Response to Housing Benefit Reform Consultation

Response to consultation document

“Supporting people into work: the next stage of Housing Benefit reform”

Preface

On behalf of LAIOG (Local Authority Investigation Officers Group) UK, of which 90% of local authorities are members. I submit our response to your consultation document based on a survey carried out within the membership.

David Clarke

Chair of LAIOG UK

Easing the transition into work

Do you agree that a Transition into Work Payment will help ease the move into work?

The general consensus is that the transition into work payment would ease and assist the move from benefits into work and will also create the incentive for people to take employment. It would create more suitable support during the period waiting for wages and tax credits to be assessed and put into payment. This additional support would assist those moving into work thus giving them a stable financial footing as they commence employment. The fact that they would continue to receive help with their rent would assist them in meeting other expenses incurred e.g. travel costs, parking, suitable clothing and other day to day expenses. However, the type of work/salary and circumstances of the customer would need to be carefully considered.

What would the main features of such a scheme to secure maximum impact and minimise risk?

The current extended payment period is 4 weeks. Whilst there is possible scope to extend this period, it is thought that 3 months would prove to be expensive and difficult to police. The scheme should also have clear guidelines such as a 12 month period of qualifying benefits to be eligible. Consideration should be given, where possible, to how long the employment is expected to last e.g. 3 months minimum, with the possibility of a longer period for those who have been out of the employment market for the longest period.

In order to secure maximum impact there would be a need to publicise it on a national basis informing customers that they would only qualify if they report the commencement of employment i.e. change of circumstances correctly.

It would also be useful create monitoring systems which would measure the effectiveness of the system by analysing how many customers have returned to claim Jobseekers Allowance (JSA), Income Support (IS) & Employment Support Allowance (ESA) within a set time period.

Fixed period awards

Should we introduce fixed period Housing Benefit awards for those customers in work?

The introduction of fixed benefit periods for all standard claims would allow customers to have a clearer understanding of the benefits they are in receipt of and enable them to budget more effectively. Variations such as overtime would not penalise those trying to pay off their debts, bills etc. This would reduce overpayments and the administration involved especially where the customer’s hours of work fluctuate on a regular basis. The introduction of earnings bands, similar to non-dependant deductions could provide a guide for reducing or increasing benefit for those whose income changes significantly, thus making the scheme fairer and more transparent. Customers would be expected to report changes in income but would not always see a change in their entitlement.

A different view is that the idea of a fixed period award e.g. six months would be a step backwards to the old Family Income Supplement days when customers often used to take advantage of the system by restricting their income prior to claiming or reclaiming in order to maximise the award. Once awarded they would then revert back to their normal working patterns. A solution to this would be to use the average wages over the previous six months.

It is obvious that if there was other new income received during the fixed period, where the changes in income did not affect the benefit, this would be beneficial. However, after the fixed period if they were worse off then this would possibly result in financial budgeting problems after such a lengthy period.

What would be the main features of such a scheme to secure maximum impact whilst avoiding any perverse incentives and minimising risk to those whose income falls significantly

Creating the fixed period award would be an additional incentive to get people into work and stay in work. However, there must be the facility to respond to certain changes during the fixed benefit period e.g. changes of income of a certain level or the number of people in the household. Another option is to base the fixed period on the customer’s earnings alone and any other changes should be declared.

Very little emphasis seems to have been placed on household make up. What would happen if a partner leaves or enters the household, new children, new non dependants, age changes and capital?

If as indicated, changes in circumstances e.g. earnings, capital etc. during the fixed period award do not affect the claim, there is the distinct possibility that the number of investigations and ultimately sanctions/prosecutions would drastically reduce.

Fair benefit rates and clearer benefit areas

What is the level of rent above which it would not be reasonable for the taxpayer to offer support?

A suggestion would be to use a system of ‘rent control’ or ‘registered fair rents’ as a guide. The situation may arise where benefit customers end up in poor accommodation which is something that needs to be avoided. However, the level of choice currently available is too high and includes a larger percentage of ‘better’ properties. These properties would probably not be affordable to people who are in work.

How should we set benefit rates at an appropriate level so that they reflect the housing choices of other working households not eligible for benefit?

Most of the current problems stem from losing the Local Reference Rents. Using all the rents in a Broad Rental Market Area (BRMA) and taking a median rent is why there are people living in accommodation that they could not afford if they were working. In addition Local Housing Allowance (LHA) has driven up rents and landlords are charging rents very similar to the LHA rates resulting in people who are not eligible for housing benefit having to pay inflated rents. This is particularly evident in rural areas where there is a distinct lack of accommodation available and the prices are unaffordable for those in low income employment.

The proposed reform of the housing benefit system should be more generous to people who have been resident in the property for some time and have been in the employment market most of their lives and who, for no fault of their own, have found themselves unemployed for the first time. This would demonstrate that people, who have paid into the system, would be able to see the benefits of having worked. This would also promote the culture of work.

In new claims where the customer was not paying the full rent for 52 weeks prior to the claim for benefit being submitted, they cannot afford the accommodation even if they were in full time employment, and they have no links to the locality during the 3 month period then central government and the local authorities should assist the customer in finding more affordable accommodation suitable for their needs in another area. This would then encourage them to seek employment so that they can afford to pay rent for reasonable housing which meets their needs.

How could we set benefit rates to reflect different market conditions in different areas?

The BRMA is already in place in order to ensure that benefit rates reflect different market conditions in different areas. Using the BRMA has ensured that LHA rates are suitable and effective. The introduction of more uniform rates across counties or wider areas would create more examples where the LHA rate would possibly be below the rent that they are being charged.

An alternative would be to consider analysing the average incomes of people in a particular area and with the results arrive at a rate that working people can afford.

Would excluding the most expensive rents when setting LHA rates result in fairer levels of benefit?

The general consensus is that the exclusion of the most expensive rents would definitely result in fairer levels of benefit.

How should we set appropriate Housing Benefit areas?

It is thought it would be appropriate for housing benefit areas to consist of smaller localities rather than the larger BRMAs.

Fairer size criteria

Should the Local Housing Allowance size criteria be adjusted?

It is thought that the Local Housing Allowance size criteria should be adjusted and possibly brought into line with the appropriate LA Housing Department. Currently the size criteria are different which causes problems where the Housing rules allow additional bedrooms over LHA rules because they do not have size restrictions.

Should there be consideration for only supporting families only up to a certain number of children/? Apparently this is currently under debate in the USA as at the moment they only support families up to a specified number of children.

Restricting the LHA to the 5 bedroom maximum has been an effective tool in controlling the expenditure on LHA.

Should Housing Benefit be extended to provide for an extra bedroom where there is an established need for a room for a non-resident carer?

The ability to use an alternative LHA rate if an additional bedroom is required for disability/non-resident carers would assist in a number of cases if set criteria to permit this were determined. Examples of such criteria could be the receipt of disability benefits such as Disability Allowance Care & Mobility components (DLA), severe disablement allowance etc.

Another view is that HB should not be extended for rooms with carers as customers are usually in receipt of DLA and could use this money to create more space in the property. DLA mobility used for vehicles is already being widely abused where family members use the car on a regular basis, just occasionally using it to transport the actual disabled person around. Therefore this could lead to abusing the system by letting the additional room to paying guests.

Is there a case for providing for an extra bedroom in the size criteria to help parents who need to care for non-resident children if there is evidence that working households can do so?

As above there is a case for this providing that certain levels of criteria are met. Confirmation of joint custody or proofs of visitation rights are examples of this.

An alternative view is that no extra payment should be made for non resident children. Many working fathers are forced to live in sub-standard accommodation because they have to continue to pay the mortgage on the ex-marital home in addition to maintenance payments for the children. There are also many single fathers who have never worked, fathered numerous children and have no intention of contributing towards the children’s upkeep. This system would reward these people.

Decent housing, mixed communities

Should Housing Benefit entitlement be conditional on property meeting certain standards?

Housing Benefit entitlement should not be conditional on a property meeting certain standards; it should be based on the customer’s needs and circumstances. Currently local authorities pay Council Tax Benefit to customers who may reside in sub-standard accommodation and are unable to afford to maintain their property therefore it would be unfair to place such a barrier in front of those in rented accommodation.

However, in cases of houses in multiple occupation (HMO) HB should be conditional on the property reaching the minimum standards required for health and safety issues.

Another view is that HB should be conditional on the condition of a property, including communal areas in the cases of flats.

Should a direct payment to the landlord be linked to the property meeting a certain quality or energy standard?

It is argued that it is the government’s responsibility to ensure quality and energy standards are met. Payment or non-payment of HB, as the case may be, should not be used as a stick to make landlords comply.

A direct payment linked to the property meeting certain standards would create additional bureaucracy, thus leading to delays in payment, potentially creating difficulties in the relationship between tenant and landlord. Subsequently this would lead to a reduction in the availability of single room and bedsit accommodation. This type of accommodation is already amongst the poorest. Some landlords would possibly not be able to comply with the new rules and would withdraw the accommodation.

The payment of HB should be linked to the customer’s circumstances or choice.

Local lettings agencies

We would welcome views on how Housing Benefit can contribute to the delivery of improvements in the standard of housing for tenants.

Introduce regulations which would assist and allow local authorities to enforce minimum standards of accommodation.

Reconsider direct payments to landlords perhaps linking it to the ‘decency’ of accommodation.

In order to make the HB system fairer, the customer needs to give something back. Unfortunately some benefit customers are illiterate and these people with assistance need to educate themselves in order to have a better chance of entering and remaining in the employment market.

Towards tomorrow’s housing supporting

Local Authorities are in the best position to continue and develop the links with private sector landlords, Registered Social Landlords (RSL) and charities that they currently have. This very significant link would be in danger of being broken should this aspect be introduced as our mutual customers would again be lost in the complex area of Housing Benefits if Housing Benefits were not administered by local authorities.

At the moment Her Majesty’s Revenues & Customs (HMRC) does not work with other partners and organisations, they are purely focussed on dealing with their own remit. The ability to resolve problems and give tenants the security that they deserve would be jeopardised.

Huge amounts of tax credits remain unclaimed by customers who are entitled. The reason for this is that they are worried about being overpaid or struggle to understand the system due to the complexities.
Customers who are reliant on HB to maintain and secure their tenancies are at risk if the same failures are encountered as when Tax Credits were initially introduced.

Statistics demonstrate that local authorities are getting more and more efficient at administering HB. Processing times are down, Fraud and error are down and official error has reduced significantly. Therefore this suggests that local authorities are the most efficient organisation to administer the benefits for their particular areas. This would then permit DWP and Jobcentre Plus to concentrate on getting people back into work and HMRC to concentrate on collecting taxes etc.

The methodology used by HMRC does not appear to be effective. The majority of HB customers who are in receipt of tax credits have an overpayment which is being recovered. Some of the overpayments are huge due to changes not being notified in time. HMRC often recover the overpayments by ceasing the credits altogether until the debt is repaid. If this method is used for HB then surely this would put their tenancies in jeopardy.

The current welfare system is not viewed as a safety net for some customers but has become a way of life. The USA has a voucher system which could be considered. They also only pay for the children that a customer has when they initially claim. If they have more children whilst in receipt of benefit they are not paid any additional allowance.

There is a need to make customers accept responsibility for their actions. Funded education on budgeting, debts and as stated previously basic literacy would be beneficial.