Welfare reform will cause housing crisis - report
And the Chartered Institute of Housing NI report also concludes that it may soon be no longer viable for Housing Associations to build new social homes in some parts of Northern Ireland.
To understand the severity of the situation and the full scale of the impending crisis it is first necessary to explain how the benefit system currently works.
There are two broad categories that are relevant: those people living in social housing, and those who rent from private landlords.
Those in social housing on low incomes can claim Housing Benefit to help with their rent. There is no fixed amount: how much is received depends on individual circumstances and their income. Housing Benefit therefore can either pay part of their rent or the full amount. In Northern Ireland most tenants rely on it to pay their rent in full.
The system also benefits social housing providers as well: the income they receive through rent pays off the borrowings which were required to build the homes and revenue towards new builds.
There are two caveats: housing benefits can be reduced if tenants have a spare bedroom (the bedroom tax) or if the total benefits they would be entitled to goes above a set limit (the benefit cap).
A different system applies to people renting in the private sector. Here the benefit is called a Local Housing Allowance (LHA) and this is paid on the basis of the number of bedrooms they are deemed to need. This system adversely affects people under 35 who are only entitled to the equivalent of a single room in a shared house.
The LHA rate is set annually and is supposed to be no more than the equivalent cost of the cheapest 30% of homes in a local area – the so-called Broad Rental Market Area or BRMA. It therefore differs from Housing Benefit in that there is an upper limit.
This would be tolerable if the Local Housing Allowance was aligned with the bottom 30% of the market. But this is no longer the case.
In 2013/14 rates were capped at the previous year’s figure, plus consumer price index. The following year they were capped at 2013/14 levels plus one per cent and for the next four years from April 2016 they will be held at the 2015/16 level.
Therefore the Local Housing Allowance is no longer doing what it was intended to do, ensuring access for people on low incomes to the bottom third of the rental market. It can no longer account for rises in the private rental market due to increased demand and economic fluctuations.
Research from the CIH last year showed that no less than 80% of LHAs were already below the bottom 30% of the market. The cash shortfall of the shared accommodate rate was £5.00 or more each week in two areas – South (Banbridge, Newry and Armagh) and South West (Omagh and Fermanagh).
Tenants affected have to make up the difference themselves, and if they can’t, they face getting into arrears and, ultimately eviction and homelessness.
That would be bad enough if it only applied to tenants renting from private landlords.
However Universal Credit is shortly to be introduced. It will start operating in the Limavady area from September of this year before rolling out across Northern Ireland. Universal Credit simplifies the benefits system by replacing six separate benefits with one.
Low income tenants will all be treated the same post reform, with those in social housing receiving the same package as those in the private rented sector. Perhaps unsurprisingly it will be the Local Housing Allowance package that will be adopted rather than the fairer Housing Benefit system.
This change will apply to general needs housing from April 2019 for all tenants on Universal Credit, and for legacy Housing Benefit tenants whose tenancies began or have been renewed since April 2016.
The current freeze on Local Housing Allowance applies until 2020 so we can expect many more tenants to get into serious difficulties with their rent in the interim period. The worst affected areas will be those west of the Bann
This will not just affect tenants, of course. Plummeting revenues will make it increasingly difficult for housing providers to build new homes. The CIH report predicts that the worst affected areas will be: Omagh and Fermanagh; Craigavon and Dungannon; Banbridge, Newry and Armagh, and Coleraine, Portstewart and Ballymoney. In these places some types of accommodation will become unaffordable and some areas, including where there is high levels of need, will be impossible to develop and there will be pressures on the quality of new builds.
The impact on single people under 35 will be potentially devastating. Social housing providers generally don’t build shared accommodation so in the near future we can expect every occupant of a one bedroom social housing flat to face a shortfall.
As to pensioners, under the LHA regime the allowance depends on the size of the property – so pensioners who under-occupy their homes will soon be facing a shortfall.
This harsh new regime, with potentially devastating consequences will be worsened still further when supplementary payments to alleviate the bedroom tax disappear in 2020.
It is a toxic cocktail and time to alleviate the impending crisis is fast running out. Action could be taken by the Executive utilising the additional funding secured by the DUP/Tory deal. The problem is that we don’t have one and it is hard to see a direct rule minister flouting his own party’s welfare policy agenda by making the changes necessary to save tenants from financial ruin, and housing associations from the crisis that will engulf them as a result.
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