A massive relief to social landlords and tenants, but what now?

Originally posted as a column for Inside Housing on October 26.

So finally even the prime minister accepts that plans to impose a local housing allowance (LHA) cap on supported and social housing are unworkable.

Theresa May’s announcement at prime minister’s questions that the cap will not be implemented represents a massive u-turn that will be an equally massive relief to social landlords and tenants.

Statements from a succession of different ministers over the last few weeks had signalled the move for supported housing in the face of overwhelming evidence of postponed investment and knock-on costs for the health and social care sectors.

The decision to scrap it for social housing too was more of a surprise, though it may have been influenced by the difficulty of distinguishing social from supported homes.

It all seems a long time since yesterday morning when I was on BBC Radio Wales talking about analysis by Community Housing Cymru (CHC) showing the devastating impacts of the LHA cap on social housing in Wales.

Wales would have been affected more than anywhere else in the UK by the cap because it starts off with such low LHA rates but the analysis showed quite clearly that the proposal was unworkable.

So where does that leave things? In the short term, all eyes will be on next Tuesday, when the government responds to the consultation on the future funding model for supported housing. More may emerge in the parliamentary debate that is happening this afternoon.

Based on the ministerial mood music the result something like the supported housing allowance proposed by two select committees of MPs before the election and then refined by the sector. Any suggestion of LHA plus local top-ups must surely be off the table.

However, the government will surely want to salvage something from the wreckage of the policy that will allow it to claim that it is ensuring better value for money.

Theresa May mentioned escalating service charges in the preamble to her statement at PMQs so perhaps associations with investment plans on hold might want to wait another few days.

The details will be equally vital for social housing. Has the cap been scrapped completely and for everyone, including the under-35s, or will some vestiges remain?

Next up will be the Budget on November 22 and that could raise some more difficult questions for supported and social housing.

The plan as originally announced at the spending review and 2015 Autumn Statement would have saved £2.4 bn between 2018/19 and 2021/22.

Even after adjustments for a delayed roll-out and a supported housing fund announced in the last two budgets, the savings would still have totalled £1.9 bn over those four years.

Austerity may have been watered down since the election but it is still hard to see the Treasury allowing this u-turn without cuts elsewhere in the welfare budget to compensate.

So do the DWP’s assurances about no further welfare cuts still hold or could there be a nasty surprise or two to come?

It’s also important to realise that the scrapping of the cap for supported and social housing still leaves huge problems with the LHA in the private rented sector.

A succession of cuts since 2010, culminating in a four-year freeze in rates until 2020, mean that the LHA is now more less guaranteed to leave tenants with shortfalls against their rent and landlords with rising rent arrears.

Add the impact of universal credit, and it’s little wonder that the private landlords who can are voting with their feet, which will pose major problems for homelessness prevention work.

And end to the LHA freeze is at the top of the Budget wishlists of many housing and homelessness organisations – does the LHA cap decision make that less likely?

Next, remember that this is not the only cap that affects social housing. As Joe Halewood points out on his blog this week, the combination of an overall benefit cap not updated for inflation with the resumption of CPI plus 1% rent increases will make social housing less and less affordable over time.

Equally nothing announced today does anything to alleviate the impacts of universal credit that are only set to escalate.

However, these are issues for tomorrow and the days to come. For today, the pint sat in front of me looks full rather than half-empty.

This blog was written before the detailed announcement about future funding of supported housing on October 31. While the prospects still look good for sheltered and long-term supported housing, which will continue to be funded via the benefits system, they look grimmer for short-term supported housing, which will be funded by ring-fenced funds devolved to local authorities.

This raises obvious fears about whether the funds will be large enough to meet need and whether they will be uprated in line with need. But it is also sounds awfully like a new version of Supporting People, the ring-fenced fund devolved to local authorities that has virtually disappeared in many places since the ring fence was removed.