Unintended clarity from the DCLG

 

pickles in trauma towers

A leaked letter has emerged, sent from the DCLG to the office of the Prime Minister. The full text of the letter is here. Written by Eric Pickles’ private secretary, apparently at Pickles behest, the letter sets out the DCLG’s concerns at the effects of the Government policy to cap total welfare benefit payments to any one household at £500 per week. The letter is quite shocking. The shock is not so much in the results that it sets out (and those of some of the other policies being pursued), as these are pretty much in line with what everyone else has been telling them, but in the fact that the letter was written 6 months ago and made no difference whatsoever to the Govt’s determination to bring in the policy.

The headlines are these:

The DCLG warned that the policy would result in 20,000 families becoming homeless from private sector accommodation. An additional 20,000 homeless families are expected to result from the separate limits on housing benefit.

The pressure on local authorities, already seeing increased demand, will be substantial and the additional costs to the public purse will exceed the £270 million pa from 2013/4 that the policy is projected to save (again, this is distinct from the caps on housing benefit). The policy will therefore cost more than it saves and possibly by a substantial amount.

The knock-on effect on the projections for ‘affordable housing’, as being brought in the Localism Bill, are substantial. The stated aim of ‘affordable housing’ was for 56,000 new homes to be built on the basis of rent of 80% of market rent and short term tenure. The letter sets out the DCLG analysis that only 50% of those would be built if the benefits cap went through, with the most drastic effect on the very badly needed 4 bedroom family homes. These would quite simply not be supportable under the £500 per week cap.

The DCLG suggestion – subsequently ignored by Cameron and by the DWP – is that Child Benefit should be exempted from the £500 per week cap. The alternative proposal being floated by ‘some people’, that families be required to divert a proportion of their non-housing benefit income to housing costs, was rejected by the DCLG as “it is important not to underestimate the level of controversy this would generate”.

The letter notes that just removing Child Benefit from the income cap would ‘substantially reduce the negative impacts’ as it would mean that:

families with 4 children would be able to live in most parts of the country outside London and the South East.

The Govt and DCLG’s public comments have always been that the limit on benefits would have little effect on homelessness and child poverty.

In addition, there has been a repeated rejection of the view that the separate cap on housing benefit would have much of an effect on homelessness, instead we have been told repeatedly by Grant Shapps and others, that private landlords would reduce rents accordingly. The fears of increased homelessness raised by London Local Authorities were dismissed.

Here is Grant Shapps in an interview with the Guardian in October 2010, a couple of months before this letter was written:

“People like me – who set up a homelessness foundation, worked with all the homeless charities, authored probably six of seven homelessness papers – don’t make changes without thinking through the impact of them on the homeless, […] It is ludicrous to suggest that we would ever do things that would end with people living on our streets.”

At the time Shapps was saying this, it turns out that the DCLG was internally estimating 20,000 households would become homeless as a result of the housing benefit caps. (Meanwhile, Westminster Council alone estimated, as of May 2011, that 5,000 households in the borough will ‘need to move’, with most leaving the borough, once the cap comes in. Only 6% of landlords in the borough are considering reducing rents. Despite this, the wonderful Philippa Roe, Cabinet member for housing, proclaimed that HB caps would reduce rents in June this year!)

Further, Grant Shapps and others have stated that caps on benefits would have little or no effect on the affordability of ‘affordable housing’.  Here is Mr Shapps in a parliamentary answer in December 2010:

Alison Seabeck: To ask the Secretary of State for Communities and Local Government whether a social rented home under his proposed affordable rent model would be classified as affordable if the rent were in excess of the housing benefit cap.

Grant Shapps: Affordable rent levels can be up to maximum of 80% of local open market rents. Our expectation is that providers will want to take into account housing benefit caps when setting rents.

Which is a non-answer. Or in a Ministerial Statement by Shapps also from December 2010:

Being able to offer a fixed-term Affordable Rent option will mean housing associations become even more effective in helping people get back on their feet, and ensure more affordable homes are built for every pound of taxpayers’ money that is spent

This was at the same time as the DCLG was privately estimating that benefit caps would make 4 bed properties uneconomic as ‘affordable tenancies’ and that no-one would build them in consequence, and, of course, that 50% reduction in the number of affordable tenancy properties that would be built. The means that the stated purpose of the ‘Affordable tenancy’ flagship element of the Localism Bill has, by and large, disintegrated. The 80% market rent and the short term tenure would not produce more housing of the kind actually (and desperately) needed.

And there is that chilling comment at the end of the letter, that effectively states that even if the Goverment changed policy and Child Benefit was taken out of the overall benefit cap equation, no family with 4 children that was reliant on welfare benefits could afford to live in London or the South East.

One expects spin, one expects ministers to avoid difficult questions, but where the DCLG on its own assessment knows that as a result of the benefits policy, a slow motion housing catastrophe is imminent and that its own flagship housing policy is pretty much dead in the water, the statements made by ministers amount to dissimulation at best.

[Edit – update. And there have duly been accusations that Ministers, including Grant Shapps, have misled parliament. After January 2011, the date of the letter, Grant Shapps replied to a direct question from an MP on whether he had an estimate of the number of households likely to become homeless as a result of the overall benefit cap by citing a DWP impact assessment from February 2011 which said “that it was “not possible to quantify” the cost to local councils generated by the welfare cap and the likelihood that it will require councils to house some families made homeless”.  This might take some explaining.]

Whether there will be some form of Government response to this is anyone’s guess. Given the current direction of travel, it will probably take the form of Ken Clarke taking Homelessness out of scope for legal aid.

[Update. A ‘source’ for the DWP has now responded in the following terms:

“You know what councils are like – when they have concerns, they are very vocal about it […] The cap only comes in at £26,000 and that’s equivalent to a gross income of £35,000 for a family that’s working. And the minute someone enters into part-time work, they are exempted from the cap […] There might be some people who have to move to a less expensive area. But that doesn’t mean they won’t have anywhere to live. We are very optimistic about the behavioural change that this will bring about. We have already started to change housing benefit. And have you seen droves of homeless people? No, you have not.”

Well, homeless applications in the first quarter of 2011 were up 23% against the same period in 2010. The HB changes only came in in April 2011 (and the 30th percentile cap not until October). We haven’t had the homeless figures for the second quarter of 2011 yet, so the answer to the DWP ‘source’ is how could you possibly know about any current impact on homelessness’. But then making things up without any recourse to evidence now appears to be second nature to those in charge of the DWP.]

 

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Benefits, Homeless, Housing law - All.

10 Comments

  1. One point missing from this is the impact of the OBC on supported housing, and specifically homeless families units and DV refuges.

    The OBC calculates all benefits and reliefs (eg council tax benefit) and subtracts these from the £500 cap with the residual being the maximum HB that will be paid.

    CIH and NHF figures, that have gone unchallenged, say that a family with 3 children receive £317pw in benefits and reliefs meaning a max amount of £183pw in HB. Most refuge and HFUs have higher rents than this nationally due to such projects being furnished and staffed. Hence a family moving into a HFU say through fire or flood or other emergency reason will NOT have enough HB to pay the rent – or will someone with 3 children or more moving into a refuge.

    While this is a housing issue and not (yet) a legal one, there will be some interesting legal consequences emerging if and when people are evicted from HFUs and refuges due to arrears.

    The issue has been flagged many times yet supported housing is still not exempt from the OBC (unlike war widows and those on disability benefits) yet to avoid this unfairness of the victims being penalised it needs to be.

    Moreover in HFUs it can be the case that two rooms are needed to accommodate such a family and as such two rents are charged and this could be more than the entire OBC.

    Irrespective of misleading Parliament and other political underhandedness this letter reveals, the impact of OBC has still not been fully thought through and those entering emergency accommodation such as HFU or refuge – through no fault of their own, will see such unwitting ‘victims’ be penalised.

    • And don’t forget that temporary accommodation under Part VII is to have an HB cap too, shortly.

    • Slight non sequitur – why is temporary accommodation so astoundingly expensive in any event? There’s no requirement to accommodate them in-borough (I know Westminster sends them to far flung locations)… surely with a bit of digging and suchlike cheaper temp. accomm. can be found?

    • No, really. Supply and demand, certainly in London.

      Mind you, some housing associations that charge vast weekly rent for temp accom really are milking things.

  2. Incidently the ‘make x homeless’ is perhaps misleading as it would be more relocation rather than pure homelessness.

    It comes down to the old arguement of those spending £2k pm in rent ‘capped’, and if they could be housed elsewhere.

    Then that gets into the realms of right to live in certain locations, or, like many periods in the past, people move and adapt to life and location.

    Cheers

    Rob

    • Umm, Rob that IS ‘make X homeless’. Please do keep up.

      The number who will have to relocate is another, considerably higher, number. E.g. West London boroughs say that 81-90% of the private sector HB claimants in their boroughs will see a significant shortfall on their rent after the caps come in (between £84 and £300+ a week). 5000 households in Westminster alone. And 80% of private landlords in Westminster say if their current tenants could no longer afford the rent, they would ‘end the tenancy’. Only 6% said they would lower the rent. So 4000-4500 households having to move/potentially becoming homeless in one London Borough alone.

      And bear in mind that these are the same people being urged to get work and come off benefits. Cheaper (actually affordable) accommodation = areas without work=people remaining on benefits. All in all, a good plan.

  3. Temporary accommodation and cost.

    By its nature a HFU or a refuge needs to be fully furnished as people dont take the kitchen sick with them when they flee fire, flood or violence. This is right down to bed linen, cups, saucers etc. It also includes high cost items such as waterproof mattress covers and the accommodation needs to have much communal furnishings.

    All of these furnishings suffer a great deal of heavy use and therefore need to be depreciated over a shorter period than would be the case for a single dwelling. Then add in the costs of HMO compliance with fire extinguishers, yearly legionelliosis tests, provision of white goods, communal commercial grade washing machines and dryers (I could go on and on here) and then of course we have staffing costs to add to this for safety and security (oh and CCTV, emergency lighting etc…)

    These are all HB eligible costs which adds to the net rent to create much of the gross rent. This is why the overall (gross) rent figures are much higher and are fairly consistent nationally which is why the total rent in low-cost areas of the UK will likely be in the £200 – £350pw range and therefore fall victim to the Overall Benefit Cap

    The argument that landlords are milking rent charges is a falsehood and rent levels are necessarily high to cover the cost of the furnishinbgs and services that are needed.

    All such rents are rigorously scrutinised by HB departments to ensure the costs are ‘reasonable, realistic and justifiable’ and often these high rents still dont cover all costs.

    The impact and manifestations of the OBC may well see refuges and HFUs close due to becoming non-financially viable because of the OBC.

    I can see refuges and HFUs basing entry on whether the service user is disabled (one exemption to OBC) or having to refuge larger families as they know HB wont cover the rent or even two rents if they need two rooms, which HB can cover now but wont be able to under the OBC unless refuges and HFUs are exempted from the ill-thought through OBC.

    I can foresee huge legal challenges here if supported housign is not exemptedd from the OBC

    • Joeh, I think XF and I were talking about temporary accommodation under Part 7, rather than refuge/HFU accommodation.

      Standard part 7 TA has few or none of the additional costs you mention and would be considerably harder to justify as not being milked. (Exhibit A – http://nearlylegal.co.uk/2008/09/on-the-naughty-step-5/)

      None of this is to go against your point on the effect of the cap on refuges and HFUs, which I entirely agree with.

  4. NL – Thanks for that clarification and I hadnt read the Stadium HA case previously and I agree it was deserving on being on the Naughty Step.

    However two points puzzle me and these are; (a) how did the HB dept allow such an increase without scrutinising it or presumably having sight of the non-figures Stadium HA had on this, and (b) why did the HB department not get any condemnation for their obvious incompetence in this matter?

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