Jess McCabe

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Learning curve 17/04/2014 A year on from the introduction of…

Learning curve

A year on from the introduction of the bedroom tax, Jess McCabe catches up with Inside Housing’s welfare reform focus group to find out if dealing with the impact of the changes has become child’s play or if it’s still requiring baby steps

One year ago, Inside Housing recruited 10 social landlords from across the country. The aim? To track in detail how the government’s welfare reforms were really affecting them – and their tenants. Would the bedroom tax, introduced on 1 April 2013, cause rent arrears to soar? Would tenants be left in destitution – and their landlords struggling financially?

A year on, social landlords in our focus group at least, seem to be learning to cope with the changes (see individual landlord boxes). We have seen some evidence that overall rent arrears are starting to stabilise in some cases. But with the roll-out of universal credit still looming on the horizon, and some tenants only coping because of emergency, short-term discretionary housing payments from their local authority, the future remains uncertain.

One year into welfare reform, the number of tenants deemed to be under-occupying their homes – and therefore affected by the bedroom tax – has started to drop. In most cases, our focus group landlords report fewer tenants subject to the bedroom tax. From 1 April last year, tenants have had their housing benefit cut by 14 per cent if they have one spare bedroom, and 25 per cent if they have two or more spare bedrooms. With fewer tenants affected, this is helping to minimise the impact of the policy on the balance sheets of our 10 landlords.

Going down

Just 5,675 Leeds Council tenants, for example, are now subject to the bedroom tax. This is quite a drop from the start of the focus group, when 6,794 tenants were deemed to be under-occupying.

As of April last year, Riverside had 6,740 tenants subject to the bedroom tax. Now, the number has fallen to 6,167 tenants.

A number of tenants have been temporarily taken out of the bedroom tax equation because of the loophole discovered in January, in which tenants who have been continuously claiming housing benefit from before 1 January 1996 and have lived at the same address since then were excluded from the penalty.

But as this loophole has now been closed, the number of tenants affected is likely to swell at a later date.

Some landlords have also worked hard to move tenants into smaller homes, so they are no longer deemed to have ‘spare’ bedrooms. Leeds Council reports the most tenants to have downsized so far – 213 via choice-based lettings and 208 via mutual exchange or transfer.

‘This isn’t all down to tenants moving out or finding work, although some have,’ explains Richard Marshall, external partnerships officer at the council. ‘We have redesignated some properties [848 in total], a lot of tenants came forward with previously undisclosed family members and other sundry changes of stock size.’

Around 28 of 4,000-home Coastline Housing’s tenants have downsized between April 2013 and March 2014. As a result, it is taking longer to fill properties once they become void – from about four days on average in 2012 to 19 days at present. It’s not taking longer to find a tenant to fill the home, explains Louise Beard, director of housing and care at Coastline. But the same size team at the association has about 300 voids to handle, compared with the usual rate of between 200 and 240 a month. ‘Consequently it’s taking longer to deal with,’ she says.

The number of under-occupying tenants living in Hastoe Group properties rose at first – from 143 in April 2013, to 264 in November 2013. But this has now dropped back again to 221, or 6 per cent. Paul Nicholson, head of business performance at Hastoe Group, says: ‘We know that some of the tenants affected have moved – although not necessarily to downsize and there have been other changes of circumstances as you’d expect. We have a significant number of tenants who work part-time or seasonally and are not continuously on housing benefit.’

At Link Group, the number of tenants affected by the bedroom tax has risen slightly since November, from 325 to 351.

‘Tenants previously not under-occupying can find themselves in that position, for example if a child leaves the home, a family member dies and the exemption period has expired or a disabled person no longer has an overnight carer,’ says a spokesperson for the 6,395-home landlord.

Rising arrears
The picture for tenants who are still under-occupying is getting grimmer. Most of our focus group reports that an increasing proportion of tenants who are affected by the bedroom tax are in rent arrears. Take United Welsh for example: when our focus group began this time last year, 35.8 per cent of its 726 tenants affected by the bedroom tax were in arrears. Now, just 383 of its tenants are affected by the bedroom tax – but 70.5 per cent of these tenants are now in debt to their landlord.

At first, Salix Homes experienced a similar rise – from 44 per cent in arrears when we started tracking them to 73 per cent last November. The latest data shows, however, that the proportion affected has started to edge down to 64 per cent. The landlord has also managed to lower its total arrears in the last year from £1.7 million to £1.5 million.

Sian Grant, head of customer service at the 8,500-home landlord, puts this down to assiduous preparation prior to welfare reforms coming in.

‘This has included creating separate patches for the management of accounts where the tenant is under-occupying, allowing the other income management officers to concentrate on business-as-usual rent collection,’ she says.

Salix has hired four new income management officers specifically to intensively manage the cases of tenants who are under-occupying. At the same time the landlord has stepped up its efforts to educate tenants about the changes brought in by welfare reform and get them into ‘payment patterns’, she adds.

Even if tenants are not in rent arrears, Paul Malkin, income services manager at 8,555-home Aspire Housing is cautious of assuming this means all is well.

‘People are getting into the routine of paying it [the bedroom tax]. They’re paying it – not every week at times. I wouldn’t ever say they can afford to pay it. But they want to keep their homes,’ he says.

So how much of a contribution does the bedroom tax actually make to social landlords’ total arrears?

At United Welsh, arrears have more than doubled since we started following its welfare reform journey, from £215,000 last April to £657,000 by the end of February this year. The landlord tells us that under-occupiers make up 16 per cent of overall arrears.

‘We have 30.55 per cent of under-occupiers paying in full, 53.26 per cent paying in part and 15.4 per cent not paying at all,’ a spokesperson says. ‘So although the bedroom tax is undeniably having an impact, there are many other factors to consider when we look at the overall arrears increase.’

But this is by no means a trend that every landlord has experienced. At Coastline the proportion of arrears notched up – but then went down again. It is now lower – at 0.98 per cent – than it was last April, when it was 1.08 per cent. Family Mosaic has seen arrears drop from 5.5 per cent to 5.1 per cent.

Mr Nicholson at Hastoe says the reduction is a result of focused management, improved IT systems and increasing the provision of welfare advice to tenants.

Temporary reprieve
Many of the landlords in our focus group believe the true extent of the impact of the bedroom tax is being softened in the short term by discretionary housing payments.

Salix reports the number of tenants affected by the bedroom tax in arrears has dropped to 36 per cent as of 31 March 2014 ‘almost entirely’ due to support from DHPs. A full 741 of its tenants have received a total of £292,000 of DHPs in 2013/14.

Leeds Council tenants have received more than £1 million in DHPs. ‘These payments paper over the serious impacts of the charge,’ Mr Marshall states.

The question of what happens when DHP funds run out – or if it is reduced – is a recurring fear among landlords. And then there is the roll-out of universal credit still to come. Many members of the focus group worry about the start of this policy – date still to be determined – which will combine a swathe of existing benefits, including housing benefit, into a single monthly benefit, paid to the claimant. As well as having a direct impact on arrears – if tenants simply don’t pay their rent when they receive their monthly cheque – it could have other repercussions.

As Mr Marshall from Leeds Council warns: ‘Once universal credit comes into being across the country the reason for rent arrears will be far more difficult to state and the government will find blaming it on fecklessness far easier.’

Aspire Housing tenant

Mark’s journey

‘I’m no longer a sob story,’ says 46-year-old Mark Taylor. Inside Housing has been following Mr Taylor’s life for a year now, and the Aspire tenant has come a long way in that time.

Back in April 2013, the divorced father of three was facing financial ruin.

Living in a two-bedroom flat in Newcastle-under-Lyme, he was deemed to have a spare bedroom, even though his two daughters – then 14 and nine – and 13-year-old son were cramming into the bedroom for weekend visits. With his council tax benefit also being cut, Mr Taylor found he needed to find an extra £60 a month. He was living off toast all week in order to have enough money left over at the weekend to feed his children.

But after going on television to talk about the impact of the bedroom tax on his life, a mysterious benefactor donated £1,000.

With the money, he was able to pay off about a third of the high-interest loan he took out from doorstep lenders. With the help of his landlord, Mr Taylor managed to get a discretionary housing payment from Newcastle-under-Lyme Council which left his rent account in credit by £40.

Since then, Mr Taylor – who cannot work as a result of disabling back pain – has managed to stay out of arrears. Feeling like things were going better, he approached his local bank branch and got an overdraft which allowed him to pay off the remaining debt on the high-interest loans. As a result, Mr Taylor is £360 a month better off – and says he is much better able to cope with the cut to his housing and council tax benefits as a result.

He is even seeing a physiotherapist every three weeks and doing recuperative exercises, which gives him some hope he will one day be able to recover enough from his back injuries to get a job.

‘Last year, it did affect me. It was a case of pay the rent or buy food for me and my children,’ he recalls. But life has now improved. ‘I’m a positive story.’

See Inside Housing to read the full feature, including boxes with data from each of the 10 landlords in the focus group

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