Written evidence submitted by Link Group Limited

Link Group Limited is Scotland’s 3rd largest housing association. The Link group of companies consists of the parent company, Link Group Limited which is the Registered Social Landlord (RSL), and 4 operating subsidiaries comprising Link Housing Association (LHA), LinkLiving and self governing RSLs Larkfield Housing Association and Horizon Housing Association.  Link provides housing and support services to approximately 10,000 customers in 26 of Scotland’s 32 local authority areas, mainly in the Scottish central belt.

Our submission focuses on the implications of the changes for landlords and claimants, particularly vulnerable groups, and includes feedback from each of the Link group of companies.

Statistical data:

Our own analysis of information received from our tenants suggests that approximately 85% of them will be affected by one or more of the welfare reform measures.

Demand for our in-house Welfare Benefits and Money Advice Service has increased by 42% in the previous 12 months.

Approximately 61% of our tenants are on full or partial Housing Benefit.

Approximately 40% of our tenants have digital access at home.

68% of Horizon tenants have a disability, with 38% living in housing which has been purpose built or adapted for their needs.

Affected by the social size criteria: 19% of working age Horizon tenants

                                                               18% of working age Larkfield tenants

                                                             6% of working age Link tenants

43% of working age Horizon tenants affected live in and need housing built to wheelchair user standard (there is clearly a disproportionate impact on disabled people).

 

In terms of impacts on Link we can confirm the following:

1)      Increased rent arrears: We expect rent arrears to increase in the future due to the following:

    1. Whilst we appreciate the benefits of tenants being responsible for paying their own rent under Universal Credit, we are concerned about the significant risk of increased rent arrears as vulnerable tenants and those lacking the financial skills struggle to manage this new responsibility. Information from the Direct Payment Demonstration Projects (DPDP) confirms that rent arrears have increased to 6% due to direct payments and that supporting tenants has required a significant staff resource that is not sustainable in the longer term. We are aware of DWP’s intention to ensure that vulnerable tenants can access alternative payment arrangements and have their rent paid directly to their landlord. Nonetheless, it remains unclear how the assessment of vulnerability will be carried out and what resources the landlord will require to ensure that the process is managed effectively.
    2. We expect that arrears will continue to rise as household incomes become further squeezed by other welfare reform measures such as the Benefit Cap (which is of particular concern for our tenants in temporary accommodation), restriction of benefit increases to 1% per annum, the introduction of Personal Independence Payments and the introduction of the localised council tax support.

Link’s current rent arrears remain relatively steady with no significant increase caused by the introduction of the social size criteria. However this has only been achieved by significant investment in staff resources to support our affected tenants. 

2)      Increased transaction costs: At the current time, 61% of our tenants are on full or partial Housing Benefit, which incurs a negligible bank transaction cost. Under Universal Credit it is anticipated that approximately 80% of UC claimants will have their rent paid directly to them and will then pay this to Link. Assuming that every tenant paid their rent in a single payment each month this will equate to approximately 74,000 bank transactions per annum at an average cost of £0.50 per transaction. We are aware from the DPDP that tenants often make a number of smaller payments towards their rent each month as they juggle household budgets to meet other bills. The number of bank transactions and therefore the associated costs are likely to be higher than this. Link has had to increase the number of licences to allow staff to accept credit card payments and we expect that the number of required licences will increase further as the demand for this facility increases. There is a cost associated with each licence.

3)      Increased staff resources: Supporting tenants to manage the various aspects of welfare reform is already proving difficult and the required resources will increase as further Welfare Reform measures are rolled out. The following activities do/will require additional staff resources:

    1. Keeping tenants up to date with the changes and how they will impact on them.
    2. Gathering information about our tenant’s circumstances to ensure that we can target support effectively and at the right time.
    3. Rent arrears and rent account monitoring, which is currently required for tenants affected by under-occupancy and will increase significantly as UC is rolled out.
    4. Rent collection, banking payments and updating rent accounts. We want to offer a variety of payment methods to our tenants to optimise rent collection but this is resource intensive. 
    5. Offering one-to-one support to tenants directly affected. This is already proving difficult for our Welfare Benefits and Money Advice Service due to the need for tenant support on under-occupancy and Personal Independence Payment claims. In our experience, tenants engage more effectively with one-to-one support and this is confirmed in findings from the DPDP. 
    6. Supporting tenants to claim Discretionary Housing Payment. Whilst there is prescribed guidance in place, each local authority has implemented this differently and there are inconsistencies in awards. Advising our tenants is therefore time consuming and difficult. Further information is provided under ‘effects on tenants’.
    7. Up-skilling our tenants to manage their finances. At the moment we are trying to provide this service to tenants affected by under-occupancy to ensure that they are best placed to pay the shortfall. The need and demand for this service will increase significantly as Universal Credit is rolled-out.
    8. Up-skilling our tenants to manage digital access.
    9. Providing training and awareness sessions to Link staff in Welfare Reform changes.
    10. Reviewing policies and procedures to ensure that they continue to meet the needs of the business and our tenants. These include Allocations Policy, Transfer and Mutual Exchange Procedures, Rent Arrears Management Procedures etc.
    11. Business planning made more difficult due to the continued uncertainties and changes to the Welfare Reform roll-out timetable. Additionally there is a lack of clarity of the detail of benefit claims processes, claims maintenance and the intended protocols for information exchange between DWP and landlords. This makes it difficult to plan staff resources, staff training and effective engagement with tenants. There is an increasing expectation on landlords to provide support and services to tenants yet the information is not available to assist us to plan this effectively.
    12. Operating the existing benefit system and the new reformed benefit system over a long period of time. This will require robust management and increased staff resources to ensure that staff are kept fully informed of the roll-out timetable and receive appropriate training to allow them to do their jobs. Link operates in 26 local authority areas so we anticipate a number of challenges in managing this.  
    13. Tenancy turnover has doubled in the first four months since the social size criteria was introduced, thus doubling the staff time and costs required to manage tenancy changes.  

4)      Housing (Scotland) Act 1987: Link must comply with the requirements of the Housing (Scotland) Act 1987 when allocating properties. We are concerned that the requirements of the Act are inconsistent with the under-occupancy legislation, particularly in relation to bedroom size, which prescribes that 2 children of the same gender must share a room even if it may only be suitable for single occupancy.  We are facing challenges to ensure that our Allocations Policy meets the needs of all of our tenants regardless of whether or not they receive HB.

5)      Increased Void Costs and Stock Profiles: Void costs increase where the property available does not suit the needs of the prospective tenant who bids for it. This is of particular concern in hard-to-let areas or where there are a limited number of properties of a particular size. We are aware of and concerned at the limited availability of one-bedroom properties available with a reported shortfall of 20% across Scotland. Larkfield HA has a stock portfolio of 394 properties but only 12 of these are 1 bedroom.

6)      Business viability: In general, there are fears throughout the RSL sector that both lender and credit-rating confidence will be adversely affected by the DWP proposals and this might well have a knock-on effect on the terms and conditions imposed by lenders in future. Link itself will be in the same position as any other goods and services provider i.e. if we don’t receive sufficient and appropriate payment for those services from our customers, then we can’t cover costs and viability will be threatened.

 

7)      Private Sector Leasing:

Link currently manages the largest Private Sector Leasing (PSL) scheme in Scotland on behalf of the City of Edinburgh Council and provides temporary accommodation for 1,750 tenants who are deemed to be in priority housing need.

Tenants housed in temporary accommodation often present with multiple vulnerabilities and may have chaotic lifestyles. It is likely that they will not have the ability to manage their finances to pay their rent themselves.  It is unreasonable to expect them to keep control of what rent they owe to which landlord and arrange these payments once their Universal Credit payment is received.

Whilst it is understood that consideration will be given by DWP to the tenant’s vulnerabilities in order to make payments of rent to the landlord, we are concerned that the processes and administration required to set these up will be onerous on housing staff. It is therefore recommended that the default position for tenants in temporary (private or local authority) accommodation is for them to have their rent paid directly to the landlord.

As previously noted, tenants accessing temporary accommodation are often extremely vulnerable and may have chaotic lifestyles, thus facing considerable risks to their health and well-being if required to share. In order to be sustainable, the shared tenancies are also likely to require intensive housing management and support from an increased number of specialist staff. There are further concerns that the processes involved in matching individuals to share will result in delays in securing suitable accommodation and pose significant challenges for staff involved.

Temporary accommodation has to be flexible and reactive to homelessness needs. If the size criteria restriction is applied, Link is likely to be in a position where we are unable to house those presenting as homeless. We will also see an increase in void periods as it would be unreasonable to place people in accommodation they will not be able to afford due to shortfalls in benefit entitlement. It is not feasible to manage temporary accommodation in this way as the need for one-bedroom properties far outweighs their availability. This is likely to increase homelessness and potentially a return to rough sleeping. It also increases the cost for the provider due to potential increase in void periods.

A standard rate may not cover the actual costs of delivering the scheme so managing agents will withdraw from future provision. We believe that the management fee should be paid based on actual service delivery costs, which are scrutinised as part of the tendering process. The administration, claim processes and uncertainties over payment will pose difficulties for Link.  

In addition to the specific points raised, our expectation is that the cumulative impacts will likely result in an increase in the cost of providing temporary accommodation due to the additional administration involved, the increased need for specialist housing staff, the shortage of suitable accommodation and the increase in void periods whilst tenants are matched and suitably-sized accommodation is sourced.

It is likely to increase the number of legal actions and evictions; due to the increase in arrears it will limit future housing options or consideration for re-referral to our service. This will lead to an increase in homelessness, more pressure on services, but with greater limitations on what can be offered. Also, given the relatively high rents in the scheme and the higher risk of non-payment of rent, landlords’ cashflow problems may lead to bankruptcy and resultant further homelessness.

Landlords have not been willing to accept lower rental offers for larger properties which would meet the benefit cap so we are left with no alternative but to hand them back, reducing the stock of properties suitable for large families.   

An example of how a tenant is currently affected by the benefit cap.

1 adult and 5 children in a 4 bedroom property. The household income comprises Income Support £339.46 (includes amounts for the children) and Child Benefit £73.90.

The total income from benefit for this family is £701.81 per week which includes the Housing Benefit award of £288.46 weekly.

As the benefit cap amount is £500 weekly for this family, they will have to find £201.81 each week to contribute towards their rent.

This tenant is seeking employment of 16 hours per week paid at the minimum wage of £6.19 per hour. She would then be entitled to Working Tax Credit and child care costs of up to £339.87 per week. Child Tax Credits of £271.27 per week, Child Benefit of £73.90 and Housing Benefit of £261.51 per week.

Total benefit income is £946.55 which is £244.74 more than when solely in receipt of benefit. Where are the savings?

Whilst we appreciate the need to encourage people to access employment, it is likely that the pressure to find and sustain employment when a family is experiencing homelessness will place additional stress on the household.

 

In terms of impacts on tenants and in particular vulnerable groups we are concerned about the following.

8)      Stock Profiles: Link Housing Association operates a choice-based letting system. We are aware that limited availability of smaller properties is proving challenging for many people registered with us. This is particularly problematic for people trying to access temporary accommodation through the homeless route.

9)      Disabled Tenants: Disabled tenants who have had their properties adapted to meet their needs are penalised if they have an extra bedroom yet there will often be a significant cost to adapt a smaller property. There is already considerable pressure on adaptation budgets so accessing funds for additional adaptations may prove problematic. Horizon HA has received a mutual exchange request from a disabled tenant who wants to move to a smaller property, which would require adaptation. Whilst the cost of this will be met by Scottish Government Stage 3 funding it demonstrates the false economy of the social size criteria as we recognise that this will result in a cost to the welfare budget but will increase costs to the RSLs and Scottish Government.   

10)  Service Charges for Adaptations: Under Universal Credit the costs associated with special equipment and adaptations will be deemed as ineligible service charges. We understand that the support for these costs will be withdrawn completely with no transitional protection. These costs will therefore have to be fully met by the tenant, many of whom will struggle to cover this additional expenditure. This is another threat to the ability of disabled people to live independently.   

11)  DHP: Whilst we are aware of and actively pursue claims for Discretionary Housing Payments for our tenants affected by the under-occupancy legislation, we are concerned at the inconsistencies in the decision-making process and the negative impacts on the health of our tenants. Our tenants report that their health is affected by the stress and anxiety resulting from uncertainties caused by the short term and discretionary nature of the awards. To date only 15% of Horizon HA’s tenants in general needs housing and 31% of tenants who live in purpose built or adapted housing have been awarded a DHP. Awards range from 3 months to 1 year and some local authorities take DLA into account in considering income available and others do not.

12)  Tenant health and well-being: As well as the impacts of DHP, our tenants are also reporting deterioration in their mental health with increased levels of stress and anxiety for the following reasons:

    1. The challenges of managing household budgets and being responsible for direct payment of their rent.
    2. Accessing benefits systems and the claims processes digitally when they have no access at home and no skills to manage this.
    3. The disproportionate effect of the social size criteria on disabled people. 43% of working age Horizon tenants affected live in and need housing built to wheelchair user standard.
    4. Tenants who have a custody agreement that allows overnight access to their children on condition that they can provide suitable accommodation are penalised for having the additional bedroom they require. Consequently, they are faced with a difficult choice - to meet the shortfall or down-size and lose overnight access to their children.
    5. Personal Independence Payment migration that requires a new claim with very tight timescales, an assessment under new legislation and the prospect of a medical.  

The Scottish Government Welfare Reform Corporate Partnership Group Health Briefing Paper of August 2013 reports that the NHS is aware of and predicted exactly the health issues our tenants are reporting.    

13)  Other Issues:

    1. Link is concerned at proposals that place the responsibility for managing rent arrears with DWP rather than with the landlord. Link is best placed to manage tenants’ rent arrears with our focus on sustaining the tenancy in the longer term. We urge DWP to leave that responsibility with the landlord. 
    2. We are concerned at the lack of detail available on proposed information and data sharing protocols between landlords and DWP under Universal Credit. 

27 September 2013