I have been blogging about government policies and direct links to homelessness for a decade with the austerity policies of bedroom tax, overall benefit cap and Universal Credit and so forth; an esoteric subject that has overnight become mainstream since the Kwarteng budget and a tweet below seen today by tens of thousands sums it up nicely:
UK on Friday: I worry about heating my home this winter
UK on Wednesday: I worry about having a home this winter
Very succinct!
Homelessness has always been ‘othered’ – something that only happens to others – yet today and in the foreseeable future it is something that will affect hundreds of thousands of households in the near future whether tenants or mortgage payers.
Did anyone else notice the tweet below which is a 44% increase in mortgage rates and also viewed and liked by thousands?
The same mortgage that was 3.93% on Tuesday is 5.64% today with HSBC! (5 year fee saver fix).
As the risk of being flippant the only thing the current government will be world beating at is increasing homelessness as the 44% mortgage increase together with 40% of mortgage products being withdrawn by the market sees the market preventing viable remortgage solutions.
Almost all who othered homelessness in the past are in for one hell of a shock when it happens to them, which it inevitably will.
The 34.9% who own their home outright in England are mostly inured to it unless their relationship breaks down which is the number one reason for homelessness presentations. The 29.9% paying a mortgage, the 18.5% who rent privately, the 10.1% who rent from a housing association and the 6.7% who rent from a council are hurtling headlong into the state of homelessness an directly caused by government incompetence.
The prolonged recession and high interest rates that the Bank of England first reported in its May MPC Report to last all of 2023 is now likely to last longer. Their next MPC report on 3rd November will be required reading for an update on that as will be the next Bank of England MPC report scheduled for Thursday 15th December 22 after the OBR publishes its scrutiny of the 23 November ‘explainer’ of last week’s mini-budget of Kwarteng is released.
By this time we should (ahem!) know how much benefit rates will increase in April 23 and by how much Registered Provider (council) rents and Private Registered Provider (HA) rent will rise by in April 23. We are already seeing – anecdotally – significant hikes in private renting levels yet due to the dispersed nature of the PRS with its millions of landlords all acting independently little can be inferred from them. We know, today, that the government has no plans to increase LHA in the private sector and the scant detail of the Kwarteng mini-budget confirms no energy or other cost of living ‘mitigations’ are forthcoming after March 23.
We have a perfect shitstorm of conditions for a massive spike in homeless household numbers and one which is structural unless radical changes such as the abandonment of the overall benefit cap policy and many other austerity policies occur. However, the reverse is likely as many expect that working-age benefits will not keep up with CPI inflation and like wages will be a real term cut which directly creates higher household expenditure costs from lower household benefit and/or wage incomes. Government has to balance the books it will say so reduced public spending is needed to offset the giveaway tax cuts so more austerity seems assured making homelessness hikes even more inevitable.
One issue never mentioned about the cut from 45p to 40p tax rate is how much this exposes the greater than 60% effective tax rate on low earners when the many millions on low pay who have to claim Universal Credit see each extra one pound earned a cut to Universal Credit of over 60%. How can any Government justify a tax rate 50% higher to those on minimum wage than paid by those on £155k or more? This is but one example of how the Kwarteng budget has lots of issues still to be raised that have yet to reach the mainstream. By the time the OBR has had the chance to scrutinise it we will also be seeing other inflations hit the mainstream media of how much water rates and council tax will increase by next April is merely another element of the perfect shitstorm for increasing homelessness.
Finally, I intended this post to use my 30 years of working in and advising on homelessness to say how bad it will be for all newly homeless households, yet the reality of what hundreds of thousands are going to see would sound so far-fetched that you wouldn’t believe it. Instead, I will leave this with prepare yourself for the worst you can imagine and you may be 10% prepared for the homeless reality you will find soon enough.
There was merit in the Priti Patel Rwanda plan after all …
Lisa Nandy’s staccato 17 sentence housing speech at Labour conference 2022 Wednesday 26 September 2022 was a farce and revealing that the Labour Party doesn’t give a damn about what we perversely call social housing.
These 17 sentences of utter claptrap and ill-conceived nonsense reads:
So we will mend the deliberate vandalism of our social housing stock.
Because the idea of a home for life handed on in common ownership to future generations.
Is an idea worth fighting for.
Council housing is not a dirty word.
So today, I can announce we will be the first government in a generation to restore social housing to the second largest form of tenure.
This will be our mantra.
Council housing, council housing, council housing.
We’re going to rebuild our social housing stock and bring homes back into the ownership of local councilsand communities.
With home ownership opened up to millions more.
And for private renters we will tilt the balance of power back to you through a powerful new renters charterand a new decent homes standard – written into law.
Because security in your home, the right to make your home your own and most of all the right to live in a home fit for human habitation.
Is non-negotiable.
Because housing isn’t a market it’s a fundamental human right.
It’s tempting at a time of national crisis, to retreat and to play it safe.
That’s not who are.
It was with ambition, courage and conviction in the darkest times.
That out of the devastation of war, we built more council houses than any Government in history.
Three of these seventeen sentences have pledges as highlighted at sentences 5, 8 and 10. The other fourteen sentences are political waffle befitting a fourteen year old.
Sentence 5 – “to restore social housing to the second largest tenure”
Oh dear! Where to begin! There are five forms of tenure which are:
Owned Outright – 34.8% of England live in 8.29 m owned outright properties
Mortgage Payer – 29.9% of England live in 7.11 million mortgaged properties
Private Renting – 18.5% and 4.4 million households rent privately
HAs – 10.1% and 2.4 m rent from a Private Registered Provider (HA landlord)
LAs – 6.7% and 1.6 million rent from a Registered Provider (Council landlord)
Invariably those who own outright (tenure form 1) is combined with mortgage payers (tenure form 2) and called the home ownership tenure. However, you don’t own until the mortgage is paid off and to highlight that those who own outright will see their housing asset rocket in value due to higher interest rates whilst those who are paying a mortgage will see their mortgage costs almost double each month with soaring interest rates moving near to 6%. It is why they are two very different tenure forms.
We see a similar conflation of PRP and RP housing as ‘social housing’ yet the correct name given to housing associations of PRIVATE Registered Providers by the official Regulator of Social Housing (RSH) correctly differentiates them from the only public sector and publicly owned properties of council landlords.
Sentence 8 – “bring homes back into council ownership”
Is Lisa Nandy suggesting a Labour government would nationalise PRP properties and bring them under public ownership? Over 1.6 million former council houses were transferred from councils to newly formed housing associations under the LSVT policy. 1.6 million Council houses were transferred from public sector ownership to private sector ownership and most of them under the last Labour government despite this being a Thatcherite policy.
Housing associations (PRP) cannot hold any public duty e.g. to house or re-house anyone as they are not public sector bodies. PRPs now own and manage 60% of the absurd conflation we call ‘social housing’ in England and three in every five SRS properties. In 1980, 31% of Britons lived in a council house and just 3% in a housing association property so council housing tenure has shrunk by 80% in this time when HA tenure has more than tripled from 3% to 10.1%
IF (a) Nandy means taking the perverse conflation of social housing to become the second highest form of tenure it means a move from 4.0 million SRS properties to >7.11 million properties to overtake mortgage-paying tenure which is currently the second highest tenure form.
IF (b) Nandy means taking council housing to the second highest tenure form then it means nationalising PRP housing and bringing it under council and thus public sector control AND building at least a further 3.2 million new council houses!
Good luck with both of those aims Lisa Nandy!!
However, today we are told that Starmer Labour wants to see the perversely conflated “home ownership” go from 65% to 70%. This extrapolates to 1.19 million more mortgage payers taking the current mortgage paying tenure up from 7.11m to 8.3 million households and making mortgage-paying the largest tenure form overtaking the 8.29 million who own outright.
This would mean for social housing to become the second largest tenure that some 4.31 million more social housing is built under a Labour government and whether PRPs are nationalised or not.
However, the PR spin merchants of the Labour Party and the myriad of Labour Housing Groups were repeating after the Nandy speech that the new 2022 Labour Party target is 90,000 new ‘social’ (ahem) homes per year which either means Nandy expects the Labour Party to be in power for 45 years [4.31m new properties divided by 90,000 per year]; or the myriad of Labour Party spin merchants were seeking to downplay the Nandy speech which was written by a 14 year old with an IQ of 14 else there was plenty of ‘shrooms’ taken by the Labour Party Housing Policy speechwriters when drafting it.
Apparently ‘shrooms’ make the Labour Party housing policy speechwriters forget that at least years conference they pledged 150,000 new ‘social’ homes per year making the 2022 Labour conference speech of Nandy a 40% cut in new social housing properties.
When the delusional blinkered incompetents who comprise the social housing cogmiscienti try to ignore the above and ask how council housing can return to its former ‘glory’ (ahem!) ask yourself why would councils who now see 90% of them have their own private landlord companies (LHCs) which enable then to operate no fault eviction tenure (AST) at full market rents then why on earth would councils choose to go back to what nostalgic rose-tinted spectacle wearers call coundil housing?
Ten times the hassle for 40% of the rental stream is hardly an incentive is it?
2018 White Paper
Half of English local authorities have NO council housing and clearly nobody told the idiots who drafted this appallingly inept speech and told the idiotic Nandy to say council housing, council housing, council housing would get a cheer from the conference floor. That’s about the level of prethought that went into this speech on housing if I am being too complimentary.
It is something about Liverpool that makes the Labour Party live up to the old maxim of its better to letter people think you are an idiot than to open your mouth and confirm it? It was the Labour leader speech of Miliband in Liverpool in 2011 when he said that Thatcher was right and her Right to Buy policy was a good thing.
Yesterday at the Labour Party conference Lisa Nandy pledged to build 90,000 new social housing properties per year under a Labour government. The Labour Party conference the year before in 2021 pledged to build 150,000 new social housing properties per year.
What was the reaction from the great and the good of social housing such as the chief executive of the Nat Fed to this FORTY PER CENT CUT in new social housing … Call it ambitious!!
The usual PRP / Nat Fed sycophancy
It was welcomed by the chief executive of the National Housing Federation the umbrella body for the Private Registered Providers – the correct name for housing associations used by the official regulator of social housing (RSH) to reflect that HAs are private not public sector bodies – and called ambitious FFS!
What is it about Labour Party conferences in Liverpool? In 2011 the then Labour leader Ed Miliband in his speech said Thatcher was right about the Right to Buy “Some of what happened in the 1980s was right. It was right to let people buy their council houses” was the verbatim quote!
Today we are told Kier Starmer will pledge to raise ‘home ownership’ from 65% to 70% in his leader speech despite only 34.8% in England owning their home outright. Perverse to prioritise getting 1.5 million more onto the mortgage ladder when the current 7.11 million and 29.9% of the population who are currently on it are facing their mortgage costs more than doubling due to soaring Tory interest rates making every rung of that ladder as slippy as you can get.
Instead of attacking the Tories for making those on the ‘housing ladder’ at huge financial risk of homelessness and or bankruptcy, Starmer chooses to encourage 1.5 million more households and over 2 million voters more to take this high risk option and at a time when mortgage providers are increasingly withholding their mortgage products! Then again, just as the polls show a 17% Labour lead the Starmer-Labour conference pledges to bring in proportional representation!
Good job there are no breweries left in Liverpool for the Labour Party and the National Housing Federation to have a piss up in eh!
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The Guardian has published an editorial saying the social housing model is broken. Yet is it?
It is far, far worse than the Guardian want to believe and a 20% immediate rent cut to council and housing association rents is needed from 1st October 2022. Read on!
My response to this Guardian piece is the social housing model is irreparably broken and needs far more than a futile rent cap and the entire editorial reminds me of the little knowledge is a dangerous thing dictum so I have reproduced the editorial in full below and then discuss.
The article is littered with hyperlinks and a device to appear as though all pertinent issues have been considered before asserting that a rent cap in England is a step in the right direction and also littered with shibboleths, myth and assumptions purporting to substantiate the Guardian view and where I will start.
“… most social housing tenants rely on benefits to pay rent…” –
Guardian
This is acutely misleading and plays up the narrative that Kate Henderson chief executive of the National Housing Federation, the lobby group for England’s Private Registered Providers aka housing associations has shamefully stated many times in the recent past.
We should also remember that 60% of housing association residents are supported to pay their rent through housing benefit or Universal Credit.
The official facts as published in the yearly English Housing Survey are 61% of existing socially rented households receive all or some housing benefit and the correct full breakdown is:
39% receive no housing benefit (or UC housing cost element) at all
36% receive full housing benefit
25% receive housing benefit for part of their SRS rent
64% or 2 in 3 existing social housing tenants pay some or all of their rent and no different to the private renting tenant on LHA in reality. This carefree statement of most is a fundamental distortion and myth surrounding social housing and one which the NHF wants to propagate and promote and the NHF pen is behind this distorted anonymous Guardian editorial.
This level of detail is more than semantics or pedantry and is needed. It dovetails with 43.2% of SRS households have energy prepayment meters (also EHS) and means that energy bills HAVE to be paid as the first point of call before rent and before the spurious heat or eat narratives that pervade. In numbers, the private rented sector has c290k tenants receiving housing benefit and on a prepayment meter (19% of PRS properties have them) when there are over 1 million SRS renting households on housing benefit and have energy prepayment meters. The lights have to be kept on as does the fridge and these meters have to be constantly fed to avoid financial penalties when they are re-fed.
Throw into the mix that the EHS which is national statistics approved also said for 2020/21 that 89% of SRS tenants struggled to pay rent then and 82% of them have no savings and way before the monthly energy bills doubled and then we have the fixed monthly household incomes.
Households have fixed monthly incomes as wage and benefit increases have already been received for this financial year so the 114% jump in energy bills from September’s £106pcm average to October’s £227pcm average means SRS households have to find £121 of savings or cuts to other household expenditure costs. By January 23 when average monthly energy bills rise to £290pcm it means £184 of cuts in other household expenditure just to keep the lights on under the Truss ERG government £2,500pa energy cap.
From 1st October and less than 3 weeks time until 31st March 2023 and a six-month period thereafter, SRS households will have these same fixed monthly incomes from wage and/or benefit and be paying £1,534 in energy bills in the last 6 months of this financial year, which is £256 pcm on average when they have paid £703 and an average £117pcm in the first six months of this financial year. An average of 119% more and a need for SRS households to find £140 per month of savings from other household expenditure in order to keep the lights on – and the fridge on to store the food they cannot afford to heat.
The six month period BEFORE households increase their monthly household income and BEFORE and capped rent increase can take place is being overlooked. It is a never before seen period and a truly unprecedented and exceptional one when it comes to the tenant ability to rent, which they are unable to do.
This Guardian editorial plays up to the social landlord narrative of the issue being ALL about the next financial year when rent rises seem likely to be capped and it wholly ignores that SRS tenants in England cannot afford to pay rent in this period. All about how social (sic) landlords need to be compensated for the rent foregone by any rent cap imposed from April 23. It also sees the rent freeze of the Scottish government as radical and puts pressure on the Truss ERG excuse for a government we have in England when it is correctly seen as a plaster on an open wound.
A rent freeze now in Scotland until March 23 only affects the private rented sector as social housing rent rises are already in effect frozen until next April. There are other issues too with Scotland having 24% of its citizens in social housing and 18% in the PRS compared to England (16.8% SRS and 18.6% PRS) and how many and whom this will effect. The Guardian little knowledge is a dangerous thing editorial doesn’t mention these pertinent factors or the very high likelihood that the rent freeze will need to continue long after March 23 in Scotland and that is when the proverbial hits the fan for this SNP vote grabbing policy attempt. The Guardian editorial is superficiality writ large.
What tenants need and today is not a rent freeze or a rent cap from April. What tenants need is an immediate 20% cut to rent from 1st October in England, Scotland and Wales as that is how severe the aren’t affordability crisis is. However, none of the three governments in England, Scotland and Wales have the powers to impose a rent cut for the private rented sector, which they do have the powers but not the inclination or political balls to do in the social rented sector.
(The Guardian is right that the overall benefit cap policy has to go or have its cap raised to at least £30,000 per year and yet the editorial picks and chooses to state the benefit reduction to government of capped rents yet mentions nothing about the significant benefit increase that abandoning the two child limit would result in!)
A 20% rent cut in the social rented sector and now may sound drastic times a thousand yet it needs to be considered and seriously. It would mean RP and PRP landlords have to get the hell out of being housing developers and focus solely on being social landlords. If government want more new social housing then government can stump up the capital subsidy needed or bugger off! That reads as flippant and/or I have not considered the hundreds of impacts this would have or the hundreds more after I had considered the first one hundred impacts. It is ‘flippant’ in that regard of course YET a 20% cut in social housing rents is what is needed to allow the social housing model to survive. That is the extent of how unaffordable and broken the social housing model is in England and one however flippant response to the urgency of avoiding hundreds of thousands if not over a million evictions from social housing by October 23 and that cost.
England needs a fundamental review of the social housing model as the existing one in play since the 1948 Welfare State is broken and needs ripping up and starting again. England needs a genuinely social housing sector and both RP and especially PRP landlords are unfit for purpose in their current guises. England needs a new social housing landlord vehicle and has for some time and the energy price hikes and soaring inflations are the straw that broke the social housing camel back. Coming immediately after the pandemic and the Brexit shit show doesn’t help either but neither does the expectation of so-called social landlords that they require inflation-busting year on year increases that they have had for decades in all but a 4 year period.
The notion of a rent cut, an immediate one and a significant one is not as outrageous as it may first appear. The very left wing will like the idea yet so will the very right wing we have in government. Paying 20% less and keeping a roof over ones head is a far greater incentive than any tax cut and dampen down pressures on tax cuts, minimum wage hikes and also enables the 10 million who live in England’s SRS a far greater chance of saving for a mortgage and getting on the proverbial housing ladder and the property owning democracy ideology of the far right.
Finally, this Guardian editorial ignores the tenant dimension just as all social (sic) landlords, their leaders and lobbies always have done. SRS households cannot possibly find the additional £140 per month of cuts to food, council tax, water rates and all other typical household expenditure costs that the energy price hikes mean. The ONLY saving they can make and even if they receive full housing benefit is to not pay all of their SRS rent (if they buy 10% less food they will still be paying 10% more than they paid for it in April 22!)
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Notes & Comments
How many more could escape homelessness by a 20% SRS rent cut?
How much would the ‘public purse’ save from this?
How many more could save more and more quickly for a mortgage deposit?
How would a true publicly owned social landlord provider prevent the current pathetic SRS regulation stop being an old boys club that the Clarion example proved?
How would a 20% SRS rent reduction impact on PRS rent levels and the differentials?
How would telling government that their trickle-down economics bullshit of charging existing tenants more than needed to pay for new tenants be impacted?
How would real new housing based on objective housing need by each locale work rather than the subjective post-war basis of housing need that we have had?
What form would a new public sector publicly owned social landlord vehicle take to replace the current unfit for purpose RP and PRP sectors?
I could ask a hundred more such questions that have painful answers and require a new clarity of thought other than the nonsense that most SRS tenants rely on housing benefit and other shibboleths. These would be a reflection of just how broken the social rent model is, the same social housing that the other four pillars of the 1948 Welfare State depend upon yet not even the woke lefty housing activists recognise the gravity of the current social housing model or recognise the extraordinary next 6 month period BEFORE rents can be capped or frozen and what it means for the ten million men, women and children who live in social housing in England.
Everyone has to look at what having soaring inflations all over the place not just energy costs doubling for the SRS tenant households. In the next few months the first inklings of how much council tax, water rates, insurances and a whole host of other household costs will surface all demanding huge increases, we will know what excuse this government will come up with for not increasing working-age benefits in April next year by the 13% or so inflation we will have for September 2022 when that figure emerges (and note well not till long after the current rent rise consultation charade finishes – how convenient!)
Rip up the social housing model and start again from scratch is what is needed and that requires a 20% immediate rent cut and then a two year rent freeze to enable that to happen. Something we need a cross-party consensus on yesterday and which the electorate will know about whoever they vote for in the next general election.
As many including myself always pithily say, you can never provide a solution to a problem if you fail to scope the problem fully in the first place or Fail to prepare then prepare to fail or numerous other variants. Nobody can possibly provide a solution to the cost of living crisis and how it impacts on the social housing model without looking at the lot of the SRS tenant – and especially not an anonymous Guardian editorial!
SRS landlords and their lobbies have a callous disregard for social housing tenants and one that will cost them £2 billion over the last half of this year.
They believe and promote the rent eats first that in ordinary times is valid.
However, in less than 4 weeks starting on 1st October 22 an extraordinary, exceptional and truly unprecedented six month period begins when a cautiously estimated 57% of existing SRS tenants will not be able to pay a cautiously estimated £2 billion charged in council and/or housing association rent.
IF social landlords ever chose to walk the proverbial mile in tenant shoes they would recognise this cautious £2 billion of rent going unpaid and the exceptional period and exceptional context of 1st October 22 to (at least) 31st March 23.
However, SRS landlords are solely fixated on what rent increases they can impose in April 23 and are ignoring this 6-month exceptional period before any rent rises can take effect.
This is both a callous disregard for tenants AND business incompetence way beyond negligence.
I have used critical known facts about existing SRS households and cautiously estimate 2,282,381 existing SRS households in England (57%) will be UNABLE to pay some or all of their rent in this exceptional period. This inability to pay is not out of choice but of necessity and I am at pains to stress that.
The rent unpaid in this exceptional six-month period is more than the rent foregone if SRS landlords have a 5% rent increase imposed or chosen for all of the April 23 to March 24 financial year over the CPI+1% expected rent rise and reveals why SRS landlord not seeing the reality of rent unpaid in the 6 months before any rent rise can take place and fixating on the post April 23 period is chronic business negligence not just a callous disregard for those they call their customers!
The simplest and easiest way to explain is to compare average monthly household spend on energy and very simplistically I start with this in Table 1 below.
The simple table above uses UC standard allowance and State Pension benefits that are intended to cover all household expenditure, and the minimum amount on which to subsist, yet energy bills alone come to more than this minimum amount to live on.
The single person or single parent household (over 25) receives £334.91 in UC standard allowance, the couples allowance is £525.72 and the single State Pension of £182.15 per week is £804 per month. Critically these incomes were fixed in April 22 and remain at this amount until April 23 as wage income for all households will remain the same as wage and/or benefit incomes have been fixed for this financial year.
How can the SRS household go from paying a monthly energy cost of 25% of the average rent in from April to September this year (£117pcm of £466pcm) to spending 109% of rent on energy bills in the last six months of this financial year from October to next March?
If a picture paints a thousand words than so can a bog standard MS word table!
The incredibly basic table above shows the business incompetency / tenant callous disregard from SRS landlords and anyone else who believes the rent eats first dictum that cannot possibly apply from 1st October 22 for at least six months.
The figures for monthly energy spend come from the Resolution Foundation who released an extremely critical chart after the latest OFGEM yearly energy price cap increase.
Summary
The purpose of this very short piece is to get the incompetent innumerate housing ‘leaders’ and even the housing activists to recognise the exceptional period and what it means for tenant ability to pay rent and for the seemingly trifling matter of SRS landlord financial survival!
There is no purpose in my seeking to explain how 177,336 existing SRS households who are part payers (they top-up their part housing benefit) and have energy prepayment meters and their UC Housing Cost Element paid directly to them will be one of many cohorts who make up my 2.28 million figure of those UNABLE to pay some or all of their rent…
OR the 8.4% of all existing SRS households who receive ‘full housing benefit’ and do not have energy prepayment meters will be UNABLE to pay their rent either in this exceptional period of 6 months and 26 rent-weeks BEFORE any rent rises can take effect.
How many Billions in rent will go unpaid between October 22 and March 23?
This is discussed below in what I intended to be a brief objective piece not a diatribe yet runs to over 3000 words that mostly avoids hyperbole or rant and pulls extremely hard punches. I apologise for the necessary length but not for one word of the content. What follows will upset government, social landlords, tenant and housing activists, and just about every actor on the social housing stage and all such actors will find something and perhaps everything changes their current groupthink.
Millions of existing SRS tenants will be unable to pay rent to their council and housing association landlords in Q3 (Oct – Dec 22) and Q4 (Jan – Mar 23) of the current financial year as they simply will not have the money. The known facts say that SRS tenants have this inability to pay rent. To be clear I am not advocating that tenants should not pay rent; merely that they have an inability to pay it.
SRS landlords and activists wrongly assume they will pay or they have choice to pay and both see the only problem as whatever rent increases occur in April 23 whilst missing the elephant in the room of the 6 months and 26 rent weeks before any rent increase can be imposed. The Rent Inability Paying period or RIP period as that is apt.
Facts that are known
The English Housing Survey (EHS) is recognised as official statistics and has been published yearly for more than 25 years by the government housing department of the day. It is monstrous in size and contains scores of annex tables containing simple tenure data such as England has 3.984 million SRS households provided by councils and housing associations. This is well known data yet the EHS also contains a plethora of little-known data which are very pertinent fact to the tenant inability to pay posit I discuss here.
Annex Table 3.28 reveals that 43.2% of all SRS tenants have prepayment energy meters which is of huge import in the ability to pay rent as these meters need and have to be fed first to (a) keep the lights on; (b) keep the fridge on; and (c) to avoid higher energy cost as if they are not fed there is a financial penalty that is immediately taken when they are re-fed.
1,721,088 households have to feed the meters first before any other household expenditure (43.2% of the 3.984m SRS households) and feeding the meters comes before council tax, other utilities, insurances, rent and even food as the heat or eat narrative assumes food is capable of being stored in a fridge. The prepayment meter issue also makes the pithy narrative of the rent eats first as a false narrative and argument.
The chronic energy price hikes
Last week shortly after OFGEM announced the latest huge spike the extremely purposeful chart below was issued by the Resolution Foundation which projected the average energy spend on a critical monthly basis. OFGEM and news reports saying the October hike was 80% per year (£1971 to £3549) yet on a monthly basis it increases from £106 in September to £273 in October which is a 158% monthly increase and double the stated 80% media figure.
Chart 1 – The critical MONTHLY energy bills for SRS tenants
More importantly households in the social rented sector budget on a month-by month basis so they need to know how much they will spend each month on gas and electricity and 42.3% of them need to know how much they will have to feed the meters from their fixed monthly incomes of wages, benefits or both. Like almost all households wage and benefit increases this financial year 2022/23 occurred back in April and do not increase until April 23 so the period from 1st October 22 to 31st March 2023 sees fixed monthly household incomes competing against raging energy bills and of course is the autumn and winter periods when all households spend more on energy.
The payment of rent source in social housing
A very pertinent yet ‘little-known’ fact in the official statistics that is the EHS is that only 36% of existing SRS households have their rent met in full by housing benefit (HB and UC housing cost element) and this fact is at annex table 3.4 which says (a) 61.2% of SRS tenants receive housing benefit; AND (b) 58.1% of them receive full housing benefit which means just 36% have their rent met in full by housing benefit.
Critically, we can breakdown existing SRS tenants into three main cohorts of:
39% of existing tenants pay all their rent – 1.554 million are fully self-payers
36% get their rent paid in full – 1.434 million are benefit payers
25% get partial housing benefit – 0.996 million are part-payers or rent.
64% of existing SRS tenants and almost 2 in every 3 SRS households pay some or all of their rent outside of housing benefit and this in number is 2.55 million households … of which 43.2% of them will have energy prepayment meters. 1.1 million tenants who pay some or all of their rent will be in a meter feeding first frenzy in the 6 month period before any rent increases can take place and will NOT have enough left after they do feed the meters to be able to pay rent.
Let’s delve a bit deeper in each of these three rent payment cohorts
1. The full self-payer – this could be a single person household working 35 hours per week at just over national minimum wage who does not get a penny in housing benefit ultimately to someone earning millions. If we use the single person aged 25 to 66 male or female working 35 hours per week at national minimum wage (£9.51) they receive £1,313 in monthly net wages and £2.85 per month in Universal Credit. In March 22 having been informed the yearly energy bill would increase from £1278 (£106pcm) to £1917pa this diligent hardworking self-payer increased his standing order to £164 per month. Yet in this financial year that he or she was told they would spend £1,917 on gas and electricity they will actually spend £3,749 in total as Chart 1 reveals which means the 6 payments of £164 set aside for energy between October 22 and March 23 and £984 in total will see an actual energy cost of £3046 for this 6 months, an average of £508 each month. Where will this household find the savings or cuts from other household expenditure to pay the additional £344 in energy bills over this 6-month period? Take off the £66 per month energy rebate (£400 over 6 months) and still £278 in cuts from all other household expenditures needs to be found to pay the energy bill whether on meters or not after this claimed mitigation from government.
The tenant cannot reduce all fixed expenditures such as council tax, water rates, travel to work costs etc and is already eating 10% less food than in March and which is costing 10% more in actual terms due to chronic inflations in basic foodstuffs such as 26% for dried pasta and 30%+ for milk.
This self-payer and in full time low paid work can only reduce one household expenditure when he or she has energy meters and that is RENT.
2. The household getting full housing benefit – There are no available figures for how many of the 1.434 million existing SRS households have their housing benefit or UC housing cost element paid directly to their landlord. As UC is intended to see its housing benefit element (UCHCE) paid to the claimant directly let’s assume half of these 1.434 million existing SRS households or 717,000 existing SRS households receive full rent in UC housing cost element. As statistically 43.2% of them will have prepayment energy meters this is 303,291 existing subsistence-level households who will have to find an average of £508 more each month to feed the meter in each of the 6 months of this period, or to be more accurate £508 less £66 monthly energy rebate then less a further £54 per month (the £324 balance of the £650 cost of living payment for these 6 months) so £388 more each month on average pumped into the energy meter.
The only household expenditure they can cut to keep the lights on and the fridge on and avoid energy penalty costs is … to cut their rent payments.
Summary
ALL existing SRS tenants households will severely struggle to pay full rent during the 6 month period from 1st October 22 to 31st March 23. Many tens if not hundreds of thousands if not more tenants will NOT be paying full rent to council and housing association landlords. They simply will not have the means to do so – an inability to pay.
If rent collected drops from its ordinary average of 96% to 92% during this six-month period one billion pound in rent will not be paid to SRS landlords in rent. If 88% of rent charged is paid in this six-month period then SRS arrears will increase by one billion. If 84% of rent charged is paid in this six month period £2 billion in SRS rent goes unpaid.
Shibboleths, assumptions and myths are not facts!
SRS landlords have always been able to and indeed have played the pay you rent or suffer the eviction consequences card with tenants in social housing. Tenants have always believed this and correctly so yet the period from 1st October 22 for at least 6 months changes all of that power balance. This period has a context and reality never before seen. It is truly extraordinary and in ordinary times landlords held all of the power that pay rent or else means yet the energy price hikes change that power dynamic as SRS landlords cannot afford to evict en masse as each eviction cost equates to 18 months of rent income per tenancy and if 25% surplus is made on each rent it would take SRS landlords 6 years of full rent being paid to recover the cost of each eviction.
Hundreds of thousands of existing SRS tenants will not be able to pay some or any of their rent in this six-month minimum period (many will not receive benefit increases until May 23) and billions in rent charged will go unpaid. SRS landlords even the 60% who are housing associations and can used the only mandatory arrears ground (Ground 8 which council landlord cannot use) cannot possibly set in train hundreds of thousands of repossession cases.
SRS landlord leaders never look at tenant facts. They never walk a mile in tenant shoes or take an empathic approach and they errantly assume that rent will be paid because tenants know the consequence of not paying is eviction … in ordinary times! They further assume that the rent is paid first before energy bills or any other household expenditure and below is an example of social landlord think taken from a housing leader yesterday on LinkedIn:
The fuel crisis is a massive issue for housing associations and stock holding local authorities who are already struggling to tackle repairs due to rising costs and increasing demand. There is a link between fuel poverty this winter and worsening disrepair, mould and damp. Homes that are not adequately heated are much more likely to have these problems. A lot of people will not heat their homes which will cause damage to housing stock so it is important that advice is readily available and that stock retrofit is accelerated by landlords so that customers benefit directly from energy savings.
I have anonymised the housing leader who posted this typical housing groupthink nonsense that assumes the rent will be paid first before energy costs and the primary issue of the impact this will have on landlord stock with a secondary feigned impact on tenants. Housing ‘leaders’ in the social rented sector are not aware of the prepayment meter percentage across the SRS and what I referred to above as a ‘little-known’ fact. Their blithe ignorance of those they offensively call their customer reveals starkly that they never even attempt to walk a mile in tenant shoes or choose to see any other tenant dynamic. The level of their assumptions is chronic business negligence and they reside in the SRS bubble which is redolent with tell a lie often enough and you yourself will believe it regardless of what the facts say.
Last week saw Kate Henderson the chief executive of the National Housing Federation (the umbrella lobby for English housing associations who own and manage 60% of all English social housing) infer that as 60% of SRS tenants get housing benefit then the added costs of landlord expenditure require rent rises next April and with the assumption (and blithe ignorance) of the inability of tenants to make rent in the prior 6-month period of Q3 and Q4 of this financial year which I discuss above. Only 36% of SRS tenants receive full housing benefit and 43.2% of them will be on prepayment meters and be unable to pay full rent even though they receive full housing benefit!
If anything reveals that social housing landlords and leaders never ever take an empathic approach to the lot of ‘their’ tenants (and yes it is always the possessive they use of “their” tenants or “their” customers!) then the Kate Henderson opinion piece in Inside Housing exemplifies this abject business negligence and idiocy in failing to see the Rent Inability Payment period. What planet are these buffoons on reader?
The truly extraordinary unprecedented Rent Inability to Pay period (RIP)
WHEN the known facts are looked at the period becomes RIP for the social housing model of the 1948 Welfare State and RIP for the homeless resettlement model which includes domestic violence and abuse as one homeless cohort.
Imagine it is the 1st October 2022 a mere four weeks or so away and you are housing allocation officer at a housing association in any of the low rent areas of the North of England. You get an enquiry for re-housing a lone parent two child (same-sex) household from a refuge. You know – ignoring the energy price hikes completely – that the cheapest 2 bed property at your cheapest social rent level will see housing benefit cover the full rent … yet in April 24 it will not cover full rent and the overall benefit cap policy will see a rent shortfall of £93 per month and more than £1,100 per year. You know your HA cannot afford this lone parent two child benefit household as I discussed in detail here.
Now you look at the projected monthly energy bill price hikes and you realise that despite this lone parent Mother and her two child household getting enough in UC housing cost element to cover the full rent there is a massive likelihood that this domestic abuse survivor household will not and cannot pay full rent because of the energy price hikes if she intends to put food in the bellies of herself and her children and cannot even afford to keep the lights on! You too have seen the housing leader quote I anonymised above which assumes rent will be paid first before energy bills and realise how assumptive and errant that is …
To cut to the chase, every social housing allocation today has to take account of the cost of running the household not just whether the rent will get paid by housing benefit (UCHCE) as some standalone factor as a vacuum. Every council and housing association allocation of a property in the six-month RIP period HAS to factor in the energy price hikes and how much the monthly energy bills will be in October 22 through to March 2023 and beyond. Typically some 150,000 council and housing association properties will be available in this 6 month RIP period and every single one of them will have to deny allocation to any household who is in receipt of Universal Credit as they are too high a financial risk to the payment of rent and even if they receive FULL housing benefit!
This is not a normal NO DSS period this is M&S NO DSS and means quite simply that the 43% of working-age households in England who receive Universal Credit will never again be allocated a social rented sector property!
From today the prospective tenant of any newly available council or housing association property will require a 5 year history of being in-work and non-receipt of any social security benefit and a handwritten special dispensation letter from the Vatican to get a council or housing association flat!
The monstrous energy price hikes mean that ordinary NO DSS in the social rented sector is something viewed through the rose-tinted spectacles of nostalgia! No council or housing association landlord can afford to house or re-house the very same tenant they were set up to provide for and the social housing model is officially dead.
RIP social housing.
__________________________
As I was writing this the government has announced a consultation relating to SRS rent increases from April 23 which is available to read here though it is pointless and purposeless as the damage will have been done in the 6 month and 26 rent-week period before any rent cap or reduced rent increase can take effect – To wit, what planet is the government on!!
Even IF social housing rent levels are frozen the shit will have hit the fan for social tenants and social landlords before April 2023 and the consultation is putting a plaster on an open wound which is gushing blood quicker than water companies are gushing raw sewage into our rivers and seas.
On the latest projections, bearing in mind they are always increasing with every new projection and energy price cap announcement, will see tenants paying £379 for their energy bill in April 2023 and even higher from next October 23 to December 23 based on the £5,386 per year projection from January 23 issued by OFGEM last week that extrapolates to £459 (Oct 23) £607 (Nov 23) and £732 in Dec 23. So limiting rent rise to even 3% is a totally irrelevant factor in the tenant inability to meet the rent as indeed is a rent freeze – capping rent rise in financial year 23/24 and beyond is a non-issue for tenants or landlords in social housing.
The rent rise ‘issue’ from April 2023 is a total irrelevance revealing just how superficial and negligent government and SRS leaders and even housing activist campaigns on behalf of tenants groupthink is as to what the government and OFGEM allowed energy price hikes really mean for tenants and how devastating they are for the social housing model, the homeless resettlement model and for domestic violence and abuse.
On 1st October the average monthly dual fuel bill will be £304 more than the day and month before
On 1st October the typical household will have had any wage or benefit increases and will not get any increase until April 2023. They have a fixed household income in other words.
On 1st October the average household will need to spend £304 per month less on any other household expenditure a figure which increases to £408 per month in January to March 2023
The average household cannot spend anything less on food or on council tax or on insurances or on travel costs so where will these £304 to £408 per month cuts come from which total £2,136 worth of cuts in the six month period from 1st October when no increases in household income will happen?
In the case of council and housing associations tenants, the social rented sector or SRS, it can ONLY be from reduced rent payments. BUT social tenants get all their rent paid in housing benefit Joe … goes the longstanding myth when 64% of existing social tenants pay towards their rent.
The yearly official English Housing Survey (EHS) saw its most recent release in July this year and stated in its Annex Tables that (a) 61% of SRS tenants receive housing benefit (or UC housing cost element) yet; (b) 59% only receive partial housing benefit. In short:
28% of SRS tenants pay all of their rent and don’t get HB (1.15m SRS households)
36% of SRS tenants pay some of their rent on top of HB (1.48m SRS households)
36% of SRS tenants receive ALL of their rent in housing benefit (1.48m SRS households)
2.63 million SRS tenant households are self or part-payers in housing jargon paying some or all of their rent with partial or no housing benefit. These 64% of all council and housing association tenant households will have to find savings or cuts of £304 per month in October, November and December and then £408 cuts to their household expenditure in January, February and March next year before any benefit or wage rises in their household income are received.
The EHS also tells us that 43% of all SRS households have prepayment energy meters which need to be fed first just to keep the lights and the fridge on even before we get into any ‘heat or eat’ discussion.
Let’s subdivide the self and part rent payers into two further cohorts and the 2.63 million of them become:
1.5 million don’t have a prepayment energy meter
1.13 million DO have an energy prepayment meter
We arrive at 1.13 million council and housing association households who pay some or all of their rent and who have an energy prepayment meter which they have to feed first before ANY other typical household cost. How are these 1.13 million social housing tenants going to find an average of £356 per month in expenditure cuts for the six month period beginning on 1 October 22 until they receive any benefit or wage increase in their household budget?
How much can these 1.13 million households cut back on food costs? NOTHING!
How much can they cut back on council tax? NOTHING!
How much can they cut back on travel costs? NOTHING!
How much can they not spend more of on Christmas and New Year? LESS THAN NOTHING!
How much less can they spend on replacement light bulbs? NOTHING!
How much can they spend less on any other typical household running cost? NOTHING!
What can and will they spend less on? The ONLY answer is RENT.
October to December 22 is probably the highest household cost quarter in any year due to Christmas spend so the 1.13 million SRS households who pay towards their SRS rent cannot and will not spend anything less on all other collective household expenditure cost … other than rent. For the avoidance of any doubt I am not saying SRS tenants SHOULD spend less on rent or avoid paying rent. I am merely saying that SRS tenants WILL BE UNABLE to pay full rent and for a six-month continuous period. It is a statement of INABILITY not one of CHOICE to be clear.
If we return to the latest EHS we find that 89% of social tenants were struggling to pay rent last year and before the £356 extra per month they will be spending on energy bills on average in October 2022 through to the end of March 2023. It is also in the EHS that 82% of SRS tenants have no savings and whilst these EHS figures are best estimates they are critical factors in the question of will or can SRS tenants pay rent in a 6-month continuous period to which the ONLY answer is no they are UNABLE TP PAY RENT!
Do tenants and landlords realise this?
I suspect few do and for which I blame the media! Last night I caught the BBC News at 6pm and found myself screaming at Faisal Islam the economics editor with words to the effect that he was an innumerate incompetent. Like many I only tend to scream at the TV when BBC Question Time parades and platforms Nigel Farage but then I can just go to a national housing conference to see and hear this Fascist so I tend not to watch BBC QT.
Faisal Islam stated the October energy bill will be £3600 per year which he said was £300 per month. That bears no relation to reality. The average household tends to pay double in energy costs between October and March as it spends from April to September. You cannot simply divide a yearly bill by 12 months as he did … and especially for those who live month-by-month and who need to know how much their energy and other bills will be each month. When we stylise yearly energy spend projections on the basis that we spend two-thirds of the yearly energy bills in the six months of autumn and winter we find a realistic monthly spend as below using the latest energy price cap projections released by Reuters this week.
Between April 22 and September 22 the average household dual fuel bill is circa £109 per month as this six-month period is the spring and summer months when we spend one-third of our yearly energy bills which increased to £1,971 per year in April 2022. The 54% increase in April 22 has had very little financial consequence as it began in the cheapest energy cost months of Spring and Summer and I approximate to £109 pcm. YET in October the monthly dual fuel bills will increase to £413 per month which is £304 per month MORE than the average household is paying today in August 22 and will pay on average in September 22.
Faisal Islam by saying energy bills will be £300 per month in October was being extremely innumerate and unrealistic to the 43% of working-age households who receive Universal Credit and thus budget on a month-by-month basis. The 57% of working-age households like Faisal Islam who I assume earn enough not to claim Universal Credit can budget on a yearly basis but those who live month-to-month cannot hence my screaming at the BBC News with total justification and vindication.
Tenants and landlords who believe the October price rise will be 80% to 90% increasing from £1971 to £3600 or so PER YEAR are fundamentally missing the increase in monthly energy bills that will increase from circa £109 per month in September 22 to £413 per month on 1st October 22 for an increase of over 400% … and which have to be paid from the same fixed household income!
Oh Fuck! I hear the SRS tenant say reader? How the fuck can I afford my rent and I am in the cheapest possible rented property of a council house at the social rent level and work full time at NMW?
Oh fuck, fuck, fuck! I hear council and housing association landlord finance directors asking themselves … How many billions in rent is not going to be paid between 1st October 2022 and 31st March 2023 out of the ‘customer’ inability to pay even the cheapest rents? And quickly followed by Can we as a social landlord even survive until April 23? … Shortly followed by said housing finance directors digging out the number of a recruitment consultant! If SRS tenants pay 90% of rent during this six-month period which is a massive stretch then that is an additional £1.2 billion of rent going unpaid on top of normal arrears to English social landlords in this 6 month period and before rents can be increased.
I finish with the overview of the Reuters article of 22 August
AN OPEN LETTER TO ALL SOCIAL RENTED SECTOR LANDLORDS
IF you are fixated with what rent rise to impose next April then you are missing the biggest issue which is how will social landlords survive with no rent or rent top-up payments from a minimum 1.3 million SRS tenant households in the six-month period between 1 October 22 and 31st March 23.
The energy price cap is why and here I posit the argument that the energy price hikes are a greater danger to the social housing model and to social landlord survival than RTB which is not as perverse as it may first read ….
The energy price cap is projected to increase from £1,971pa today in October to £3,850 per year, then again in January to £4,426 per year and then to £5546 per year from April. As I write one forecast in the Independent says it will hit £6,100 per year from next April. Let’s begin by making some sense of these numbers.
It was £1278pa in March 22 which means the amount spent on gas and electricity averaged this £1,278 between April 2021 and March 2022. In Chart 1 below I process these pieces of data into meaningful management information with a best guess of how much the typical household will spend each month on gas and electricity or ‘energy’ in the period from 1st October 22 to 31st March 23, a six-month / twenty-six week period I call the ‘relevant period’ and the penny will soon drop.
Chart 1 – Monthly energy spend
We know that the yearly cost of energy as at March 22 was £1278 per year. This averages £106 per month for every month from April 21 to March 22. However, we all ‘know’ that we spend far more on energy in the Autumn and Winter months than we do in the Spring and Summer months.
This above chart stylises the typical household spending twice as much on energy in the Autumn / Winter months than in Spring & Summer – a simple even crude posit yet one which is valid.
The £1278 spent in the financial year April 21 to March 22 is represented by Spring and Summer average spend of £71 per month (£426 total) and £141 per month in Autumn and Winter months (£846) to represent the £1278 yearly total for FY2122.
When we do the same for FY2223 the current financial year and its 3-monthly energy price gap changes of October 22 and January 23 it becomes a £119 per month energy cost from April 22 to September 22, then £428 monthly energy cost from October 22 to December 22, then a £492 per month cost of household energy in January, February and March 23 as the chart shows.
Relevant Numbers
It means the yearly spend on energy in FY2223 will be £3,414 of which £2,760 will be the energy spend in the 1 October 22 to 31 March 23 period – the six month period before any rent rise can take effect in social housing. In that time the single person or single parent household on Universal Credit will receive (a) 6 UC standard allowance payments of £334.91; and (b) the £324 balance of the £650 Cost of Living payment; (c) a £400 energy rebate, and (d) £75 council tax rebate. These four incomes total £2,808.
The 1st October 2022 to 31st March 2023 sees income of £2,808 yet energy expenditure of £2,760 leaving £48 for 26 weeks of all other household spend including food.
However, IF you are on a prepayment meter the energy spend in this 6-month period is £184 higher making the energy spend for the 46% of council tenants and 41% of HA tenants with prepayment meters £2,944 when income is £2,808 over the period (EHS 2019/20, Annex Table 3.28)
The SRS tenant in receipt of Universal Credit standard allowance who is a single person or single parent household will be spending more than their total income just on energy in this 6-month period. They have no income to spend on food, council tax, water rates, travel, clothing, replacement light bulbs or … rent in this 6-month period that also includes the far greater added cost of Christmas.
UC standard allowance, what we still call dole. is supposed to be enough to subsist and pay for all household expenditure not just energy costs but the cost of food, clothing and replacement light bulbs etc., yet in this critical 6-month period even with supposed mitigations from government it won’t even cover the typical gas and electricity costs of the SRS tenant household.
Some obvious questions to SRS landlords are:
What % of your ‘customers’ are in receipt of UC standard allowance?
What % of your ‘customers’ already have an SPO paying £3.70pw towards rent?
What % of your ‘customers’ have deductions from their UC standard allowance?
What % of your UC ‘customers’ already have an APA with you as landlord so arrears are deducted from their standard allowance and paid direct to you as landlord?
What % of your existing ‘customers’ receive part HB and what % full HB?
In short, any council or HA landlord who believes they will get a penny of rent over and above any housing benefit (UC housing cost element) from October 22 to March 23 is a social landlord who is living in Cloud Cuckoo Land. But hey you all carry on with what rent increases to impose in April!
This six-month period of 1 October 22 to 31 March 23 is before any rent increase can take effect; is a period before any UC tenant gets any more in benefit income; and likely before any in-work tenant receives anything more in increased wage income to top up their part HB; and a period highly likely before any self-paying or non-HB SRS tenant receives anything more in increased wage income.
The much and rightly publicised second wage increase this year to workers in Aldi or the one-off £1200 payment to those working for the Nationwide Building Society are exceptions to the rule of wage increases being one-offs that usual start from April each year and run to the following March. The vast majority of SRS tenant incomes whether by benefits or wages are fixed for the financial year April 22 to March 23 and constant for the 1 October 22 to 31 March 23 (the relevant period.)
The innumerate non-reality of the Dickensian social landlord?
I have read all the same articles you have read and discussed concerning next year’s rent increases such as those from Cratus or the doyen Alistair McIntosh of HQN calling for rent increases of half the September 22 CPI rate being applied next year. These articles and ‘advice’ predate Dickens and are more Swiftian in their Cloud Cuckoo Land nonsense and If applied in April 23 and April 24 this is £3.8 billion in rental income that English SRS landlords will forego in FY2324 and FY2425 based on BoE projected CPI rates and the 5% to 6% increases in this two-year period which is what half CPI amounts to are not affordable by any tenant given the energy price hikes. It would also mean each successive years percentage rent increase starts from a £3.8bn lower sector turnover – yet ALL these innumerate articles from the ‘great and good’ wholly ignore the financial disaster of the relevant period of quarters 3 and 4 of FY2223! How business-negligent is that?
The behind closed doors notions emanating from the Nat Fed (aka the Mad Hatters Tea Party events) of we can’t possibly apply a double-digit rent increase next year to simplify their negligent innumeracy and PR spin view of 9.99999% rises being somehow acceptable as they are less than double-digit also wholly ignores the relevant period of the six months before any rent rise can take effect.
The Nat Fed subsidy call per new build would realise some 50,000 fewer new builds over the next two years with this half CPI innumerate rent rise suggestion too. How well is that going to go down with the ever more commercial HA landlord appeasers of Conservative Party policy to just build, build, build irrespective of who can afford or of whom they are built for?
However, before the ‘sector’ can begin to plan for their seismically changing target tenant that the 300%+ energy price hike means – aka dump the UC benefit tenant en masse – they have to survive the relevant period.
The energy price hikes are a more serious threat to the social housing model than the Right To Buy?
For example from April 23 many SRS tenants in the North of England will be paying more for energy per month than they will be for a 2 bed social rent property in the region of £106 per week every week is what the latest forecast of £5,546 per year means.
Being very optimistic (speaking with housing leaders weekly can see Dr Pangloss creep) if the yearly energy bills from April fall by £1,000 per year to £4,500 per year (which ignores the latest £6,100pa estimate in the Independent this weekend) equates to the current UC standard allowance for a single person or single parent household and that is with a 10% inflationary uplift on UC benefits in April 2023 … which still leaves the UC recipient household having zero to spend on food or on any rent from the way below subsistence-level UC standard allowance.
No landlord can afford the UC receiving tenant and as the majority of UC tenants will be in employment which is what the paying of the £650 one-off cost of living payment to over 8 million working-age households means proverbial and fan hits the rented housing and re-housing market with the energy price hikes.
Last week I published a detailed piece on why today no social landlord can afford to allocate a property to the lone parent two child benefit household after the release of the 10.1% CPI inflation rate for July 22 which used the refuge example to get around the stigma of the lone parent issue. The overall benefit cap means that they will get full HB now and in some of England’s regions full HB in FY2324 yet from April 25 they will have a massive shortfall between their maximum HB and the cheapest 2-bed social rent level. That small household type of the LP2C has become familia non grata to the cheapest social housing rent today because of this not just from April 25 in the cheapest SRS properties in England’s cheapest rent regions of the North East, Yorks & Humber et al.
The LP2C benefit household will have between a £105 and £335 per month cut to their maximum housing benefit by the OBC policy in FY2425 so what SRS landlord will accommodate them TODAY knowing these shortfalls will happen in less than two years time? That’s RIP to the domestic abuse and homeless resettlement models TODAY too!
Even if the LP2C household finds minimum wage part-time employment and escape the HB cuts of the OBC policy such households can still not afford the cheapest social housing rents given the energy price hikes. All the SRS landlord EET practises of cajoling their ‘customers’ into doing this as a means of pro-tem escaping the OBC ravages and however merited are now defunct and redundant too.
The Rip Van Winkle Social Rented Sector
The first thing every council and housing association landlord need to recognise is the impacts of non-rent payment for the reasons I outline above in the relevant period and the numeric facts speak for themselves. I am talking of every existing tenant and from those who need to pay £3.70 per week as part of an SPO to remain and those paying £5 or £10 per week in ineligible service charges right through to full self-payers of SRS rent. If your customers can’t pay the cost of your product in any sector then they will soon no longer be your customer.
The energy cost hikes are a far more radical and urgent threat to the social housing model than the Right To Buy ever was or ever has been and SRS ‘leaders’ need to get real over affordability which is by far the greatest threat to their continuation as landlords than any under supply or the inane just build more bloody social houses narrative. The energy price hikes mean a radical fundamental culture change to the business of providing social housing and as I say above optimistically even if the projected £5546 per year energy bill falls by £1000 per year by the end of FY2324 then the social housing model is in the proverbial brown smelly stuff.
The old-selling technique of ‘back them up to the hearse and let them smell the flowers’ or the consequences of carrying on regardless and doing nothing or nothing more is needed by every SRS landlord whether they have 1,000 properties or 100,000 properties.
How much more in all-found eviction costs will the energy price hikes mean to your bottom lines and how much more in former tenant arrears costs will doing nothing mean? Those costs are likely to be monstrous increases and also mean for developing SRS landlords that your current 5, 10 and 20-year plans are defunct and not worth the glossy PR paper printed on or splashed upon your websites. For all SRS landlords, large or small, developing or not, your current business plans, of which many were correctly adjusted by the pandemic, are redundant as the energy price hikes are a bigger threat than Covid-19 ever was as well as far greater than RTB ever was or is.
The relevant period is six months and twenty-six weeks in length and sees ALL existing and ALL future SRS tenants having to pay £300+ per month more just to keep the lights on and the fridge working leaving nothing for any form of rent payment or rent top-up payment. The ‘heat or eat’ narrative only comes AFTER feeding the meter. The standard allocation affordability testing and standard eviction policies of SRS landlords are defunct and no longer fit for purpose. The way you do business needs to seismically change and ahead of the fixated discussions on what possible rent increase can we impose next April, which needs to and has become an afterthought … and even if not needs to fully include the non-payment of rent highly likely in this relevant period which by and large has been missed in any such discussions.
I have daily and weekly conversations with SRS housing leaders (CEOs, other Directors or Board members) and with social housing activists too. I have had these confidential and trusted conversations for many years and way before the austerity policies of bedroom tax and OBC etc began in 2013 reflecting my professional work advising them and my Speye Joe online persona of challenging and provoking the ‘sector’ because I can as I have no boss to stop me from doing so. It is a unique and enlightened position to have the freedom to do this and it means I can (usually) see all sides and in the often different ways they impact by region.
Landlords make compelling cases for CPI+1% rent rises at least for April 23. Housing activists make just as compelling cases for rents to be frozen. What these two polarised positions ignore is the relevant period of the six months before any rent increases can take effect from 1st October 22 to 31st March 2023 when 1.3 million existing council or housing association tenants of working-age WILL BE UNABLE to pay anything in rent.
Framing this as both polarised sides do of tenant will to pay or not is fundamentally misframed as detailed calculations see 1,278,923 existing SRS tenant households just in England will be unable to pay a penny towards rent in working-age households who are often in greater poverty than the proverbially poor pensioner household. This massive non-payment of rent starts in spectacular fashion in the relevant period beginning in just six weeks time and lasting for six months and twenty-six weeks.
ALL SRS landlords have the same problem of how the hell can we get tenants to pay rent – which means the ‘woke’ housing associations are a movement traditionalists of the sector have the same problem as the if you can’t pay rent then bugger off / this is government policy there is nothing we can do ultra-capitalist focus of many of the super-sized housing associations hiding behind the ‘social’ landlord label.
You are all in the shit to be blunt and the very survival of social landlords and the social housing model is threatened. IF social landlords are relying on a stable full of white chargers being available to rescue you and a continuation of the growth by acquisition ‘mergers’ then you are very much mistaken. The merger frenzy will abate dramatically as the smaller HAs will be rightly seen as toxic due to ever-increasing current and former tenant arrears (that are not payable direct through Universal Credit) and rent payment levels nearing or dropping into the high 80s making them ripe for political rescue but not for economic takeover. The due diligence bar for mergers has become a far higher bar due to the energy price hikes and the political context of energy shareholder profits given higher government priority over its populace having a roof over their heads.
These are just a small number of reasons why the energy price hikes are a far greater threat to the survival of the social housing model and the survival of social landlords than Right To Buy and yet the ‘sector’ focus is almost exclusively on what rent increases to impose AFTER the relevant period that will see the greatest ever crisis the social housing rented sector has ever seen and which social landlords are blind to by focusing exclusively on the post relevant period.
There is none so blind as those that refuse to see and SRS landlords are refusing to see what is in front of their faces, that is the relevant period when at least one-third of existing social housing tenants WILL BE UNABLE TO PAY any rent or any rent top-up. It is NOT a speculative question of will or non-intent to pay rent but a six-month period of being unable to pay anything.
The landlord or activist who chooses to frame this as a battle of hearts and minds re rent payment is simply wrong and indeed choosing to frame it that way is deliberately misguided. It is not a question of “enough is enough” it is an issue of simple economic fact of the SRS tenant inability to pay rent during the relevant period.
IF the EHS is correct then 89% of SRS tenants have no savings and struggled in FY2021 to pay rent.
IF the average £14 bedroom tax deduction of ten years ago saw the start of the heat or eat narrative then what is £300+ per month in reduced income due to having to spend £300+ more in energy cost going to do to the heat or eat narrative?
How ‘accustomed’ to not being able to pay anything in rent for six months will SRS tenants become?
How much longer will SRS landlords believe the lie that the rent eats first when feeding the energy meter to keep the lights and the fridge on is the reality for 40%+ SRS tenants who have a prepayment meter?
How quickly will existing SRS tenants realise that ‘rent debt’ is possibly the only debt that does not attract interest?
IF any SRS landlord is deranged enough to think that any tenant will prioritise rent over food in their children’s stomachs …
ALL of the above bullet points and a great many more are issues in the relevant period and way before any rent increases next April …
_______________________
UPDATE: LESS THAN ONE HOUR AFTER RELEASE 22 August 2022
Reuters, perhaps THE most objective news site there is, released new UK forecasts here and they are much graver and much more severe than my content and a must read. The Reuters overview is:
Citi sees UK CPI peaking at 18.6% in January
BoE may need to raise rates to 7% if inflation persists
Ofgem cap to hit 3,717 pounds in Oct, 5,816 pounds in 2023
BoE forecast inflation to peak in October at 13.3%
The Reuters figures mean:
Average energy bills of £413pcm Oct, Nov & Dec 22 – mine were £428.
Average energy bills of £517pcm Jan, Feb & Mar 23 – mine were £492
The relevant period total is £2,790 whereas mine was £2,760
Will the social housing deluded leaders still focus on what rent increase they can get away with in April 23 whilst labelling me as scaremonger? Plus ca change and if so these SRS ‘great and good’ are also calling Reuters an even bigger scaremonger than myself! Go figure!
Liz: Hi Rishi, its Liz here from the refuge about the 2 bed flat for Theresa and her kids Penny and Kemi. Have you come to a decision yet?
Rishi: Sorry Liz she’s failed the affordability testing. It’s going to have to be a no, sorry.
Dateline: Thursday 18 August 2022 and Rishi is a diligent allocations officer at a housing association somewhere oop North. He has had to refuse Theresa and her two girls, the lone parent two child benefit household (LP2C) from being allocated a nice little two-bed flat at a social rent level of £420 per month due to affordability.
Background
Rishi had a long meeting yesterday with directors and the board of the housing association for whom he works, the same day that CPI inflation was announced for July 22 at 10.1% and after laying out the figures to their shock and amazement his HA bosses agreed that no benefit household of a lone parent and two children will be allocated any of their housing association properties again due to affordability reasons.
The Figures
The LP2C benefit household this financial year FY2223 has £640pcm headroom under the overall benefit cap (OBC) policy. The £1667pcm total cap after deducting the £1027pcm in other benefits leaves £640pcm as the maximum housing benefit (UC housing cost element) that can be paid.
Yet the refuge applicant has been refused despite the rent being £420pcm and some 10% below the average all England (excl London) average 2 bed social rent level. This is because the HA conservatively (no pun intended) believes the CPI inflation rate in September 2022 and September 2023 will be 11% in both years (see below).
In April 23 the figures say:
the OBC cap will still be £1667pcm
the other benefit of £1027 today will increase by 11% to £1140pcm
the £420pcm social rent increases by CPI+1% rent formula of 12% to £470pcm
In April 2023 the OBC becomes CAP (£1667) less OTHER £1140pcm = Max HB of £527 which is still headroom affordability of £57 given the £470pcm rent. However in April 24 the figures say:
OBC cap will still be £1667pcm
OTHER benefit will increase 11% to £1265pcm
RENT will increase by 12% to £527pcm
The OBC equation in April 24 is CAP (£1667) – OTHER (£1265) leaving a Max HB of £402pcm for every lone parent two child benefit household which is a £125pcm shortfall between the maximum amount of housing benefit that Theresa, Penny & Kemi can receive and the cheapest two bed social rent level property.
This means all LP2C benefit households would need to find £1500 per year out of their OTHER subsistence-level benefits just to meet the rent, which the HA board correctly decided was impossible and all LP2C benefit households new and existing will be an acutely high risk of an arrears eviction from April 24 and a financial risk too far.
The 11% CPI figures?
The Bank of England has consistently underestimated CPI inflation rates saying in October 2021 they would be 5% in the summer of 2022 then stating as high as 7% and in their last MPC report projection of August 22 said the CPI rate in September 22 would be 9.96% and 10.92% in September 23 and if interest rates stayed at 1.75%. (see below)
Bank of England August 22 MPC report
Yesterday’s 10.1% CPI rate for July already surpasses the 9.96% September 22 projection which is forecast to hit 13% before the end of 2022. As such any social landlord estimating 11% for the September 22 CPI rate is also underestimating. The September 23 CPI rate of 11% estimate is a similar underestimate given the habitual understating and as it too is based on interest rates remaining at 1.75% when they could reach 3% or even 4% by this time as many are predicting.
SRS rent rises at CPI+1%
This is the current rent formula and is due to end in 2024. There is much discussion in SRS circles that SRS landlords cannot afford to impose CPI+1% and a number of the ‘great and good’ of SRS leaders are espousing rent increases of CPI divided by 2 instead. However, this is innumerate as the figures reveal.
By April 2024 the CPI uprated OTHER benefit will still be the same leaving a maximum housing benefit payable of £402 per month as detailed above for all households under the OBC policy.
The rent increases will be 5.5% per year moving the 22/23 £420pcm social rent to £443pcm in April 23 and then to £467 in April 24 for a £65 per month shortfall position and the lone parent two child household needing to find £786 per year from subsistence-level UC other benefits just to meet the rent.
That is not possible even before the massive inflationary costs of energy, food and all other typical household expenditure.
Further this CPI/2 knee jerk proposal would cost England’s social landlords £3.34 billion in rent foregone by operating it rather than CPI+1%.
OBC limit and benefit uprating?
Rishi Sunak confirmed in his Spring Statement that benefits would be uprated in April 23 by the September 22 CPI rate (as they have been since 1997).
David Rutley, a minister at the DWP in response to a question on the OBC cap limit to Sir Stephen Timms MP in July 22 stated that the OBC cap was not due for review until 2027 (below) and it won’t be ahead of the next scheduled general election something in 2024/25 despite its architect David (Lord) Freud stating in 2021 that the OBC had never saved a penny to the public purse and all ministers are amazed at its popularity.
The statutory obligation to review the cap levels at least once in each Parliament changed on 24 March 2022, when the Fixed-term Parliaments Act 2011 was repealed, and the new obligation requiring the Secretary of State to review the levels at least once every five years means that the DWP now has until 2027 to complete a review.
Today sees councils and housing associations unable to afford the lone parent two child household on UC in the cheapest social housing at the cheapest social rent level. As such all LP2C households applying for social housing anywhere in England will have to be refused the cheapest 2 bed social rent property. From April 2024 all existing LP2C households already in social housing will be at acute risk of the arrears to eviction to homeless pathway and this will happen in April 2023 in the higher social rent areas of the South East and east of England regions too … even if social landlords choose to implement CPI divided by 2 as rent rise instead of CPI+1%.
In short the social housing model and pillar of the 1948 Welfare State is defunct due to soaring out-of-control inflation and the OBC policy interaction. This also means that the homeless resettlement model is defunct whether from a domestic abuse refuge or any other form of temporary homeless accommodation (TA) such as hotels and B&Bs.
The numbers say we have a perfect shitstorm scenario for massively increasing homeless household numbers. One other pertinent fact is 76% of all SRS housing stock in England is the 2 bed and larger sized property which has become the definitive NO DSS property at the cheapest ‘social rent’ level.
Scary but not scaremongering and unless the OBC policy is abandoned or housing benefit is taken out of its calculation then the shit has hit the biggest fan imaginable as England is unable to house or re-house those greatest in objective housing need.
Footnotes:
Many SRS housing professionals will know I have been saying the above nightmare SRS affordability scenario for some time, since 2012 if you check my Speye Joe blog posts and before the OBC began. Some are still in the sector and heard me first-hand when I presented these figures at a CIH seminar in London in 2013. Some have moved on to Shelter who still absurdly maintain that NO DSS only happens in the PRS and very conveniently forgetting that the Bedroom Tax and the OBC policy are NO DSS policies in the SRS
For those who still refuse to see what the irrefutable figures say and label me as scaremonger (blah, blah, blah) I remind you that this nightmare was delayed and its can kicked down the road with the 4 year imposed 1% rent cuts 2016 – 2020 which would mean that today’s rent levels would be 10.7% higher than they are.
The average 2-bed rent of £107pw and £466pcm in England (excl London) that the Statistical Data Return figures reveal would be £516pcm and £50pcm higher than they are today. The £420pcm figure I use above would be £465pcm if the imposed 4 year cuts had not taken place.
It was further delayed by the two child tax credit limit a few years before (Now UC child element) but that’s too lengthy to explain here except to say simply it increased OTHER benefit and thus reduced MAX HB even more in the zero-sum OBC policy.
How long can the blinkered SRS leaders get away with saying We are social therefore we will always house those most in housing need? Or how long can you hold the line that This is government policy there’s nothing we can do?
Go figure! Do the math! Wake up and smell the coffee!
Today we are informed the average yearly energy bill is to be £4266 per year in January rising to £4426 in April (see here) before falling to c£3900 in Q3 and to £3800 in Q4 2023. – Those numbers alone mean little so let’s apply them to the average household.
The average UK domestic energy bill from October 2022 to March 2023 will be MORE each month than the single person or lone parent gets each in month in dole. In October, November and December this year the typical gas and electricity bill will be £389 in each of these months when dole, now Universal Credit standard allowance will be £335 per month.
Dole is intended to pay for gas, electricity, food, clothing, travel and replacement fecking light bulbs, all normal household expenditure in short. A single person or lone parent aged 25 to 66 gets this £335 (£334.91 to be exact) monthly amount for all household expenditure.
In Oct to Dec 22 gas and electricity cost is £54 per month more than the total amount of dole / Universal Credit pays out. From January to March 2023 the gas and electricity cost will be £145 per month more than is paid in dole / Universal Credit … as Chart 1 below reveals
Chart 1 – Dole versus typical gas and electricity costs (1 October 22 to 31 March 23)
The 6-month period from 1 October to 31 March is typically the six months with, unsurprisingly, the highest gas and electricity cost. I checked my energy bills for the last 8 years and the Oct – Mar six-month period is 72% of each year’s energy bill on average. I strongly suspect this will be average of the typical household so Chart 1 above reflects that.
The £4266 pa estimate for January 23 does not equate to a £351 bill in January. Simply dividing the £4266 by 12 months does not reflect reality as it would mean we spend the same in July as we do in January. It also does not mean the average bill for January 23 to December 23 will be £4266. Extrapolating all the figures as found in the Guardian article referenced and in the graph below means £4115 we be the actual cost of dual fuel for the calendar year January to December 2023 based on the projections we have been informed of today.
If 70% of this yearly £4114 dual fuel bill is in the highest 6 months it means £2880 and £480 per month in Jan, Feb, Mar, Oct, Nov and December 23 AND the balance of £1234 in 2023 sees an average of £206 per month in April, May, June, July, August and September. I have used the same methodology for determining the £389 monthly dual fuel bill for the last three months of calendar year 2022
Insert guardian
The impacts on social housing and homelessness
The staggering projections on dual fuel cost will affect every sector and every business not just domestic energy bills. My agenda or my ‘bag’ is social housing and homelessness where I have worked in for 30 years and advised on for the last 20 years. I am a stickler for facts and especially numeric ones so when official data (EHS) says 60% of social tenants receive housing benefit of which 60% is full housing benefit and 40% part housing benefit.
This means 36% of SRS tenants and 1.48m in England sees the energy increases largely not affect their ability to pay rent. The 24% who receive part housing benefit and 986,000 plus the 40% and 1.64 million who get no housing benefit gives 2.63m SRS households who will struggle acutely to pay their rent between 1 October 22 and 31 March 2023.
These 2.63 million SRS households (containing 6.3 million men, women and children) will need to find £224 more in each of these 6 months to pay for energy than the previous year which is £224 less than can be spend on rent each month. The added costs of other household expenditures such as basic foodstuffs, petrol, clothing and so on will be more than any increase in wage income received.
Rent is largely the only monthly cost that does not attract interest for late or non-payment though social housing tenants are largely not ‘bolshie’ non-payers or have a normal tendency to not pay rent. Pareto applies I have found from advising and heading up rent payment teams and 80% of social tenants never miss rent payment, the other 20% sees 80% of them have very legitimate excuses for late rent payment … which means just 4% is the figure for habitual non-payers. A sizeable proportion of the 80% who always pay on time are also in credit with their rent and not just the one week or one month ahead as each weekly or monthly standard SRS tenancy document states.
That said the fact that monthly energy costs have increased so much that it is not a question of SRS tenant choice whether to pay rent or not, it is a case for a large percentage of the 2.63 million SRS households who do not get full housing benefit will not be ABLE to pay.
The 1 October 22 to 31 March 2023 is proverbial and fan time for social tenants and for social landlords in terms of the non-payment of rent. While SRS tenants have no proclivity to not pay they WILL give priority to Christmas spending and food for their families over paying rent. Many may well think this is their last Christmas in what they rightly see as their home despite the fact it is ‘merely’ rented. The scale of these projected energy increases is cataclysmic and with inflation projected to increase to 13% or so around Christmas this year, the mentality and culture I am describing of not making SRS rent payment their number one priority is not surprising or speculative.
So many other numeric facts are alarming in impact, for example 54% of SRS households include a disability (19% in PRS) and the added costs of disability are always more than the even the highest level of disability benefit (PIP) – and a large element in that is energy use as the seminal SCOPE reports over many years have stated. The Extra Costs Commission report of 2014 details how higher electricity and gas costs for heating, for extra clothes and bedding washing, for being housebound, for dialysis and other equipment are at play and these added costs are more than disability benefit pays. Higher food costs for coeliacs and others and so many more added household expenditure costs not forgetting petrol, diesel or taxis … are all disability costs that morally should be prioritised over rent payment too.
My professional opinion is the 6 month period beginning in October 22 and lasting through till end of March 23 will see a de-prioritising of rent payment by social housing tenants. This is not necessarily choice but necessity.
The real question is how accustomed SRS tenants will become to not prioritising rent payment from April 2023 onwards and that question will be giving nightmares to council and housing association bean counters, aka Directors of Finance even more so when they realise what the six-month period BEFORE the next social housing rent increases from April 2023 really means and how it will undoubtedly impact as I explain above.
The ‘leaders’ in the social rented sector are 100% pre-occupied with the rent increases due next April and whether they can impose the full CPI+1% rent increase formula or not leading to whether tenants can afford rent in financial year 23/24 from April to March 24. They have some degree of influence and control of this.
However, they have zero influence and zero control over the 6 month period leading up to next year’s rent increases, the period from 1 October 22 to 31 March 2023 …
Speye Joe 