Home benefits: the SFHA's Mary Taylor explains why welfare reform is a concern for housing associations

“Why does welfare matter to housing?” asks SFHA chief executive Mary Taylor rhetorically, anticipating the possible question. As she goes on to explain, the two are, in fact, inextricably linked in the social housing sector.

The majority of housing association tenants, whether of working age, many of whom are in work, or pensionable age, rely on some form of benefit support to pay the rent, even though rents are generally low.

While there are no published figures on the percentage, latest SFHA estimates suggest that 61 per cent of all rental income in the sector is derived from housing benefit, with about two-thirds of those people being of working age and the rest of pensionable age.

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“Housing of itself is not welfare, it’s about providing a decent roof over somebody’s head that they can afford to live in,” says Taylor. “But sometimes the tenants that we house are on such low incomes that they still need support to pay even low rents, which is why everything that goes on in social security is of vital interest to us.”

And right now, the SFHA is deeply concerned about changes to welfare that look set to affect housing association tenants, particularly the threat of a cap on local housing allowance (LHA) that was announced in the Chancellor’s autumn statement.

The change has been postponed a year to April 2017, but only for those in supported accommodation. Other tenancies are affected from April 2016, with those take up from that date subject to the cap from April 2018. When the change goes ahead it will cap social rents to private sector levels.

“Initially we thought private sector rents are higher than social sector rents, so why is that a problem?” says Taylor.

“But I can think of members who have said that they have tenants currently living in accommodation, which by the time you include the service charges they’re paying – which can, for example, include charges to pay for measures that enable disabled people to live more independently – their rent is in the order of £200-£250 a week and the cap means that they would be eligible for rent support of nearer £70 a week maximum.

“So immediately there’s a shortfall. And if the tenant needs housing benefit in the first place, the chances are they can’t afford even to pay the rent, never mind the rent including the service charges.” The change to LHA may especially affect older people, as these service charges are often for support in accommodation such as sheltered housing.

Once the Scottish Parliament gets more welfare powers through the Scotland Act in 2018, it would be able to top up the shortfall, but Taylor isn’t keen to see that as the solution.

“It shouldn’t be a matter of ‘topping up’,” she says. “To think of it as topping up would be starting in the wrong place, really. It’s been accepted for my professional lifetime that if somebody needs help to live independently, then the housing support will be funded through the housing support system, which remains reserved. And what the LHA cap does at a stroke is suddenly remove all of that support without consultation across the UK.”

Housing associations have decades of experience of supporting people to live independently in the community with a modest amount of support and this potential change to LHA “just kind of throws all of that up in the air,” says Taylor.

And the consequences could be very serious indeed. “The worst case is that there is no alternative source of funding identified and those services have to close and those people are then at risk of becoming homeless. The better case is that alternative funding is found, but the risk is always that some reconfiguration has to take place and some individuals then slip through the net.

“In the words of the Joni Mitchell song, ‘you don’t know what you’ve got till it’s gone’. If this strand of accommodation was disappear along with the contribution the associations can make was to wellbeing, it would take a lot of investment to get it back again,” she says.

“These services have huge preventative value. There are studies by a huge variety of people that demonstrate the social return on investment. I’m fully aware that these things are very difficult to quantify, but if you have thousands of people living in supported accommodation who might otherwise require a hospital bed or some other form of institutional care, at what cost?”

The LHA policy will also cap social rent for single people under 35. New tenancies taken up by under-35s from April 2016 will from April 2018 only be entitled to housing benefit for a room in shared accommodation.

In the cases the SFHA has examined so far, the cost even of an affordable rent is between £5 and £15 a week greater than the eligible benefit limit, and those people, again, are not in a position to pay that shortfall.

“So, ironically, this leaves us in a position that without a national rent policy in Scotland – and there is no appetite from us or from the Scottish Government at present for a national rent policy – but, in effect, the LHA system that the DWP is applying to social rents becomes a kind of national rent policy using reserved powers.

“And it’s predicated on what the private sector charges. And you think, well, if you were going about this as a piece of rational policymaking, this isn’t where you would start, this isn’t what you would seek to achieve.”

Another change currently being experienced in areas where Universal Credit has been rolled out is that, at present, the housing element of it has to be paid to the claimant who is then responsible for paying their rent, unlike with housing benefit, where it could be paid direct to the landlord.

One of SFHA’s key roles as a national body is about safeguarding rental income and it sees this change as a risk both to landlords and tenants. “Because if associations don’t have rental income, where else is it going to come from? You know, it has to come from somewhere,” says Taylor.

The previous system suited tenants too. “The majority of tenants thought this was a great system because it takes away the worry that you’re going to end up with not enough money to manage the budget and somehow the rent won’t get paid because you’ll come under pressure to use that for something else, and then that puts your very shelter at risk.”

Until around 2011, when figures were available, 96 per cent of the rent that people were eligible to claim through housing benefit was being paid directly to their housing association. As a result, social landlords used to have a 98 per cent collection rate, but Taylor says that some associations are reporting that their collection rate for those in receipt of Universal Credit has dropped to 77 per cent.

“And much more alarmingly, I heard last week from an association that said that they have 270 cases of tenants on Universal Credit with a housing cost element and 230 of them are in arrears already.”

With more control of welfare coming to the Scottish Parliament under the Scotland Act, there are two things Taylor would like to see the next Scottish government doing with its powers. “I’d like to see the next Scottish government deliver on the pledge made by the last one and introduce a system which allows the rent support that tenants are eligible for to be paid direct to the landlord,” she says. “The Scotland Act delivers this   power, so let’s use it.”

“The SFHA lobbied for this power to be included in the act and had effectively done so since Universal Credit was mentioned,” says Taylor.

The other is relieving the impact of bedroom tax. “It was the first thing that really hit us and what was very clear from the start was people might want to move to smaller accommodation if there was any, but there wasn’t anywhere to move to, and so penalising them for something they couldn’t do anything about seemed particularly unjust.

“It’s been hugely valuable to have mitigation funding coming from the Scottish Parliament and I sincerely hope that that continues. We’re hugely appreciative of the cross-party agreement for mitigation.”

Using the new welfare powers to alleviate the effects of welfare reform is just one point in a five-point manifesto that the SFHA wants parties to commit to ahead of the election.

The SFHA is also calling jointly with CIH and Shelter for 12,000 affordable homes to be built a year over the course of the next parliament. The signals so far look hopeful.

“We’re in a great place at the moment where we have both Labour and the SNP pledging billions of pounds and tens of thousands of houses if they’re returned to government.”

In order to achieve this, the SFHA is also looking for a pledge that the grant rate for building new homes will be maintained at the recently revised level of £70,000 per house. It was returned to that level in late January after having previously being cut, which had had a significant impact on the building of new social housing.

“It had been cut to £40,000 like that [clicks fingers] in 2011,” Taylor explains. “The completions started going down and the approvals dropped off the scale, so it went back up to £58,000, but  that still didn’t achieve enough, partly because the banks charge more if they are funding more than half the total costs.”

The SFHA is also challenging the next Scottish government to tackle fuel poverty by making sure all homes in Scotland are brought up to category C energy efficiency by 2025. Housing association homes are among the most energy-efficient houses in the country because of the Scottish Housing Quality standard that the sector is required to meet, but “they could be always better”, says Taylor.

“Some of the properties that I’ve seen built in the last 5, 10 years have been to the highest possible energy efficiency standards and you’re looking at people spending £100 a year on heating bills,” she reveals.

The final point in the manifesto brings us back round to housing associations providing supported accommodation to those that need it, which is to have the role housing associations play in health and social care recognised.

“What we’re looking for is recognition by the new integrated joint boards that they can’t achieve the step-change that they need in terms of keeping people at home and living in a homely environment without us.

“‘Homely environment’ often signals supported accommodation rather than anything else. So that’s the overarching goal and they can’t do that without engaging with us. We’re making headway, but we’re not there yet. We’re very keen to engage with people in integrated joint boards at the local level.”

Since the interview, the Office of National Statistics (ONS) has announced that it will assess whether Scottish housing associations should be reclassified from private non-financial corporations to public non-financial corporations for statistical purposes in the way that English housing associations have been.

If what looks like a seemingly innocuous statistical reclassification were to happen, it could in fact have a significant impact on Scotland’s ambitions for social housing.

Taylor explains: “This is because reclassification would cause the assets and liabilities of housing associations to form part of the Scottish Government’s balance sheet.

“When one considers the purpose of social housing – to house and support those on low and modest incomes – it means that the government would be, in effect, facing a much higher bill for social housing than is currently the case.

“Not only would it be providing public sector investment in social housing through housing associations - as it does now - but all the private sector investment that housing associations are able to secure in the form of development loans would become Scottish Government debt.”