Local Housing Allowance
(1 year, 8 months ago)
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Hywel Williams (Arfon) (PC)
I beg to move,
That this House has considered the Local Housing Allowance.
I am grateful and delighted to be able to lead the debate, and to do so under your chairmanship for the first time, Ms Elliott. I am glad to be here.
Housing represents a large cost to many people, but it is becoming increasingly unaffordable. The aim of the local housing allowance, of course, is to help those renting in the private sector, but it is becoming less and less effective because the level of support is increasingly out of step with the actual housing market. Since 2012, LHA rates have been decoupled from the 30th percentile of rents. Some hon. and right hon. Members will perhaps remember when it was coupled to the lower half of the market, rather than the lower third, but there we are—it is now the 30th percentile. Decoupled, it is instead uprated by consumer prices index inflation, 1% or even 0%.
That, in turn, has led to a growing gap between the actual rents that people pay and the amount of housing support that they can receive. It was therefore very welcome —but long overdue—when, in March 2020, in response to the pandemic, the Government increased LHA rates to realign them with the lowest 30% of rents at September 2019. Suddenly, we were returned to the status quo ante. However, that relief was very short lived: inexplicably, the Government froze LHA again in November 2020. Indeed, the Institute for Fiscal Studies said that the policy was
“arbitrary and unfair, and its consequences will only become more bizarre over time.”
Freezing the LHA has two broad consequences. First, the rise in rents is decreasing the amount of housing in the private rented sector available to those claiming housing benefits. Secondly, the support that low-income renters get with housing costs will be related not to the current level of rents in their area but rather to the rents of 2019. A moment ago, I used the word “inexplicably.” However, the Government’s thinking might well be quite obvious. Most commentators see it plainly as a short-term money-saving exercise—short term and short sighted, as the annual cost of maintaining the LHA level in cash terms was forecast to be £840 million in 2022-23, which would gradually fall to £345 million by 2025-26.
The alleged saving is illusory when one factors in the wider economic and social damage that the decision is causing. Previous analysis from Crisis showed that the annual cost of restoring LHA to the 30th percentile would be around £1.1 billion. That would in turn lift 32,000 people out of poverty and save a further 6,000 people from homelessness, which would produce savings of £5.6 billion—a cost of £1.1 billion, a saving of £5.6 billion. Some £5.5 billion of that saving would be on homelessness services, and £124 million on temporary accommodation. Over a three-year period, after the costs are deducted, that would save the UK Government £2.1 billion. That is why one must take the broader costs into account.
That sum is itself not to be discounted—it is a large amount of money—but most importantly, restoring the LHA to the previous level would save vulnerable people and their children from untold misery. That is the real gain. I would say it is unnecessary misery—unless, God forbid, we think that the cut in LHA is in fact an arm of disciplining the poor. Despite that evidence and the growing pressure on the Government, it was bitterly disappointing to see them maintain a freeze on LHA in the 2022 autumn statement. Although I listened very carefully to the Chancellor’s jolly festival of optimism at lunchtime, I did not detect a single word of comfort about LHA.
Despite the housing benefit freeze, rents continue to rise. In the 12 months to January 2023, private rents, in Wales at least, increased by 3.9%, the highest annual percentage change since records began in 2010. The damage being done is quite clear. The Bevan Foundation reports that in the last month only six of the 22 local authorities in Wales had any properties available at or below the LHA rates. The actual numbers are stunningly bad. During the first two weeks of February, only 32 properties in Wales were available at or below LHA rates—just 32 properties for the entire country and just 1.2% of the properties advertised on the formal rental market. In my local authority of Gwynedd, 187 properties were advertised for rent, but only 10 were fully covered by the LHA rates. People should remember that Gwynedd is—if Members will allow me this term—one of the “better” areas, with 10. Many places have none whatsoever.
There is broad consensus across the housing and homelessness support sector in favour of unfreezing the LHA and restoring it to the 30th percentile. Voices such as Crisis, the Select Committee on Levelling Up, Housing and Communities, the National Residential Landlords Association and Welsh anti-poverty organisations—such as the Bevan Foundation, which did the research I mentioned earlier—say that, and I echo those calls. The Chancellor should unfreeze local housing allowance and uprate it to the 30th percentile of market rents as we begin to address the unaffordability of housing.
Last year, I asked the Government in a parliamentary question whether they had made an impact assessment of the decision not to uprate the LHA and about the impact on the proportion of homes available in Wales that would be covered in full by LHA. I was told that no such assessment had been made. That is making policy in the dark. If we do not know what we are dealing with, how can we make policy? I ask the Minister, given that the growing gap between real rents and LHA rates in Wales is plain to see, how the Government can justify not making such an assessment and whether she will do so? That seems to me to be an obvious step to take.
Such an assessment might highlight the way that the LHA freeze perpetuates homelessness and housing insecurity. The shortfall means that people claiming housing benefit are forced to move into properties that are not fully covered by what they receive from the DWP and, often, properties of terrifyingly poor quality. Many hon. Members will have seen the sorts of cases we get—I get them regularly—that involve houses that are essentially unfit for people to live in.
Crisis Wales has said that
“too many people and families are being forced into homelessness because housing benefit simply isn’t sufficient to keep a roof over their heads”.
It is a fundamental failure. Policy in Practice found that for every 10% increase in the number of households experiencing a gap between the LHA rate and rent, the proportion of households in temporary accommodation will rise by 1%. The cause and the effect are quite obvious, I think; there is a congruity and a causality there. There are just more people in temporary accommodation.
Between 2015 and 2022, the number of households that required assistance to avoid homelessness in Wales increased by approximately 9,000, while the estimated number of rough sleepers increased by 69%. The evidence is there if the Government choose to look; if they choose otherwise, and not to look—if they choose to pass on the other side of the road—they will of course not see it. The Bevan Foundation also notes that it is not a coincidence that this all took place at the same time as LHA rates were frozen. Even now, we can see a slow increase in homelessness, with 158 more people in temporary accommodation in Wales between November and December of last year. That is in just one month. I say again that that is at a substantial and unneeded cost to the public purse.
I have another question for the Minister. Will she now assess how much local authorities could save in housing people who are homeless by unfreezing LHA rates, to enable them to sustain tenancies? That is an obvious piece of research, and the answers would be illuminating.
Housing insecurity can also lead to further pressure on other essential costs, such as energy and food, with serious consequences for mental and physical health. That is likely to be one contributing factor in the shocking statistic that 61% of people in Wales report that their mental health is negatively affected by their financial position. The LHA freeze means that emergency discretionary funding, such as discretionary housing payments or DHPs, are being used to plug the gap. Again, Welsh local authorities spent the highest sum of their allocated DHPs in 2020-21. The latest data show they are on course to do the same this year, with a 4% increase in the number of DHPs being spent on local housing allowance shortfalls.
That is all in the context of austerity, of course, as the reduction in DHP funding available to Welsh local authorities in the last financial year amounted to a 27% cut, which follows a reduction in the previous year of 18%. The cuts resulted in the Welsh Government topping up DHP funds last year by £4.1 million. That is the knock-on effect. I again put it to the Minister that there is a fundamental problem when local authorities are using their emergency allocations, and the Welsh Government have to top up the funds due to successive cuts. Does the Minister think that is sustainable in the long term? I do not think so, but I am interested in her opinion.
The LHA freeze is not the only concern. When it comes to the calculation of LHA, it is important to note that the rates sometimes do not accurately reflect market conditions, particularly at the very local level. At present, there is no obligation on landlords to share information on rents they charge, which makes it difficult to secure a true overview of the local rental market. Furthermore, are the broad rental market areas used to calculate each area’s LHA truly representative? They can encompass large areas with multiple rental markets within them. The gradient of change in the markets might be extremely steep, and might not take hotspots of high rent into account.
For example, in my constituency of Arfon we have Bangor University and a student population of 9,000, which is very large relative to the around 20,000 people in the local area of Bangor itself. There might be a severe hotspot there. In more rural parts of north-west Wales, holiday lets might have a significant effect. In the south-east, the removal of the Severn bridge tolls has increased rents in places near the border, such as Newport. People live in the cheaper parts in Wales and drive over to Bristol for their jobs.
Kerry McCarthy (Bristol East) (Lab)
The hon. Gentleman mentions Bristol, where this is a massive issue, which is the reason I have come to this debate. A recent inquiry by the Bureau for Investigative Journalism and a local newspaper, The Bristol Cable, found that there were virtually no properties with LHA rates available in Bristol, as he said is the case in his patch. I share his concerns; it is happening everywhere.
Hywel Williams
I agree entirely with the hon. Lady. As I said earlier, this affects the entire UK. Indeed, she might be clairvoyant, because I am going to refer that particular point in Wales. My concern, of course, is with Wales, where I know what is happening best. In Arfon, as I said, we have Bangor University and the holiday lets market, and then we have the Severn bridge.
I have asked the Department for Work and Pensions if it plans to undertake an assessment of the accuracy of the mechanism and metrics used to calculate the rate at which the local housing allowance is set and allocated in Wales, and the broad rental market area boundaries, if they are relevant. I was told that those boundaries are kept under review by the rent officers in Wales, and if they decide that a boundary should change, they can submit a review to the Secretary of State for consideration. I ask the Minister: have there been any applications by rent officers in Wales to request a review of broad rental market areas in Wales? I would be interested to know. I believe the BRMA mechanism should be devolved. Housing is already a devolved matter, as are other welfare services. There is a congruence between them, and a reasonable case can be made for them to be under the same authority. We could then redesign the mechanism to be far more responsive to local circumstances.
The local housing allowance is just one plank of the large-scale reform of the housing market. That is why Plaid Cymru secured the inclusion of a welcome commitment by the Labour Government in Wales to introduce proposals for a fundamental right to adequate housing for Welsh citizens, as well as an explanation of the role that a system of fair rents could play in making the private rental market affordable for local people on local incomes. There are also new approaches for making housing affordable. The devolution of housing benefit has a key role to play in that process. Had we control of the funding of housing benefit, we would then do things differently, such as repurposing some of the money into building more social housing. That would allow Wales to move from a model of subsidy to a rent system that subsidises supply. It is a straightforward move.
Welsh Labour has committed, in the co-operation agreements with Plaid Cymru, to advocate for the devolution of the administration of benefits. I asked the shadow Secretary of State, the right hon. Member for Leicester South (Jonathan Ashworth), if he would be prepared to pledge that. He said that I was inviting him to venture into choppy waters. I think that is quite true, but I will just bowl this one at my colleague on the Labour Front Bench, the hon. Member for Westminster North (Ms Buck): will the Labour party in Westminster consider supporting devolving LHA to Wales, as Welsh Labour Members in the Senedd have asked?
To conclude, it is vital that the Government take action to end the housing crisis. Affordable, decent housing should be a right for everyone. Affordability is central to housing stability, and can then reduce stress and increase self-esteem, wellbeing, life satisfaction and a sense of security for people. It can also alleviate crowding, further reducing stress and the spread of infectious diseases. I call on the Government to take action now to address the affordability crisis by unfreezing the local housing allowance.
Sir Stephen Timms (East Ham) (Lab)
I am delighted to serve under your chairmanship for the first time, Ms Elliott. I congratulate the hon. Member for Arfon (Hywel Williams) on securing this debate.
On Monday, in Committee Room 5, the Joseph Rowntree Foundation launched its research on an essentials guarantee. It has tested public opinion and worked out the cost of absolutely basic, non-housing essentials in Britain today: food and non-alcoholic drink, electricity and gas, water, clothes and shoes, communications, travel, and sundries such as cleaning materials. That is the lot, and the Joseph Rowntree Foundation says that the cost of all that for a single person is £120 a week, which is £35 a week more than universal credit from next month. That is just for the minimum, basic essentials. It is absolutely clear why so many people have to go to food banks.
Quite a lot of people do not get the full rate of universal credit because of deductions of one kind or another. In addition to that, because of the subject we are debating, a growing number of people have to take money out of their inadequate universal credit payments in order to pay the rent. Local housing allowance often stops people on universal credit being paid housing support anywhere near to the amount of their rent. It is making life impossible.
Since LHA was frozen in 2020, after temporarily being restored to the 30th percentile, as the hon. Member for Arfon pointed out—it used to be the 50th before 2011—rent has risen sharply across the country. DWP data shows that by last August, 57% of private rented households in receipt of housing support had a shortfall between their benefits and the rent. That proportion is going up.
In July 2022, the Work and Pensions Committee published a report, “The cost of living”, which highlighted how support through the LHA was not keeping up with rising rents. The fact that housing support and current rents are so out of kilter—the hon. Member for Arfon referred to this—creates what the Institute for Fiscal Studies described as “bizarre consequences”. It gives an example, one of which affects the constituency of my hon. Friend the Member for Bristol East (Kerry McCarthy), stating that
“the 30th percentile of rents in Bristol is £100 more than in Newbury. But the amount of housing support that those who live in Bristol can receive is £12.50 less than those who live in Newbury.”
That makes no sense. The system has got completely out of touch with the reality.
Crisis told the Select Committee about research with Alma Economics before the pandemic, showing that a return to the 30th percentile would benefit the public purse by over £2 billion, because it would avoid councils resorting to more costly temporary accommodation.
The hon. Member for Arfon rightly made this point. In its briefing, the National Residential Landlords Association says that we should press the Minister, and I want to join the hon. Member in doing so. Have the Government worked out how much local authorities could save in temporary accommodation costs if the local housing allowance was back up at the 30th percentile?
The impacts are getting more severe. Shelter has warned this year that the
“continued freeze on housing benefits is pushing more and more private renters towards homelessness”.
The number approaching Shelter with rent arrears is up 30%. Crisis says that the
“affordability gap is driving homelessness”,
and reports that evictions from the private sector have more than doubled in the last year.
Government figures last month showed the first increase for four years in the number of rough sleepers, and in London there was a 34% increase. The Government say they are committed to ending rough sleeping, but their policies, and particularly this policy, are increasing rough sleeping.
People in households with a disabled person are more likely to be hit by LHA shortfalls. Paul Sylvester, head of housing operations at Bristol City Council, told our Committee in 2021 that half the households they saw with a shortfall included a disabled person. They were increasingly seeing disabled people forced to use their disability benefits to
“cover the rent top-up, rather than what they are meant for”.
Discretionary housing payments can be used by local councils to support households at risk of homelessness. This financial year, the DHP budget has been cut by 29%. Shelter has said—echoing again the hon. Member for Arfon—that a number of councils
“appear on the brink of running out of funding”.
There are 31 English councils that had spent over three quarters of their budget on DHP before winter began. They included traditionally low-rent areas such as Derbyshire Dales, Leicester, and Hinckley and Bosworth, which all spent over 80% of their annual allocation in the first six months. The east midlands, where they are all located, had the highest rate of private rent inflation in the last year, at just over 5%. In the north-east—your area, Ms Elliott—Sunderland, Gateshead and Northumberland all spent more than 90% of their DHP allocation by the end of September.
Sadly, today’s Budget has done absolutely nothing to help. The Government must stop turning a blind eye to such a very serious problem and recognise that local housing allowance must go up, at least to the 30th percentile. Once it has gone up to that, it needs to be kept there.
Jim Shannon (Strangford) (DUP)
It is a pleasure to serve under your chairmanship, Ms Elliott. I congratulate the hon. Member for Arfon (Hywel Williams) on securing this Westminster Hall debate. Northern Ireland has a totally different system, so I do not expect the Minister to answer any questions about Northern Ireland. This is a devolved matter on which the Assembly takes decisions. However, I want to support the hon. Member for Arfon by illustrating how the local housing allowance is causing similar difficulties in Northern Ireland. I put on the record that I concur with and fully support his comments on the difficulties in his constituency and in Wales, as well as remarks of the right hon. Member for East Ham (Sir Stephen Timms) on the difficulties in England.
Housing allocation is done differently in Northern Ireland. The principle of shortfall housing allowance is a UK-wide issue, which is why I am here to support the comments. Almost 30,000 private renters in receipt of local housing allowance in Northern Ireland are facing a shortfall in their monthly rents. It is having a real effect. Among the biggest issues raised with my office are those of benefits and housing. If an issue combines both benefits and housing, that causes real difficulty. That is where I am.
I read an article this week that said that almost three quarters of housing benefit claimants living in private rented accommodation in Belfast are being charged more than their housing benefit allowance. This is replicated in Newtownards, the mainstay of my constituency, with a lack of one or two-bed properties meaning that people have to rent three-bed properties, which costs a lot for those on a smaller wage. In Northern Ireland and particularly in my constituency, rental accommodation costs far outstrip income and wages.
The local housing allowance in Ards is £83.53 per week, meaning a make-up of around £300 per month for those who rent accommodation. It takes a massive effort to squeeze the shortfall at a time when price rises are putting the pressure on. It is important to say that I recognise that the Government have taken many steps to try to help with the issue of price structures and increases, and I recognise the many good things that the Government have done. However, I think there needs to be a focus on this issue in particular, and I concur with the comments made by the hon. Member for Arfon and the right hon. Member for East Ham.
It is unsustainable for my constituents to have to make up £300 when the cost of gas and electric has trebled. Further information shows that in a workgroup covering Dunmurry and Lisburn—both in Northern Ireland—89.5% of claimants have a shortfall between the rent charged by their landlord and the applicable local housing alliance for the property occupied. That massive number indicates that this is an issue. Local housing allowance is used to calculate the level of housing benefit available to those living in the private rental sector. Over half of low-income renters—some 51%—surveyed across Great Britain in November said that their rent had increased. Research by Crisis on the cost of living provides a snapshot of the devastating impact of unaffordable housing. The hon. Member for Arfon illustrated that very well and evidentially in his contribution.
It is little wonder that we are in a housing crisis. In the past year alone, rents in Northern Ireland have risen at their fastest rate in 16 years, and have increased by an average of 11% across Great Britain. In the last year, listed rents in Scotland have increased by 13%, and by 15% in Wales. These are massive increases to try to keep track with. It has led to people applying for affordable social housing, which has in turn led to the Northern Ireland housing statistics for 2020-21 showing that some 44,000 people were on the Northern Ireland Housing Executive waiting list as of 31 March 2021. Of those 44,000, just over 30,000 are in housing stress. That means that three quarters of those people are in housing stress through attempting to address the issue of rent.
I will conclude, as I want to give the hon. Member for Neath (Christina Rees) the chance to participate. For me it is abundantly clear that if we address the issue by making the local housing allowance come close to covering basic rent, we will allow those who are working and able to cover a small difference to come off the list, thereby allowing those who need full rent coverage to access social housing. Families are under pressure and inflation has risen, along with the price of groceries, energy and fuel. The price of every single item has increased. I heard on TV this morning that every foodstuff has increased by between 17% and 19% in the last few months. The rates will increase again this year. That automatically results in an increase in outgoings, but the incomings simply cannot meet the cost. That is a fact.
I agree with the assessment made by Crisis, which did a case study of a lady who could make her rent payments but could not afford to heat her home or eat three times a day. This is the depth of crisis that homelessness statistics do not show—those who have walls but do not have a home. That has to be addressed.
Christina Rees (Neath) (Ind)
It is a pleasure to see you in the Chair, Ms Elliott. I congratulate the hon. Member for Arfon (Hywel Williams) on securing this very important debate.
Wales is facing a housing crisis because there is a shortage of affordable properties that people can purchase or rent. That shortage forces many low-income households to move into a property that they cannot afford, risking financial hardship, or into a property that is in poor condition, risking ill health, or to seek assistance from local authority homelessness services. The local housing allowance, introduced in 2008, is the amount of housing benefit, or the housing element of universal credit, available to those who are renting from private landlords. The amount of support provided is based on the area in which the individual lives and the number of bedrooms they require. There are a number of LHA determining factors, including allowing a tenant to rent in the cheapest third, 30th percentile, of properties within a market area, which depends on the location of the property—Wales is divided into 23 broad rental market areas—and on the number of bedrooms to which a household is entitled.
However, despite the good intentions behind the LHA, the scheme has been the subject of much criticism and controversy. In many areas, the LHA does not cover the full cost of renting a property, leaving individuals and families in a precarious financial situation. The issues have recently been exacerbated, as LHA rates have been frozen since 2020 at the level of 2018-19 private rental rates. Research by the Bevan Foundation found that in my Neath constituency, 51 properties were advertised for rent in February 2023, but not one property was covered by the LHA rate. Furthermore, the gap between market rents and the LHA rate in my constituency is £95.93 for a one-bedroom property, £113.33 for a two-bedroom property, £146.24 for a three-bedroom property and £251.45 for a four-bedroom property. That means that many people in Neath face the prospect of homelessness, with some being forced to choose between paying their rent and putting food on the table. That is an unacceptable situation that needs to be addressed urgently.
One solution to the problem is to increase the LHA rate for the area. That would provide much-needed relief to those who are struggling to pay their rent and would help to prevent homelessness. The Welsh Government have already taken steps to address this issue with the introduction of the Welsh housing quality standard and the Housing (Wales) Act 2014. However, more needs to be done. The UK Government must recognise the unique challenges facing areas such as Neath and take action to ensure that the LHA rates are sufficient to cover the cost of renting a property. That not only would help those who are struggling to make ends meet but would have wider economic benefits by reducing the number of people who are at risk of homelessness and supporting the local rental market.
However, low-income tenants may face more barriers when looking for properties in the private rental sector, and many may find them difficult or impossible to overcome. Examples are requirements for deposits of more than one month’s rent, guarantors, credit checks, minimum income checks, and professional-only tenants. The Bevan Foundation found only 32 properties in Wales at or below the LHA rate. Twenty-three also had one or more of the barriers that I just mentioned. To put it another way, only nine properties fully covered by the LHA did not require one or more of the additional qualifications. Seven were in Cardiff, one in Ceredigion and one in Rhondda Cynon Taf; there was none in my constituency of Neath.
The local housing allowance is a vital scheme that provides much-needed financial assistance to those who are struggling to pay their rent, but current rates of LHA are inadequate in many areas, including my constituency of Neath. It is time for the UK Government to take action to address the issue, and to ensure that LHA rates are sufficient to cover the cost of renting a property. The Chancellor could have used his Budget today to uplift LHA rates to the contemporary 30th percentile, providing housing security and decreasing mental and physical illness among those struggling to pay their rent. By not taking action, the Chancellor has increased pressure on local authorities, which will drive up the use of temporary accommodation. He has not prevented homelessness, not supported the local rental market and not provided a brighter future for the people of Neath, Wales and the UK in their home.
David Linden (Glasgow East) (SNP)
It is a pleasure to see you in the Chair for this afternoon’s proceedings, Ms Elliott.
As others have done, I commend the hon. Member for Arfon (Hywel Williams) for securing the debate, which is short but none the less important. We have had an interesting discussion, with thoughtful contributions from the right hon. Member for East Ham (Sir Stephen Timms) and the hon. Members for Strangford (Jim Shannon) and for Neath (Christina Rees).
The debate of the hon. Member for Arfon allows my party to place on the record our asks on local housing allowance rates. For example, we want to see LHA increased in line with average rents. Likewise, we have called on the British Government to support renters by suspending the shared accommodation rate for under-35s and care leavers, which I believe remains a massive social injustice.
As we know, in November the Secretary of State confirmed that LHA rents for the 2023-24 financial year
“will be maintained in cash terms at the elevated rates agreed for 2020-21.”—[Official Report, 17 November 2022; Vol. 722, c. 24WS.]
My party has pushed the British Government to ensure that the approach to LHA rates does not go back to that taken by the pre-pandemic cuts, which made the private sector totally unaffordable for people in receipt of benefits in some areas, especially when we take cognisance of the long-term shortage of social housing that blights many of my constituents. We cannot have a conversation such as this without recognising the enormous damage done to social housing by the right-to-buy policy and the failure to build more social housing after that.
Ministers’ decision to maintain LHA rates at cash terms in 2023-24 means a further freeze for private renters and places additional and needless pressure on tenants, which in turn adds to pressure on the discretionary housing payment funding pot. Through discretionary housing payments, my colleagues in the Scottish Government are supporting tenants who are under severe financial pressure. In reality, the Scottish Government are plugging some of the gaps caused by the crumbling of the UK social security system here in Westminster.
To highlight one particular example, since the introduction of the punitive bedroom tax, the SNP Government in Scotland have spent £350 million on mitigating it. That has been done by way of discretionary housing payments, which in effect means that the bedroom tax is not in operation north of the border. The hon. Member for Arfon will correct me if I am wrong, but the situation in Labour-run Wales means that the bedroom tax is not necessarily mitigated—something their colleagues in Scottish Labour often forget to mention in Holyrood.
Obviously it is great that SNP Ministers have chosen to act to protect people from the bedroom tax in Scotland, but it is just one of the many areas where the devolution framework comes under strain, as spending decisions in Scotland are frankly taken to paper over the cracks of poor welfare policy made here in London. The inescapable reality is that every penny we spend on the discretionary housing payment to deal with Westminster’s heartless social security agenda is a penny less spent on devolved competences such as education, transport and health.
In summary, Ministers must do better and this Government must act urgently to improve some of the problems with local housing allowance that I and others have outlined today. Failure to do so, I am afraid, only highlights the need for Scottish independence, and for decisions about Scotland to be taken in Scotland—not to languish in the Whitehall in-trays of Tory Ministers the people of Scotland did not vote for.
Ms Karen Buck (Westminster North) (Lab)
It is a pleasure to respond for the Opposition under your chairmanship, Ms Elliott. I congratulate the hon. Member for Arfon (Hywel Williams) on securing this important debate. This is a niche issue for many people, yet it is so incredibly important. Rents are the single largest item in most families’ budgets. Not being able to pay the rent has the consequence of forcing families into poverty and also risks homelessness, as we have heard—I will return to that point in a minute.
I wish that, just occasionally, we could have a debate such as this with more than one Department present—it would be a good experiment and brilliant to have that opportunity. It is absolutely impossible to consider local housing allowances in isolation from housing policy. The fact that the housing market is so fundamentally broken is driving the crisis in rents and unaffordability, and therefore the pressure on the local housing allowance. The attempt to bear down on the local housing allowance drives up homelessness and has consequences for other Government Departments. It would be good to be able to hold two Ministers to account for the policies they pursue and their two different agendas, which usually—and in this case—involve a toxic pass-the-parcel game of responsibility and blame, with consequences for both.
As we have heard, the Government have accepted the need to uprate benefits in line with inflation this year—indeed, they have been proud of that fact. I do not think that should be a cause for congratulation. It should be the most absolutely fundamental principle of social security policy, yet they completely fail to accept that that same principle should apply to the local housing allowance. I would like the Minister to explain exactly why in this one area of policy, which affects the largest item of a family’s budget, the Government do not seem to believe that inflation exists. Of course, inflation does exist and, as we particularly heard from the Chair of the Select Committee, my right hon. Friend the Member for East Ham (Sir Stephen Timms), rents are soaring across the country, but probably most severely in London.
There are two consequences. First, over 800,000 households in the private rented sector face a shortfall between their rent and their local housing allowance. Some 57% of all universal credit households in the private rented sector have that shortfall. Secondly, dipping back into the issue of housing policy, it forces households into the absolute worst end of the private rented market. In this place, we discuss what has happened to households stuck in the poorest quality housing and the conditions that people are forced into if they are concentrated at the bottom end of the market, even if they can get it, have been a big media theme over the course of this winter.
Although we are discussing the freeze that has happened, in particular since 2020, this is also not a new phenomenon. Since the Government reduced the LHA from the 50th percentile to the 30th, there has been a continuing series of freezes, of which this is only the most recent. It was all based on the belief that the setting of the LHA levels would be bound in itself to influence rents, because it was understood or believed that such a large proportion of the private rented sector was funded by it. That was only ever partially true, or only true in some places, and always failed to recognise that even in a broad market rental area, there are different housing markets, and what applies to one part of the private rented market will not apply to others.
We know that the blind spot over the local housing allowance uprating can be seen in the homelessness statistics, as well as being felt by tenants in the shortfall between actual rents and the support available. There is an average monthly shortfall between rent and local housing allowance of £100 a month. It is indisputably true that the shortfalls are driving tenants to lose their homes. The end of a private rented tenancy is the single largest contributor to homelessness almost everywhere in the country.
David Linden
Does the hon. Member agree that the Government have to look at the picture in the round? When someone is evicted from their home, it is ultimately the state that picks up the cost. We should consider local housing allowance a preventive spending measure and the Government are short-sighted on the issue.
Ms Buck
I absolutely agree with the hon. Gentleman that homelessness is a cost on the central Government budget and on local authority budgets as well.
We have seen homelessness soar. Rough sleeping is up by 74% since 2010 and by 26% in the last year; there has been an 83% rise in the number of children who are now living in temporary accommodation as a result of homelessness. One in 23 children in London is now homeless. The squeeze on local housing allowances is undoubtedly a major factor driving that situation.
I have no doubt that the Minister will refer to discretionary housing payments, but, as my right hon. Friend the Member for East Ham has made clear, they make only a tiny contribution towards the total cost of budget shortfalls. Those payments have been cut by one fifth in 2021-22, and again this year. In any event, they are restricted in various ways, including by the fact that they are only ever meant to be temporary, so they are not, and never can be, the answer to the fall in local housing allowance.
The poorest, the most vulnerable and those with the least bargaining power in a toughly competitive private rented market, among them families with hundreds of thousands of children between them, are forced to deal with evictions, with frequent moves, and with all the disruption that homelessness causes to education, employment and caring allowances.
As Policy in Practice demonstrated in an important research report yesterday, the broken housing market also drags a substantial number of higher earners and higher-rate taxpayers into means-tested benefits such as universal credit via the housing allowances system, which is a completely unintended consequence of the freeze.
Investment in social housing—a way of ensuring that those with the lowest incomes can enjoy secure and affordable homes—is by far the best solution to this crisis. A better managed private rented sector would also be good for tenants. We have been promised action on that for years but we are yet to see it. All of these things would be better for the public purse, too. In the meantime, freezes in the local housing allowance make no sense whatsoever and only serve to make a bad situation worse.
The Parliamentary Under-Secretary of State for Work and Pensions (Mims Davies)
I thank the hon. Member for Arfon (Hywel Williams) for calling this debate on the local housing allowance, which provides housing support for universal credit and housing benefit claimants in the private rented sector. I thank you, Ms Elliott, for presiding over this important debate; it is my first time here, too.
The Government fully recognise the importance of affordable, decent quality housing, as the hon. Member for Westminster North (Ms Buck) pointed out, which is why we have invested significantly to support those on low incomes, including private renters. All constituency MPs are focused on this issue, as has been alluded to this afternoon. We are grateful to our excellent caseworkers who support us and keep us informed about what is going on in our constituencies. I thank all the charities for all the positive work that they do in the sector. I will be visiting further innovative pilots and interventions on Monday to look and learn and see how we can really help the most vulnerable to progress, including some of the groups that have been mentioned this afternoon.
Acting on childcare, as we have done today, helping people to progress and earn more and helping people with energy costs will help with the wider challenges that many of our colleagues have spoken about this afternoon and all the constituents who have been impacted. The Government spent almost £30 billion supporting renters with housing costs in 2021-22. More widely, the Chancellor announced in the autumn statement a significant wide-ranging package of support to help low-income households struggling with the increased cost of living, which will of course include housing.
We recognise and acknowledge that rents are increasing. However, the challenging fiscal environment does mean that difficult decisions were necessary to ensure that support is targeted effectively. That support provides stability and certainty for households through the further cost of living payments for the most vulnerable for 2023-24, which I was pleased to bring forward myself. Around 8 million households on eligible means-tested benefits will get a further £900 pounds in payments in 2023-24.
Hywel Williams
Does the Minister accept the argument that I and other Members have made—that doing something about the local housing allowance would save the Government money in the round?
Mims Davies
I appreciate and understand the point that the hon. Gentleman is making, and I will make some further comments shortly.
Today’s Budget has focused on more help so that people can be better off, to raise living standards and to improve lives. To the hon. Member for Westminster North and the right hon. Member for East Ham (Sir Stephen Timms), I say that this is a challenge that I am working on and that I am keen to rise to—across Government, as the hon. Lady says, and of course with the Department for Levelling Up, Housing and Communities. I say to anybody struggling today, whether with housing costs or other matters that are impacting them, that there is an opportunity to find out more on the benefits calculator website, in case they are missing out on any extra support. There is also the Help for Households website and the Job Help website. Of course, as has been mentioned, the benefit cap, working age benefits and disability benefits will also be uprated by 10.1% for 2023-24.
The household support fund extension provides an extra £1 billion of funding, including the Barnett impact. I met many local authorities yesterday afternoon to see how they are targeting that support—particularly on housing needs and costs, white goods and other things that might affect household budgets. The scheme will be backed with £842 million and will run from 1 April to 31 March 2024. It is right that devolved Administrations will decide how to allocate that Barnett funding. As we have heard, local authorities are expected to support those households most in need.
One of the Government’s key aims is to support people into work and to progress in work where possible. That approach is based on clear evidence that, for those who can work, particularly where the work is full time, it substantially reduces the risks of poverty. We see real challenges, to which the hon. Member for Westminster North alluded: more single households, more single parents and family breakdown. The support that we are giving, because of global impact, means that the supply is all the more challenging. I agree with the hon. Lady that wider issues around cost and quality, which very much concern me, mean that this policy, the growing need and the focus are only getting larger. I agree that, in Government, the issue is very much about more than me; I am sorry that I am not enough this afternoon, but I will try to do my best.
Let me turn to some of the points made by hon. Members. On the decision to freeze, we recognise that rents are increasing. However, the challenging fiscal environment has led to where we are, and it is important that we target effectively. The Secretary of State will review the rates and the standard process annually. The hon. Member for Arfon raised the issue of quality. Discretionary housing payments can be made to help claimants with the costs associated with moving to a new home if there is a quality issue. Everyone rightly has the ability to get a safe and secure home. Landlords are key; we need them to come forward, to stay in the sector and to want to be part of the solution where they have already met the decent homes standard. Quality housing remains a priority for this Government, and of course there is currently a White Paper on that.
Mims Davies
I understand the point. That is why I want the quality to rise, rather than people feeling that they have to move. There is obviously a fall-back position.
The hon. Member for Arfon made a point about the broad rental market rates. Those are determined for Wales by rent officers in Wales. If the rent officers believe —I have just looked again at my local rates—that the boundary needs to be reviewed, as the hon. Member for Bristol East (Kerry McCarthy) mentioned, they can apply to the Secretary of State for change, but no reviews have been submitted by Wales. Local authorities can also request a review by contacting rent officers. It is up to the rent officer whether they will review it, but I think that is an important point for the hon. Member for Arfon to take away.
Obviously, there is the wider cost of living support as regards Welsh and indeed Northern Ireland devolution. The hon. Member for Strangford (Jim Shannon), with his typical empathetic tone and understanding, has brought real care to the debate, as usual. I recognise the hon. Member for Neath (Christina Rees), because I lived nearby in Neath for many years, and I very much welcomed the Welsh housing standard. I think that is exactly what we should be doing, rather than reducing things. I sense that the right hon. Member for East Ham is keen to come in.
Sir Stephen Timms
I am grateful to the Minister for giving way. I am pleased to hear that she is working across Government on the issue, and I wish her well with that. Can she tell us whether there has been an assessment of how much could be saved in the costs of temporary accommodation if LHA was raised back up to the 30th percentile?
Mims Davies
I hope to come that before I conclude my remarks. On the “no impact assessment” point made by the hon. Member for Arfon, we will publish an equalities analysis to the House of Commons Library, and I know the hon. Member for Glasgow East (David Linden) will keenly watch for that. On the recent question regarding shared rooms, there is an issue with the quality of data on room entitlements, so, if the hon. Member for Arfon writes to me, I will share with him further what I can best do to provide that.
David Linden
I am grateful to the Minister for giving way. I spent a bit of the afternoon reading the Government’s White Paper on health and disability, and have actually been very encouraged by one part of it that talks about the importance of transparency in decision-making processes in the DWP. Will the Minister confirm that there will be a change of culture now in the transparency and publication of some of these things, which, recently, some of us felt to be a bit murky?
Mims Davies
The hon. Gentleman points out the many questions he is asking about transparency, and I welcome that. Where policy is in development, we need to protect it, but, ultimately, if it needs to be transparent, I am very happy, where suitable, to share it.
On the point made by the right hon. Member for East Ham and others about temporary accommodation, it is, of course, an important way of ensuring that no family is without a roof over their heads. We are committed to reduce that need for temporary accommodation by preventing homelessness. We are investing £366 million into the homelessness prevention grant to support local authorities to prevent homelessness. The key point, and our main duty, is how best to support people so that they are not in that situation. I very much understand that, and I am keen to respond about how we are trying to do a little more about that.
It is important for Members to understand that the local housing allowance is not intended to cover all rents in all areas. In April 2020, in direct response to the covid-19 pandemic and the influx of new claimants because of the pandemic, we increased local housing rates to the 30th percentile of local market rates, costing nearly £1 billion and giving claimants on average an extra £600 in 2020-21. We have maintained that increase since then, ensuring that all those who benefited from the increase continue to do so.
I recognise that there are circumstances where extra help is needed, which is where we distribute the discretionary housing payments according to local need. Those payments play a critical role in providing support to the most vulnerable households in meeting their housing costs. Since 2010, we have provided nearly £1.6 billion in DHP funding to local authorities.
Of course, the competitive nature of the private rented market is driving up prices, alongside the annual review of LHA rates. I say to the hon. Member for Westminster North and the Chair of the Select Committee, the right hon. Member for East Ham, we are absolutely determined to work around the quality and supply challenges that are ultimately driving that. Overall, the DWP Budget measures today represent £3.5 billion over the next five years to boost workforce participation.
In conclusion—
Mims Davies
I will wind up. I take all the points from hon. Members from all around our wonderful nations today, and I am sorry I cannot tell them any more than that this issue is a very strong focus for me, and that we will continue, I hope, to work together for all our communities.
Hywel Williams
I thank everyone who has taken part in the debate; we have heard some very powerful evidence. I thank the Minister for her replies, as well. We will not let this be. Can I also say that other Members would have been here? I neglected to say that my hon. Friend the Member for Cynon Valley (Beth Winter) would have been here, but she had to attend a family funeral. There is a great deal more interest than we see here in the Chamber.