The cheapest social housing is unaffordable for the ‘benefit household’

In the South East of England region the benefit household of two parents and two children does not receive enough in their maximum housing benefit to cover the average social rent level. By 2024 the same rent shortfall position will apply to the 1 parent 2 child household. By 2026 the 1 parent 2 child benefit household (1P2C) will have a rent shortfall across every English region as their maximum housing benefit level will be less than the average social rent level.

We cannot escape articles about the rent shortfall in the private rented sector they are everywhere and have been for many years due to repeated real term cuts in Local Housing Allowance, the private tenant version of housing benefit. It is wrongly assumed that in council and housing association properties, the social rented sector or SRS, that housing benefit is full and does not have a rent shortfall position yet it does and has for many years due to the overall benefit cap policy and how it works. The much bigger issue is when we have rent shortfalls on the cheapest rent levels, the social rent level then the benefit household has nowhere to afford to live. That is the position today for any benefit household with 3 or more children across the English regions and for the 2 parent 2 child (2P2C) benefit household in the South East and East of England regions with 112 local authority areas between them and circa one-third of all English council areas.

The housing benefit rent shortfall in social housing has a dramatic and disastrous impact on homelessness as firstly, existing benefit households face the arrears to eviction to homeless pathway. Secondly, new or prospective SRS tenants who are benefit households are refused social housing due to what social landlords call LETWA, or Limited Entitlement To Welfare Assistance, which is nothing more than euphemism for NO DSS.

This paper is some 2700 words long and takes no more than 10 minutes to read. It is not meant as a magnus opus and I could have written 27,000 words or more. However the issue is of such seriousness and gravity and we can predict it today knowing what we know today and it argues there will be no (working-age) benefit tenants in council and housing association properties in a few years time because social housing is unaffordable and has systemic rent shortfalls that are far worse than LHA shortfalls in the PRS.

The crisis of affordability in social housing is alarming and has dramatic homeless impacts and today England has a crisis of inflation with CPI inflation projected to go above 7% and falling back to 5.3% by September in the latest Bank of England projection. If that materialises, and it could be higher, then benefit levels will increase by 5.3% in April 2023 and SRS social rent levels will increase by 6.3% yet the overall benefit cap limit will remain at a constant maximum. It is this latter point of HOW the overall benefit cap works that each year sees an ever-reducing maximum housing benefit amount to set against an ever-increasing rent charged.

The OBC works by a simple equation of CAP minus OTHER BENEFIT equals MAX HB and Table 1 below illustrates that for the 2P2C benefit household in the South East region. It is based on the 5.3% Bank of England projection for CPI on September 2022 returning to its target level of 2% each year thereafter.

Table 1

In April 2022 the 2P2C benefit household will get £1,213 per month in UC standard allowance, UC child allowance and Child Benefit (collective OTHER BENEFIT) and when this is subtracted from the £1,667 overall benefit CAP it leaves £454 per month as the maximum housing benefit or UC housing cost element. Official rent data (CORE and SDR) reveals the average social rent level is £542 pcm so the max HB gives an £88 per month rent shortfall.

In April 2023 the CAP remains at £1,667 per month yet OTHER BENEFIT increases by 5.3% and from £1213 to £1,277 leaving a maximum HB of £389 per month. The social rent level increases by 6.3% from £542pcm to £576 per month seeing a rent shortfall of £187 pcm.

The way the OBC works and the systemic flaws it contains of a cap limit that remains constant providing less in housing benefit each year against an ever-increasing rent charged I first flagged up in 2011 and two years before the policy began in 2013. When it began the OBC largely only cut the housing benefit of the benefit household with 5 children and a few with 4 children whereas today it cuts the housing benefit maximum to benefit households with just 2 children. In 2013 the first data revealed c26,000 benefit households in England had their housing benefit cut (PRS and SRS) and the latest figures reveal c200,000 and 8 times as many which reflects the systemic flaws in the OBC policy.

Table 2 below reveals the figures for the 1 parent 2 child household against average social rent levels in the South East region and which reveals how benefit households move from a zero housing benefit shortfall to an actual one of acute significance.

In April 2022 and just 6 weeks time the 1P2C benefit household has no rent shortfall and can receive up to £102 per month above the average social rent. Yet the 5.3% CPI projected inflation means this ‘headroom’ falls to just £14 per month in April 2023 and even if CPI inflation falls back to its target of 2% it will mean a rent shortfall in April 2024 which increases each year to become a monthly rent shortfall of £148 per month and £1,776 by April 2027.

The lone parent benefit household with two children (1P2C) will be persona non grata in social housing. Existing benefit households will be evicted on the arrears to eviction to homeless pathway if they cannot find these monthly rent shortfalls from other subsistence level benefits. Given food inflation is more than the CPI headline rate and 54% increases to gas and electricity from April this year and then a projected further increase in October 2022 that is simply impossible. The prospective social housing tenant of the lone parent with 2 children will be refused social housing on the LETWA aka NO DSS affordability issue.

The lone parent with just 1 child could just as easily face the same NO DSS refusal of the cheapest social housing as the number of children can increase and as it will be no later than 2030 that the lone parent one child household does not get enough in housing benefit / UC housing cost element that covers the cheapest social housing rent levels. The social rented sector has no chance of achieving NET ZERO in terms of carbon emissions by 2030 yet every chance of achieving NET ZERO in terms of benefit households by 2030.

What we KNOW today and based on how the OBC policy works and assuming it continues that way means the social rented sector will have no working age households on housing benefit / UC housing cost element by 2030. You would think this reality which is a Doomsday reality would be the hottest topic of discussion for all politicians for social landlords for all homeless lobbies for all poverty and social welfare lobbies and be top of the list for all homeless and housing activists. YET it is not discussed at all and the only issue of rent shortfalls discussed is in the PRS and not a dickie-bird about the same rent shortfalls in the SRS.

None of the above is scaremongering or even any other form of subjective opinion, it is purely what the numbers say on an objective basis.

The assumptions of 5.3% CPI in September 2022 is the Bank of England’s latest projection. The return to 2% CPI and target level by September 2023 is very much an optimistic one as it is in each subsequent year.

The use of average rent levels (social rent) is based on official average rent levels issued by government and the average property size across the SRS is 2.4 bedrooms which is a mid point between the 2 bed and 3 bed properties that the 2P2C and 1P2C households qualify for and are entitled to.

The use of average rent levels in the 67 local authority areas in the South East region means the highest rent areas such as Elmbridge will reach the benefit household no go zone a year BEFORE the average and the lower local authority areas of rent eg Southampton a year AFTER the average SE local council.

I have the average rent levels for the more than 300 local authority areas in England and I have the precise average 2 bed and 3 bed social rent (and much higher affordable (sic) rent levels too) as these are in the public domain in the official CORE and SDR datasets. I doubt anyone would read a table of 317 LAAs each with 2 social rent levels and with 2 affordable rent levels (for the 2 and 3 bed properties) as this would be unwieldy. I therefore simply chose to use the overall average rent levels at the social rent level which is the cheapest level of rent to make the above points.

Where the hell will the benefit households live? Is one question that immediately springs to mind yet we need to look much deeper.

How much longer will every homeless family spend in expensive and unsuitable temporary homeless accommodation they are placed in by each local council? These households cannot escape TA unless they have employment and they are in a NO JOB NO HOME scenario – as indeed is every existing benefit household with a SRS tenancy.

How much more bed-blocked will single homeless hostels become and all domestic violence and abuse refuges become? Resident in hostels and refuges cannot leave them unless they have employment – the same NO JOB NO HOME position which leads to more applicants being refused hostel and refuge provision because they are bed-blocked and thus more rough sleepers and more women fleeing violence and abuse refused refuge!

How the hell will supposedly social landlords cope as the benefit household is no longer viable is another question? In 2013 when the OBC began official data revealed two-thirds of all SRS tenants received housing benefit yet by 2030 at the latest there will be zero of working age!

Back in 2013 I gave a presentation on this at the CIH in London and the audience of social landlords could not disagree or deny the figures. There was a uniform response of essentially we don’t care what the facts say we are social landlords and we will always house those in housing need, YET they cannot do this as the very same numbers (darn pesky numeric facts) say.

The social rented sector landlords cannot afford the benefit tenant who is turn cannot afford the cheapest social housing, that at the social rent level. That is what we know and where we are.

The Overall Benefit Cap policy has created this doomsday scenario and needs to be seen for what it is and how it works and be abandoned urgently. However, the SRS landlords who demand inflation-busting rent increases each year are just as culpable and the rent formula of [CPI+1%] which ends in 2024 yet sees the G15 cabal demand it for a further 30 years is a case of when something is too good to be true then it is for social landlord finances and operations.

Where the hell have Shelter, JRF, Resolution Foundation, opposition politicians been since 2013 in not opposing and not seeing what the OBC policy does and manifests? They have been as negligent as you could possibly be. While it may be easier for all these actors to make the case for rent shortfalls in the PRS they have all not bothered to see the far more dangerous issue of rent shortfalls in social housing, more dangerous because there is NOWHERE for benefit households to live when housing benefit shortfalls meet the lowest possible rents.

The issue of NO DSS and the emotive nonsense that surrounds it is a large part of the problem. NO DSS is essentially an affordability issue where maximum housing benefit (LHA) is way below the rent charged by private landlords. Yet expecting those PRS landlords to take the benefit household is like walking into a care showroom and demanding you receive a Range Rover when you can only afford a Mini. The OBC policy and two others which began in 2013 in bedroom tax and increase in NDDs have seen SRS landlords practise NO DSS as the norm. Sorry single person you cant afford a 2 bed as the bedroom tax cuts your housing benefit by 14% is what the bedroom tax policy does to allocation policy yet is never seen or discussed as NO DSS yet that is what it is and always has been.

Purportedly social landlords cannot say oh the OBC is government policy and beyond our control yet carry on regardless and ignoring the OBC impacts yet that is precisely what they have done. Pay your rent or bugger off is the rationale and that is never a social ethos or social purpose. The drive to develop and to convert social rent level properties to the on average 43% higher misnomer of the affordable (sic) rent model hasten this pay your rent or bugger off scenario, which is also a case of social landlords reducing their available customer.

Some 9.6% and c250,000 properties of housing associations in England are now at this charade called the affordable rent and some of the larger housing associations have 1 in 5 of their total housing stock at this level for example Notting Hill Genesis meaning some HAs are practising far more NO DSS than others. Just 1.6% of council housing stock is at this affordable (sic) rent level so HAs are 6 times more greedy commercial landlords than council landlords. And we still call them social!!

in 2011 there were zero social housing properties at the affordable (sic) rent level yet by March 2021, the latest data, there were 275,000 or so or 30,000pa SRS properties developed or converted that would have been at the much lower social rent level yet are at the 43% higher rent level called affordable (sic|) rent. This is more properties taken out of social housing than have been sold off with the Right to Buy in that time … and as ever because of the ridiculous time lag between the position today and official housing and rent data there will be far more than this total of affordable rent regime products and probably more than 300,000 in total across England.

Government housing policy since 2010 has in short been a disaster. The OBC, bedroom tax and NDD increases fundamentally has changed social housing allocation norms by the housing benefit cuts that manifest and has created more homelessness and much less affordability. The Affordable Rent regime whose purpose is to replace massively cut capital subsidies and replaced with revenue subsidies of charging higher rents and top-slicing the difference to create subsidy has only succeeded in making social housing less affordable to the target market SRS tenant of those who can’t afford to buy or rent privately. These knee-jerk ideological policies are now killing off the concept of social housing yet paradoxically creating a far greater need for it with significant increases in all forms of homelessness … and ALL of these policies have been met with next to zero challenge and opposition by the multiplicity of social housing and homeless actors.

In summary go back and look again at Tables 1 and 2 and if you can be bothered create your own simple spreadsheet and you will see those numbers and objective numeric facts all bear out and what we still call social housing will by 2030 be a complete BENEFIT HOUSEHOLD NO GO ZONE and NO JOB NO HOME will be the norm and the Tories aided and abetted by the Conservative-loving social landlords will have killed off completely 62 year of the housing pillar of the 1948 Welfare State in just 20 years.

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NB: ALL of the above shortfalls are to the lowest, that is SOCIAL RENT level and not to the much higher and misnomer of AFFORDABLE RENT levels.

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