Housing and Social Security: follow-up paper on Welfare Reform

1 Introduction and Wider Context:

The Scottish Government published its annual report on the impacts of welfare reform in Scotland in June 2017 ^[1] . The report analysed the financial impact of the UK Government's welfare policies introduced since 2010 at a Scotland and Scottish local authority level by 2020/21. It also brought together evidence on the impact of welfare reform on income inequality, poverty and child poverty and the impact on women and people with disabilities.

Further to the annual report the Scottish Government committed to providing three further reports, to cover additional ground, and explore the impact of welfare reform to date and in future in three areas. Reports have been published on the impact of Families with children and on disabled people, this report looks at the impact of welfare reform on the housing sector in particular. All three reports build on the context provided by the first report.

The Scottish Government does have some powers in relation to housing and social security which are discussed below, but the majority of the policy responsibility and spending remain reserved to the UK Government. This report considers the impact of welfare reform on the housing sector, with a focus on two specific areas of particular interest, the impact of the benefit freeze and the LHA cap on the private rented sector, and the impact of UC on rent arrears in the social rented sector. These two areas demonstrate that reserved welfare policy has an impact on the operation of the housing sector, that has profound implications for devolved policy.

Considering the full impact of welfare reform on the housing sector is challenging. An approach looking purely at the statistics surrounding individual reforms and benefits will not account for the impact of behaviours that may be driven by reform, or the costs of activity (such as enhanced welfare rights activity) which may reduce the apparent cost of these reforms. Focusing on housing specifically is challenging because it is also not possible to isolate the benefits traditionally associated with the housing sector from the wider context. Although the main focus of this paper is on the changes to support for housing costs, the whole social security landscape will have an impact on the ability of households to meet their rent. Households do not necessarily observe strict demarcations between housing and non-housing related benefits, and reductions in other benefits, and especially the impact of sanctions, may lead to households failing to pay rent, even where the support for housing costs is apparently adequate. Conversely some households will respond to housing losses by reducing their spending on other items, and the impact of this will not be immediately felt by their landlord, nor be visible in any statistical collection.

This paper considers in the main the current, historical or short term impact of welfare reform and does not look to make medium or long term forecasts, this is because the future impact of welfare reforms will be a function of future policy decisions which are unknown and market forces relating primarily to levels of rent. The main data set available to analyse housing support in Scotland is the provision of data on Housing Benefit through the DWPs StatXplore system. The data available for Universal Credit ( UC) is much more limited than this and so much analysis in this area relies on Housing Benefit caseload only, this will be an increasing challenge in future years.

Wider context

The overall welfare spending context was described in the annual report, which demonstrated that social security spending is forecast to have reduced by £47.5bn by 2020/21 overall due to UK Government measures, including £21.8bn due to uprating measures introduced during the 2010-15 parliament. The impact in Scotland is forecast to be £3.8bn by 2020/21 compared to the 2010/11 baseline. ^[2]

In Scotland there are 2.4m households of which around 20% are in receipt of support for housing costs ^[3] through Housing Benefit or an award of UC which includes housing costs. The total cost of this support in 2015 was about £1.7bn. In addition some households will receive a Discretionary Housing Payment ( DHP). The majority of support for housing costs is available for those who rent their homes, although some loan support is available for those with a mortgage. This report focuses on the impact of welfare reform on tenants, as well as their landlords, especially social sector landlords.

Housing costs have a substantial impact on levels of poverty, and in turn levels of poverty vary substantially between sectors and groups. Poverty levels are higher after housing costs for all groups except pension age households. Pension age households are more likely to be owner occupiers, and have been protected from many aspects of welfare reform, (for instance the bedroom tax only applies to working age households). Poverty rates in the social sector are higher before housing costs (28%) than those in the private sector (24%) However after housing costs the rates are identical (at 38%). This reflects higher incomes in the private sector, balanced by higher housing costs. ^[4]

Changes since the publication of the annual report.

Since the publication of the annual report there has been a substantial policy shift in relation to support for housing costs in the Social Sector. In 2015 the UK Government announced that the level of Housing Benefit, or the housing costs element of UC, for tenants in social rented sector accommodation would be capped at the local housing allowance ( LHA) rate. Refinements to this policy in relation to supported accommodation were proposed by the UK Government in 2016, before being abandoned in October 2017. This change had been expected to save in the region of £68m by 2020/21. ^[5] New arrangements for supported accommodation will still be put in place, including funding for short-term supported accommodation being devolved to Scotland from 2020 ^[6] , however, no further changes are now expected for general needs accommodation in the social sector.

The Autumn Budget 2017 also contained a number of measures designed to mitigate the impact of the move to UC, especially in terms of the impact on the ability of tenants to meet their housing costs. ^[7] This included an increase in the availability of advances to new claimants, the provision of a two week run on for claimants transferring from housing benefit, and the removal of the controversial seven day waiting period in advance of the first assessment period. Regulations were laid on 22 January 2018, with the majority of these provisions to come into force in April. ^[8] These regulations also provided that those in temporary accommodation would receive Housing Benefit rather than receiving housing costs through UC, this was to address concerns about the recoverability of costs for homelessness accommodation and services through UC, this is an interim measure and it is not clear how temporary accommodation will be funded in future. The funding of temporary and supported accommodation clearly has implications for the running of devolved services in Scotland.

Shortly before completion of this report the UK Government announced that they would be ending their policy of removing automatic entitlement to the housing element of UC from 18-21 year olds, this decision was linked to the UK government's direction under the Homelessness Reduction Act, although it is not apparent that the DWP have acknowledged that the policy increased the risk of homelessness. The dropping of the policy may have been linked to the low level of savings compared to the administrative burden of managing it, but was nonetheless welcomed by the Scottish Government and by campaigners in the sector. As such the Scottish Government expects to close its mitigation scheme, which was operating on an interim basis with the intention of a more permanent solution being put in place. It is too early to put in place a full evaluation of the history of the policy in Scotland, and it is unlikely that the costs of the short lived policy will ever be quantifiable, but in addition to any hardship for individuals, it is clear a great deal of staffing resource, at local, Scottish and UK Government level was expended to no real benefit.