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

4 Conclusion

The impact of Welfare Reform, from the 2012 Act onwards, on the housing sector in Scotland is substantial. The impact has been most strongly felt by tenants and their landlords, with different kinds of impact in the private and social rented sectors.

In the private sector this report has highlighted the impact of the freeze on LHA rates on affordability of accommodation, and shown that the freeze on rates has substantially limited the availability of affordable accommodation in a number of areas. In the social sector this report has highlighted the impact of UC on rent arrears, although the data is limited it is clear that the full service of UC is having an effect of the ability of landlords to collect rents. Neither of the impacts highlighted are an apparently intentional impact of the policy. The decision to move the level of LHA to match the 30 ^th percentile was indeed criticised, but this report has highlighted that the actual level of support available has fallen substantially short of that reduced level, which was presumably considered to be a reasonable level of support by the UK Government when it was set at that level. If it is not the intention of the UK Government to increase rent arrears, then it would appear to be incumbent on them to address the consequences of these changes. These are the focuses of this report but this report has also highlighted a number of other social security measures with a direct or indirect impact on housing. In addition to these the overall social security context must be borne in mind. The real terms cut of almost £4bn by 2020/21 will have an impact on households throughout Scotland, even where such households are not affected by a direct housing related cut.

The impact on individuals is matched by an impact on landlords, as well as the impact of rent arrears on business models most social landlords and local authorities are investing in a range of activities which will mitigate the impact of rent arrears, but which are of course paid for in the main through rents for all tenants. Landlords, both private and social may also consider changes to their business models, rent setting and investment patterns based on welfare reform changes, in some case this may be an intention of the policies themselves. In Scotland housing is a devolved area, whereas social security is largely reserved with some benefits, including support for those with ill-health and disability in the process of being devolved. However the benefits being devolved to Scotland account for only 15% of overall welfare expenditure in Scotland. It is clear that the actions of the UK government, in its areas of reserved competence are having an impact on the operation of the housing sector which should be subject to devolved competence. In some cases the impact may be contrary to devolved priorities.

The activity undertaken by landlords to mitigate the impact of welfare reform will also have an impact on their business and represents a hidden cost of welfare reform, these costs will be hard to separate from the broader business of the landlord, but act in many cases to reduce the impact on individuals. These costs, like the additional costs in rent management and collections will be borne by landlords as a whole, and indeed their other tenants, this is especially the case for social landlords. Social landlords also play a valuable role in supporting a range of devolved priorities, supporting place making, new supply, and energy efficiency priorities, and additional burdens on them will have an impact on these roles.

The final cost of welfare reform has been the cost of mitigation borne by the UK Government, the £125m expected to be spent by the Scottish Government in 2017/18 is a substantial sum but it must be considered in the context of the overall level of cuts to support in Scotland. The current and future use of Scottish Government powers, may also help address some of the issues raised in this report, but it is again unlikely that they will be able to address them in full.