The Minister of State, Department for Work and Pensions (Steve Webb)
I congratulate the hon. Member for Dagenham and Rainham (Jon Cruddas) on securing this debate. It is the second debate of his to which I have responded in the House, and he raised his issues in a thoughtful and measured way. I think that the House appreciates that.
This is a welcome opportunity to consider the shared accommodation rate. Many of the other aspects of housing benefit reform have been aired quite extensively, but this one has perhaps been a bit overlooked. It is important to focus on that and the potential implications. I want to reflect on the proposition: what is now known as the SAR currently applies to under-25s in the private rented sector, and is based on rent levels for accommodation where at least one room—for instance, a kitchen or a bathroom—is shared. The spending review has announced that, from April 2012, it will be extended to under-35s. Furthermore, as the hon. Gentleman acknowledged, there are exemptions for those in certain vulnerable situations. There is also the issue of discretionary housing payments, to which I will return, because he raised some important questions.
Clearly, one reason for introducing this measure is to reduce the budget deficit. It is worth noting, therefore, that it will save £130 million in housing benefits in 2012, rising to £225 million in 2013. There are two ways of looking at that: it is a lot of people, but it is also a significant amount of money for the Exchequer. It is not done lightly, but it is an important contribution to the Department’s efforts to rein in the budget deficit.
On the number of people affected, the hon. Gentleman mentioned the figure of 120,000, but that is the answer to a slightly different question. We think that the figure will be 80,000 to 90,000. Those are the sorts of numbers we are talking about. He is right that the shortfalls, particularly in London, will be significant. Whereas with some of the caps—certainly the 30th percentile —in some cases the shortfall will typically be £10 a week or less, such shortfalls will be very different. The sorts of examples and figures that he gave are available on the internet. Other than in exceptional cases, it is unlikely that people will make up the shortfall from their spare cash. I take his point entirely that the shortfalls will be significant and that, although there might be occasions on which tenants can renegotiate their rents, that will probably be the exception rather than the rule. Although he kindly tried to write my speech for me—I was writing furiously all the good points he made—I am not going to say, “We don’t need to worry, because landlords will just slash their rents”, because that is not realistic.
Why are we introducing this measure? As the hon. Gentleman said, the thinking behind the under-25s rate is to save money and have a level playing field for young people on benefits and other young people on low-paid jobs who commonly will share accommodation. For the under-25s, the figure is about 45%. That means that about 45% of single, non-student—students would obviously bump up the figures—childless people who are under 25 and not on benefits are in shared accommodation. That is our control group. He might ask what the figure is for 25 to 34-year-olds. The answer is 40%. He used a figure of 2%, and I have seen that number, because when I saw the crisis briefing, I thought, “Oh my goodness, 2%”. However, it turns out that 2% is the answer to a totally different question—it includes all tenure types and all ages. The appropriate benchmark is that roughly two in five of the sort of folk we are talking about, and who are not on benefits, are sharing. The question is: what is the appropriate level of support from the taxpayer? Should the taxpayer pay the full cost of a self-contained flat for a 29-year-old, when many of their contemporaries would be living in shared accommodation? That is the thinking behind this.
If, therefore, this measure leads to shortfalls, and if renegotiation of rents is a limited option, what alternatives are available? I have mentioned the limited exemptions, particularly for vulnerable people. The hon. Gentleman downplayed the role of discretionary housing payments rather more than I would, so let me explain why. The discretionary housing benefit budget is increasing nationally from £20 million this year, to £30 million next year and to £60 million in each of the following three years. It is being trebled compared with the year just ending. However, we will not spread the money incredibly thinly across the whole country, but focus it where it is most needed, and the impact of the SAR is one of the things that will dictate where the money goes. I cannot forecast what his local authority will get beyond next year, but clearly London authorities as a whole will get a significant proportion of that increase—I strongly suspect that it will be more than the national average increase.
There is a case for saying that discretionary housing payments are the right approach, whereas using broad categories of people probably is not. The hon. Gentleman mentioned a whole set of people, but what was striking about his individual examples was how individual they were. We do not necessarily want to say that every ex-offender should have support, but to consider particular situations. Clearly, we need some block exemptions for the most vulnerable—we have that—but discretionary funding should be used in specific circumstances to ease some of the examples that the hon. Gentleman gave.
Discretionary housing payments are clearly a top-up, which are not meant to meet the whole rent. Housing benefit is already doing much of that, and discretionary housing payments cover the shortfall. The hon. Gentleman says that £120,000 is not much. Off the top of my head, a shortfall of £20 a week means £1,000 a year, so the sum covers 120 people. It does not sound like a huge amount, but it will treble across the country and can help some of the vulnerable groups that he mentioned.
There is a question about the options for young people. The hon. Gentleman pre-empted one of my points, but I shall make it again anyway. He rightly pointed out that quite a few young people have chosen—some have freely chosen but others may have felt constrained because of availability—to live in shared accommodation. Even though they are over 25 and the benefits system would pay for a self-contained flat, they have chosen shared accommodation.
We think that nearly half the local housing allowance cases that are currently assessed under the shared accommodation rate would be entitled to higher rates if they lived in separate accommodation. Nearly half the people to whom we pay the shared accommodation rate—that is what they get if they are in shared accommodation—do not need to be in shared accommodation because of the benefits system, but are there anyway. I must admit that that surprised me. Clearly, that is not all about choice. It is partly about availability, but it again suggests that what we ask is not quite as unreasonable as perhaps it might seem at first sight.
When considering that group’s characteristics, there is a question about how soon they can support themselves and not be on benefit. Clearly, a shortfall of £30 or £40 is difficult but manageable for a short period for many people, if they have been working, but difficult to sustain for a long time. That group tends to have relatively short jobseeker’s allowance durations. If we consider the 25 to 49-year-olds, for whom data are readily available, we estimate that around 60% of that group have been on JSA for less than six months. Clearly, after six months of a shortfall, someone is well out of pocket. However, although there might be a shortfall at a point in time for quite a few of those people, many might have a reasonable expectation of getting back into work and then being able to afford their rent in self-contained accommodation.
There is a question about what their options are if they decide not to carry on in free-standing accommodation. One option for some will be living with mum, dad or family. The hon. Gentleman and I both well know that it is not a perfect solution or something that works for people who have irreparable family breakdown. It is not a blanket solution. However, in general, that age group—I think they are called the boomerang generation—are doing precisely that. Many 28-year-olds and 31-year-olds are back with mum and dad or family. Perhaps they are saving for a house, and they have made the decision to stay with family because it is cheaper and they can put money by. Should we ask the taxpayer to pay for some 29-year-olds and 31-year-olds to have a flat of their own, rent fully paid, when others have to live with mum and dad and save the money? Again, it is a balance of fairness. Living at home with the family is not an option for all, but it will be for some. The hon. Gentleman talked about bonds with family and their breaking down—I do not know what living with your mum and dad at the age of 31 does to you, but it will be an option for some. At a time when money is tight, it is not an unreasonable thing to ask young people to include in the range of options that they consider.
There is also an important issue, which is underestimated, about being a lodger. Again, I take the hon. Gentleman’s point about individuals with particular needs. Her Majesty’s Revenue and Customs runs a special scheme called Rent a Room. It was introduced in 1992 to boost the private rented sector and was designed specifically to encourage individuals to offer spare accommodation in their homes at affordable rents to low-income groups such as nurses and students. Under the scheme, home owners and tenants who let furnished accommodation in their own homes are exempt from income tax on rental income of up to £4,250 a year. They receive relief on the rent and tax relief on meals, goods and services, such as cleaning and laundry. As people who get less than that amount do not have to tell HMRC, we do not know exactly how many people benefit from the scheme. However, we have survey data from the family resources survey, and roughly 130,000 landlords do not pay tax on their rental income under the scheme.
The situation is very dynamic, and as young people start to realise that they cannot get benefit for a flat on their own and start to look for lodgings, another family who may have lost income through redundancy or loss of overtime in these difficult economic circumstances might wish to let out their spare rooms. So the availability changes over time. There are tentative signs of a new supply of shared accommodation. Indeed, in east London, there is some suggestion that the housing benefit cap will mean that larger family homes will be converted into shared accommodation. I take the hon. Gentleman’s point about HMOs, and I will come back to that in a minute. Clearly it does not solve the problem for those families, but in the context of this debate it could mean three or four new single rooms will be available for young people. The situation is dynamic and changing.
The hon. Gentleman raised the issue of delay or cancellation. Although the change starts in April 2012—on current plans—it would kick in on the anniversary of a claim. So someone who starts a claim in November 2011 would have it renewed in November 2012. The position will not change all at once on a single day so that everyone turns up at the local hostel saying, “I’m homeless.” There will be a gradual change and people will start to explore other opportunities. They will know that the change is coming—we are talking here in late 2010-11—and there will be a chance for new supply to come on stream so that people can think about their options. We are keen not to do these things suddenly because we recognise that people will need time to adjust.
The hon. Gentleman mentioned some of the problems of HMOs, and the Government recognise that those need to be handled carefully. He will know better than most that HMO licensing is mandatory for houses of more than three storeys housing five or more persons. Local authorities also have discretionary powers to extend licensing to small HMOs where they have identified problems with management or property condition. This is known as additional HMO licensing. Local authorities will be able to impose conditions on those licences, such as requirements for occupation by a set maximum number of people or the provision of adequate amenities. Fines of up to £5,000 can be imposed for breach of a licence and letting a property without a licence is a criminal offence subject to a fine of up to £20,000. That is not to suggest that everything is perfect, but the Government are aware of the problems.
Since April last year, there has been a general consent for local authorities to introduce this additional HMO licensing and they do not need permission from central Government to do it. If councils think it necessary in their area—such as the hon. Gentleman’s area—they have those additional powers to crack down on rogue landlords. It is important to point out that sharing a house with a few other people is not synonymous with slum accommodation and rogue landlords. Both versions are out there, and we want to encourage the provision of good shared accommodation and drive the bad guys out.
The Department has always planned to monitor the impact of these changes, but when the other place considered the housing regulations it was agreed, after discussions with Lord Best, that there would be full independent monitoring and evaluation of the housing benefit reforms. I assure the hon. Gentleman that we are committed to comprehensive review of the changes to housing benefit, some of which will come into effect from this April. That will include independent, comprehensive primary research that looks at the effects on different types of households in a range of areas including London. The evaluation will cover a whole list of things, including homelessness and moves; the shared room rate and HMOs; the impact on Greater London; black and minority ethnic households; landlords; the housing market; and the labour market. To update the House, we have just completed an expression-of-interest exercise for potential contractors for the research, and we are drafting a specification for the monitoring. The idea is that the results will be published.
We recognise that these are significant changes, and that there will be people who are adversely affected; that is why we have trebled the discretionary housing payment budget. The hon. Gentleman was absolutely right to raise his concerns about that group, and it is something that we are looking at carefully. I thank him for bringing the matter to the attention of the House and reassure him that we take seriously the points that he raises.
Question put and agreed to.