The impact of welfare reform on Kirklees Council tenants and KNH: the first two years

Transcription

1 The impact of welfare reform on Kirklees Council tenants and KNH: the first two years June 2015 Quality Homes and Services in Successful Communities

2 Contents Introduction... 3 The impact of welfare reform changes... 5 Under-occupation charge... 5 The benefit cap... 9 Benefit sanctions... 9 Rent arrears Managing the impact The regional picture Future focus For more information Glossary

3 Introduction Whilst 2013/14 was a year of change and uncertainty due to the introduction of a raft of welfare changes designed to make work pay, 2014/15 has been quieter; the changes have become embedded within normal business, and housing organisations and tenants alike have got to grips with the full impact of the existing reforms. Although no new reforms have been introduced in the past year, many of the existing reforms have been challenged through the courts. The under-occupation charge has withstood a number of challenges based on disability, caring responsibilities and room size and has seen the closure of a loophole relating to the 1996 Rule. This loophole allowed an exemption from the under-occupation charge for tenants who had been continuously in receipt of Housing Benefit since 1 Jan 1996 and led to some tenants receiving a refund of the charges they had paid. The impact of sanctions given to jobseekers hit the headlines, as did a rise in the number of food banks and increasing numbers of people reliant on them to feed their families. The replacement of Disability Living Allowance with Personal Independence Payments (PIP) suffered a setback when the contractor responsible for carrying out the assessments pulled out amidst concerns over the complexity of assessments, delays in making decisions and the high number of successful appeals against adverse decisions. To some extent, the past year has given us breathing space in which to assess the impact of the reforms to date; however, 2015/16 will once again be one of change. Universal Credit is gradually being rolled out and will be introduced for new single claimants within Kirklees on 29 June This is a significant change and will require intensive management to minimise any negative impact on both tenants income and the Housing Revenue Account. Claims for both universal credit and housing benefit will need to be made online and there will be an increased emphasis on the use of Real Time Information (RTI) linked to company payroll records in order to assess claims. This will result in fluctuations in the amount of Universal Credit paid to claimants, as payments are adjusted in line with changes to earnings. 3

4 A 1% freeze on benefit increases will further squeeze incomes, and a 250k reduction in the Discretionary Housing budget for 2015/16 may result in further pressure on funds available to alleviate hardship. The roll-out of PIP will gain momentum with the appointment of a new contractor to carry out assessments on the backlog of 600,000 claims plus any new claims. The general election in May returned a Conservative majority to Parliament with a mandate to continue their reform of the welfare state. Prospective changes put forward and anticipated include: a reduction in the benefits cap from 26k to 23k removing housing benefit from jobless year-olds reduction in sickness benefit of up to 100 per week for claimants with treatable illnesses who fail to engage with a recommended treatment plan. Illnesses being considered include drug and alcohol dependency and obesity. widening of existing sanctions on receiving Jobseekers Allowance for migrants who refuse to attend language courses 4

5 The impact of welfare reform changes Two years into the implementation of welfare reform, it is now possible to more accurately assess its impact on both Kirklees Council tenants and on KNH. The impact of each major change is considered below. Under-occupation charge The under-occupation charge came into effect on 1 April It limits the number of bedrooms for which a claimant can receive benefit. Benefit is calculated according to rules relating to the size and composition of a household. Based upon an average rent of for 2014/15, tenants under-occupying by one bedroom had their housing benefit reduced by 9.75(14%) per week, and those under-occupying by two bedrooms by 17.41(25%) per week. Extent of underoccupation Number of tenants affected Change April 2013 April 2014 March 2015 Apr Mar Bedroom 1, Bedrooms Total affected 2, The number of tenants affected by the under-occupation charge has fallen by 27% since it was first introduced in April The greatest fall has been in the number of tenants under-occupying by two bedrooms, which has fallen by 36% compared to 26% for tenants under-occupying by one bedroom. This is due to their being given Band A housing priority and financial assistance to move under KNH s Homefit scheme. 5

6 During the weekly reduction in housing benefit from the under-occupation charge has fallen by 1,575 (8%) from 19,380 in April 2014 to 17,805 in March Extent of underoccupation Weekly reduction in housing benefit to KC tenants (based on average rent) April 2014 March 2015 Variance 1 Bedroom 14,488 13,435-1,053 2 Bedrooms 4,892 4, Total affected 19,380 17,805-1,575 The total reduction in housing benefit resulting from the under-occupation charge has fallen from 1.01m in April 2014 to 0.93m in March 2015, a decrease of 81,900. The following table shows the number of tenants who have remained in their homes and paid the under-occupation charge. Many of those staying in their homes received Discretionary Housing Payments to enable them to meet their rent liability. However this may not be possible for many of them in the coming year: % of under-occupation charge not paid Number of under-occupiers at 31 March 2015 % of under-occupiers Fully paid % - 24% not paid % - 49% not paid % - 74% not paid % - 99% not paid %+ not paid Grand Total 1, % 6

7 A comparison of the rent arrears of under-occupiers at April 2014 and March 2015 shows that arrears have increased by 76,642 during 2014/15, with average arrears increasing from to (Note that this is based on a group of tenants who under-occupied their properties for the whole of 2014/15) Tenants affected by the under-occupation charge who wish to downsize are supported by the KNH Homefit Team. In 2014/15, the team has carried out 102 visits with qualifying households where the tenant subsequently chose to join the scheme. 68 have moved with the help of the Homefit Service, of whom 39 had registered since April This is less than the 114 households supported to move home during 2013/14. This is due to fewer one-bedroom homes becoming available for tenants to move into. The focus of the Homefit Team has therefore shifted slightly towards supporting tenants to stay in their home whilst they are waiting for a suitable property to become available and on promoting an improved mutual exchange service. Nevertheless, this has released 135 spare bedrooms for use by families compared to 232 in 2013/14. Homefit Officer, Sarah Jowitt, with one of the tenants she has helped to downsize 7

8 Wendy s story A lady we helped last year lived in a three bedroom property and was really struggling to pay the under-occupation charge since her son and daughter had left home. She was unable to heat the property or pay for any food. Only a year or so ago she was in work but due to ill health, she had to give up her job as a textile worker, where she worked with heavy machinery. She was struggling to get used to living on benefits, rather than a full time wage. She became more withdrawn and her health deteriorated as she became more isolated as she could not afford to go out other than to medical appointments. The house also had bad memories as she had recently gone through a relationship break-up. Her mum was very unwell and needed care and support. When one of our Arrears Recovery Officers visited her, they noticed that she was really struggling and managed to get her a food parcel and some credit for her gas and electric. They also made a referral to the Homefit team. A Homefit officer registered her application for Choose n Move and helped support her with bidding for properties. It was not long before she had an offer of a bungalow nearer to her mum and the team arranged a removals service to help her on the day. They also helped her contact the utility companies so she could get settled into her new home. This lady now lives only a few streets away from her mum. She can walk to see her every day and both of them benefit from the new arrangements. She is no longer paying the under-occupation charge and so is better able to afford to eat and to heat her home. She seems much more confident and loves that she has a bungalow, where she feels much safer, as she still has blackouts and falls. She is extremely thankful for the extra support from Homefit and would not have had the confidence or resources to sort her move without our support. By staff from different teams working together, this lady now has a fresh start in a property that is more affordable and manageable for her. The effect on her mental health has been overwhelmingly positive and she can now begin to try and re-build her life. 8

9 The benefit cap The benefit cap was introduced between July and September 2013 in Kirklees and imposed a maximum threshold of 26,000 per year per household on benefit payments. The cap equates to 350 per week for a single childless claimant and 500 for families. On 1 April 2014, seven Kirklees tenants were subject to the benefits cap. By 31 March 2015 this had risen to twenty one. The average benefit reduction resulting from the cap was in 2014/15 compared to in the previous year. At the end of 2014/15, 17 of those affected were in rent arrears. The total arrears for these households were , with average arrears of The impact of the benefits cap in Kirklees has been limited; however a planned reduction in the cap to 23,000 will undoubtedly affect more tenants. Benefit sanctions Sanctions are imposed on people who fail to keep appointments, reject jobs or walk out on jobs without good reason. The number of jobseekers who have been sanctioned has risen year-on-year from 10% in 2008/09, to 15% in 2010/11, 16% in 2012/13 and 18% in 2013/14. (Figures released under the FOI Act and reported in the Guardian, 13 Feb 2015). In contrast, government figures show that 606,000 sanctions were imposed on people claiming Jobseekers Allowance last year, a fall of approximately 300,000 compared to the previous year. The recent fall in the number of sanctions is supported by KNH s Rent Assist Team, which has seen a decrease in the number of tenants identified as being in hardship due to benefit sanctions over the last year. Isolated cases still arise, but not in the same volume as in 2013/14. A mandatory pilot began in April 2015 to apply sanctions to universal credit claimants working less than 35 hours a week who are on the minimum wage and typically earn less than 12,000 per year. Those who fail to engage with support provided by Job Centre Plus to increase their pay through work-focused interviews and work search requirements will receive a sanction. The level of benefit reduction for in-work Universal Credit claimants who are sanctioned starts at around 29 per person per week. 9

10 Mary and John s story One of our Debt Advisors had an elderly client referred to them who was struggling to manage to pay all her household bills and put food on the table for herself and her 25 year old son. John had been sanctioned on a number of occasions, the latest for 13 weeks. He had learning difficulties, but this wasn t factored into his claimant commitment by the job centre advisor, as should have been the case. The sanctions had a significant impact on the family: not only was John not receiving any Job Seekers Allowance, but Mary also faced a non-dependant reduction in Housing Benefit. This meant she had more rent to pay, placing further strain on her already stretched budget. John obviously had no money and couldn t contribute to the household finances by paying board or helping with food and bills. His mother had to try and feed them both, heat the property, pay rent and all the other household bills. On an already limited income, she could not do this, and both their diets and health were suffering. John applied for a hardship payment, but this was refused as the Department for Work & Pensions (DWP) argued that his mother could support him. This decision placed a great strain on their relationship and also contributed to their worsening health and wellbeing. The debt advisor was able to successfully access a hardship payment for John and successfully applied for a Personal Independence Payment for Mary. This means that John can now claim Carers Allowance and move away from Job Seekers and the claimant commitment. 10

11 Rent arrears The implementation of welfare reform in 2013/14 initially resulted in increased rent arrears. This trend had started to reverse during the last quarter of 2013/14 and has continued throughout 2014/15 with total arrears gradually reducing. Year 2012/ / /15 Rent arrears (current tenants) 1.57m 1.70m 1.59m There are a number of factors contributing to the level of rent arrears: The number of Discretionary Housing payments (DHP) secured by KNH for tenants An increase in the number of tenants paying their rent by Direct Debit there are currently 7,334 tenants paying their housing rent by direct debit Restructuring of the Rent Assist team towards a stronger focus on the prevention of debt and arrears instead of enforcement through legal process. There were still 147 evictions during 2014/15 with approximately 3 of these due to arrears resulting from the under-occupation charge; however this represents a slight reduction on the previous year when 152 households were evicted. 11

12 Managing the impact Since 2013, the Rent Assist Team has been boosted by seven temporary posts funded from the Housing Revenue Account until May 2016: two Debt Advisors, four Arrears Recovery Officers and one Senior Arrears Recovery Officer. The additional resources have made it possible to create a specific Prevention and Enforcement Team that has enabled us to maintain high service levels despite an increase in both the volume and the complexity of cases. The Prevention team concentrates on working with tenants to stop the escalation of arrears and one Debt Advisor now concentrates on providing personal budgeting support to tenants. With Universal Credit due to go live in Kirklees during June 2015 and Government plans for additional changes to the welfare system, this resource is vital to the future management of arrears. The expanded Debt Advice team dealt with 1,335 referrals in 2014/15, compared to 1,251 in 2013/14 and 681 in 2012/13. This represents an increase of 96% compared to the period before welfare reform was introduced. The team helped tenants to gain access to 123 food parcels in 2014/15 compared to 65 the year before and has helped 88 tenants apply for charitable grants (35 in 2013/14) totalling 48,058 ( 23,489 in 2013/14). Grants have been awarded for a variety of reasons: Clearing rent and council tax arrears Insolvency fees (bankruptcy and debt relief orders) Paying for white goods (cookers, washing machines) Paying for baby items and clothes Helping to cover the cost of a mobility scooter The Debt Advice team has helped 140 tenants to apply for Discretionary Housing Payment, 103 of whom were awarded an ongoing weekly payment worth on average of per week. An additional 54 tenants received a backdated award of approximately

13 The Rent Assist team also organise an annual toy store, which gives toys donated by KNH staff to some of the poorest households who would otherwise not be able to afford Christmas presents. This year, KNH helped 40 households provide presents to 75 children and gave out nine Christmas hampers. Senior Debt Advisor, Paul Watson, founder of the KNH toy store, with some of his colleagues and Cllr Cathy Scott The Rent Assist Team has helped tenants with temporary emergency top-ups for their gas and electricity meters. Often these are provided to tenants left without any money whilst they await a benefits decision. The average top-up provided to tenants was 20. They have also helped tenants to get debts written off totalling 24,267 and helped 164 tenants to claim additional benefits, of which 100 were backdated. The total value of these backdated awards was 87,

14 Jana s story A 48 year old single tenant went to the Customer Service Centre in an emotional state. She had no money, no gas, no electricity and hadn t eaten for three days. She was extremely distressed, emaciated and depressed and was immediately sent to see the Debt Advice Team at Perseverance House. When she arrived she broke down and was extremely anxious. We gave her a couple of bars of chocolate and a warm drink. Once she had recovered a little we began to see what else we could do to help. After a period of employment, she claimed Jobseeker s Allowance but she had a number of deductions taken from her benefit. This left her with insufficient income to meet all of her essential expenditure. This left her feeling overwhelmed and helpless and she ignored calls, correspondence and people at the door step. As a result, she had built up rent arrears and eviction proceedings were being considered. Bailiffs were pursuing her council tax debt and she was incurring bank charges each month. In addition, she owed around 8,000 to other creditors. Initially we used a KNH discretionary fund to credit her gas and electric meters and arranged a food parcel. We were then able to reduce the amount of deductions from her benefit and avert further recovery action for rent arrears. We persuaded the bailiffs to return recovery to the Council Tax Section and negotiated a payment plan with them. We applied to Yorkshire Water Community Trust and they agreed to clear her water debt. The bank agreed to refund 60 to her account. Finally, we applied to a charity and they agreed that her income was insufficient so they have agreed to give her an additional 260 every two months to supplement her income. They have also agreed to pay the 90 for a Debt Relief Order. This will result in her being debt free. As a result of the advice and support she received from KNH, the tenant was relieved, warm and had food in her cupboards. She has started smiling again. 14

15 The regional picture Whilst our arrears performance in 2014/15 suggests that welfare reform is having minimal impact on the Kirklees Housing Revenue Account (HRA), this has been achieved as a result of the measures put in place by KNH to mitigate the impact on income. The human impact is a different story. KNH is one of ten northern housing organisations taking part in the Real Life Reform project, an 18 month study looking in detail at the impact of welfare reform on social housing tenants. The sixth and final report in this study was published in March It highlighted that: Average debt has increased by 1,266 to 3,554 since the start of the study Weekly debt repayments have increased by 88.8% ( 18.21) since the start of the study and now average The proportion of households in debt has decreased from 74.3% to 64.2% over the last quarter, partly due to the use of Debt Relief Orders 23.5% of households are employed which is the lowest level over the 18 month study and of these fewer than one in five are in full time work More than 6 in 10 households have less than 10 left each week after bills, including 4 in 10 that have no money left The average amount left each week after bills is for full-time employed households, for unemployed households, 16 for partially employed households and 5.83 for households on zero hour contracts 1 in 5 households have used a food bank The average weekly spend on food is per household or 3.63 per person per day 59.1% never or rarely use public transport The average spend on fuel has reduced by 4.4% from 26 to per week since the start of the study. A total of 53.8% do not feel that they heat their homes to the level they need 44% feel that their health has deteriorated since the start of the study. 15

16 For more information about Real Life Reform, please visit the website. Future focus During 2015/16 the Conservative Government plans to extend welfare reform in order to save a further 12bn in the benefits budget. KNH will continue to monitor these developments and respond on a timely basis to minimise the impact on both the HRA and on tenants. The key building blocks for managing a successful transition to Universal Credit will also be developed and will include: DIGITAL INCLUSION Working with tenants and residents associations and external partners to increase the number of public access computer points and training courses available to tenants. PARTNERSHIPS The further development of partnerships with DWP, local jobcentre staff and other agencies to provide appropriate support and budgeting advice to tenants moving onto Universal Credit. IMPROVED DATA COLLECTION As tenants move onto Universal Credit and become responsible for paying their own rent, we will need up-to-date customer profiling information to identify where support can add the most value INCREASING AWARENESS OF UNIVERSAL CREDIT Whilst Universal Credit has been talked about in the media for several years, it is only recently that a clearer timetable has been announced for its introduction within Kirklees. As the transition to Universal Credit becomes imminent, it will be important to engage with tenants about what it means for them and how they can prepare themselves for a successful transition. REVIEW OF INCOME MANAGEMENT PROCEDURES Current arrears processes are based on weekly payments; however these processes will need to change as more tenants start to receive Universal Credit on a monthly basis. The capability for identifying arrears based on expected payment dates will also need to be developed. 16

17 DIRECT DEBIT - Tenants will continue to be encouraged to pay their rent by direct debit with a particular emphasis on persuading new tenants and those moving onto Universal Credit to make the switch. Later in 2015 KNH will follow the lead of Kirklees Council and start to remove alternative payment methods in order to ensure that income is collected cost effectively. In anticipation of this, we are reviewing the capacity of the existing direct debit management facility to cope with future demands. For more information For more information about this report, please contact Dave Bennett, Principal Manager, Rent Assist Kirklees Neighbourhood Housing T: E: david.bennett@knh.org.uk 17

18 Glossary Debt Relief Orders (DROs) - are one way to deal with your debts if you owe less than 15,000, have little spare income and don t own your home. If you get one: your creditors can t recover their money without the court s permission you re usually freed ( discharged ) from your debts after 12 months Direct Debits An instruction to your bank or building society to authorise an organisation you want to pay to collect varying amounts from your account. Payments are taken automatically but the amount and frequency cannot be changed without giving you advance notice of the changes. Discretionary Housing Payments (DHP) - The DHP fund is a Government grant to local authorities. It is not Housing Benefit but enables councils to make emergency payments to tenants to temporarily help cover shortfalls in rent. Employment and Support Allowance (ESA) - If you re ill or disabled, Employment and Support Allowance (ESA) offers you: financial support if you re unable to work personalised help so that you can work if you re able to You can apply for ESA if you re employed, self-employed or unemployed. You might be transferred to ESA if you ve been claiming other benefits like Income Support or Incapacity Benefit. HomeFit scheme - KNH took over the Homefit Scheme from the Council and have worked predominantly on rehousing tenants with two spare bedrooms who have priority in the Kirklees Housing Register. Housing Revenue Account (HRA) - The HRA is a ring-fenced account held by local authorities. This means that it is kept separate from other Council accounts. It contains all the spending and income relating to the dwellings owned by the council, acting as landlord. 18

19 Jobseeker s Allowance (JSA) - is at least a week to help you while you look for work. How much you get depends on your circumstances and the type of JSA you qualify for. To qualify for JSA you usually have to be: 18 or over (but below State Pension age) able and available for work meet the other rules for eligibility Non-dependant - someone who normally lives with the Housing Benefit claimant such as an adult son, daughter, relative or friend. Boarders, sub-tenants and joint tenants are not nondependants. Universal Credit Universal Credit is means-tested financial support for working age people who are in or out of work. It is a single monthly payment paid direct into a claimant s bank account. Universal Credit will replace: Income-based Jobseeker s Allowance Income-related Employment and Support Allowance Income Support Child Tax Credit Working Tax Credit Housing Benefit 19