Welfare reform - housing and social security: second follow-up paper

1. Introduction

Following the publication of the Scottish Government’s Welfare reform: annual report 2017 - the fifth annual report on the impacts of UK Government welfare reforms in Scotland, the Scottish Government published three further reports in 2018 to provide additional information on the impact of welfare reform on the housing sector, families, and disabled people. This report is designed to provide an update and refresh to Housing and Social Security: follow-up paper on Welfare Reform, published in May 2018 building on the context provided by the Welfare reform: annual report 2019. In particular this report updates the evidence on Universal Credit impacts, Local Housing Allowance Rates, and the benefit cap.

Our findings show that UK changes to welfare policies continue to have a significant impact on the housing sector in Scotland.

Four years of frozen benefits has seen the real value of many working-age benefits reduce to around 93% of their 2015 value,^[6] squeezing incomes of low income households. For many this will make it harder for them to pay their rent and make ends meet.

The Local Housing Allowance rate cap has continued to reduce the accessibility of private rented accommodation for many areas of Scotland. Our updated analysis (see chapter 5) suggests that only 11 out of 90 LHA rates in Scotland are set at the level allowing families to rent a home in the 30^th percentile of the rental market. The blanket cap has created a system that has been unable to adapt to varying private rental markets across Scotland, meaning some areas and some rates have been particularly badly affected. Action is needed from the UK Government to level rates up, ideally to the 30^th percentile across the board, and create a system that is fair across Scotland.

This report also points to evidence that suggests that the design of Universal Credit (UC) has impacted on increased social sector rent arrears as the benefit has rolled out across Scotland. This is a fluid situation; changes to UC have been made or announced and so it is hard to know to what extent they may mitigate these impacts as more people move to UC. What is clear though is that landlords, both in the private and social sector continue to have real issues with the administration of UC. DWP plans to align their payments to social landlords to the UC payments to tenants is an important example of action that will be welcomed when it is delivered and will make a big difference to landlords seeking to support their tenants. We hope the UK Government is able to meet its commitment to delivering on this change soon.

The Scottish Government continues to mitigate UK Government welfare reforms with investment of around £100 million a year including through the Scottish Welfare Fund and Discretionary Housing Payments, including mitigating the bedroom tax in full, and UC Scottish Choices.

Budgets need to be managed carefully, but Scottish ministers continue to look at what more can be done, for example in the development of additional support through DHPs for care experienced young people. That said, Scottish Government powers are limited in this area, and many of the changes that need to be made to the welfare system can currently only be delivered by the UK Government.