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Councils, Housing Associations and tenants are all struggling.

The changes made to housing benefits, which were introduced by the UK Government’s welfare reform programme, are having a significant impact on Welsh councils, housing associations and tenants. Councils and housing associations are all struggling to deliver effective and sustainable solutions to address the challenges both they and tenants face, according to a report published today by the Auditor General for Wales.

Auditor General for Wales, Huw Vaughan Thomas said 

The welfare reform and in particular the changes  to housing benefits are having a significant impact on social housing providers and tenants in Wales. Councils and social housing providers need to work together more closely to find sustainable solutions that will mitigate the risks to tenants that are arising from these changes and the further reforms which are due to be implemented.

The UK Government estimates that its welfare reform programme will reduce annual spending on housing benefit by around £1 billion in 2013-14 and 2014-15. To help deliver these savings, housing benefit payments have been reduced for households with working age adults who under occupy their home and a benefit cap has been introduced restricting the amount people can claim.

Yesterday's report has found that the changes made as a result of the implementation of the welfare reform programme  will affect a greater proportion of tenants of social housing in Wales than in either England or Scotland. The report also found that there is increasing poverty, debt and exclusion amongst some social housing tenants, which coincide with these changes. Rent arrears of current social housing tenants in Wales have also increased; the number of tenants in arrears went up by 23.3 per cent in the first six months following introduction of the spare room subsidy and benefit cap. 

The report identifies some weaknesses in how councils are responding to welfare reform.. There is significant inconsistency in how councils are monitoring and evaluating delivery of their plans and, despite local authorities identifying welfare reform as a substantial risk, approaches being taken to mitigate this risk are not always comprehensive.

The removal of the spare room subsidy has resulted in an increased demand for smaller homes. However investment to develop new housing is limited and it will take time to develop new properties. Councils and housing associations have done little to increase their supply of smaller housing, either through building new properties or converting existing properties to make smaller homes. To date there has been limited take up of lodgers or use of the private rented sector, and performance on supporting tenants into permanent employment to reduce the impact of welfare reform is mixed.

Our report also found evidence that welfare reform changes to housing benefit and the introduction of the benefit cap are resulting in increased costs for, councils, housing associations and tenants and the Welsh Government has set aside money to address some of the impact in Wales. Social housing landlords are having to make a greater investment in staffing and administration costs to deal with managing empty homes and collecting rent, which has become more complex since the introduction of welfare reform. The report concludes that the roll out of Universal Credit and direct payments – where tenants receive the benefit direct rather than have the money paid to their landlord – could make this situation much worse.

The report makes seven recommendations for improvement, including: