Is A Housing Benefit Rebate A New Solution?

A straight-to-the-point post today where I would like to put forward an idea and have you shoot it down. Tell me here or on Twitter any of the reasons why you think this would never work. Like the earworm song that you hear just as you leave the house and it crawls around your head all day, this is an idea that I first wrote about back in March but has since refused to leave my mind. Therefore I think the sanest thing all round would be to see if you can shoot it down and if not, see what we should do about it.

So what is it? It’s quite a simple thought but potentially if it worked then it could have a far-reaching impact on social housing. We all know the Government really wants to cut the benefit bill – so I've been thinking about a completely new model of funding housing associations that would help them achieve that. I think we all accept we are now in a competitive and a payment-by-results world. But, in my model the capital grant needed to build a new home isn't what you compete on. The money for building the house comes from the government, but what we would compete on is the level of a rebate of the housing benefit – and this rebate would be paid back to the government.

In practice we would say to the government, “You give us £X to build new houses and we'll add our own money to it. For this we will promise to rebate you Y% of the housing benefit we would have otherwise have received from you, for the next five years.” It’s attractive to the government because they get a much-needed reduction in their housing benefit bill, but an added benefit to both housing association, tenant and the government is that the way we would lay off our risk is to focus on getting people into work. Because if we got a tenant into work then they would still pay the rent, but the amount that they claim through housing benefit reduces and we save money on the rebate.

It strikes me that this model has the makings of a truly fair system where the housing association is encouraged to use its power in the community to build something beyond the bricks and mortar of the houses. If all of us looked to think strategically and create jobs, and get recognised for that, we know that we could do more.

So tell me – why wouldn’t it work?

Could The Big Society Bank Change Our Communities?

One of the ongoing criticisms of the Big Society is that it lacks definition. As mentioned in a previous post I’m cautiously optimistic about the philosophy itself, but I thought it might be interesting to show one way in which the Big Society could have a genuinely big impact on funding within the community. This is sketched out in back-of-the-envelope figures so don’t take me to task on the numbers in this post! It's just a way of showing that at least in theory there are changes afoot.

Oh.

For Trafford Housing Trust there is roughly £700,000 of funding each year that goes through our Community Panels - which are about local people making decisions for their neighbourhoods. If we look at the Big Society Bank we could start to imagine what size loan this would produce if instead of thinking of that money as a single yearly amount, we looked at it as being the repayment of interest and principal for a loan. Suddenly, rather than having a single yearly figure of £700,000 then you’ve got a five or six yearly lump sum of £7-10 million. 

What could we achieve with that level of Big Society funding?

Take an example of a community centre. One that's tired and needing money spending on it and then once refurbished, likely to run at a loss for some time (indeed if ever) before it is able to support itself from paid-for activity. If you had a system where you used part of our Community budgets to repay a loan that would do up (or possibly even build the centre itself) and it was partly used to run the community centre in the right way on a diminishing level of subsidy against an agreed business plan, then you’ve got a very different model for use of that money than just putting up some railings or making some car parking spaces.

Could the Big Society Bank go one step further?

There are two other factors that make this switch in funding interesting. The first is if you factor in social impact bonds. For the uninitiated this is a form of payment by results stream. It might be that you say that you want to start a community project and the impact of it will reduce a set social issue by x%. That improvement will save the government £y million per year, so they promise me that money if I achieve it. When I’ve got that promised income stream I can then use it to raise money from a bank. However, if I don’t achieve that result then I still have to make the payments on the bond. Add in the proceeds from a social impact bond and our initial £700,000 of funding per year has now become a very significant sum of money indeed.  

Then we factor in another element based on the simple truth that success goes to success. If we wanted to attract philanthropic money, or go to large companies and get access to their Corporate Social Responsibility money then these are sources of funding that like to see success. Naturally, they’re not going to want to throw money after projects that fail or don’t make much impact. Like it or not – "iconic" projects are one of the things that they like. Getting something off the ground with large capital investment is intriguing because it enables you to go to philanthropists and CSR money and say look what we’ve achieved – with your money we could double this, or replicate it somewhere else – suddenly you’ve got even more community centres.

So how does this relate to the real world? What could you build? Sale West is a great example. There’s a community centre there that’s been fragmented into at least four and – I’ve had two meetings already on this and I still don’t truly understand how it’s set up – potentially five or six management regimes - so the building isn’t managed effectively. When the Sale West estate was built there wasn’t a church and the church there uses the centre on a Sunday. They would like to build a church and their view is that instead of it being a community centre that the church is able to use, that there should be a church that is also community centre with the two spaces both working for each other. Now that means doing something quite ambitious to the site, something which would require significant funding, something perhaps that the Big Society Bank could do. How's that for definition?