Written evidence submitted by the Local Authority (NCC) and the Arm’s Length Management Organisation (YHN)

Summary

Implications for claimants, for tenants, landlords and local authorities –

• Newcastle and the North East are hit particularly hard by the Social Size Criteria (SSC)[1] – 5,719 households in Newcastle are affected, of which 88% are YHN tenants. Furthermore, some of the problems that SSC purports to address are not locally significant – overcrowding is not an issue, supply of larger social rented homes is reasonable, supply of one bedroom properties is low, and rents are affordable.
• Relatively tough local economic and personal circumstances can make it difficult for affected tenants to move into work – many are likely to either attempt to pay using their existing income or fall into arrears. This means further hardship – many people are hit by the cumulative impact of multiple cuts.
• Discretionary Housing Payments cannot fill the gap left by cuts.
• Dealing with the impact of housing reform has been financially costly for the local public sector.
• Falling demand and increasing numbers of voids could threaten the sustainability of some neighbourhoods.

New and innovative responses to the changes to housing support already taking place –

• An innovative pilot project in the ward worst affected by the Social Size Criteria includes closer working between different agencies an offer of real employment to tenants.
• Our successful Financial Inclusion Partnership, bringing together 47 agencies across the city.
• Working in the community to give face to face advice and support to thousands of tenants.

Treatment of housing costs within Universal Credit –

• We believe that locally administered direct payments work best for tenants and landlords. It helps to minimise error and fraud, and local knowledge means a better service for tenants.
• The changes as they stand will reduce certainty of income for YHN and so threaten long term business planning.
• We welcome the exclusion of supported accommodation from UC but we would like to see the definition extended to cover properties that are not necessarily purpose built or formally designated as supported accommodation, are in effect supported accommodation because of their tenants’ needs. For example, housing blocks where the client group are predominantly vulnerable and receiving floating support.

Implications for tenants

1. Estimates suggest that between 36 and 45 thousand people in Newcastle are affected by on-going cuts to social security payments. Housing costs are at the heart of the welfare reform programme. Newcastle’s housing mix, especially our large social housing sector, means that the Social Size Criteria (SSC) has a particular impact upon our residents.

2. The housing reforms will make the poorest people in Newcastle poorer. For those who cannot meet their increased rent liability by maximising their income through unclaimed benefits, securing employment or by reducing their expenditure, an alternative offer of affordable accommodation will be made by the Council’s Private Rented Service. However, the scale of the cuts and the nature of the local employment and housing markets mean that many residents’ living conditions are likely to worsen. Importantly, many people dealing with reduced housing support will be affected by multiple benefit cuts.

3. There is limited evidence that any increase in work incentives will be enough to mitigate the immediate impact of reductions to housing support. Local economic conditions remain very tough – at around 10%, the unemployment rate in Newcastle and the North East is the highest in the UK (and is higher in the most deprived neighbourhoods). Add to this the comparatively weak labour market position of many of our least well-off residents and we do not anticipate welfare reforms leading to large numbers of affected people moving into work or increasing their working hours – certainly not in the short to medium term.

4. Numbers affected by SSC at the end of July 2013 –

• 5,719 households in Newcastle were affected by SSC 88% (5,033) of those living in YHN managed properties.
• 18% of YHN households are affected by the SSC.
• At 59% (3,355), single households over 25 are the largest group affected.
• 20.5% (1,172) of households affected are in work.
• 82% (4,683) have a deduction of 14% due to under occupying by one room.
• The average weekly loss is £13.79 per household.
• The average annual loss is £708.58 per household.
• The annual loss in housing benefit to the City is in excess of £4m (£3.3m for YHN Managed Property).
• 16% (810) of those affected in YHN managed property have a disabled adaptation.
• The highest weekly loss because of SSC in a YHN managed property is £33.09 with 6 households losing over £30.00 per week

5. In addition – 

• 56 households in YHN managed tenancies are affected by the benefit cap
• Average loss in housing support is £48 pw
• 6 of whom are losing over £100 per week and all but 50p of their housing support
• Unlike in the South of England the main determining factor relating to loss of benefit is not the rental charge but the number of children in the household.

Implications for landlords and Local Authorities

6. Supporting tenants affected by the housing welfare reforms has involved significant cost to YHN –

• Communication of the changes through home visits and information material –more than £60,000.
• Additional projects this year – £200,000
• Large scale review of Tenancy Management to ensure services are responsive in the new environment, particularly around pre tenancy assessment and arrears focus – around £230,000 pa.
• YHN rent arrears increased by £800k over the first five months of this financial year.
• Though arrears tend to fluctuate throughout the financial year, a good comparison would be to compare rent arrears figures of current tenants for the same period in 2012. In August 2012 £2.17m rent was owed by current YHN tenants compared to £2.53m in August 2013 - an increase of £360k on the year. 
• 66% of those affected by SSC are now in arrears (August 2013)

7. Rehousing people affected by the SSC presents a huge challenge. Of those under-occupying under the new rules 3,361 are in need of a one bedroom property. There are already 3,233 families on the waiting list for a one bedroom property but only around 800 become available each year (including bedsits).

8. There is little evidence that the SSC is needed to encourage better use of social housing stock in Newcastle. Overcrowding is not a significant issue for YHN. In July 2013 only 54 (1%) of customers on the housing register were in a preferential category because of overcrowding, while 225 (4%) were considered to be in particular need because of welfare reform.

9. Research Commissioned by the Association of North East Councils[2] found that the social housing market in Newcastle, with limited supply of one bedroom properties and little overcrowding, is typical of the wider region. This suggests that moving to a neighbouring local authority area is not an obvious solution for Newcastle residents.

10. Working with other registered social landlords (RSL) and the private rented sector it could be theoretically possible over a number of years to rehouse all tenants affected by SSC. However –

• tenants may not wish to move or be prepared to move to another area of the City where they do not have well established support networks or connections
• tenants may not fit the criteria for available properties
• YHN tenants must compete with RSL tenants who are affected if there is availability in that sector
• There is limited availability of private rented property in Newcastle, it provides little access to those on benefit, is generally more expensive and is perceived as providing less security and lower standards of maintenance and repair (average YHN one bed rent is £70 whilst Local Housing Allowance is £91)
• Only 113 of the tenants that we engaged with have so far moved.

11. Refusals of larger properties are increasing, as are short term void periods. If a trend develops where there is low demand to live in particular properties and areas, it could in the long term threaten not only rental income for YHN but the sustainability of some neighbourhoods.

12. YHN has an excellent record of performance and tenant satisfaction. The changes are threatening this record. We have also begun to see signs of the emotional impact on staff faced with the desperate circumstances of some of the affected tenants. 

13. Discretionary Housing Payment has helped to bridge the gap for those affected by SSC and benefit cap but is under resourced.  Local Authority staff have dealt with difficult cases well to prevent court action etc. but this has come at the expense of dealing with ‘normal’ case. Slow turnaround has often resulted in arrears or tenants borrowing money to pay their rent which has caused additional stress and anxiety. 

New and innovative responses to the changes to housing support already taking place

14. In addition to our existing employment support we are developing a pilot programme in the area of the city most intensely affected by SSC. The project will provide more integrated offer of support, bringing together housing and employment services, offering to work more intensively with the individuals and families affected, and creating new job opportunities where possible. A project coordinator has been appointed. We will work with Newcastle University to analyse the impact, and if this more intensive approach proves effective we will expand to other areas. Our experience is that people will respond more positively to employment related support when it is linked to a real job offer. This builds on YHN’s Your Home Your Jobs scheme which has a 70% success rate in securing on-going employment.  The prospect of a tangible employment offer will give people real work experience, provide a work related reference, promote confidence and reduce the perceived risk of employers of taking on people with no work history. 

15. YHN have reduced rent for tenants by moving to unfurnished tenancies and offering furniture from charities or the Supporting Independence Scheme (our local replacement for the Community Care Grant element of the Social Fund).

16. Our Benefit Cap project, a DWP funded partnership between NCC and YHN, has provided tailored support to hard-to-reach families, many of whom are considering employment, training & education for the first time. The Benefit Cap project has assisted people with DHP applications but a change as big as Universal Credit will require greater resources.

17. YHN support staff are working more flexibly, with a move to mobile working allowing them to help tenants with online applications. 

18. YHN are exploring the possibility of expanding a Supported Lodgings Scheme for some tenants under 25 who may need additional support to deal with the new arrangements.

19. We have worked hard to raise awareness of the impacts of welfare reform. We have carried out over 150 briefings, produced agreed information explaining where help can be secured, ran stories in newsletters and the local media, worked with community and faith groups and the Newcastle Council for Voluntary Services and held awareness raising events across the city. This has included a successful voluntary and community sector application for £350,000 to the Big Lottery Fund - Advice Services Transition Fund, led by Shelter.  The most significant activity has been YHN’s visits to tenants potentially at risk from the SSC (paragraph 20).

20. Between December 20012 and 01 April 2013 YHN engaged face to face with over 4,700 households potentially affected by SSC with an additional 1,400 households who didn’t respond to a series of visits/contacts. Of those visited up to the end of March:

• 1,500 would consider re-housing or a mutual exchange (some of these would consider either option)
• 950 would like help with advice and support
• 463 would like help with opening a bank account
• 320 would like help with employment  

21. Financial Inclusion – the Newcastle Financial Inclusion Partnership brings together 47 agencies that provide information, advice and assistance to help people better cope with reduced income and increased expenditure. We have an integrated approach to information and advice that helps people to maximise income, reduce expenditure, keep their home and access digital support. Our financial inclusion work has included a number of positive actions such as:

• Advising 6,036 people to secure £9.76m of unclaimed benefits in quarter 1 of 2013.  This includes targeted work by the Council’s advisors to secure £1,226,880 for 561 families with children and £819,173 for 274 disabled people.
• Being 2013 regional winners of the Illegal Money Lending Team’s award for work in reducing the risk of people using loan sharks, the results of the national award will be available in the autumn.
• Money advice training for people on the Work Programme
• Self help materials see (http://www.newcastle.gov.uk/benefits-and-council-tax/welfare-rights-and-money-advice/changes-benefits-people-working-age) for people claiming disability related benefits.
• The Summer Support Scheme which has offered food to 406 families who may have gone hungry without free school meals as they are also subject to either the “bedroom tax”, the Benefit Cap and are paying Council Tax for the first time.
• Supported the Credit Union to provide over 400 more loans to vulnerable people and providing alternatives to payday loans.
• The provision of debt advice to 1,199 people over the last 3 months.
• Being the first city to sign up to the FINCAN Fair Finance Pledge and being recognised as the regional leaders for our financial inclusion work.

22. YHN is developing more flexible service delivery and processes, increased digital inclusion and expanding the range of payment options for tenants. We are working with Barclays Bank and the Credit Union to improve and increase access to bank accounts and promoting the benefits of financial inclusion. We have significantly increased the number of transactions by Direct Debit. We are expanding focus on pre/start of tenancy assessment and support, having set up a Financial Inclusion Team in addition to existing Advice and Support Services. The need for this service will increase with Universal Credit (UC) when payment dates vary for each tenant and housing cost claims will need to be concluded at sign-up.

Treatment of housing costs within UC

23. Around 7182 (27%) of YHN tenants have all of their accommodation costs covered by Housing Benefit and paid directly to the landlord. Under Universal Credit, this will fall to 2783 tenants of non-working age.

24. We welcome the plan to exclude housing costs in supported accommodation from Universal Credit. However, we would like to see the definition extended to cover properties that are not necessarily purpose built or designated as supported accommodation but are in effect supported accommodation because of their tenants’ needs. For example, housing blocks where the client group are predominantly vulnerable and receiving floating support. This is a relatively costly but still cheaper option than purpose built accommodation.

25. We believe that Housing Benefit should continue to be administered locally –

• Weekly payments for people on weekly tenancies mean that changes in circumstances/entitlement are picked up quickly, reducing the potential for error and fraud.
• Similarly, good working relationships and information sharing between NCC and YHN means greater efficiency and a better service for customers. For example, we operate a 49 week rent year – a small, cost-free measure that is popular with customers but unlikely to continue under UC.
• Housing costs can be paid from the start of tenancy date rather than payment being tied in with the UC claim start date. Under UC, Payment will not be immediate and arrears more likely to accrue.
• HB claims are currently “digital-by-default” but 80% of these are assisted by NCC or YHN staff because many tenants do not have access to IT. Errors that may lead to a delay are quickly resolved.

26. We believe that direct payment to the landlord remains the better system –

• Many tenants prefer this system because it allows them to better manage a limited budget. For example, it ensures that a key liability is paid and they are not tempted to use it for incidental or emergency expenses. Many can budget exceptionally well, the issue is that they have so little money that they need to be able to do this for shorter periods and from day to day.
• Some vulnerable tenants run greater risk of accruing arrears by not making regular payments. They are also less likely to take up financial services and be at risk from financial abuse by having larger sums of money in the house.
• Under UC, where a tenant has not met their rent liability the landlord is permitted to return to direct payment when two months of debt has accrued. The tenant will be required to repay this in six to nine months. This is likely to place enormous strain on their income. The current system is built to avoid situations such as this.

27. Taken together, the current proposals threaten the YHN 30 Year Business Plan, reducing YHN’s capability to provide services and to invest in new stock replacement. Pilots have found that SSC is undermining the success of direct payment to tenants and that the transaction costs will increase as housing costs are paid direct to the tenants and payments are made more sporadically.

27 September 2013

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