Housing Associations and Welfare Reform

October 2013

Mary Taylor Chief Executive

SFHA

Overview

• HAs in Scotland • Current

challenges – welfare

• What is needed

Sector profile

• 280,000 homes for rent, – plus shared homes, part ownership and factoring – plus mid market and intermediate rents

• 11% of all housing in Scotland – 46% of all affordable rented housing

• 150 HAs and co-ops– Range of sizes: 400, 4000, 40,000. Typical around 1800. – Roles vary – All regulated social landlords (RSLs) by the Scottish Housing Regulator

• More than just housing– Support, care, regeneration, employment training, social enterprise,

garden schemes and more

Social Housing in ScotlandSocial Rented sector Private Rented sector

Mobility 40% in their home for more than 10 years

A third in their home for less than a year

Size 576,000 (24%) 325,000 (14%)

Property size ~80% one or two bedroom ~60% one or two bedroom

Turnover 12% 1br available (69,000) At least a third? (107,000)

Demand ~350,000 ?

Housing Benefit 65% claim HB, equates to 55% of rent received

30% claim LHA

Housing need ~45% ‘vulnerable’ Job movers, students

Age of tenants 54% are 45 or older 52% under 35

Economically inactive 52% (older tenants) 36% (student renters)Cost (rent per week) £62 ~£160

Housing in Scotland cf GB

High proportion of social housing stock High proportion of new housing starts as social housing

o = to NI

High proportion of government spend on housingo 3.3% cf 5.1% in NI

High spend on housing per household Lowest average rent as a proportion of average earnings Lowest proportion of social tenants on HB Lowest average weekly HB spend for social renters

Current challenges in ScotlandHigh demand

Highest proportion of new HA lets going to homeless households Higher proportion of social housing as temporary accommodation Higher than average unemployment rate Rising demand for intermediate rent property in some locations

Supply constraints Highest RTB sales as a proportion of social housing stock – RTB to be abolished Greatest loss of social housing over past 20 years Lower than average RSL spend per unit when including private finance Falling subsidy per unit drives rents up when changes to HB makes harder to afford

Welfare Cuts in Scotland

£499m

£302m£290m

£225m

£165m

£81m

£50m£32m £13m

Incapacity benefitsTax Credits1 per cent upratingChild BenefitDisability Living AllowanceHousing Benefit: Local Housing Al-lowanceHousing Benefit: Under-occupation ('bedroom tax')Non-dependant deductionsHousehold benefit cap

£1.66bn (24%)

Annual impact in 2014/15

Est’d Impact of welfare cuts on Housing Associations in Scotland

2013-14 2014-15 2015-16 2016-17 £-

£25

£50

£75

£100

£125

£8.4 £16.7 £25.1 £33.5 £9.9

£19.7

£29.6

£39.5

£19.9

£30.0

£40.1

£50.3

Housing Benefit Other Welfare Benefits CPI/RPI wedge

Annu

al Im

pact

(£m

)

£38m

£66m

£95m

£123m

Distribution of HAs’ arrears

Bedroom Tax Share of LA Arrears

0%

20%

40%

60%

80%

100%

24%

13%

30%

25%

28%

32%

36%

44%

29%

36%

32%

35%

42%

46%

45%

47%

45%

49%

67%

49% 53

%

56%

58%

61%

62%

63%

65%

65%

68%

68%

70%

71%

72%

72%

73%

73% 83

%

97%

Bedroom Tax arrears Any arrears

…three wishes?

1. Time to organise downsizing 2. Recognition that social housing requires

investment 3. Housing Benefit is a subsidy for housing

1. Time to help tenants to downsize

Then

ue

Glen O

aks

Anonymous

Pineview

Cunningham

eLin

k

Wish

aw Dist

rict

Kingdom

Barrhea

d

Yorkh

ill

Elderp

ark

White

inch an

d Scotst

oun

Port of L

eith

0

100

200

300

400

500

0%

5%

10%

15%

20%

436

199245

87

350 365

69

300

88

30

103 113

192

1% 2% 2% 3%3%

5%6%

7%9%

10%

13%15%

16%

# Under occupying% Downsizing

Und

er o

ccup

ying

tena

nts

Dow

nsizi

ng te

nant

s

2. Recognition that social housing requires investment

Housing is not like other commodities

• Imperfections• Supply• Info• Location• Finance

• Equity • Fair access

Hence intervention and public investment

2. Investment 19

20

1922

19

24

1926

19

28

1930

19

32

1934

19

36

1938

19

40

1942

19

44

1946

19

48

1950

19

52

1954

19

56

1958

19

60

1962

19

64

1966

19

68

1970

19

72

1974

19

76

1978

19

80

1982

19

84

1986

19

88

1990

19

92

1994

19

96

1998

20

00

2002

20

04

2006

20

08

2010

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Private and Social Housing Completions in Scotland PrivateSector

Public Sector &Housing Association

Co

mp

leti

on

s

1919

Add

ison

A

ct19

24 W

heat

ley

Act

1930

Gre

en-

woo

d A

ct

1949 Housing Act

1964 Housing Act

1974 Housing ActW

W2

Cred

it Cr

unch

Thatcher Era

2. Investment

0

5,000

10,000

15,000

20,000

25,000

30,000

3,919

1,096

Social Housing Completions in ScotlandHousing Associa-tionLocal AuthorityOther Public

Com

pleti

ons

2. Investment

1986/87

1990/91

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

£-

£100

£200

£300

£400

£500

£600

£700

£800

£900

£1,000

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

HAG Private finance % Private

£ m

illio

n

% P

rivat

e

3. Housing Benefit is a Subsidy for Housing

£-

£5

£10

£15

£20

£25

£6.5

£23.1

Housing Subsidy Spending in Great Britain

Public investment in social housingPublic expenditure on Hous-ing Benefit

£ bi

llion

(cas

h)

3. Housing Benefit is a Subsidy for Housing

Housing Subsidy Spending in Scotland

Devolved

Reserved

If I had just one wish?

What challenges lie ahead People – governing bodies, employees , customers

• Demands and expectations of customers • Values of providers • Intellectual demands of future strategy • Emotional demands - morale and resilience • Attitude to risk • Leadership

Doing things differently?

• Diversify e.g. into mid-market rent? • New forms of finance – bonds, securitisation • Different relationships with other bodies

– Contracting, partnerships, subsidiaries

• Services to people – older, poorer, more vulnerable – relationship to health and social care agenda

• Any change could mean greater risks– all sorts, everywhere … – governance implications of assessing and treating risk

Prospects?

Prospects?

Shift from capital to revenue subsidy

Greater risk with reduced Housing Benefits

Greater dependence on private finance Cuts to Housing

Benefit to control welfare spending

1% cap undermines ability to inflate rents

Direct payments undermine ability to collect rents

Enough additional cash to support borrowing?

Depressed value of the homes used as loan security

Downward pressure on credit ratings

Increased risk of alternative funding sources relative to inflation

Risks no new homes for social rent

Worst that could happen?

• Drop in demand, higher turnover • Repossessions and abandonments• Less funding (rent and borrowing)• Costlier procurement• Job losses and less contractor capacity • Reputational damage from getting it wrong • Sharing, partnering, merging

Best that could happen?

• New rented markets & business opportunities – Eg selling services to others

• Opportunity to get closer to customer – better customer relations

• Challenges provide imperative to – greater efficiency– focus on asset management

• Sharing, partnering, merging