Development Department Research Programme
Deposit Guarantee Schemes in Scotland
Centre for Housing Policy, University of York
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People on low incomes renting in the private rented sector (PRS) often find it difficult to pay a deposit, usually equivalent to a month's rent. Some schemes offer help through offering, in place of a deposit, a guarantee that in the event of eventualities such as damage, theft or rent arrears, the landlord or letting agent would be recompensed up to an agreed level. These schemes are a valuable preventive measure against homelessness. In 2002 in Scotland, the Homelessness Task Force recommended that all local authorities should provide access to such schemes by 2004. These findings are based on a multi-method study of nineteen schemes operating in Scotland. The research was designed to provide guidance on the features recommended for any new schemes.
- Schemes were operating in nineteen of the thirty-two local authorities, and were in the process of development in a further ten areas.
- Over 500 clients had been helped with deposits between April and September 2002. In practice, schemes operated with very few restrictions in the clients they helped, although they tended not to accept clients with more intensive support needs, and the housing benefit regulations severely restrict their effectiveness in dealing with under-25s.
- Schemes can be extremely effective in preventing homelessness if access to this service is secured early enough by the client. In some instances, poor information networks meant that clients only became aware of schemes after a stay in a hostel or experience of street sleeping.
- Schemes were by no means uniform in their management, their use of the PRS or the services they offered. Many had evolved a way of working that countered difficulties presented by the state of the local PRS and the operation of housing benefit regulations.
- Essential services from the perspective of clients included help with finding and setting up a tenancy, and tenancy support. Tenants said that having to find property for themselves with only a deposit guarantee to offer a landlord was daunting, since the concept was not easy to explain. Landlords and agents were generally happy to accept guarantees, but wider availability of cash help with rent in advance might widen the pool of properties available to tenants.
- Schemes were not always able to set up tenancies that were financially sustainable, given limited supplies of property and the housing benefit restrictions. For some clients, help with securing a private rented sector tenancy created work disincentives as the rent might not be affordable if the client found employment.
- Schemes needed to have a clear role as defined through liaison with the local homelessness agencies. However, the flexibility of schemes means that they are able to offer a variety of methods for meeting the purpose of securing PRS accommodation for people in housing need, and in most areas are likely to constitute a valuable addition to housing options.
Nineteen schemes were included in the study. They varied in their management structure: some were managed wholly within the local authority; some were based on joint working agreement between a voluntary sector agency and the local authority; there were some schemes that operated within large voluntary sector housing and advice agencies; and there were two stand-alone schemes that operated wholly independently.
Staffing resource for the schemes varied substantially. None of the local authority schemes had a full-time scheme worker, although a full-time post was being planned. The voluntary sector schemes were much more likely to have a full-time worker in addition to relying on volunteers to perform sometimes quite central roles in the process of setting up and ongoing management of tenancies. The majority of schemes received funding from the Rough Sleepers Initiative: indeed, in half the cases, this funding represented all their income.
According to statistics collected by the Glasgow Homelessness Network, between 1st April and 30th September 2002, 1584 clients were registered as having used a deposit guarantee scheme. The number issued with a guarantee was 521. Schemes varied in their scale of operation. The Fife Keyfund scheme was by far the largest, dealing with 93 new clients a year. Active but small schemes may assist an average of around 10-15 clients a year. Many schemes were upwardly revising their targets for dealing with clients.
Schemes were quite flexible with regard to the clients they accepted. Interviews with scheme clients demonstrated that scheme help could usefully be extended to those with low-level support needs, including people recovering from drug and alcohol addiction, and those with mental health problems such as depression. However, most schemes did not offer assistance to under-25s, largely because of the difficulties with Single Room Rent restrictions under housing benefit; and they tended not to help clients with intensive support needs since, for the most part, accommodation in the private rented sector was not viewed as appropriate for this group. Schemes also perceived that funding arrangements with the Rough Sleeper Initiative precluded their extending assistance to people deemed priority homeless.
Schemes used the private rented sector in different ways, depending on the state of the local housing market, particularly in respect to the availability of social housing: as an interim measure, to enable people to move out of resettlement hostels and into more independent accommodation with a view to moving into social housing in the longer term; as emergency accommodation, providing speedy access to homeless households in locations where hostel provision was limited; and as a long-term option, for clients whose other housing options were severely restricted. Schemes were not rigid in interpreting the role that the private tenancy would play in resolving someone's housing difficulties. The flexibility was evident in interviews with tenants. Some had no intention of moving out of their private tenancy, had an affordable or no shortfall and had long-term illnesses that meant that they were unlikely to seek work. For others, the private tenancy was a means of moving out of hostel accommodation, and a way of getting back on track although it was anticipated that a move might be necessary if work could not be found that would cover the rent.
As a means of tackling homelessness, the deposit guarantee scheme has a very particular preventive role if access to this service is offered early enough in the, often protracted, downward trajectory that usually characterises housing difficulties. Some of the interviewees had known that a period of settled housing was due to come to an end (for example, following relationship breakdown a partner had given them a 'deadline' to leave by) or had experienced a period during which they 'sofa surfed' with friends or relatives. It is during this period that information about scheme help should get through to people. However, many of the interviewees had only heard about the scheme when they had descended to living in hostel accommodation, in some instances after one or more nights sleeping on the streets. This situation held despite the fact that they may have been to the council's homelessness office on a number of occasions.
One final consideration with respect to scheme effectiveness in dealing with homelessness is whether the schemes were able to create sustainable tenancies. The interviewees' experience indicates that in some cases, clients were being set up in tenancies with substantial shortfalls between the housing benefit payable and the rent charged, and these sums had to be found from other benefit income. Many of the claimants had to meet shortfall payments of 5 or more per week. In some instances, schemes applied for discretional hardship grants for clients in financial difficulties, but this sort of help is time-limited and some clients were feeling insecure in terms of not knowing how they would cope when that help came to an end.
Further, where clients were clearly capable and willing to find work, in securing them properties where the rent would not be affordable on a low income, schemes were not providing a sustainable housing solution. This was particularly the case in Edinburgh, where demand for social housing properties was so high it precluded the scheme setting up move-on for clients who aimed to find work.
The provision of help with deposits was usually accompanied by a package of 'add-on' services that were considered essential to the successful progress of a tenancy. The way in which the package of services was put together reflected schemes' strategies for dealing with local constraints such as a limited supply of properties or difficulties with local housing benefit administration.
Although some clients were happy just to receive help with the requirement to pay a deposit, many appreciated help with finding accommodation and setting up a tenancy, and continuing support once a tenancy had started. This type of help ensured that the tenant was settled into a tenancy that was sustainable in terms of it being of reasonable quality, and where (in most instances) the shortfall was affordable. Scheme help with difficulties arising during the course of the tenancy -for example, with repairs or the supply of furniture -meant that tenancies were more likely to be maintained.
The clients were a little more ambivalent about the help they were given with deposits. Although, in principle, assistance with the deposit was appreciated, in practice some clients found the guarantee itself difficult to understand. Tenants who had had to find their own accommodation found it daunting to have to explain the guarantee to prospective landlords. In addition, once the guarantee was in place, some tenants felt uncertain about their responsibilities once the guarantee period came to an end.
For landlords and letting agents, perhaps the most important services offered by schemes were help with rent in advance, and methods by which housing benefit payment delays could be reduced. Not all the schemes offered rent in advance payments, and in some areas, landlords and agents did not expect to receive these from clients. However, it appeared that in some areas, a scheme offering some cash up front - and then recovering that cost from the first housing benefit cheque - constituted a substantial incentive for a landlord or agent to take a housing benefit claimant.
The local contexts
There were three sets of variable local contexts within which schemes operated: The way in which housing benefit was administered locally influenced the package of services that schemes had to offer. For example in some locations, payments from the Discretionary Hardship Fund could be accessed readily for clients with substantial shortfalls, which meant that schemes had slightly more flexibility with regard to properties they secured for their tenants. The main difficulty with housing benefit, and one that few schemes were able to counter, was restrictions in payments to under-25s.
The state of the local housing market also had a substantial impact on scheme effectiveness. For example, in an area with a ready supply of social housing and a landlord unwillingness to deal with benefit claimants, deposit guarantee help could lack both a rationale for operating and the means by which to do so. In other locations, a reduced supply of properties, particularly for single people, meant that schemes had long waiting lists of clients.
The place of schemes within what might be termed the local homelessness 'network' also had an impact on their effectiveness. In some locations, for example Aberdeen, the scheme was well established and well integrated into other services for homeless people. In other instances, it was clear that information about the scheme had not disseminated through to other agencies' front-line advice staff.
Deposit guarantee schemes constitute an effective preventive measure, but their operation is constrained by the local context in which they operate. In particular, housing benefit administration and the local housing market provide barriers that schemes have to circumvent through modelling an appropriate package of services.
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