Housing and Welfare Reform CIH South East Conference, Brighton 6 th March 2013 Andrew Parfitt Deputy Director of Housing Policy Andrew.parfitt@dwp.gsi.gov.uk
Summary of reforms in relation to Housing (1) LHA rates to be uprated annually by reference to the Consumer Price Index from April 2013 this will end the monthly uprating of LHA rates and bring the system in line with other pensions and benefits Autumn statement confirmed that most DWP benefits will be limited to a 1% increase for three years from April 2013 Housing Benefit for working age Social Rented Sector claimants will be restricted for those who are occupying a larger property than their household size and structure would warrant from April 2013: Affects 31% of working age Social Rented Sector Housing Benefit claimants, with an average loss of 14 Support for Mortgage Interest - Autumn statement confirmed that 13 week waiting period and 200,000 capital limit will continue until 31 March 2015 2
Summary of reforms in relation to Housing (2) Introduction of localised support for Council Tax to replace Council Tax Benefit from April 2013 The Benefit Cap will be rolled out on a phased basis in four London Boroughs from April 2013 and of course introducing Universal Credit 3
Local Housing Allowance From April 2013, LHA rates will be set at the lower of the previous LHA rate up-rated by the previous September Consumer Price Index (CPI) figure or the 30 th percentile of local rents As part of the preparations for introducing annual uprating, we froze LHA rates from April 2012 to provide a baseline Following the announcement in the Autumn Statement, in line with proposals for working age discretionary benefits more generally, increases to LHA will be capped at 1% for the next 2 years, (April 2014 and April 2015) We have set aside 140m of the savings generated to increase the LHA rates in areas where there is a shortage of affordable accommodation The new annual LHA rates which will apply from April 2013 were published by Rent Officers on 13 November 2012 4
Monitoring and Evaluation Research commissioned in 2011, early findings June 2012, interim report in spring 2013 with a final report in early 2014. Funded by DWP, DCLG, Scottish Government and Welsh Assembly Government Undertaken by a consortium of CRESR, IFS, Ipsos MORI and Oxford ISP To provide robust quantitative and qualitative evidence on claimants and landlords experiences To track national and local impacts To build a cumulative understanding of impact To model future impact from initial evidence of change Annual publication of LHA rates and the 30 th percentile of market rents to monitor LHA uprating by CPI and 1% 5
Social Rented Sector June 2010 Budget announced size criteria rules to be introduced into social rented sector Housing Benefit entitlement for working-age tenants in the social rented sector will be restricted to reflect the needs of their household This will take effect from April 2013 for all current and new claimants Claimants will see a reduction in their eligible rent of 14% for under occupation by one bedroom and 25% for under occupation by two or more bedrooms The number of bedrooms Housing Benefit will cover will be based on the LHA size criteria rules (but with no Shared Accommodation Rate) one bedroom for each of the following: a couple a person who is not a child (age 16 and over) two children of the same sex two children who are under 10 any other child 6
Preparing for the Under Occupancy Charge (1) The Chartered Institute of Housing has produced a toolkit, which includes examples of best practise, designed to aid landlords in the implementation of this measure We have been working closely with local authorities and housing associations in developing implementation plans and writing guidance We have engaged with welfare rights organisations while developing this policy to ensure the needs of different customers are taken into account Along with the guidance we have developed products to aid with implementation including draft letters, leaflets and posters designed to draw claimants attention to the changes 7
Preparing for the Under Occupancy Charge (2) Local authorities need to collect information from social sector landlords about how many bedrooms there are in their properties Local authorities will inform those claimants who are potentially under-occupying their property and ask them to confirm the information they hold Local authorities may also write to landlords to notify them of tenants likely to be treated as under-occupying their properties Local authorities may work with these tenants to discuss their options and provide advice and support 8
Localising Council Tax Support in 2013 The Local Government Finance Act (received Royal Assent on 31 October 2012) paves the way for the implementation of localised Council Tax support schemes in England from April 2013 DWP & DCLG are working together on: the provision of appropriate data to facilitate the planning of local schemes the continuation of the flow of information that local authorities currently receive from DWP, such as the LAID and LACI the development of new data flows that will be needed once Universal Credit is in place An assessment of the ongoing and new costs of implementing local schemes is being undertaken to determine the level of funding local authorities need to implement and support the administration of their schemes. However, for 2013-14, local authorities will receive HB Administration Subsidy funding on the same basis as in previous years 9
Benefit Cap The benefit cap will be introduced on a phased basis in four London Boroughs - Bromley, Croydon, Enfield and Haringey from April 2013 and will apply to the combined income from the main out-of-work benefits, plus Housing Benefit, Child Benefit and Child Tax Credits The benefit cap levels will be: 500 per week for couples and lone parents 350 per week for single adults 56,000 households will be affected by the cap in 2013/14 the average benefit reduction is 93 a week per household 10
Benefit Cap - Exemptions The following households will be exempt from the cap: those entitled to: Working Tax Credit those in receipt of Disability Living Allowance Industrial Injuries Benefits Personal Independence Payment Attendance Allowance Employment and Support Allowance, if paid with the support component Armed Forces Compensation Scheme Before 6 April 2005, the War Widow s/widower s pension and war disablement pension claimants who have been in employment for 50 weeks out of 52 weeks or more when they claim benefit will be exempt from the cap for up to 39 weeks 11
Benefit Cap Disregard for supported exempt accommodation Housing Benefit paid to those living in supported exempt accommodation is excluded from the benefit cap calculation This is the case from the introduction of the benefit cap in April 2013 and under Universal Credit (where housing costs will continue to be met under Housing Benefit rules) These households are not exempt from the benefit cap, but, by not including Housing Benefit in the calculation, these cases are unlikely to be affected by it 12
How is Universal Credit different? Current System The welfare system has more than 30 benefits each with their own rules and criteria Universal Credit Universal Credit provides a new single system means-tested support for working-age people who are in or out of work Work incentives can be very low, benefits are reduced to take account of earnings but different benefits have different rules Conditionality: some benefit claimants are capable of working but have no obligations to look for work Payments are paid to different adults in a household and for various periods Universal Credit will make work pay. Financial support will be reduced at a consistent and predictable rate and people will generally keep a higher proportion of their earnings Universal Credit will personalise conditions according to people s capability and circumstances Universal Credit is paid on a calendar monthly basis in a single payment to each household (we will retain the ability to pay more frequently or to split payment in exceptional circumstances) 13
Direct Payments Demonstration Projects Six local authorities & housing associations are now trialling direct payments of Housing Benefit to selected tenants Project timeline Jun 2012 Projects started Jul 2012 Jul 2012 Aug 2012 Jan 2013 Jun 2013 Aug/Sep 2013 First direct payments to selected tenants in local authorities in England and Wales First bi-monthly Learning Report produced summary shared on Learning Network First direct payments to selected tenants in Edinburgh Learning the Lessons report published Project completes Final Project evaluation report published 14
Payment of Universal Credit Universal Credit will be paid to claimants who are in work and out of work As most businesses pay monthly, Universal Credit will also be paid monthly Claimants will be responsible for managing all household costs, including rent payments To help claimants prepare for Universal Credit, we will test key elements of incorporating housing support into Universal Credit whilst protecting the financial position of social landlords Housing costs for owner-occupiers in Universal Credit will continue to be paid to qualifying lenders direct under the Mortgage Interest Direct scheme Direct Payment Demonstration Projects will run for a year in six local authority areas 15
Universal Credit and housing For social sector renters rent plus eligible service charges less any under-occupation deduction less housing cost contributions from non-dependants For private sector renters the lower of actual rent and service charges or the appropriate LHA less housing cost contributions from non dependants For owner-occupiers flat rate of interest on outstanding loan up to a set capital limit of 200,000 plus eligible service charges help subject to waiting period help ceases if claimant or partner receives any earned income 16
Universal Credit and Supported Housing Having listened to concerns of stakeholders we have decided that these housing costs will be met outside Universal Credit In the interim this will be administered broadly as now through existing DWP legislation by local authorities For the longer term we are still looking at options, particularly the feasibility of a localised system We are continuing with the existing DWP definition of supported exempt accommodation and not any other broader interpretation of supported housing Housing costs for people in Supported Exempt Accommodation will not be included in the calculation for the benefit cap 17
Temporary Accommodation From April 2013 Housing Benefit subsidy for all temporary accommodation cases will continue to be based on the current arrangements In most cases this means, 90% of the appropriate January 2011 LHA rate for the property that the local authority places the claimant into; plus 40 (for London authorities) or 60 (for non-london authorities) management element Temporary accommodation cases in Universal Credit will have housing support based on the appropriate LHA rate for the household (not the property, as happens now) The management element for temporary accommodation cases in Universal Credit will be separated out and paid directly to local authorities in order to protect this funding stream We are considering how the separate management element will be paid for Universal Credit claimants, our preferred option is to provide additional funding through the Discretionary Housing Payment pots with a mechanism to reflect changes in local caseloads. This will be an interim arrangement while we work on a longer term solution 18
Universal Credit - Support for Mortgage Interest Principle: To protect home owners from repossession as far as possible Support for Mortgage Interest will be on Universal Credit platform owners will receive help with mortgages and other eligible loans based upon a standard rate of interest and a set capital limit will continue to be a waiting period before they are entitled to help Main changes: all loans secured against the property are eligible for help help ceases if claimant or partner receives any earned income no deductions for non-dependants and no linking rules Autumn statement confirmed that 13 week waiting period and 200,000 capital limit will continue until 31 March 2015 19
Housing Credit for Pensioners (1) Universal Credit will replace means tested benefits including Housing Benefit, Child Tax Credit and Working Tax Credit resulting in changes for customers who have reached Pension Credit qualifying age (linked to women s State Pension Age) As pensioners are outside the direct scope of Universal Credit an alternative mechanism is needed to deliver support for rent and for dependent children. This support will be incorporated into Pension Credit For pension age customers, support for eligible rent will be delivered as an additional Pension Credit component Housing Credit, which will run alongside both the current Guarantee Credit and Savings Credit components New pension age customers wishing to claim support for eligible rent after October 2014 will need to make a claim to Pension Credit DWP will continue to pay landlords directly for pension age customers if that is the current arrangement. 20
Housing Credit for Pensioners (2) Support for children Currently people responsible for children, including those over Pension Credit age, may receive support from HMRC for each child through Child Tax Credit What will change To protect the continuity of support for pensioners, there will be an additional amount for children incorporated into the Guarantee Credit element of Pension Credit. This will be known as Child Addition. There will be 4 rates: for first child, subsequent children, and higher rates for disabled children In Work Support Following the abolition of Working Tax Credit, working age customers will be able to access similar support through Universal Credit. There will be no Working Tax Credit replacement within Pension Credit; however, pension age customers who do not qualify for Pension Credit but are still entitled to Working Tax Credit will be entitled to Transitional Protection at the point of change, provided their circumstances remain the same 21
Housing Credit for Pensioners (3) When the changes take place key dates No earlier than October 2014 The current go live date for modified Pension Credit (new claims only) This is 12 months after the introduction of Universal Credit By the end of October 2017 All existing claims to Housing Benefit will have been migrated to DWP from local authorities All existing claims to Child Tax Credit/Working Tax Credit will have been migrated to DWP from HMRC 22
Housing Credit for Pensioners (4) Migration Almost 1.6 million Housing Benefit and 100,000 Tax Credit cases will need to be migrated The underlying principle of the migration approach will be to ensure continuity of financial support for pension age customers and to minimise the potential for avoidable contact, confusion and anxiety. There a comprehensive communications strategy and close collaboration with local authorities and HMRC throughout the planning process and beyond The pension age migration strategy will be compatible with the Universal Credit Programme s approach for working age customers The existing case migration approach will be based largely upon a managed, i.e. planned and controlled, movement of cases. Work is ongoing to fully define the criteria supporting managed migration Channels There will be no change to the way that pension age customers claim Pension Credit. Telephony will continue to be the primary channel for new applications and enquiries Pension age customers will not use the Universal Credit online claims channel, there is an intention to provide an online channel for Pension Credit at some point in the future 23
Conclusion A major programme of reform to limit increase in HB expenditure. Independent monitoring and evaluation and additional DHPs. Basic structure of housing element of Universal Credit the same as now in PRS housing the lower of LHA and actual rent in SRS actual rent less any under-occupancy charge. Universal Credit part of a broader transformation of welfare, strengthening work incentives and promoting social justice. Further reforms will follow for those of Pensions Age. 24
Questions?