aimed at lobbying MPs.  See here for more information.
David Orr, the Federation’s Chief Executive, said:  ‘The very people the government should be helping during these tough economic times: the disabled, foster carers and families – are exactly the people who will be hammered by these measures.  Hard up families will be left with a stark choice if these proposals go ahead: either move out of your home to a cheaper area or stay put and live in hardship or debt.’
‘We believe these reforms will be hugely damaging to community life and will see people priced out of their homes, away from local schools, and their support networks. With time running out to influence ministers, this week is the chance for anyone who is concerned about these proposals to stand up and be counted.’
Red Brick would urge our readers to spread the word and join in wherever possible.

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Callous, coercive and destined to fail

The Welfare Reform Bill, currently in Committee Stage in the House of Commons (follow the debates here), contains many provisions which will have a profound effect on the housing opportunities of people on low incomes in the years to come. 
One of the changes that has attracted little attention is designed to tackle under-occupation in the social rented sector.  From 2013 housing benefit will be reduced if the household is of working age (the limit is rising from 60 to 65) and is deemed to be living in accommodation which is too big for their needs.  An ‘underoccupying’ claimant will lose a proportion of their HB, which will no longer meet their current housing costs, with an average loss of £13 per week. 
The government’s own impact assessment estimates that 670,000 social tenants will be affected, around one-third of all HB claimants in the sector.  In the north, between 40-50% of tenants will be affected, in London around 20%.  This is an extraordinary number of people.
Affected tenants will face a ‘choice’: make up the shortfall from their other income, take in a lodger, or move to smaller accommodation in either the social or the private rented sector.  Even if only half of those affected decide to move, pity the poor landlord in the north when 1 in 5 of all tenants knock on the door asking for an urgent move to smaller accommodation.  In London, additional transfer requests from 10% of tenants would swamp the housing allocations system. 
Nearly 4 in 5 of those affected currently ‘underoccupy’ their homes by just one bedroom.  They are hardly evil – most people with one spare bedroom do not recognise themselves as underoccupiers, and often the last bedroom is small anyway – but they will lose £11 per week on average.  Over recent years policy had moved strongly towards recognising that the real challenge in underoccupation is to tackle cases where there are 2 or more spare bedrooms, where there is most to gain.  Under the new rules, a family of 6 with 2 sons and 2 daughters living in a 4 bedroom property would be deemed to be underoccupiers, and would receive the arbitrary HB ‘fine’. 
The loss of an average of £13 per week might not be noticed by the Cabinet of millionaires, but this is a huge sum of money to anyone on a very low income.  The policy’s only chance of success will be if there is a supply of smaller homes to transfer into.  Yet the government’s impact assessment admits that there are simply not enough smaller housing association and council properties available.    
The policy is the opposite of the ‘moral hazard’ – where people are insulated from the consequences of their own actions.  In this case people will face the consequences of the government’s actions with no reasonable course of action open to them to avoid or pre-empt or respond to the change in policy.  It is coercive and in a nasty way: if they cannot move, they will face deliberate impoverishment with no way out. 
Will the policy achieve its stated aim and save any money?  Labour shadow welfare reform minister Karen Buck thinks not.  Tenants who are unable or unwilling to move will fall into rent arrears, with the risk of eviction (and loss to the landlord) triggering the costs associated with a rise in homelessness.  The government thinks that some will move into the private rented sector, where rents are higher even for smaller properties, so the cost will go up not down.   
And in a final irony, the policy will not even address, indeed will avoid, the biggest single issue in the underoccupation debate – which is what to do with underoccupiers of retirement age whose family has moved on.
For our previous post on the Tories’ market solution to underoccupation, click here.

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Institutional chaos

The Chief Executive of the National Housing Federation, David Orr, spoke last week about the ‘institutional chaos’ facing housing associations and the need to think carefully about balancing the needs of their business with their mission. 
He said “You might take a strategic business view that the smart thing to do is wait until all the moving parts have settled down and not take any risks. But that is pretty disastrous in mission terms with the scale of the housing crisis.”
Housing associations (HAs) certainly face huge dilemmas in the current policy framework.  It is no longer possible to build what is needed most – social rented housing at genuinely affordable rents – except in tiny numbers as a special case.  So, if HAs with development programmes want to keep them going, and most are assembling their bids at the moment, there is little choice but to plan a mix of private housing, shared ownership and the new, grotesquely-named ‘Affordable Rent (AR)’ product (which is little different from the intermediate rent products we have seen before).  Of course it can be argued that building almost any housing is useful given the current shortage, and AR at 80% of market rent is not that much different from social rents in those parts of the country with the lowest values.  But everywhere else, the virtual removal of social renting from the mix totally disregards the needs of communities and the people on lowest incomes.    
One thing HAs with a development programme can and must do is protect the existing stock of social rented homes when they become available for re-letting.  The government wants them to re-let a share of their existing homes at AR rent levels to generate funding for new development.  I think they should demonstrate their commitment to their mission, to borrow David Orr’s word, by refusing to do so and by re-letting these homes at social rent levels.  Councils, in revising their housing strategies and setting their new ‘tenancy strategies’ under the Localism Bill, should set out their opposition to existing social rented homes being re-let at such high rents. 
Lettings policies, already the art of getting a quart in to a pint pot, will come under even greater strain.  Demand for homes that are re-let at social rents will increase as supply contracts even further.  Who will the new AR tenancies at up to 80% market rents be allocated to?  The government argues that the profile will be the same as those who currently get allocated social rented homes, but they also say that the new policy will not impact on the requirement for housing benefit – and they can’t have both of these.  Higher rents require more housing benefit, as we have argued before and as Family Mosaic’s research showed.  Once again their housing policy and their welfare reform agendas are in direct conflict. 
HAs caught in the middle say quietly that this is an argument that the lenders may ultimately decide – they don’t like it when the tenants can’t pay their rents and this will be reflected in their risk assessments of new schemes.  One middle course would be for HAs to refuse to set AR rent levels above the limit for Housing Benefit, irrespective of local market rent levels.  That would reduce the yield but would keep the homes available for people on housing benefit.  But, in higher value areas, it is the total benefits cap (rather than the housing benefit limit) that will prevent many tenants from being able to pay their rent.  This will be reflected in the risk assessment for new schemes and the pressure will be on to let to people with sufficient income to be able to afford the rent. 
So, there are dangers both ways.  If AR homes are let to people on low incomes who would previously have qualified for a social rented home, then housing benefit spending will go up.  If AR homes are let to people who can afford the higher rents, then people on lower incomes will be squeezed out and more will end up in private rented accommodation at higher rents with a higher requirement for HB support.  Either way, there is likely to be upward pressure on HB spending: the government will have to find more money or look for more cuts.  The prospects are grim.

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What are housing associations for?

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

There has been speculation in the last few days that the charitable status of housing associations might be under threat.  It would cost the sector a huge amount in additional tax if charitable status was lost.  The issue has been bubbling under for a while, but the new debate has been triggered by a request from the Tenant Services Authority to the Charity Commission to express a view on the implications of the new (mis-named) Affordable Rent regime. 

The Commission’s response is of course equivocal: it depends on the circumstances of each association, what their charitable objectives are, and how Affordable Rent fits in with their activities as a whole.  The key sentences in their reply are these:

“Generally, where an association has a charitable purpose to relieve those in need by providing housing, then those who benefit must be poor and in housing need…….. Associations will be aware of whether, in practice, some affordable rent products have rents at a level that people in poverty cannot access, and where housing benefits are capped at a level below the rent.”

“In summary, in principle, charitable housing associations can provide an Affordable Rents product. However, the extent to which the product will be used to relieve poverty may determine whether it is able to satisfy the public benefit requirement and one aspect of this will be the extent to which housing benefit will cover the rental. Charitable associations operating in areas of high market rents will therefore need to look at this aspect in detail to see whether the affordable rents can provide a means of relieving poverty.”

From an ideological point of view, it is clear where the Government is headed.  By dictating that there will be no new social rented housing built in future, only ‘Affordable Rent’ (ie up to 80% of market rents), and by requiring that a proportion of re-lets in developing associations are also let at ‘Affordable Rent’ levels, the government is signaling the transformation of housing associations from bodies dedicated to providing homes for the poorest in society to institutional private landlords of near-market homes.  

Some people in the sector have also been asking for this problem to visit them.  Many housing associations are brilliant at what they do and serve homeless and badly-housed people, their tenants and their communities very well, but some look and act less and less like charitable bodies as each year passes and give every impression of not liking poor people much let alone wanting to relieve their poverty.

Charitable status might be protected as long as it is possible for people on low incomes to access ‘Affordable Rent’ homes.  That in turn will depend on the allocations policies followed and the continued availability of housing benefit.  Some associations think they will not be able to let the new homes to people who could be defined as charitable beneficiaries; for schemes to be viable they will have to let the homes, or at least a significant proportion of them, to people who can afford the rent without the risk associated with needing housing benefit to support their payments.  For the moment, the government says HB will be available for AR properties, but in high cost areas it is the operation of the overall benefits cap and the uprating by less than real inflation that will make it impossible for families on benefit to access these homes. 

The loss of charitable status would be a blow, but, in the context of government housing policy, it is the bigger question ‘what are housing associations now for?’ that needs to be answered.

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Godzilla versus King Kong: the new Affordable Rent model versus the new Housing Benefit regime

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

On 28 February, in answer to a Parliamentary Question, the Minister of State at Work and Pensions, Steve Webb, admitted that his department “has not estimated the proportion of tenants in social housing likely to claim housing benefit if rents for new tenants are let at 80% of market rates”.

This would seem a crucial piece of information and illustrates how much prejudice and how little evidence was used to determine the many changes to Housing Benefit the government is committed to introducing. 

Fortunately others in the real world have been doing some background.  At pretty much the same time as Mr Webb was making his admission, Family Mosaic Housing Association was publishing research based on real life calculations for a sample of their properties and tenants.  This showed, in their words, that “setting rents at 80% of market rent would increase our clients’ requirement for housing benefit by 151%”. 

Like a lot of housing associations, Family Mosaic does not seem to be hostile to the government’s proposals to introduce flexible tenancies or to put rents up to some extent to fund new development.  It appears that quite a lot of landlords think that they should have more ‘freedoms’ and that their tenants should enjoy fewer rights (this is the long-term character flaw in my view).  But at least FM deserve a little credit for digging into the issue and publishing the results.

The report states that “the impact on tenants will vary by location, with those living in inner London the hardest hit: for most of those in Essex, social rents are already at 60-80% market rates” and concludes that “for those tenants receiving benefits, the proposed new affordable housing model creates, or worsens, the poverty trap, acting as an additional disincentive to gain employment.”  Rents for their properties in London would increase by over £100 per week and in some cases by over £200 per week.  The worst affected people will be those on benefits facing large increases in rent but who are also likely to be caught by the overall benefits cap of £26,000, as Tony has pointed out in previous Red Brick posts.  

If (when) the new rent regime comes in, income to FM to support their development programme would indeed increase, but this would be significant only in London.  The cost would be shared by the new tenants paying higher rents and by Housing Benefit.  If the increased cost in HB terms is anything like the figures published by FM, there will be a head-on collision between Godzilla – Eric Pickles’ policy of moving towards market rents as a way of funding development – and King Kong – Iain Duncan-Smith’s policy of cutting housing benefit to the bone.