Welfare Reform and Changes to the Benefits System
If you’ve been a landlord for more than a year or two, you will already seen some fairly substantial changes in the area of welfare benefits and in particular the Housing Benefits paid to tenants.
2013 will see the introduction of even more change, affecting not just private tenants but tenants in the social sector with substantial reforms to just about all areas of welfare provision.
As of the 1st April 2013, virtually all claimants, whether they are in or out of work and irrespective of their circumstances will be affected by the Welfare Reforms. The government says that the reforms will:
‘create the right incentives to get more people into work, protect the most vulnerable in our society, whilst ‘delivering fairness to those claiming benefit and to the tax payer.’ (Source: Department of Work and Pensions website)
As well as changes from central government, local authorities have also been allowed more responsibility for implementing changes and shaping the provision of some benefits in their own areas. It’s not possible to condense all of the changes into this short newsletter and we also don’t yet know all of the details. As always, there are qualifying rules, exemptions and a long list of ‘ifs and buts,’ so this is not intended as a definitive guide. For more information, please check either the Department of Work and Pensions (DWP) or your local Council’s website.
From a landlord’s point of view, this is obviously the biggest concern. As you know, Housing Benefit for private tenants has already changed significantly in the last couple of years, but bigger changes are still to come. Housing Benefit in its current form will be abolished and replaced with a housing element contained in the new benefit, Universal Credit. This will be paid wherever possible to the claimant, not the landlord, monthly and in arrears. There will be some protection in place to ensure that vulnerable tenants or those with substantial rent arrears can have their rent money paid direct to the landlord, but as yet we do not know the details of how this will work or which tenants it will apply to.
The Bedroom Tax
This applies to social tenants only and is a new set of regulations regarding ‘under occupation,’ for social tenants; it’s not actually a tax. The good news is that it won’t affect private tenants. These regulations which take effect from April 2013 will restrict the amount of Housing Benefit for council and housing association or ‘social’ tenants to amounts based on the size of accommodation they need for their household. In real terms it simply brings their benefit into line with benefit for private tenants who, as you know, have their benefit based on the appropriate Local Housing Allowance (LHA) rate for their household size.
From April 2013, Council Tax Benefit in its existing form is being replaced with a new benefit called the Local Council Tax Reduction Scheme. (LCTRS) The rules for LCTRS are set by each local authority in its own area. For further information check out your local Council’s website.
This change will not affect landlords directly; but they do need to be aware of this if discussing
the affordability of their property with a potential new tenant. Although a prospective tenant might be entitled to full Housing Benefit, if they are then responsible for paying the full Council Tax, they might not be able to afford to live in the area they wish to.
Abolition of Council Tax discounts for most empty homes
Although this does not strictly come under welfare reform its an important change directly affecting landlords. The current Class A exemption for properties where ‘structural alterations or major repairs are required or ongoing’ and Class C discounts for properties that are empty and unfurnished’ are both being abolished. The 10% discount on furnished but untenanted properties is also being abolished. This means that landlords will be liable to pay the full council tax on untenanted properties from day one of the void period. Once a property has been empty for two years, it will be charged at a higher rate of 150% of standard Council Tax for the relevant property band.
Replacing the Social Fund
From April 2013, Social Fund Loans and Community Care Grants which have been available from the Department of Work and Pensions to people on low incomes to meet emergency or various types of unexpected expenditure are being abolished.
They are being replaced with a new scheme called ‘Local Welfare Provision,’ which will be administered by councils setting their own local rules. One again refer to your local Council for further information in your area.
The Benefit Cap
From summer 2013, the government is putting a limit on the total amount of benefit that a household can receive, although as always with DWP decisions there are some exceptions and qualifications to this.
This is known as the ‘Benefit Cap’ and its set at: £500 per week for couples with or without children, £500 per week for single people with children and £350 per week for single people without children. If total income from benefit exceeds the cap, it will be restricted by making reductions from the claimant’s Housing Benefit, meaning that they are then liable to make up any resulting shortfall in their rent. As yet, the government haven’t announced a firm date for the cap to be introduced, but it is expected to be before the end of summer.
The DWP has put together a Benefit Cap Calculator you can use that can give you an indication as to whether you will be affected or not.
Changes to Disability Benefits
There will be significant changes to benefits for many disabled people. The main disability benefit called Disability Living Allowance is being replaced with a new benefit called Personal Independence Payments (PIP). If you have any tenant who is receiving Disability Living Allowance, it is important that they comply with any requests for information from the DWP or requests to attend interviews etc.
The DWP have created a checker to show you if or when PIP will affect you and when you will be able to claim. You can use their checker HERE.
DWP has a dedicated page for further information.
Universal Credit (UC) is being introduced from October 2013, to replace a list of existing benefits including Job Seekers Allowance, Employment Support Allowance, Child Tax Credits, Working Tax Credits and Housing Benefits.
People entitled to one or more of these will now just receive one award of UC which will include an element for their housing costs if appropriate. The aim is to simplify a system made up of dozens of different benefits and thousands of pages of regulations that even benefits staff can struggle to understand. Under UC most claimants will just have to make one claim for one benefit to cover most of their living costs, irrespective of where or who they live with, or if they are out of workor working but on a low income. As people’s circumstances change, such as a move in or out of work or an increase in their earnings, they will only need to report the changes once, to one agency.
For claimants who are already in work, the IT systems administering the credit will link in with the government’s tax systems to ensure that people’s claims are updated in ‘real-time.’ And their benefits can be adjusted to take account of changes in earnings. The expectation is that most claims will be made on-line and support will be available for people who don’t have internet access.
The credit is being phased in gradually from October 2013 until 2017. Different groups of claims will move onto UC at different times, but new claims will go onto UC from October. This is likely to include anyone previously claiming benefits who has had a break in their claim and then re-claims.
Keeping on top of Rent Arrears
As a landlord you don’t need telling that whatever may be happening with your tenant’s benefit they need to keep on top of any problems and up to date with their rent. If tenants need help or advice they should make sure they get advice promptly and never leave a benefit issue unresolved.
Until Universal Credit comes in; if a landlord is concerned that their tenant may be receiving Housing Benefit, but not using it to pay the rent, they should report their concerns direct to the Council’s Housing Benefit Service.
Data protection considerations might mean that the council cannot share any information with the landlord or even confirm that the tenant is actually claiming Housing Benefit. Your local Council may be able to assist you in where payments will be paid – you should contact them directly for further information.
This information is provided by kind permission of Sandwell MBC Housing Quality Team.
Further information for the Sandwell area can be found in their special edition edition of The Bugle (Newsletter of Sandwell Landlord’s Forum) – Welfare Reform.