The homelessness trap

Originally published on February 25 on Inside Edge 2, my blog for Inside Housing

If the government provides Help to Buy for first-time buyers why not Help to Rent for homeless people?

A new campaign from Crisis says it is becoming harder and harder for homeless people to get a place to live because most landlords think it’s too risky to rent to them.

‘Home: No Less Will Do’ is supported by the leading private landlord associations and calls on ministers to give homeless people looking to rent the same kind of support as they offer first-time buyers and to introduce a Welsh-style homelessness prevention duty.

As things stand, they are caught in what Crisis calls the ‘homelessness trap’: the private rented sector may be their only hope of a home (especially if they are single) but they struggle with upfront costs; and welfare reforms are making landlords less likely to want to rent to them.

The potential consequences – and the timeliness of the campaign – are underlined in new figures published on Thursday showing that rough sleeping has risen by 30% in a year and has doubled since 2010.

A survey of 800 private landlords finds that 82% are unwilling to rent to homeless people (the most common reasons being the risk of rent arrears and the need for more intensive management) and 55% are unwilling to let to tenants in receipt of housing benefit. With local authorities increasingly reliant on the private rented sector and now able to discharge their homelessness duty with a private let, the implications are alarming.

National welfare reforms are a key factor. Two-thirds of landlords say direct payments under Universal Credit have made them more reluctant, while half cite Local Housing Allowance (LHA) caps.

Things are about to get significantly worse as a result of a four-year freeze in LHA rates that is guaranteed to increase shortfalls between housing benefit and rents. And the local safety net is full of holes: Discretionary Housing Payments (DHPs) are an inadequate cure-all at the best of times and are not available to people who’ve been sofa-surfing or sleeping rough because they won’t be on housing benefit; local welfare assistance (what was the social fund) is fading away; and targeted affordability funding to allow LHA increases in local areas under pressure from rent rises during the freeze is not available for 2016/17.

Assuming they can find a landlord willing to rent to them, the key problem for homeless people is finding the money for a deposit, rent in advance and letting agent fees. This can add up to more than £1,200 in London for a single homeless person moving into shared accommodation. Unsurprisingly 80% reported difficulties raising a deposit while 73% struggled to raise rent in advance.

The costs of all this are not just felt by those affected but by the government too. The state picks up the increased bill as more people end up living in more expensive temporary and hostel accommodation (and supported accommodation which is itself under threat from a different form of LHA cap). Repeated homelessness increases pressure on the health and social care system, mental health services and the criminal justice system.

So what can be done to improve things in a system that relies so much on private landlords? The government already funds private rented sector access schemes that help people create and sustain tenancies and help landlords mitigate the risks. The report calls for more support for them including a national rent deposit guarantee for organisations supporting homeless people to use in place of a cash deposit.

On welfare policy, the report calls on the government to reconsider the LHA freeze or at a minimum commit to an annual review of rates in relation to local market rents. It also recommends improvements to the shared accommodation rate and Universal Credit and improved access to local support, possibly by councils combining DHPs and local welfare assistance.

Improvements to the homelessness legislation would also help. The report calls for a stronger prevention and relief duty for all homeless households regardless of priority need status. A statutory framework like this is already in place in Wales and is being seen as an example for the rest of the UK. Encouragingly, the Westminster government has made a commitment to look at the options on prevention, including legislation, and a report last month found that most councils support a change in the law too.

However, the most eye-catching recommendation is that call for a national rent deposit guarantee underwritten by the government.

Help to Rent was the name that sprang instantly to mind when I read this. After all, Help to Buy already offers first-time buyers a free £3,000 (via the Help to Buy ISA) and a 20% equity loan and will shortly offer them the chance of a 20% discount on a Starter Home that they can keep after five years. In addition, there are government guarantees for Help to Buy mortgages, Build to Rent and affordable housing. Whatever you think of Help to Buy and its consequences, it’s not going away any time soon under this government.

A guarantee on rental deposits seems a no-brainer: action with no immediate cost to the public purse that will prevent expensive consequences for central and local government. So why not? And if not, why not?