Impact of the changes to Housing Benefit announced in the June 2010 Budget

Written evidence submitted by The Salvation Army

Summary

 

1. This response focuses on the proposal to reduce housing benefit (HB) by 90% of the initial award after 12 months for claimants receiving Jobseeker’s Allowance (JSA), from April 2013.

2. The Salvation Army states in the strongest terms that if this restriction is applied to those in hostel accommodation, it will be extremely hard or even impossible for those affected to afford to stay in a hostel. This will prevent hostels from operating as a "social safety net", and will result in more rough sleeping and hostel closure.

3. This restriction in HB is likely to result in more evictions and people being made homeless generally as a result of not being able to meet the 10% shortfall in housing benefit.

4. Hostel accommodation provides a safe environment for homeless people to stabilise their life, address the causes of their homelessness, and prepare for re-settlement, and where possible, a return to work. However HB levels for hostel accommodation are typically higher than for private or socially rented accommodation.

5. If HB for hostel accommodation is restricted to 90% for persons in receipt of JSA for over 12 months, it is likely that a person who has been evicted would be less able to afford to meet a 10% shortfall in HB for a hostel than for the accommodation from which they were evicted (because a 10% shortfall in HB for a hostel is likely to be more than a 10% shortfall in private or socially rented accommodation.

6. Individuals who have been receiving JSA for 12 months will be deterred from entering hostels, or may enter hostels only to be evicted shortly after, because they are unable to afford to meet the 10% shortfall in addition to the ineligible charges.

7. Others who enter the hostel after a shorter period of receiving JSA may be forced to "drop out" part way through the rehabilitation programme if they cannot afford to meet the 10% shortfall once they have been on JSA for 12 months. This creates more rough sleepers and perpetuates the "revolving door" of homelessness

8. Additionally, hostel landlords are likely to recover less income from their rental charges, due to non-payment of shortfalls, evictions and abandonment, but will be prohibited by regulations from increasing the charge to compensate. This will threaten the financial viability of hostels, particularly in the current climate when Supporting People funding is also being severely cut back.

9. This removes the "safety net" of hostel accommodation, and makes it likely that homelessness and rough sleeping will increase. This in turn is likely to result in an increase in antisocial behaviour and crime rates, and reduced social cohesion as addictions and mental illness go untreated in the homeless population.

Background: The Salvation Army and its Client Groups

 

10. The Salvation Army (TSA) began as a Christian Mission in 1865, and assumed the title The Salvation Army in 1878. The Salvation Army carries out its social work activities under The Salvation Army Social Work Trust, which is a registered charity.

11. TSA has dealt with the homeless client group for over 100 years, and currently manages over 70 hostels throughout the UK, providing over 3,200 beds per night. We provide short-term supported accommodation, for homeless people, (predominantly single homeless).

12. TSA has not directly registered as a housing association with the Tenants Services Association, but has Investment Partner Status with the Homes and Communities Agency (meaning that it can access capital funding to build and renovate accommodation).

13. Virtually all TSA’s residential homeless projects meet the definition of hostel as defined in housing benefit regulations. Those that cannot be classified as hostels are resettlement flats and do not meet the definition because they are self-contained. 1

14. Approximately 40% of the accommodation we manage is directly owned by TSA. The remaining 60% is owned by registered social landlords and TSA acts as the landlords agent – these are classified as "excluded tenancies". 2

15. Virtually all our accommodation is "exempt accommodation" 3 under HB regulations (because it is provided by a housing association or voluntary organisation and care, support or supervision is provided).

16. All except one of our hostels receive Supporting People funding. Overall, our residential homeless projects receive roughly equal amounts of Supporting People and Housing Benefit (in excess of £20 million per annum from each)

17. All our residents have support needs. Many initially arrive with chaotic lifestyles, have a history of drug / alcohol abuse, have been rough-sleeping, have mental illnesses, or have complex needs.

18. To reflect the cost of providing accommodation to this client group, and the higher level of services provided, our charges can be significantly above the Local Housing Allowance rate.

19. A rough survey of current residents suggests that approximately 50% are in receipt of Jobseekers’ Allowance, but the length of time that they have been receiving this benefit is not readily available. The other main benefits are Employment Support Allowance and Pension.
Impact on The Salvation Army of the announced 90% restriction in HB for those receiving JSA for more than 12 months

20. In the financial year 2009-10, The Salvation Army received approximately £22 million income from residents’ housing benefit. If we were to lose 10% of this, the loss would be £2.2 million which is a significantly prohibitive sum to the organisation.

21. A snapshot survey of some of our hostels suggests that, at present, approximately 50% of our residents are in receipt of JSA, but we cannot readily access data to show how many have been in receipt of JSA for more than a year.

22. The next main benefits are Employment Support Allowance (ESA) and Pension. We do not know whether the proportion of residents on JSA / ESA will change in future, and whether receipt of ESA will affect HB rates.

23. We anticipate that in the majority of cases it would not realistically be possible to recover the 10% shortfall in HB from the resident. A 10% shortfall in HB would be £12 - £20 per week, depending on the hostel, and this would be in addition to ineligible charges of up to £35 per week.

24. This would be unaffordable in most cases, and certainly unaffordable for those aged under 25 or having deductions applied to recover previous HB overpayments.

25. We anticipate that we would not be able to recover the loss in housing benefit by increasing hostel charges. Where we manage hostels in partnership with a housing association, or have directly accessed HCA capital funding, HCA rent-setting regulations prohibit rental increases exceeding specified parameters. In all cases, Local Authority (LA) Departments are likely to restrict HB if the annual increase in charges significantly exceeds the rate of inflation.

26. This announcement of the proposal to restrict HB comes at a time when our other major source of income for homeless hostels, Supporting People (SP) grant, is also subject to severe cuts.

27. As all SP funding is now subject to tender, there is no guarantee of any SP funding. Where we have existing contracts we are being asked to manage funding cuts of up to 20%, and are being offered shorter term contracts, and annual renewals.

28. Our Trustees are no longer willing or able to commit significant sums to subsidise Government funded programmes for the homeless client group, and are allocating funding according to where it will have the greatest social impact, which is not necessarily the area of greatest need.

29. The Salvation Army has already withdrawn from providing three homeless hostels since April 2010, in London, Bolton, and Darlington, and other services are under threat of closure.

Implications of the announced change for:

 

Incentives to work and access to low paid work

30. The Salvation Amy recognises that for those who have been out of work for a short period, the proposal to restrict HB to 90% of the original award after 12 months in receipt of JSA may have an impact in encouraging those who have been unemployed for a short period back to work. These people are not far removed from the work market, and it would be less of a leap for them to re-enter employment.

31. It is debatable whether the announced restriction in HB will have an impact for those who have been out of work for a longer period, whose work skills have deteriorated, and who would find it much harder to find work. The announced change to restrict HB to 90% may just increase hardship, without affecting motivation or ability to find work.

32. Without further refinement, those who are attempting to make themselves more work-ready by entering work training programmes would still be penalised by these provisions. There would be no incentive to undergo training to improve prospects of work.

33. For those who fall out of work, it will be harder for them to maintain an existing tenancy or access new accommodation (see "Landlord Confidence" below).

34. Landlords will be become less willing to renew a tenancy or offer a new tenancy to a person who is in receipt of JSA, due to the increased risk that HB will be restricted and rental income lost.

35. Once a person has been in receipt of JSA for over a year, the restriction in HB would make it much harder for them to secure affordable accommodation. The lack of a fixed address would severely impair the ability of a person to find employment, regardless of how genuinely they desire to find employment.

36. For homeless people and hostel residents, the announced reduction in HB almost certainly will not create an incentive to work, and would actually act as a disincentive to stay in hostel accommodation, where they can engage in rehabilitation and support programmes aimed at re-integrating them into society and becoming work-read. Perversely, the proposed restriction of HB to 90% will create a financial barrier for homeless people to enter a hostel, and an incentive to "drop out" of hostel accommodation on the anniversary of their HB award, because meeting the 10% HB shortfall in addition to the HB ineligible charges will simply be unaffordable.

37. Hostels provide support to residents to stabilise their lives, support in engaging with professionals to treat addictions and mental illness, life-skills training and links with education establishments and work-training programmes. All of these bring a person closer to being "work ready". With no fixed abode, and without the support provided by hostel support staff, a homeless person can find it virtually impossible to find work.


Shortfalls in Rent

38. Due to the fact that many individuals who enter hostels are at a point of crisis in their lives, have an extremely chaotic lifestyle, and need to be provided with a safe, controlled environment, and a healthy diet, hostels provide a higher level of housing services than general rented accommodation. This often makes hostel accommodation more expensive to provide than mainstream private or socially rented accommodation.

39. This has long been recognised by housing benefit regulations, and is why there are specific regulations relating to hostels and "exempt accommodation". Charges and HB levels for hostel accommodation are often higher than for other accommodation.

40. Housing benefit rates for TSA’s hostel accommodation typically range from £120 to £200 per week, so a 10% shortfall would equate to £12 to £20 per week.

41. Ineligible charges at TSA’s hostels typically range from £10 to £16 for self-catering accommodation, and £26 to £35 for half board accommodation.

42. The amount a person who has been in receipt of JSA in excess of 12 months would therefore be responsible for paying at a Salvation Army hostel is shown in the table below:

10% restriction in HB per week.

Ineligible charge per week

10% shortfall in HB plus ineligible charge

£12 - £20

Self catering: £10-£16

£22 - £36

Plus in some cases £9.90 to cover deductions to recover previous HB overpayments

Half board:
£26 - £35

(includes £15.50 meals deduction)

£38 - £55

Table 1: Amount a person in receipt of JSA for 12 months

would have to pay for TSA hostel accommodation

43. In many cases, hostel residents have previously been overpaid HB at a former address, and LAs usually recover this at the rate of £9.90 per week. They are also responsible for making up this shortfall in their housing benefit.

44. JSA rates are currently:

· £65.45 for those aged 25 or over

· £51.85 for those aged under 25.

45. It would be hard for individuals who have been in receipt of JSA for more than 12 months to afford the self-catering hostel accommodation.

46. It would be very hard for over 25s to afford half board hostel accommodation, and potentially impossible to for under 25s to afford half board hostel accommodation.

47. Homeless people in receipt of JSA for more than 12 months would be deterred or prevented from accessing hostel accommodation because of an inability to pay ineligible charges and the shortfall, and those in receipt of JSA for a shorter period could be forced to "drop out" once their claim reaches the one year mark.

48. This could lead to the situation whereby only those who have been receiving JSA for less than one year, or those receiving other benefits could afford to access the "safety net" of hostel accommodation.

49. Perversely, those who have been in receipt of JSA for more than 12months would be unable to stay in hostel accommodation, where they would receive support to access the professional support services, treatment programmes, and training opportunities to enable them to return to independent living and the work market. These people would be more likely to become rough sleepers and entrenched homeless.

Levels of evictions and the impact on homelessness services

50. The proposal to restrict HB to 90% for those in receipt of JSA for more than 12 months will inevitably lead to increased rental arrears and more evictions being sought by landlords.

51. How the courts will respond to these cases, and whether evictions will actually be granted is unknown. There are suggestions that a legal challenge could be mounted on the grounds that a power to impose a penalty that could result in a person losing their home on the basis of failing to meet "an administrative deadline to find work" could contravene the European Convention on Human Rights.

52. We are unclear whether a person evicted due to failure to pay rent, but who was unable to pay in full because of a 10% restriction in their HB award, would be considered as statutory homeless for the purposes of LA re-housing.

53. Whatever the outcomes of the above, we anticipate that the proposal to reduce HB awards by 10% would result in more individuals being unable to pay their rent in full, becoming homeless and presenting themselves as in need of accommodation.

54. For a person who has been evicted due to rent arrears, and who has been in receipt of JSA for 12 months, the 10% restriction in HB will create a barrier to accessing emergency hostel accommodation, because it would be harder for them to afford a 10% shortfall in HB at the hostel rate than for the accommodation from which they have been evicted. This is because HB rates for hostels are typically higher than for private or socially rented accommodation.

55. It is possible that only those in receipt of other benefits, or in receipt of JSA for less than 12 months, would be able to afford to live in a hostel.

56. This barrier to accessing hostel accommodation could lead to the creation of a homeless population who cannot afford to enter emergency accommodation, and instead become street homeless or set up squats. LAs would then be forced to commit financial resources from other budgets to address the issues that would arise as a result of this.

57. Because of the risks to HB revenue, even landlords who accept tenants receiving HB will prefer those who have been in receipt of JSA for only a short period, making it harder for LA Homeless Services to place the longer term unemployed. This would be compounded by the other measures being introduced, to set the LHA at the 30th percentile, and increase rates in line with the Consumer Price Index rather than the Retail Price Index, both of which would make it harder for benefit claimants to access affordable housing.

58. Those who do enter a hostel and go through the resettlement programme would find it harder to move on, due to an unwillingness of private landlords to accept the risk of accepting a tenant who has been receiving JSA for a longer period, and the other LHA measures. This could result in LA-funded hostels "silting up" with residents, and/or individuals dropping out of the resettlement programme back into a more chaotic lifestyle, and reverting to a cycle of homelessness due to an inability to move on from hostel accommodation, and an inability to pay the 10% shortfall in hostel rate HB once they have been in receipt of JSA for a year.

Landlord Confidence

59. Due to the high risk that the level of HB will be restricted, there will be a financial disincentive for all types of landlord to provide accommodation to tenants who are in receipt of JSA, rather than other benefits. Even if courts do allow evictions to be granted for non-payment where the failure to pay has been partly due to a 10% restriction in HB, landlords will be aware that court action will be lengthy and costly and they are unlikely to be able to recover arrears.

60. The reluctance of some private sector landlords to accept tenants in receipt of HB will be exacerbated, and fewer properties will be made available to JSA recipients. Properties may increasingly be let for 6 months rather than a longer period, so that the landlord can terminate the tenancy more easily to avoid a reduction in HB if the tenant should fall out of work. This will result and a higher turnover of tenancies, which is a less efficient use of available housing resources for society generally.

61. For providers of socially rented accommodation, there will also be a disincentive to accommodate residents in receipt of JSA, due to the very real risk that HB income will be reduced. Housing associations will be restricted by HCA rent-setting regulations from increasing their charges significantly to recover the loss in HB revenue, and are likely to be forced to accept the loss in revenue. Working age tenants will become a higher risk category, and to avoid lost revenue social landlords could be incentivised to convert stock from general needs accommodation to accommodation for the elderly or incapacitated, or if there are no outstanding HCA capital commitments, de-commission and sell-off general needs stock.

62. Hostel landlords will be affected by the same factors as social landlords, and are likely to experience a reduction in HB income as a direct result of benefit being restricted by 10% for a proportion of residents. Hostel landlords are also unlikely to be able to recover losses by increasing charges, due to HCA restrictions, or HB departments’ refusal to accept "unreasonable increases" in charges. Although hostels may try to enforce payment of the 10% shortfall by the resident, this is less likely to be successful because payment of 10% of the hostel HB rate may be totally unaffordable, as hostel HB rates are generally higher than other accommodation.

63. In recent years, LAs have increasingly taken over the assessment and referral of homeless persons, and direct access hostels are now far less common. Local referral and admission agreements may force hostels to admit residents that are known to be unable to meet the shortfall, with the result that hostels cannot avoid losing income, and the resident is set-up for eviction from the start of the tenancy.

64. All of the above effects on landlord confidence will limit the availability of accommodation for those in receipt of JSA for more than 12 months. Perversely, those in receipt of JSA for more than 12 months will be less likely to be able to afford to access the "safety net" of hostel accommodation than mainstream accommodation.

65. For landlords of supported accommodation, this proposed restriction in HB comes at a time when the main other source of income, Supporting People (SP) grant is also subject to severe cuts. LAs are asking providers to manage funding cuts of up to 20% on existing contracts, SP contracts are being awarded for shorter periods, and the need to put services out to tender means that there is no guarantee of SP funding at all. Providers of supported accommodation are finding it increasingly hard to manage services under these conditions with these levels of financial risk, with the very real result that services are being closed.

66. The Salvation Army has itself ceased providing three hostel services in Bolton, Darlington and London since April 2010, with other services under threat of closure.

67. Once hostel provision has been lost it is very costly and difficult to replace.

Community Cohesion

68. If the restriction of HB to 90% for those receiving JSA for over 1 month is applied to residents of hostel accommodation, many of those people will be unable to afford to live in hostel accommodation.

69. Those who are already homeless will be deterred from entering hostel accommodation, and those in hostel accommodation at the anniversary of their JSA award may be forced to "drop out" without completing the rehabilitation and resettlement programme.

70. It is The Salvation Army’s opinion that this will perpetuate the cycle of homelessness and lead to the creation of more entrenched rough-sleepers and lead to a number of other social problems and with very serious consequences for society as a whole:

· More street homeless

· More begging

· More antisocial behaviour

· More mentally ill people on the street, not engaging with treatment services or taking appropriate medication

· More homeless drug and/or alcohol abusers, not accessing professional support networks, or taking advantage of the stable environment and encouragement provided by a hostel to undergo rehabilitation and/or appropriate treatment.

· More drug abusers sleeping rough or squatting, leading to "drug houses" and public health issues of discarded sharps and drug paraphernalia

· More crime, in order to fund addictions, and homeless lifestyle

· More squatting generally, with associated anti-social behaviour.

In The Salvation Army’s opinion, these are some of the likely outcomes from the proposed reduction in HB.

Recommendations

 

71. We strongly recommend that proposal to restrict HB to 90% of the original award for those in receipt of JSA for more than 12 months should not be applied to residents of hostel accommodation. Hostels act as a "safety net" to save people from rough-sleeping, and prepare them to return to mainstream accommodation and work.

72. To make hostels unaffordable by manipulating HB rates for individuals at a time when they are most vulnerable and not "work ready" is counter productive to all back to work and homelessness goals.

73. If it is agreed that a financial penalty should be applied to encourage those in receipt of JSA for more than12 months back to work, The Salvation Army recommends that the financial penalty should be applied through JSA itself, and not through housing benefit. In this scenario, consideration should then be given to how incentives will apply to those who enter training schemes to improve their employment prospects.

6 September 2010


[1] HB Regulation 2.(1). Our services meet the definition of “ hostel” because they are non-self-contained-accommodation, with meals provided, or facilities for cooking, and are managed or owned by a registered housing association, or managed by a voluntary organisation or charity that provides care/support/supervision aimed at rehabilitating or resettling residents within the community.

[2] HB Reg 14 (4)(b) and Schedule 2 paragraph 3

[3] Qualifies as “ exempt accommodation ” because it is owned by a housing association/registered charity/voluntary organisation and care, support, or supervision is provided by the same body. HB and CTB (Consequential Provisions) Reg's 2006 Schedule 3 paragraph 4 (10)).