What are the real implications of the 1% reduction

Thursday, 17 September 2015 - 3:33pm

Since the 1% reduction in social housing rents was announced in July, there have been reports that supported accommodation will be exempted – however, nothing is certain yet so it’s essential we keep pushing for our amendment to the Bill.

“Mr Deputy Speaker, we are also going to end the ratchet of ever higher housing benefit chasing up ever higher rents in the social housing sector. These rents have increased by a staggering 20% since 2010. So rents paid in the social housing sector will not be frozen, but reduced by 1% a year for the next four years. This will be a welcome cut in rent for those tenants who pay it and I’m confident that Housing Associations and other landlords in the social sector will be able to play their part and deliver the efficiency savings needed.”

On the afternoon of the 8th July George Osborne delivered these four lines to the House of Commons, hailing serious ramifications for residential homelessness services for single people and childless couples. In a single statement the Chancellor undid the 10 year rent settlement that the Government introduced in 2014 for social housing, sending registered providers off to revise their business plans. The next day the Welfare Reform and Work Bill was published, confirming the Government’s plans to introduce this change in April 2016

Since then a number of key questions have come up.

Does the change apply to supported housing?

There have been rumours that supported housing will be exempted from the change. This may be because the Government have intimated that “specialist supported housing” will sit outside these new rules. However, the definition of specialist supported housing covers a very small number of properties and probably will protect very few homelessness services.

Our reading of the situation as it stands is that most homelessness services owned by registered providers will be impacted.

For more detail please read this joint briefing produced with SITRA and the National Housing Federation.

What impact will the 1% reduction have if it goes ahead?

A 1% reduction may not sound that severe but over four years it equates to much higher estimated reductions against projected income. Supported housing has been budgeted upon the Government’s promised rent settlement a year ago which was CPI+1% each year.

Even at 0% inflation, agencies would face surviving on around 8% less than they budgeted for – and that’s without taking into account the Government’s new Living Wage and sustained reductions in other funding to supported housing. At PMQ’s on 16 September 2015David Cameron said that Housing Associations need to be more efficient to deal with the reduction. However, supported housing runs on such small margins that further reductions may prove impossible.

We have been sent figures by a number of organisations (both large and small) showing that many homelessness services will become unviable within one or two years of this change. Others may survive but will be unable to accept the most complex clients who most need support.

What is the current situation in Parliament?

Because of the rapid passage of the Bill, we have worked quickly with partner agencies within and beyond the sector to produce a briefing for MPs and a draft amendment exempting specified accommodation. This amendment (with slight modifications) has been laid before the Parliamentary Committee looking at the Bill by Emily Thornberry MP. The amendment appears to have been accepted by the Committee Chairs for debate. We hope the Government accept it.

Alex Cunningham MP has already laid a Parliamentary Question asking the Minister of State whether the change will apply to Specified Accommodation:

To ask the Secretary of State for Communities and Local Government, whether he plans for the one per cent reduction in social housing rents announced in the Summer Budget 2015 to apply to (a) supported accommodation claimed as specified accommodation under the Housing Benefit and Universal Credit (Supported Accommodation) (Amendment) Regulations 2014 and (b) other hostel accommodation for the single homeless.”    

He received the following reply:

“In order to reduce the Housing Benefit bill, the Government has taken the decision to bring rent increases within the social sector back into line with the private rented sector. But we acknowledge that there may be some circumstances where the rent reduction policy should not apply. In particular, the types of accommodation that are current excepted under the Rent Standard such as specialised supported accommodation are likely to remain excepted. We are considering whether the existing definition is appropriate in light of the revised policy and will be setting out the details in legislation.”

What can we all do?

As the change was introduced quickly, we do not believe the Government’s aim was to impact on supported housing services in this way. However, we need to gather as much evidence as possible to show Government how damaging this change would be.

If your service will be affected and you are able to offer evidence of the impact please send it to us. Similarly, if you would like your organisation to be added to a list of supporters of the briefing and amendment please get in touch.

Download our briefing on the amendement

UPDATE - 23 October 2015

The Bill has now completed its line-by-line analysis in the House Of Commons Committee. Although the amendment was not successful the Government did clarify the situation around service charges. We will continue our dialogue with Government and politicians as to the importance of protecting supported housing from the unintended impacts of the rent reduction whilst hoping that the amendment maybe reconsidered in the Lords. To find out more about the current situation click here.

UPDATE - 2 October 2015

The Department for Work and Pensions published their Impact Assessment on the policy this week. It contains the following paragraphs on supported housing.

“Concerns have been raised that the rent reduction measures may disproportionately impact on supported housing and may cause a reduction in service provision given these housing providers tend to operate on lower profit margins and have higher rents. The Government has included clauses in the Bill to allow exceptions from the rent standard by regulation. We expect that the reductions will apply only to social housing properties currently subject to the Rent Standard. The types of accommodation that are exempted from the Rent Standard are likely to remain exempted – these include specialised supported accommodation and residential care homes and nursing homes.

"We are considering whether the existing definitions are appropriate in light of the revised policy and will be setting out details in secondary legislation and working with the sector to ensure regulations laid under clause 20 of the Bill protect vulnerable groups.

"A complete exception for supported accommodation has been considered but is regarded as disproportionate. Housing providers will be able to apply for an exemption from the rent reductions where financial viability is threatened. Excluding specific vulnerable groups on the face of the Bill from the rent reduction policy change with no prior evidence that it was needed, would raise serious questions of fairness and lead to negative impact on protected groups.”

There are a number of difficulties with this analysis and do not believe it addresses the concerns and risks to services that agencies have raised with us. We will continue our dialogue with both Government and Parliament.

If would like your agency to be involved in this process or if you have evidence of impacts you can share, please get in touch.

Impact of the 1% decrease - briefings and amendment

Technical briefing on the 1% decrease, produced in partnership with Sitra and NHF. Supported Housing Briefing and Amendment submited to Parliament.