Welfare reform: lessons from Wakefield’s pilot

Kevin Dodd, Chief Executive of Wakefield and District Housing (WDH), shares his experience of how welfare reform will affect tenants and the need for the housing sector to adapt to change.

Wakefield and District Housing (WDH) was formed on 21 March 2005, when over 75 per cent of tenants voted with an 80 per cent majority for the new company to take over responsibility for Wakefield Council’s housing stock.

Since 2005, WDH has invested over £700 million in its strategic improvement programme of refurbishing all its properties to the ‘Wakefield Standard’. This is higher than the Government’s Decent Homes standard and was a key promise made to tenants as part of the stock transfer offer.

Welfare reform is here to stay in some way, even if the landscape is continually changing. We support the principles of welfare reform. Tenants who can manage their finances should receive the support to do this. However, there are many people who will not be able to cope. This is a real threat to the way housing providers work.

We became one of the demonstration projects alongside Wakefield Council to test how tenants will react and change their behaviour when faced with competing financial priorities, using our learning to try to shape the Government’s final policy when the system is introduced.

We’ve found that many people are making partial payments to make ends meet. Many tenants in the project receive their income from several sources, juggling their obligations to us with other financial commitments.

I read recently that universal credit could leave tenants “a washing machine away from not paying their rent”. The reality is that many tenants are making the same decisions that you or I would when faced with personal crises.

These people are the ‘strivers’, and we must help make direct payments work for them. However, other people are not able to manage. Only half of the 2,000 tenants eligible to enter the project did so. The rest were judged to be ‘vulnerable’ and unlikely to cope. Of those that entered the project, only 800 still receive direct payments. The rest have had their housing benefit switched back to us due to non-payment. The majority are tenants who have consistently underpaid.

So far, arrears in the project have risen from 2 per cent to 11 per cent, a total of £180,000. Although we expect this to level out at 5 per cent, if arrears across the district rose to 5 per cent of debit we would need £2 million extra each year to cover bad debt.

Then there’s the cost of this increased intervention to help tenants understand universal credit, which we calculate to be as much as £3 million each year in lost capacity to WDH when it is fully rolled out in 2017.

Bedroom tax and the benefit cap will have a more immediate impact. We estimate that the total cost of both to WDH will be up to £5 million each year in lost capacity; that’s one new build property per week.

In short, we believe welfare reform could cost WDH up to £10 million each year. The equivalent of losing £300 million from our total business plan. Welfare reform will have a major impact on the way landlords do business.

The Government wants us to play a greater role in tenants’ lives and to build more properties, while stretching our resources and removing the financial surety that makes us attractive to banks.

Already there is greater demand on our smaller accommodation, and those who cannot be re-housed will need additional support to make their reduced income go further.

These are challenging times for housing providers, and we all must adapt quickly or the risks could be severe.

Communities

WDH’s vision is to ‘create confident communities’, and WDH aims to have a positive impact on the social, physical and economic well-being of the Wakefield district and its tenants and residents.

In 2007, WDH became the first and largest housing organisation to achieve an ‘excellent’ rating by the Audit Commission, and last year became the first housing association to reach the final of the European Business Excellence Awards, after coming first in the regional and UK finals.

The Wakefield district itself has a proud heritage, ranging from coal mining and art to rugby league and rhubarb, but it also faces a number of major challenges.

Although relative deprivation has improved slightly in recent years, the district remains the 67th most deprived in England. The Index of Multiple Deprivation 2007 shows that 30 per cent of Wakefield district’s population live in the most deprived areas in England.

Nearly a quarter of the district’s children aged under 16 live in households claiming out of work benefits, and the district’s jobseeker’s allowance claimant rate is 46 per cent, both above the national average.

WDH works extremely hard to tackle unemployment through innovative schemes such as the community employment advisors and the WDH Academy, where out-of-work young people take part in extensive placements with WDH to gain key skills and experience. This work will become even more important during the onset of the Government’s welfare reforms.

The Wakefield district also faces the challenge of an ageing population, with one in every six people in the district aged 65 or over. This figure is much higher for WDH tenants: at stock transfer eight years ago, 55 per cent of WDH tenants were aged 65 or over.

With the challenges of welfare reform, the need to diversify and change the way the organisation thinks and delivers its services is a top priority. Learning the lessons of transfer and doing what’s right to meet local needs is essential. For Northern Ireland, the leap to take a step-in to the transfer future is an exciting challenge.