If the cap fits

Worried about the impact of the benefit cap, social landlords? You should be because what happens next seems to be your responsibility.

As housing organisations slowly wake up to the dire implications of reducing the cap to £23,000, Iain Duncan Smith was asked about it at work and pensions questions on Monday. Labour’s Clive Betts asked what consultations the DWP had done with social landlords on the effects of the introduction of universal credit and the benefit cap on direct rent payments to landlords. After the usual guff about roll-outs from IDS, Betts pressed him with a points raised by Tony Stacey of South Yorkshire Housing Association (and Placeshapers):

‘Currently, if a household is in rent arrears and gets housing benefit, the benefit can be paid directly to the social landlord. When universal credit is introduced, if the family also gets a welfare cap, it is the housing cost element that is squeezed by the cap. No longer will the amount of universal credit be paid directly to the social landlord to cover the rent. Can the Secretary of State not see that that could lead to a rise in evictions? Is he aware of the problem, and what will he do about it?’

The context for this was highlighted ahead of this week’s CIH conference in Manchester in a UK Housing Review briefing on Monday. After allowing for other benefits and tax credits, the £23,000 cap will leave a couple with four children just £33 a week to spend on their rent and a couple with three children just £110 a week. Here are the impacts by family size:

None of this will come as much surprise to people familiar with Joe Halewood’s blog or a recent comprehensive post by Giles Peaker of Nearly Legal. However, yesterday was the first time I’ve seen the particular point about the cap under universal credit put to Iain Duncan Smith directly. Here’s his reply:

‘Let me be absolutely clear about the importance of universal credit. In the past, housing providers would get the money paid directly to them while the individual in difficulties sorted themselves out. Under universal credit, they can apply for an extra payment, and that will be done direct. The key point about this is that the housing provider works with the individual family to help them turn around their circumstances, rather than just leaving them as they are and not doing anything about them. All of that is being tested under universal credit. People on universal credit will be better off directly as a result of the changes that we are making.’

So there we have it in black and white: if landlords (social or private) have tenants that can’t pay the rent because they are capped they will have a responsibility to act as an arm of Job Centre Plus and find them enough work to evade the cap. Currently this is 16 hours for a single parent or 24 hours with at least one of you working 16 hours if you’re a couple (enough to qualify for tax credits). However, (sorry Mr Gove), with £12 billion of welfare cuts to come there is no guarantee these thresholds will not be raised.

And that also flies in the face of evidence that lowering the cap could force people to move away from support networks of family and friends and make it more difficult to find work (especially because of lack of affordable childcare). Research by the CIH in 2013 in Haringey, one of the first places to be affected by the £26,000 cap, found that just one in ten affected households managed to find a job.

It’s not hard to see that private landlords will react by becoming even more unlikely to let to tenants on benefits and by ending the tenancies of anyone who does become capped. In contrast, social landlords have already put huge effort into employment initiatives of various kinds in response to the bedroom tax and the cap. Might some even conclude that it’s worth creating part-time jobs or self-employed businesses for capped tenants (work for 50 weeks and you qualify for a 39-week grace period before you are capped again)?

However, what happens if they fail in what now seems to be their job of supporting capped tenants into work, or in helping tenants access scarce discretionary housing payments (which were cut for 2015/16). The only way to work with the individual family then would seem to be to evict them given the sums set out above. The eviction process and resulting bill for homelessness will cost far more than the cap saves, and local authorities will face severe difficulties in finding temporary accommodation within the cap, but IDS has neatly made it all someone else’s problem.

Just about the only potential piece of possible good news available for landlords is yet more bad news for tenants. David Cameron’s ‘merry go round’ speech on Monday signalled very clearly that big cuts in tax credits are on the way. If that means child tax credits, that could at least mean that more money is available for housing costs within the cap than in the CIH’s calculations. Or at least it would do if big cuts in housing and other benefits were not on the way too.

First posted on June 23 on Inside Edge 2, my blog for Inside Housing