Under agenda item 3, we are taking evidence from Dunedin Canmore Housing Ltd on its Department for Work and Pensions direct payment demonstration project. From the association, I welcome Ewan Fraser, the chief executive, and Graeme Russell, the housing services director.
Thank you very much. I will kick off by putting into context some of the work that we have done, then I will hand over to Graeme Russell, who has been running the project on a daily basis, to deal with some of the detail.
I have prepared a short statement and I am happy to answer any questions afterwards. Thank you for the opportunity to meet the committee again—we met last October when members visited our office.
Thank you both for giving us an overview of how things have developed since the project started and—more importantly from our point of view—since we came to see you in October 2012. I recall that when we came, you raised a few issues with us—alarm bells were starting to ring at that point. One issue was the sharing of information: it had become clear that there might be some sort of disconnect between housing departments and yourself. If people who had difficulties had gone to you, the social work department or the housing department, you could not share the information. Has that problem been overcome or is it still an issue?
That remains an issue. If a tenant reverts to direct payments, we as the landlord will not necessarily know their situation. If their benefit has been cancelled or adjusted, the first that we would hear about it would be if the tenant accrued arrears. The relationship between us and what is currently the City of Edinburgh Council’s housing benefit department has been broken as a consequence of direct payments.
Another issue was money advice and assistance. You had someone seconded to you from Citizens Advice Scotland.
That is correct.
There was always a recognition that that could not last beyond the term of the project. Has anything else emerged in relation to facilitating debt advice or other support? Are you concerned about how big a gap will be left when you do not have that direct input from a Citizens Advice staff member?
We are in a fortunate position as the association received additional funding from a trust fund to engage an advice worker for the next few years, so the immediate threat has been removed. The issue is the scale of the challenge and the time that is available given the number of tenants who require advice. As I alluded to in my opening statement, providing the sheer volume and variety of advice that is required would be a challenge for any landlord, irrespective of its size.
When we met you, you said that you were aware of just how important it was to have that person there. We knew at that point that not every housing association—especially the smaller ones—would be in a position to provide such support and advice. Are you still concerned about that?
Yes.
Yes, we still have that concern. However, we are quite lucky in that we are an organisation of reasonable size. We have a board that recognises the needs of tenants and that we are a business as well as a housing association, and that if we invest in the right areas for staff, we can help to run our business, which is to support tenants and keep a roof over their head but also to get rent collected. By investing in and providing appropriate advice to tenants, we can help that process. We can afford to invest in the right areas, but I do not think that a lot of other organisations are big enough or have the financial capacity to do that, so they will struggle more than we are struggling.
Thank you for your evidence, gentlemen. It does not seem all that long ago that we were with you at your headquarters, so I was surprised to hear that it was in October last year.
It was effectively a one-month switch back.
Yes. The other criterion was that the tenant had been contacted on a number of occasions but had not engaged in finding a satisfactory repayment arrangement.
It was not a problem, but I should clarify that the DWP was not involved in the switch back process. It set the criteria, but the switch back arrangement that we had was with the City of Edinburgh Council. We still had a relationship if somebody fell a month into arrears.
So, the DWP did not have a role in the switch back?
No.
But it is likely to in future.
Yes. The DWP will be the agency that is paying universal credit. A landlord would need to notify its local DWP office, or whatever, to get switch back. Alternative payment arrangement criteria to aid that are being tested in the pathfinders just now.
You have picked up on an issue relevant to my next question. The DWP has set out its thinking on the criteria, which is as you have suggested. Will it be a labour-intensive process for RSLs to identify individuals? I presume that RSLs would then have to go to, for example, the DWP, to inform it about those individuals.
That additional administrative exercise will be labour intensive. Our process identifies individuals who fall into arrears whether that is by one, two or three months, so identifying the individual will not be the issue. We have been fortunate under the demonstration project that, because of our relations with the City of Edinburgh Council revenues and benefits department, we can contact it if tenants switch back. I am not aware that the DWP has put in place the protocols whereby we would have to notify a local jobcentre that an individual whom we know to be on universal credit has fallen into arrears and we want a switch back of the rent element of the universal payment paid to us.
That makes it even more labour intensive not only for you but for the DWP, because all that data must be gathered, even if such individuals fall into the criteria by which they would be allowed to switch back.
Potentially, yes.
A lot of resource will be expended in the future that you, other registered social landlords and the DWP would previously not have needed to spend.
That is correct.
Lord Freud made a speech to the Chartered Institute of Housing in June stressing that, even though there will be a switch back arrangement, the underlying assumption will be that that will only be an interim measure before people receive direct payments again. Is there not a danger that we could fall into cyclical behaviour? Individuals could be coming in and out of direct payments regularly, making it even more labour and resource intensive than the situation that we have just discussed.
Yes. An individual could, as a consequence of falling into arrears, move on to alternative payment arrangements, and the DWP is creating a whole raft of different practices for that. Its intention is that nobody would be switched back permanently and that, with advice and guidance, they would revert back to direct payments. The potential is there for individuals to switch back and forth if they fall into arrears, and dealing with that would be labour intensive.
You must wonder whether that is the best use of public resources at a time of constrained finances.
Yes.
I have spoken directly to Lord Freud about that. I agree that there is uncertainty about what will happen. He stated that the switch back process will be of benefit to the RSL, because it will be worth while for tenants to switch and make payments directly because deductions will be made by doing so. However, he also said that the DWP did not have the whole process sorted out. I am therefore not quite sure what will be done about reducing universal credit to pay us directly when tenants are in arrears. Lord Freud is very aware that there will be a problem because of the uncertainty and the exact points that you are making. The DWP is to look at processes that will make it worth while for the tenant to pay their rent, but I do not know what those are yet.
You say that the processes will be worth while but that you do not know what they are yet. It sounds to me like a punitive measure, with deductions to universal credits. Did I catch you correctly?
The DWP is suggesting that it might take a deduction from the universal credit to repay directly the landlord with whom the tenant is in arrears. Lord Freud made it clear that he was aware of the problem, he knew that were would be an issue with this and that they were working on something, but he has not been clear what the exact answer to that will be. Undoubtedly, it will be an issue.
The committee will need to consider whether to explore that matter with Lord Freud.
Prior to the introduction of the project, Dunedin Canmore Housing Association’s net arrears operated round about 2.2 per cent of our gross rental debit, which is £21 million. The figure is now up to about 2.74 per cent, so there has been an increase in our rent arrears as a result of direct payments. I stress, however, that we have been on a one-month switch back, so arrears are tempered by that ceiling of one month.
Graeme Russell came to me mid-year and said that he had to restructure his department. It is not just about mindset and behaviour; we had to look at the structure of our organisation to target the debt recovery side of our operation, which was more generic with housing officers before but which has become more difficult.
Linda Fabiani had a supplementary question, I believe.
My question has sort of been answered in the responses that followed, so I am happy to wait if there are other members before me.
In your conclusion and recommendations, you say that you have
In terms of additional administrative or staff costs?
In terms of additional administrative and staff costs, and any other associated costs that you would not have had to bear if you were not participants in the project.
I will be frank. We have not made a detailed assessment of the costs, and neither has the DWP asked us for that. However, the costs have been not inconsiderable, both in additional resources committed and in the deflection of services towards the project. I could not with any confidence tell the committee what the total cost of the project would be.
But it would be significant?
Yes.
How many additional members of staff have you and other organisations put into dealing with the demonstration project?
Dunedin Canmore has put in additional staff. Some are funded by trusts, and we have rejigged the department—
How much did you get from trusts?
I think that the Robertson Trust provided about £100,000 over a five-year period.
We have also had to work on our IT systems. You have asked a good, searching question.
It would be useful if you could do that. Obviously, those costs will have to be borne by other associations across the country as the changes roll out. It will be difficult for people to access other funding from trusts—organisations will be beating each other up to get to the trusts, I would imagine. You are a fair-sized housing association. How will the smaller housing associations and co-operatives manage to deal with the changes?
As I mentioned earlier, in the past year or so, my colleagues and I have spent a considerable amount of time speaking to others. There are benefits to Dunedin Canmore’s size. The critical mass that we have enables us to employ additional resources. Smaller housing associations—the traditional ones that have around 1,000 or 1,200 houses—probably know their tenants better than we or large local authorities do. With regard to their ability to find resources, they will have to forge alliances with local support agencies and citizens advice bureaux as soon as possible. In the past, they might not have had prominent relationships with those bodies, but if they do not have the required resources they will have to think differently about their engagement with the third sector, the voluntary sector and the advice sector, and about how to make effective referrals to those third parties.
However, again, if they are overreliant on advice services that are already stretched, that might be difficult.
That is undoubtedly the reason. There is raised awareness about the responsibilities of paying rent. Our level of engagement with the tenants over the past year has given them a heightened level of awareness about their responsibilities for rent payment, which they perhaps did not have in the past when direct payments were sent.
Is it fair to say that, in the main, the folk that you have been working with intensively have been better at paying the underoccupancy charge—the bedroom tax—and that those who you have not worked with intensively have been less likely to pay up?
The people who we have not had the opportunity to work with intensively have been less likely to pay—yes, I would suggest that that is the case.
Will some intensive work have to be done by housing associations and local authority housing departments across the country to ensure that folk are helped to try to get them to pay the bedroom tax?
Yes, if the potential exists that they can pay it. The figures that we have are for individuals who have clearly made choices. Our association has helped a number of tenants to downsize or to reduce their bedroom tax and we have helped tenants to apply for discretionary housing payments.
But this is pretty costly not only for those who are affected by the bedroom tax but for the associations and other housing services that are having to put in such intensive work.
As Ewan Fraser and I have said a few times, the demonstration project has required us to re-examine a lot of the administrative assumptions that we made in the past about the collection of rent. I have worked in the business for 30-odd years and, with every respect, I think that landlords—local authorities and housing associations—became a wee bit complacent about rent collection. Our finance director could guarantee that on the 28th of the month, 60 per cent of our monthly revenue would drop into our bank account with little or no effort on our part to collect it. Universal credit and changes to welfare reform will fundamentally change that assumption, so we will have to invest more to ensure that we get the rental income to deliver services to tenants.
Representatives from the City of Edinburgh Council who gave evidence to us the other week said that it had relaxed the criteria for direct housing payments and that they were going back to folk who maybe had not been in receipt of discretionary housing payments before. That will probably mean even more work for you guys to help the council out by trying to get DHPs for more of your tenants so that there is less of a problem.
Up until last Friday our welfare rights officers—sorry Ewan; I am interrupting my chief executive, which is a first—had helped 101 tenants across our entire scope to get a DHP. Something like 368 of our tenants are affected by underoccupancy charges. We have helped more than a third of them in Edinburgh, West Lothian, Fife, East Lothian and Midlothian to apply for a DHP. It has required a considerable resource commitment on the part of the association’s welfare rights staff to help our tenants access that transitional additional funding.
You had maybe better let your chief executive in.
I was going to ask the convener if it was okay to speak, but maybe I should ask Graeme if it is okay to speak.
I have one final question. Obviously, it is a big-bang change and seems to be costing you a fair whack of money to implement. You have also seen a rise in arrears. With more administrative costs and a rise in arrears, your cash flow is obviously affected. Are we at a stage where your future investment in housing stock is affected? If things continue in the same vein, will your plans to refurbish your existing stock or to build new housing in future be affected?
The financial management of our organisation is a lot more difficult, undoubtedly, and we must be careful. We know that we have an income, and we now know what that income is, and we had to put a cap on the rise in arrears—Graeme Russell’s department has restructured and we hope that, with the cap, arrears will start to come down. To date, investment in property has not been affected, so we are still putting in kitchens and new central heating systems and doing all the things that need to be done to maintain the houses properly.
Before we come to Ken Macintosh’s questions, I have one small question. You might not be able to help me with this now, but it would be useful if you could get the information to us after the meeting. You mentioned that you had helped to get DHP for around 100 people. What would your normal level have been in previous years? Do you have an average figure?
I can check with my welfare rights staff, but it would have been infinitesimal. You will appreciate that discretionary housing payments have existed for some years, and my welfare rights staff would helped with DHP applications previously in rare and unusual circumstances.
It would help the committee if we could get a figure, so that we can compare what you are dealing with now with the previous situation. Could you do that?
I am more than happy to do that. If I can find that information I shall provide it to the clerk.
Thank you. I appreciate that.
Do you mind if I ask a few basic questions? I was not a member of the committee last year, so I have not had the advantage of coming to visit you. My questions relate to the key information on page 2 of your paper. First, are the tenants who are participating in the project volunteers, or are all your tenants involved? If just some of your tenants are involved, how did you recruit them?
Let me explain the position. A year past May, Dunedin Canmore and the City of Edinburgh Council agreed to participate in the project. At that time, the DWP and the research organisations wanted a sample of no fewer than 2,000 tenants to make the results statistically valid. Having volunteered for the project, we did our sums along with the City of Edinburgh Council and saw that we had only 1,800 tenants in Edinburgh who met the criteria of being in receipt of housing benefit and being between the ages of 18 and 59. All 1,800 tenants were notified initially by the local authority, because it paid the housing benefit.
That is helpful. You have provided a helpful list of “Tenant characteristics and key information”. Are those facts drawn from the entire cohort of Dunedin Canmore’s tenants, from the 1,800 in the working-age population who were on DHP, or from the 1,020 who participated in the project?
From the 1,020.
So they are drawn from those participating in the project.
Those are the ones who participated at the outset. The DWP commissioned the research company Ipsos MORI to undertake that survey on its behalf, and each of the demonstration projects received a summary of the characteristics of the tenants in the cohort. What is in the report is a summary of the characteristics of our tenants.
Do you have a further summary of those who originally engaged as compared with those who are still participating? You have lost a third through switch back. The Ipsos MORI survey makes a couple of observations, including a comment about arrears accumulation being
Those are my comments.
Could you expand on that? First of all, did the survey cover those who participated and then dropped out?
The survey was undertaken at the very commencement of the project. I can confirm that, partly as a result of the extension of the project, the DWP has commissioned Ipsos MORI to undertake additional research work, which I understand will be published in the spring or summer of next year. It is particularly interested in assessing the circumstances in which people were switched back and the reasons for that, as well as the reasons why people did not participate. In the fullness of time—probably next year, when all the research has been pulled together—there will be more information in the public realm. I have not seen that information or been involved in the research, but it should tease out the specific reasons why people went into arrears, why they were switched back and what the challenges have been for them. That is one of the reasons for having an extended research project.
The paper says:
That was at the start of the project. Some have initiated bank accounts since then, having had advice to develop them.
On page 3 of your paper, there are two graphs, one of which is entitled “National Picture”, but I do not understand what it is showing us.
The first graph, which is headed “National Picture”, shows rent arrears, and the second one shows switch back. I beg your pardon for not highlighting them—they are a compendium of all the arrears and all the switch backs for all six demonstration projects over the period up to payment 12, which was in June of this year. They show the general trend of rent arrears and switch backs for all six projects during the first 12 months of the project.
Are the figures for Dunedin Canmore quite similar to those shown in the graphs?
They are not dissimilar. Our arrears have been marginally less, and the graph for our switch backs—because we were on a one-month switch back—would be steeper and then would level off a lot quicker than would be the case for the other projects.
Does the picture for national rent arrears, where the trend is declining slightly, include those on switch back who are paying back their arrears?
I understand that it does.
Is the trend declining because, now that they have switched back, those people are actually better at paying off their arrears?
I would have to assume that that was the case.
What is a switch forward? Your report shows a figure of 24, with “10 reneged”.
Switch back is what happens when a tenant falls into arrears and their housing benefit is paid to us. Switch forward is where, having had the opportunity to work with tenants, we put them back on to direct payments. We took the decision early on in the association—most landlords did the same—that if somebody fell into arrears they should not be damned to be on switch back. We worked with some of those tenants, worked out what their arrears problems were, got them to repay some of the money on an incremental basis, and provided them with the advice and information that they required. That is a switch forward. They had switched back, but now they have switched forward. To date, we have had 24 of those, but 10 have reneged already and have been switched back, so they have been switched back, switched forward and switched back again.
Did you ask all the 300 or so who have been switched back to switch forward?
The opportunity to switch forward has been presented to them. If they engage with us and start to pay off the arrears that they have accumulated, we would consider that. However, communication with tenants can be difficult, particularly with those who fall into arrears, because they bury their head in the sand—that is common to people who face any issue—so we have had major challenges in engaging with tenants who find themselves in a month’s arrears and are unwilling to pay back, or to do so in a manner that would be commensurate with the project.
I have two more questions, just to make sure that I understand the figures. How did you calculate the cumulative rent arrears, which you have estimated at £150,000?
That figure represents the arrears that have accumulated among those tenants involved in the demonstration project over the year.
Would there not have been rent arrears among those tenants anyway?
The figure relates only to the period of the project. If somebody had rent arrears beforehand, that is not included. The figure includes arrears only from the commencement of their participation in the demonstration project.
But you would have expected some of those participating in the project to go into rent arrears, even if they had not been involved in the project. I am trying to work out how much of the arrears is attributable to the system. You recruited 1,000 tenants on to the project, of whom 671 are still on it. Some of them would have ended up with rent arrears anyway.
They may well have done, just because of the cost of living.
Or because of the bedroom tax, for example, or any number of issues.
Yes.
Have you subtracted an estimate for those whom you would have expected to get into rent arrears?
No, and I think that it would be difficult for us to identify them. The other reason for that arrears figure is that, because we are on a month’s switch back, the vast majority of the £149,000 equates to one month’s switch back for 300 or so tenants. We have not had the opportunity to analyse whether those tenants would have gone into arrears anyway, or whether there was any other reason for the arrears accruing. However, the figure of £149,000 is attributable to the demonstration project from its commencement.
Your report includes the interesting fact that 75 per cent of participants pay their bedroom tax in full. However, the bedroom tax has impacted on all tenants, has it not?
The impact is not on all tenants; some are not affected by the bedroom tax.
That is true.
Dunedin Canmore has 4,500 tenants, and 368 of them are affected by the bedroom tax.
So the number is only small.
We used the date when housing benefit was traditionally paid. Before the demonstration project took place, the City of Edinburgh Council paid housing benefit into our bank account on the 27th or 28th of the month. All that happens now is that, on the 27th or 28th of the month, the housing benefit payment that formerly came to us goes into tenants’ bank accounts.
So the idea that people would struggle if they were paid the whole month’s amount on the 4th of the month but payment was not collected for another 28 days was not a factor.
That was not a factor that we replicated in the demonstration project, because housing benefit was paid when the local authority would normally have paid it to us.
You say that one of the issues is the number of people who use weekly budgeting and cash budgeting. Do you collect cash from them weekly?
No. The rent accounts remain on a monthly cycle, because housing benefit is paid to us on a monthly cycle. We have not changed that. No change has been made in any other benefit entitlement; the change is simply in the payment of housing benefit. The payment cycle has remained exactly the same as it was before the demonstration project commenced.
Thank you—that was helpful.
Before I talk about the main issue that I want to raise, will you give me an idea of how many people in your overall tenant base receive full or partial housing benefit?
Over our entire stock, something like 45 per cent of our tenants receive full housing benefit and about 20 per cent receive partial housing benefit. It is fairly common among most associations for between 65 and 70 per cent of tenants to receive some form of housing benefit.
I will expand on some of what Jamie Hepburn asked about. You mentioned the difficulty of knowing—the inability to know—which elements of a tenant’s universal credit relate to housing benefit. It strikes me that, within the overall universal credit sum, people’s circumstances might change—
—on a weekly basis.
Absolutely. People might start off with full housing benefit, then get work and go on to partial housing benefit. One of the 35 per cent who have never had housing benefit might hit hard times and end up on housing benefit. It will be difficult to know what housing benefit is due, if you like, and what you have to collect.
The only thing that we will know with any certainty is what a tenant’s rent is. Under universal credit, an individual’s benefit entitlement—which I understand will be based on their application date—could vary weekly. That will depend on the hours that they work, tax credit changes and a variety of things. Under the principles on which universal credit is founded and will be introduced, a landlord—like any creditor—will not know what the payment is or when it is received.
When the Chartered Institute of Housing in Scotland gave evidence fairly recently, it said that it foresaw difficulty for many of its members in knowing what is due for rent or any component of rent.
Yes.
That leads me on to the last of your conclusions and recommendations, which is that
We do not do so at present, but we could in the future.
Right. I am sorry—I picked that up wrongly. Such sharing is going to have to happen. Development of effective data-sharing arrangements and so on sounds straightforward, but the debate about it has been going on for many years.
I am not suggesting for one minute that it will be straightforward. It will be a major challenge.
Exactly. When you first consider data sharing, it absolutely makes sense, but then you see all the component parts that are involved and the constantly changing circumstances of all the individual people. I believe that there is also a data-protection element. A bit of me says that when a person gets a lump sum that can vary depending on circumstances, it is no one’s business how much it is, as long as the rent is paid.
You are perfectly right.
What business is it of the other components of the system what proportion of the lump sum is for the bedroom tax or whatever? As I said, data sharing is a great theory that we have all been talking about for years, but there are restrictions that do not allow it to work in practice.
The parallel is to ask what right we, as a landlord, have to ask what the wages are of a tenant who is not in receipt of any benefits.
If I remember rightly, one of the great benefits—to use the word in a different sense—of the universal credit, according to Lord Freud and Iain Duncan Smith, is its simplicity for the recipient.
Yes. It is simple from the recipient’s perspective.
There is also simplicity of administration. Do you have a view on that?
The welfare benefits system that my staff and I have been used to working with for many years is overly complex and prone to failures. From a personal and professional perspective, the underlying principles of universal credit make common sense—it is a simplified system using one payment and it places some responsibility for the financial affairs of the household on the householder. From a landlord’s perspective, the challenge will be to change a culture that has existed for more than one generation that rent is due on the first of the month.
Putting in place simple systems is actually quite easy; the problem is the cultural change. We should remember that we are dealing with people who are in the greatest housing need and who need the most support. It boils down to the fact that the people whom we house struggle with a range of things. We can put in place a simple system, but the difficult bit is to get people to change the way they have worked for years. The cultural change is much more difficult than the creation of a simple system.
It is interesting to come into the discussion at this point, because there is a rights issue here in relation to tenants, and I do not think that we should be prepared to suggest that people’s rights can be suspended just because they are on benefits. However, it is the nature of such meetings that we jump around a bit, and I want to go back and take up an issue that we have discussed already and explore it a wee bit further in a slightly different way.
“Poor” is not the word that I would use. However, if a tenant was having housing benefit paid direct and we had no need to see them, we did not engage with them. Our organisation has that in common with most landlords. Unless there was a problem, we had no communication with many of our tenants so long as they had their rent paid. The demonstration project has required and forced us to engage with tenants with whom we previously had little engagement or communication, and about whom we knew little.
Previous lines of questioning have touched on resource issues; the implications for workload on the ground and the cost of covering that additional workload. I accept that there is an issue. When it comes to the improved relationship that you now have, how constructive has that change been?
It has been very positive. I suggest that, for many of our tenants, the association was in the past a remote landlord to which to report repairs. For a significant number of our tenants, the demonstration project has resulted in a level of engagement that they had not previously experienced, which has enabled us to gain additional information and to target resources in a way that might not have happened in the past. That has been a positive consequence of the demonstration project. We have had to engage with tenants with whom we had not engaged in the past, because we needed to ensure that they were able to pay the rent.
It is also a question of understanding tenants’ profiles. When we allocate a house, we know who is moving in, but with time the profiles of tenants change as circumstances and family sizes change. To ensure that we have a real understanding of our tenants, it is good to have a stronger profile of the tenants who live in our houses, because that can affect how they pay rent and how they engage with us. That is something that we had wanted to do anyway, just to ensure that we understood our tenants’ needs, and also with regard to what is kept on IT systems, so that when people call us we can help and support them.
I can think of a number of specific personal circumstances in which tenants are now engaging with the association for reasons and at a level that they would never have considered a year ago, because they had no need to. The introduction of direct payments—in addition to some of the challenges that it has presented—has made our association, as a landlord, more self-aware and more aware of the situation in which many of our tenants find themselves and of the services that we need to resource and target. In that sense, the change has been positive.
When Mr Fraser expressed that view in answer to an earlier question, I almost jumped in and said that that is the policy intention behind the change.
I think that it has already changed the attitude of a number of tenants; if the association continues on the path that we are going down and continues with the changes that Ewan Fraser mentioned we have already taken, I think that that will continue. The demonstration project is fundamentally changing the way in which our staff perceive tenants and their relationships with them. It has enabled us to better target our resources so that we can assist those who are in the greatest housing need, and we have uncovered issues with services to tenants that would have remained unknown to us had it not been for the project.
The question of how society as a whole will be changed is a broad one. Technically, we are a landlord, if we take it down to the basics, but we really take people from homelessness to trying to sustain a tenancy. The only way in which someone can sustain a tenancy is to be employed, and I think that the policy is to get people back into employment. However, a lot of the people whom we house are not ready for employment, and if the societal change is going to take place, we have to do more than just give people a house.
Will you clarify that? Are you expressing an ambition to do more if you had the resources?
We already do more, but we could do even more with more resources. The way in which an organisation such as ours is financed is that we get a bit of grant and a bit of private finance, and then we charge affordable rents. We pay a mortgage, and what we have left is for basic housing management and maintenance; that is all. Now, we are being charged with doing more with the people whom we house in order to help the changes to take place.
There is no deep-seated, hidden desire to just throw your tenants back into the pond and have the money paid directly into your bank account again.
Absolutely not. I do not think that that would help anybody.
That would be self-defeating. The demonstration project is the start of a journey for a lot of our tenants. Ultimately, as the housing services director at Dunedin Canmore, I think that the best way for us to raise our tenants’ standards of living is to help them to get off welfare. We can do that through various means including training, volunteering and employment initiatives, and that is what the association is working on just now.
Linda, did you want to ask a short supplementary question?
Yes. I am a bit wee concerned about the way the conversation is going.
I am sure you are.
Thank you, Alex. I do not think we need any interventions. Linda, do you want to ask your question?
Yes. I just want to put on record the fact that we are not talking about welfare housing. Many people take social housing, whether from housing associations or councils, as a positive choice; they work hard, pay their rent and consider that house to be their home. We heard that about 35 per cent of Dunedin Canmore tenants are such people. Do you agree?
Yes. In Dunedin Canmore, at one end we have homelessness hostels and at the other end we have shared ownership—and we have everything in between. We are a rounded housing company that provides for a wide range of people in housing need. In 2007-08, housing needs changed significantly; people who might previously have bought a house now cannot do so. We have been looking at mid-market rent and market rent and offering better-supported products. We are a rounded landlord that provides for everybody and people stay with us for the long term.
Thank you.
Good morning, gentlemen, and thank you for coming along. It has been very interesting to hear how things have panned out since last we had a chat about all this in October 2012.
They will continue with the new system. We discussed that with the City of Edinburgh Council and we are in agreement. We will write to the tenants to thank them for participating in the project and will tell them that if they want to revert to direct payments to us, they should notify the local authority, and that if they want to maintain the status quo, they are welcome to do so.
It will be interesting to see what they do and how easy it is for people to switch back to that system if that is what they wish to do.
There was a meeting between Lord Freud and the SFHA in London to look at a range of changes as part of welfare reform. I was coming from consideration of how manageable the process would be. We have always said that we would take a practical and professional approach to management practices in order to make things work. That is what we are interested in.
We all wait with bated breath. Perhaps the committee will make its own inquiries.
A year and a half ago, when our association first got involved in the demonstration project, at one point in the early planning of it, in my early meetings down in Birmingham, the general mantra was that there would be no exemptions and that everybody would be involved. However, as a direct consequence of the research that was undertaken in the demonstration project, the DWP’s mindset has shifted considerably. It is evident from the work of the demonstration pilots that there are individuals out there who, with the best will in the world, cannot manage direct payments. The last that I heard was that the DWP accepts that perhaps 30 per cent of claimants will not be in a position to manage direct payments, although advice and assistance will be provided.
I have no doubt that we will make further inquiries.
That is a very big and difficult question. How does a bank assess the risk associated with a recipient of its funds? It usually does that through the margin—the amount of interest that it charges. You will find that interest rates creep up, because the banks build risk into their lending profile. That will change for every individual organisation, so it will not be the case that every housing association is charged 5 per cent, for example. That would not happen; the banks would look at each organisation.
Has there been any evidence of potential downgrading at this point? Dunedin Canmore has been involved in the demonstration project, but other RSLs that are not part of the project and have not had help with meeting costs to change systems or hire people will have a big step ahead of them if the project is rolled out. Dunedin Canmore is already a wee bit further down the road, not least because of the assistance provided. Has there been any talk in the circles that you mix in about the investment side of things and about financial institutions being seriously worried and discussing downgrading?
I did not say that they were seriously worried. There is a degree of nervousness, but that is different from being seriously worried. There is a discussion, but the Scottish Housing Regulator is also taking a big interest and is monitoring closely the arrears, rent levels and financial capacity of organisations, so the regulatory side of things involves trying to gather and distribute information and working more closely with the sector. It also has to work with the financial institutions to ensure that there is a degree of regulation and monitoring. The banks and the regulator ask for 30-year cash flows, five-year cash flows and management accounts, and a range of checks and balances is built in to ensure that the confidence in the sector remains.
The demonstration project is a precursor to the introduction of universal credit. We are not involved in liaisons with the DWP just now. The committee will be aware that there are a number of pathfinders operating, mainly in north-west England, in which people are on universal credit, and that relationship between the landlords and DWP is live just now. It is far too early to say, and I do not have a great deal of detailed knowledge about how that liaison is taking place, but I can reiterate what I said earlier—that, whereas in the past we have had a constructive and positive relationship with housing benefit departments regarding housing benefit payments, that relationship will have to change. With the introduction of universal credit, we will have to forge new relationships, and I do not yet know how that will pan out over time. The demonstration project is not universal credit; it is only the payment of housing benefit, and only time will tell how things pan out in the future.
I guess that the IT issue is a big one, which the committee looked at a while back, and it might be timely to revisit it, because it is pivotal. You can have any relationship that you like, but if it rests on a functioning IT system, which is clearly not there at the moment, that raises issues. Thank you, gentlemen, for your answers.
We have factored in the need to look at the universal credit pilot, and we are working on how we can do that.
I have a small supplementary question, following on from what Annabelle Ewing just said. Yesterday, I heard anecdotally that some housing associations had been downgraded by the ratings agencies—I am not sure whether it was Standard and Poor’s, Moody’s or one of the others. I take it that you gentlemen have not heard about any of that.
No. In a Scottish context, we do not really get the same grading. Some of the huge English RSLs are looking at the bond markets, and the big financial institutions tend to grade them more in that case, but the Scottish ones are not at that size.
It would be useful for the committee to find out whether there has been any downgrading, although I realise that it is more likely to be happening south of the border, and to find out whether that downgrading has happened because of other issues or whether welfare reform has acted as the real risk factor.
That is a fair question and we should get that checked out as soon as we can.
I shall furnish your clerk with the information that you sought.
Yes, we asked for information on the increase in DHP and on the additional costs that you have incurred in running the project. That would be beneficial to our work.
If there are any points that you reflect on later, please do not hesitate to contact us and we will try to help you.
The next item of business will be taken in private.