Welfare Reform Bill

Baroness Hollis of Heigham Excerpts

Tuesday 18th October 2011 Grand Committee

Moved by

[Baroness Hollis of Heigham]

34A: Clause 11, page 5, line 16, at end insert “taking into account the availability of suitable accommodation”

[Baroness Hollis of Heigham]

My Lords, Amendment 34A, as noble Lords will understand, is a paving amendment for the subsequent, substantive amendment, Amendment 48, so that we can have a broader discussion on housing stock before we get into talking about individual client groups. That seemed to be a sensible way of proceeding. I declare an interest as a former chair of a local authority housing committee and a current chair of the Broadland Housing Association.

For me, underoccupancy is the most important issue in the housing section of the Bill. Essentially, the Government are saying that any tenant who is not a pensioner and is underoccupying will have their benefit cut to the size of the property that they should be occupying. The English house condition survey, and the DCLG in the past, regards someone as underoccupying if they have more than one spare bedroom. Indeed, the latest Written Answer from Grant Shapps states:

“It is estimated that 423,000 households were under-occupying”,

which obviously includes pensioners.

“This estimate is a three-year average … Under-occupying households are those with at least two bedrooms more than they need according to the Bedroom Standard”.—[Official Report, Commons, 11/10/2011; col. 337W.]

The DWP, for benefit purposes, will not allow two bedrooms more or one bedroom more but requires a precise fit. This is a much tighter and even claustrophobic ruling. A later amendment, Amendment 44, which I favour, would align the DWP to the DCLG standard. As almost 80 per cent of tenants who are affected by the DWP’s proposals have only one spare bedroom, that would address the issue for most people, although of course with implications for projected savings.

This amendment, like Amendment 43, tackles the issue in a different way. It requires the social landlord, not the tenant, to take responsibility. If the landlord does not have the stock to offer, the tenant should enjoy his current home with full HB. If the landlord can offer appropriately sized stock by DWP standards, the tenant takes the HB hit if they choose not to move.

Why do I think the DWP standards of underoccupancy are too tight? Under DWP plans, a couple with two teenage daughters in a three-bedroom house will be underoccupying, and will receive benefit only for a two-bedroom flat or home. Let us remember that we are dealing with social housing that is now built well below Parker Morris space standards. Two teenage girls might be expected to share a second bedroom that is 10 feet by 8 feet. Let us visualise two single beds put against the 8-foot wall, with 2 feet between them. Fifteen year-olds are not going to sleep in bunk beds as though they are five years-old. A 3-foot wardrobe and a 3-foot wide chest of drawers are in the 3-foot by 6-foot space at the bottom of the beds. There may be a gap of 1 foot, and that is it, if you are to open the bedroom door. There is no space for a desk, a table, or a chair. Where exactly do they do their homework? Not in the galley kitchen, because they will not have one, and not in the only living room, where the parents want to eat, talk, watch TV. They cannot do their homework anywhere, so maybe they will not. City children can stay on at school of an evening or use the public library for their homework in that situation. Rural children, dependent on the school bus, can do neither. And then we are surprised at the GCSE results. As a result they cannot find a job, and I fear that there could be two generations of worklessness.

This example assumes that those four family members have moved to the two-bedroom flat as required under the new proposed changes in housing benefit. Actually, probably they will not. Most two-bedroom homes are actually three-person, not four, with a small second bedroom, and although some 12 per cent of my housing association’s three-bedroom houses are four-person houses with a double bedroom and two singles, most are five, so we have three-person accommodation, and five-person accommodation. Imposing HB caps by bedroom numbers rather than by total space size of bedrooms—that is, trying to shoehorn a four-person family into a two-bedroom, but three-person, property—will certainly take us into the realm of forced overcrowding and judicial review. Such a family will be deemed by the DWP to be underoccupying a three-bedroom five-person property, and deemed by housing law to be overcrowded in the only property they can move to, which is a two-bedroom three-person home. What would the Minister have us do?

Will the Minister say whether, if that family were in a three-bedroom but four-person house, they will receive full HB as three bedrooms or persons, or whether they would be expected to move to a two-bedroom flat even if they were three persons? If we put a family of three into a two-bedroom four-person house, would that be classified as underoccupied? I am not playing word games because, depending upon the outcome of this question, families will or will not lose more than £10 a week of their housing benefit. These are the allocation decisions that my housing association and local authority are making day in and day out.

A fortnight ago I was visiting an attractive small development of some 20 homes that we have just built. Thirteen of them were two-bedroom houses, four of them were three-bedroom and there were three bungalows. However, of those 13 two-bedroom houses, 12 were three-person. Only one was four-person. We do not have and we are not building the four-person stock that the Minister has now told us that tenants in a family of four should occupy to get their full HB. They are mostly either three-person or five-person, with the assumption that the couple get the first type and the couple with children get the other. Nationally, our situation is replicated. There is a huge shortfall of one-bedroom and two-bedroom accommodation. Relatively, there is a surplus of three-bedroom accommodation. The national federation calculated that last year 180,000 families were waiting for two-bedroom homes, and just 60,000 became available. Who do those families go to?

I can tell noble Lords about our allocation structure. First, the homes go to families in urgent housing need. Next we have pensioners—to whom the changes do not apply—in three-bedroom homes queuing up to move to more convenient and easier-to-heat two-bedroom homes. Yet we cannot always help them because we do not have the stock, and they are the people who are most likely to underoccupy. Then we have families who need to transfer from one two-bedroom property to another in order to help look after frail elderly people in a nearby village. So we have queues of people wanting two-bedroom accommodation who are willing and able to move, and we cannot meet that demand.

However, under the Bill, if there is no two-bedroom accommodation for my four-person family to move to—as there is not—they are fined with cuts of £15 a week or more. It is madness as well as a misery. We allow—indeed, we make—the pensioners who would like to downsize stay put, while requiring the family who wants to stay put to move. This possibly causes a dislocation of schools for their children and of family support. Yet the HB bill would be identical if we swapped those categories around.

To its credit, the impact analysis recognises this and agrees that there are insufficient two-bedroom properties to meet these forced moves. On page 2, it is stated:

“If all existing social sector tenants wished to move to accommodation of an appropriate size, there would be a mismatch between available accommodation and the needs of tenants”.

Quite so. Some 670,000 tenants would be affected—2,000 of them disabled—or 32 per cent of all HB claimants. Some 108,000 tenants live in an adapted property, with the average cost of adaption being £6,500; yet 78 per cent of them are underoccupying by only one bedroom, which the DCLG does not consider as underoccupying but which the DWP is proposing to consider for benefit purposes. That could be an extra small bedroom for each teenage daughter to do their homework in, for a husband or wife who is in poor health and has disturbed sleep, for the occasional overnight carer of a disabled person, or for a grandchild.

Let us return to my family of four who are obliged to move or face HB cuts. As there is a shortage of smaller accommodation, what then? How can the tenant move if there is nowhere to move to? “Oh”, states the impact analysis blithely on page 8, at paragraph 24:

“In these circumstances individuals may have to look further afield for appropriately sized accommodation or move to the private sector, otherwise they shall need to meet the shortfall through other means such as employment, using savings or by taking in a lodger”.

Employment? Do noble Lords really think that they have not so far looked for work and that a £15 fine on their HB bill will find them a job? Using savings? The average individual savings of £300 would cover the shortfall for barely five months. Taking in a lodger? If you have small children? We need to get real. Instead, if they cannot afford the HB cut, they may move, apparently, to the private rented sector, where their HB bill will of course increase because it is higher. That, of course, is if they can find a landlord to take them, given their past history of possible rent arrears, and if they can find the deposit—a month’s rent in advance—together with moving costs, curtains and carpets, which may come to £1,500 out of savings of £300. In rural Norfolk, all this takes place close to the school that the children go to. It is simply not possible. If the family moves after falling into arrears, which private landlord will accept them anyway?

The impact analysis is revealing—it sort of knows all this. It expects savings of £700 million, but this is based on the presumption that families do not move but stay put, are fined and have their HB cut. I quote page 2:

“If a significant number of tenants wished to move, this would reduce direct savings and place extra demands on social landlords”.

A couple with a child in Crawley, quoted by Shelter and Crisis, moving from three-bed social housing to a two-bed private rented flat would see their HB bill rise by £66 a week. The savings—and this is key—are based not on people moving to smaller accommodation but on their being fined for not moving because the stock is not there and for staying put. In other words, the Government are basing their savings not on people doing what the Government say they should do but on their not doing it. The Government need their public policy, for people to move home, to fail if they are to ensure that their private policy—to cut HB and make the savings off the fines for people not moving as normally required—succeeds.

I was pretty horrified when I read that. You might think that issues around underoccupation were at the very least being propelled by a huge increase in overcrowding, so that, however reluctantly, underoccupying families should move to make way for those in greater need. It is not so. On average, 5 to 6 per cent of all households in all rented sectors are overcrowded; 40 to 50 per cent are fit; 40 to 50 per cent are underoccupied, many of them containing pensioners. So the needs of the overcrowded could be met if we were able to meet the requests of pensioners and others to downsize. No force majeure is required, except that we do not have the stock to do it.

This is not about the need of other families for the house that you are underoccupying; it is about artificially capping the HB bill knowing that there is insufficient stock for tenants to move into and then pocketing the fines because they have no alternative course of action. That is not a proper way to behave. They stay put because they cannot move and arrears mount because they have run out of savings. What do the Government suggest local authorities and housing associations then do? Should they evict them? As I said, how many private landlords will take on a tenant with rent arrears? No judicial review, and there will be plenty of those, would regard them as intentionally homeless—in which circumstances the local authority would give them priority housing and back they would come again into social housing, where everybody can find a home, or go into B&B at five times the cost. But if they are not evicted, arrears mount rapidly and a housing association’s balance sheet goes into the red. It may already have tripled the amount set aside for rent arrears due to direct payments to tenants. It could now expect it to double again if it does not evict.

We have four solutions. First, we can follow Amendment 44, aligning the DWP’s definition of overcrowding with that of the DCLG and largely define the problem away. This is the solution that I prefer, but I accept that it has cost implications. Secondly, we can build and better balance the stock, but that will take years, as our building programme is being halved by DCLG. We can, thirdly, ask local authorities to use their discretionary housing payments to top up, except that my local authority ran out of money halfway through the financial year—last November, in fact—and even then had helped only a few families. The £60 million, although welcome, will go nowhere near to meeting or softening cuts of £2 billion-plus. The final option is the path of these amendments. We place the responsibility on the landlord and not the tenant. They do not say no change; they are genuinely a compromise. If the social landlord can make an offer of appropriate accommodation, the tenant will be expected to take it or take on the HB shortfall and government make their savings. But if the landlord cannot do so because the homes are simply not there, as in my housing association, then HB continues exactly as was.

We sanction people in JSA if they do not seek work, because they can and should. We use the threat of sanction to change their behaviour. What we do not do is sanction them if, after a proper job search, they cannot find a job, because no change in their behaviour can change the economy and job vacancy rates. We sanction them according to what we can reasonably expect them to do and how they change their behaviour. This is about job searching, not a lack of job success.

Similarly, it may be reasonable to sanction by HB cuts someone who is grossly underoccupying a house that a much larger family desperately needs and who could change their behaviour by downsizing. We could debate that, but to sanction families for not moving when they cannot change their behaviour and cannot move because of the housing stock is not a sanction but a punishment of people who not only have committed no offence but who can do nothing to avoid the sanction by changing their behaviour. That is wrong. We should not fine some of the poorest people in the country who have been set up to fail. It is not their fault, and it is not decent, and I really hope that the Minister, who I am sure will share these worries, can indicate that he accepts the principle of the compromise of this or some subsequent amendment. We would all be happy to discuss further with him how this might be done. I beg to move.

[Lord McAvoy]

My Lords, I want to put a couple of points to the Minister on a particular aspect of the availability of suitable accommodation. I will describe the city of Glasgow because it is the biggest city I know. I stay adjacent to it and I know quite a bit about the different types of housing there. Some is council accommodation. My noble friend Lady Hollis of Heigham has indicated that size is important and that people can be in a small room that is classed as a room. Glasgow has what are called three-stairs-up tenements, which are usually in red or grey sandstone tenement blocks. The rooms are smaller in the likes of Dennistoun, Townhead and some older parts of the city centre, but massive in the likes of Shawlands, King’s Park and Langside. If someone was “forced” to move from a small two-bedroom flat in Dennistoun to King’s Park or Shawlands, they would be dancing up the stairs, because it would be a vast improvement on the living space that they had had. They would soon get a sofa bed in the living room.

I am leading up to the fact that this is a very difficult situation and I really do not know how this can be done. Has any assessment been made to address the main thrust of my noble friend’s amendment, which deals with the fact that the size of rooms is just as important as the number of rooms? As I say, it would baffle me, but there are highly paid people working for the Government who should at least be able to test this. My question is therefore: has some consideration been given to assessing the size of rooms compared with the number of rooms in individual cases?

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[Lord German]

I think if the noble Lord would wait a few moments, he will see what I am proposing. It is on this piece of card, which I can pass to him, but if he just bears with me, I will give him three things which I think are essential in order to make this section of the Bill work. That is why I am posing the questions, because it seems to me that the solutions are not given in any of the documents.

The document from the DWP about what these choices will be and the three questions that people will have to answer says:

“it is unclear how this”—

the policy—

“will affect the choices of claimants that are likely to be affected by the measure”.

In other words, the Government do not know; or do they? If they do know, we need to ensure that we have those figures in front of us. If we are to avoid unintended consequences, we are going to have to look at the levers that ensure that the housing stock is accurate, and if the housing stock can, over time, match the needs of this particular policy.

As we know, there are 670,000 claimants, presumably of working age, which means that a third of a million non-working age claimants are underoccupying—the noble Lords, Lord Stoneham and Lord Wigley, have talked about elderly people underoccupying. Maybe there is an answer to that which the Minister and the Government have already thought about. There are no figures that I have seen in any of the documentation that indicate how we are going to manage to create a housing stock to match the changes. First, we need to know how many of the 670,000 are going to move and the modelling figure behind it. Until we have the answer to that, we cannot answer the question about how many houses we are going to need.

[Baroness Hollis of Heigham]

The Government’s own impact assessment says:

“Estimates of Housing Benefit savings are based upon the current profile of tenants in the social rented sector, with little tenant mobility assumed”.

[Lord German]

I am grateful for that quotation, which of course goes against the other one that I gave from further on in the document, which says that we do not know what claimants’ choices are likely to be. The noble Baroness’s quotation has the word “little” in it. We have often reached the point where we have quoted from different sections of the same document, and that is why we need answers. We need to know which of the three choices people are going to make so that we can determine whether the homes are available for them. There are three solutions, which I put to the Minister and which we need answers about, at the very least after his answer to the fundamental question of whether we have the housing stock.

I ask the Minister, when replying, to talk not about the DCLG but about the three government departments that are responsible for these matters in this country, because three levers have to be pulled for the DWP to be able to answer that single question. What is the solution? I would like to know what the three government departments feel about how they can match housing demand. I must say that I am not particularly encouraged because, for many of us, moving house is probably the worst thing in the world that you could probably do. In fact, my noble friend Lord Kirkwood told me this morning that we ought to exchange our rubbish with our neighbour’s because our neighbour’s rubbish is much more interesting than our own. I have found moving house to be a very uncomfortable exercise, and I am sure we have to be careful of this. The Government say that they are working in England to develop a team of advisers who will work to help people to make better use of our housing stock, which is a laudable aim, but they also say that they will work with the devolved Administrations to see what can be done in Scotland and Wales. What can be done about the housing stock across the whole of the country where this policy impacts?

It seems to me that there are three potential solutions when we have the answers to the figures, one of which is that we must have housing money—discretionary housing money, or whatever—to ensure that the money reaches the particular groups that will need it in order to be able to make the adjustment. The second is about exceptions. We will come to that in the next set of amendments, but where the cost to the public purse can be demonstrated to be larger—and many of the amendments coming up now will demonstrate that—we must ensure that we have exceptions. The final point that has been made by many noble Lords here today is that we must have transition time for the social housing sector in all three parts of the country where this Bill applies to make the changes in order that this policy works. We cannot achieve the original purposes of these measures, all of which I think are right, without achieving those three things and without ensuring that we have a sector that can—

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[Baroness Hollis of Heigham]

Does that mean, therefore, that the noble Lord supports the DWP definition of underoccupancy in which there can be, except for special groups, no spare bedroom, as opposed to the DCLG one, which I outlined, which allowed at least one bedroom more—and in the latest Parliamentary Answer from Grant Shapps is two bedrooms more? Is that what the noble Lord was saying? We need to be clear where he is coming from on this.

[Lord German]

I cannot answer that question until such time as we have the answer to what our housing stock is, how many are going to move, and for those who are going to move whether there is available housing for them. That was the answer to the question, and the one I will give if the noble Baroness asks me again.

[Baroness Hollis of Heigham]

This is an “in principle” question: what definition of overcrowding or underoccupying is the noble Lord assuming such that the transitional arrangements must seek to meet and adapt to?

[Lord German]

I will repeat the answer that I gave the noble Baroness just now.

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[Lord Freud]

My Lords, the size criteria measure marks a significant change in our approach to housing benefit for claimants living in the social rented sector. The current housing benefit system is not fair; it is not right that families on benefit in the private rented sector have been able to live in homes that most working families could not afford, and we have already begun to tackle that unfairness through changes to the local housing allowance. It is also not fair that, in the social rented sector, housing benefit pays out the full rent on properties that are larger than required by those who live in them, while at the same time over 250,000 households in England are overcrowded.

To pick up one of the many points made by the noble Baroness, Lady Hollis, on the bedroom standard, that standard actually expects children aged over 16 to share a room with children of the same gender until they are 21. That is a rather tougher requirement than that of the DWP and the LHA, which allows separate bedrooms for a child of the same gender, aged 16 and over.

[Baroness Hollis of Heigham]

My Lords, that was why I specified a 15 year-old in my illustration of bedroom size.

[Lord Freud]

I shall continue. By 2014-15, the annual savings achieved as a result of housing benefit reform as a whole will exceed £2 billion. It is right that the social rented sector plays its part in achieving those savings. The size criteria measure itself will achieve around £0.5 billion of savings each year from 2013-14.

On the point made by the noble Lord, Lord McAvoy, about room size—the example that he used was his nearby city of Glasgow and its tenements—the size of rooms is something that we are looking at with stakeholders as part of the implementation planning. That concern is shared by the noble Baroness, Lady Hollis. It is an issue that we are looking at.

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[Baroness Hollis of Heigham]

My Lords, first, I thank warmly all those who have taken part; it has been a helpful as well as a highly focused debate on the issue of underoccupancy and leads us usefully into some of the other debates that we are to face.

I do not think that the Minister addressed the issues raised in full. My noble friend Lady Turner talked not just about the difference between stock and a home but about the need for local support, and so on, as you get older, and the fact that we may cut all the connections which the big society and localism are urging us to strengthen. We did not have a full reply to that. The noble Baronesses, Lady Thomas and Lady Wilkins, talked about the cost of adaptions to spare bedrooms. We will come to greater detail on that when we discuss disability issues. About two-thirds of those who are regarded as underoccupying by DWP criteria have a degree of disability. It will be difficult to decide where we draw the line.

Then there was the issue of the difference in localities. The noble Lord, Lord Wigley, and my noble friend Lord Foulkes, as well as my noble friend Lady Hayter, in a powerful speech about Lambeth, showed that in each of these cases the stock was not there to deliver what the Minister seeks. I attempted to throw in some evidence from rural Norfolk. The division was between those of us who regard the definition of underoccupying that DWP proposes to adopt as targeting intrinsically—an opinion that I share—and those of us who say that if it is too tight, none the less the transitional arrangements are not sufficiently generous to make it possible even to move in that direction.

Members of the coalition Government have raised the issue that we need discretionary money. There is not enough of it, as I am sure that the noble Lord, Lord German, will be aware. My local authority ran out half way through the year, and it was helping only a couple of dozen families. The noble Lord asked about exceptions, but we will have definitional problems there. He asked for transition time for stock balancing and made the point about bungalows, which is absolutely right. That will take a decade or more to achieve. On the point about unacceptable process made by the noble Lord, Lord Kirkwood, and the need for a safe transition process, frankly we will have had a further two social security Bills—as I would like to call them—in the intervening stage before we can address that.

I found the Minister’s answer deeply disappointing. The two words that he was using were “fair” and “choice”. I think he said that it was not fair that social tenants should have a spare bedroom when other people might not be able to afford such; that there should be better use of accommodation for families who are overcrowded; and that it was right that the social sector should continue to contribute £0.5 billion or so to the proposed expenditure cuts of £2 billion to housing benefit. As for better use, only about 5 per cent of housing benefit tenants are overcrowded. If we had the stock available to meet the requests of those who wish to move, we could probably meet that overcrowding today. As for the Minister’s point about home swap, frankly, under different labels, we have been doing that for decades. There is nothing new there, but I welcome the fact that the Minister is looking at room size.

The key question is why the DWP is not accepting what I understand to be the DCLG definition. That means that on 2 April 2013, there will be a family in Norwich in bed-and-breakfast accommodation who have been lingering there for a couple of weeks, to the distress of the children, but technically they require two-bed accommodation if they are not immediately to find that their HB does not meet their rent. The local authority and the housing association, because we jointly have a choice-based letting system, only has three-bedroom houses available. Will the Minister tell me what we do? Do I say to that family that they must stay in an B&B for yet another fortnight or another three weeks until possibly the perfect fit of a two-bedroom property comes up in a place near where their children have started going to school, or do I say they can move into a three-bedroom house but that they have to take the hit? The local authority may help them with the first month or so, but after that they are on the own and will have arrears, and they may go back into the recycling of bed and breakfast accommodation.

As someone who is intimately involved in this, I am afraid I know that that is what we will be facing on day two or day three after 1 April 2013, and the Minister must tell us what we say to that family: move into accommodation that is notionally too large, not by DCLG standards but by housing benefits standards, and pay the price, or stay put in bed and breakfast accommodation, with everything that we know happens to children in that situation and how damaging and stressful it is for the family concerned. The noble Lord emphasised that there are choices in what people can afford—there is no choice. His concept of fairness seems to run like this—I think this is how the syllogism worked. We start with a definition that is tight, in my view too tight, which requires 670,000 families to move, two-thirds of them with a degree of disability. Yet knowing that, we do not have the property, and we do not expect the tenants to move because they cannot. They have no choice. We then, thirdly, go on to fine them for something they can do nothing about.

I do not believe in my wildest moments that the Minister would regard that as fair. It is not fair. We all know it is not fair. A transition arrangement would be fine if it is going to be long enough, but that takes time to adjust the stock, but it is not fair to punish people for something over which they have no power to change and in which they have no choice. I am hoping the Minister will rethink this because many of us feel very strongly indeed. There are various aspects of it that I perfectly well understand, such as the need to try to cap HB expenditure. We will come back to why that is happening, but it is certainly not because of this. It is happening, as the latest reports from the chartered institute and the property federation show, because of the increase from 49 per cent to 52 per cent of the case load in the local housing allowance in the south of England, which is more expensive with a higher number of claimants. It is nothing to do with this at all. I hope the Minister will run that when we come to that debate.

Does he suggest that it is fair to punish tenants for something over which they have no choice, in a way that is antithetical in every other aspect of social security legislation of which I am aware? We sanction when people could and should change their behaviour. If they cannot, we do not; full stop. Yet with this the Minister breaches that profound principle to benefit policy in this country, and I deeply hope, because I know he is a decent man and I believe he genuinely holds to concepts of fairness here, that he will think again and hopefully be able to change his mind before we come back to this on Report. I beg leave to withdraw the amendment.

Amendment 34A withdrawn.

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[Lord Best]

I am glad to start with that affirmation in advance. I am speaking to Amendments 38, 39, 40, 42, 43, 44, 79, 80, 81, 82, 83 and 84. This group of amendments relates back to the underoccupation penalty, about which we have heard so much.

I was deeply impressed by the array of speeches from the noble Baronesses, Lady Hollis, Lady Turner, Lady Lister, Lady Sherlock and Lady Hayter—the opposition Baronesses. I wondered what the plural was and I thought of it by the end: it is “a battery of Baronesses”. I thought that I might feel annoyed that they had stolen all my speech in various instalments, but I did not. Instead, I felt admiration and was in entire agreement with what they said.

My amendments in this group include two, Amendments 44 and 84, which relate to the fundamental point here: the definition of an underoccupied home, one in which people will either pay a penalty, have to move or make some other arrangements. The amendments suggest that we should stay with the standard that we have used in the past; that is, the standard used by the Department for Communities and Local Government and the Tenant Services Authority. This allows you the basic bedroom standard plus one bedroom. The amendments call for that status quo to be resumed. I have been involved in housing matters for some 42 years. During that time, we have grappled a lot with issues around underoccupancy in managing property that I have been responsible for and trying to incentivise people to move when that has been sensible. I do not think that it is possible to insist on the basic bedroom standard and expect people to live in the homes that they would then be required to live in. That is not how we occupy our properties in this country; 83.9 per cent of owner-occupiers fail this test straightaway. Most other people, in these terms, underoccupy the homes that they live in. Indeed, we build accommodation on the basis that you are going to underoccupy it. The housebuilding industry knows that people like to be able to tell their parents that they have bought a three-bedroom house. It is actually a two-bedroom house with a box room added. We do not expect people to occupy all those rooms in the real world of owner-occupation, and people move when they fill them up. I cannot believe that social housing tenants’ lives are so different that they will be able to cope with the basic bedroom standard.

The noble Baroness, Lady Hollis, gave some illustrations. The example that I might well have quoted was read out by the noble Baroness, Lady Lister—I received the same, very impressive e-mail about a family with two daughters. I give my own example. Let us try not to pull the heart strings. It is just an ordinary case of a family where there are two girls, of 14 and nine, who are not at the moment sharing—thank goodness, because the teenage girl of 14 does not want to share with her nine year-old sister. People have lives to lead as well as homework to do; they want to invite their friend in and listen to music or whatever they want to do. The 14 year-old does not want to share with a nine year-old who goes to bed at a completely different time. Theoretically, they have to move out. They will move down from a three-bedroom to a two-bedroom home. However, it will not take long before the 15 year-old is 16 and can get a room of her own. They can then move back again—of course, the former home will not be available. It will not be long, though, before that older girl leaves home, and then the family will have to move out again. This is ridiculous—people moving around to try to fit in with the rules.

Let us face it: the impact assessment makes it quite clear that it is about saving money. Reducing the cost of housing benefit is of course a very important objective, but the great majority of ordinary people, even those who do not have small children or children of the wrong sex who will not be able to be fitted together in the right boxes, need an extra room. Their children come back—does no one realise that they have not gone for ever? Sometimes, their coming back saves other people a lot of money because the parents will put them up and look after them during some period of crisis in their lives—marriages break down; all kinds of things happen. Indeed, you in your older age or even in your middle age may get sick and need a member of the family to come back and occupy the spare room and a keep an eye on you for a bit. To have that one spare room available, even when you do not have children to put in it, is the way that the rest of us live, and it has to work for social housing—I have never found a way of persuading people otherwise. This measure is a way, I fear, of raising money. It is a fundraiser, because almost nobody in these circumstances will move. They will just have to pay—or forgo, as it is—£13 a week, which is a serious amount of money for people on very low incomes. It begins to tot up.

The consequences of that will be shared. They will be felt by the individuals, who try to cut their living standards at a time when fuel bills and everything else are rising. It will be felt also by the landlords, because it will be extremely difficult to collect the money which has not been received by way of housing benefit. That means that arrears will begin to accumulate.

At first, landlords will be tolerant and helpful and try to see this through, but eventually—and I have been responsible for social housing—you get to the point where, pour encourager les autres, you have to proceed with eviction. After a while, arrears become too much. If they cannot be paid, people are going to have to be moved out, and then you get all the cost of that.

I cannot believe that people are going to move. It costs a great deal to move. Your carpets will not fit the place to which you are moving; your curtains will not fit. You have to pay disconnection charges for your electricity suppliers, and so on. People are not going to keep moving; they are just going to be stuck there and have to pay up, or forgo the money. I do not think that it is fair. The rest of us do not feel, for a moment, that that is how we would expect to live. I do not think that people, just because they are in social housing, should be expected to.

The amendment says that if you have two rooms which, using the basic bedroom standard, would be regarded as unoccupied—they would probably be a study or whatever—you would pay the penalty, but you would not do so for one bedroom, using this very tight definition. That is the effect of Amendments 44 and 84.

Is there a solution to the problems of underoccupancy? I am not going to burden you with a long speech on this, but underoccupancy is mostly about people over pension age. They are specifically excluded from this measure. However, they are the ones who are actually underoccupying, often in a three-bedroom home, and who—if only we could find the incentives and the ways of moving people—could be moved on, and families could take those homes.

I declare my interests: I chair a housing association called Hanover. Hanover has 19,000 properties, but they are all retirement properties. We concentrate exclusively on older people.

Our target is the underoccupying elderly person, whose home, even though they feel quite reluctant to move, is not suitable any more. If it has three bedrooms, stairs, a garden that needs to be kept up and heating bills that are higher than they should be, it is a great idea if we can move people out of those three-bedroom houses. They are desperately needed by families. Housebuilders have tended to build just flats, and not houses with gardens, so these are really valuable to the rest of society. The incentives to move are what we need.

We have shown in my housing association—others have done just as well—that if you provide something that is really good, then people will move. They are not going to go to scruffy old bedsits in sheltered housing that has seen much better days. But they will go if it is to somewhere manageable, clean, bright, open and companionable.

[Baroness Hollis of Heigham]

A bungalow.

[Lord Best]

Well, preferably a bungalow, but mostly we just do flats, but they can be smart apartments. Yes, you could move.

There are some 240,000 families who are overcrowded. We have far more elderly people who are underoccupying than that. We could give incentives to older people, the incentive being the really nice apartment elsewhere. It gives you two-for-one, because you release your family home. This is not the approach being taken in this legislation.

If we are going to have to reconcile ourselves to there being this penalty, then the other amendments in this group come into play, which are about exemptions, exceptions and letting some people off. I hope it does not come to this, but if it does, a series of exemptions is outlined in the amendments that follow.

Amendments 38 and 79 would remove the underoccupation penalty for the 100,000 properties that have been specially adapted to meet the needs of a disabled tenant—we have heard a little about that already. It would be daft to move a household with a disabled family member to smaller premises if the costs of fitting out the new home—for example, with a level-access shower or removal of steps—far exceeded the savings from cutting the housing benefit and left wasted adaptations behind because no other household needed the particular adaptations made to the previous home.

Similarly, Amendments 39 and 80 would exempt the 200,000 households in receipt of disability living allowance, or the new personal independence payment, in the same way that DLA recipients have been excluded from the proposed total housing benefit cap. Some extra space for those with disabilities can even save money when that allows a carer to move in during a difficult period for the disabled person, saving the cost of hospital or residential care. Amendments 40 and 81, which are supported by the Fostering Network and Barnardo’s, as well as the housing charities, which are behind all the amendments, would exempt properties where families are providing foster care placements.

I am sure that it is simply a fault of the drafting, but, at present, the Bill would not count foster children as part of the household. Therefore, any rooms they occupy would be classified as unoccupied. That is clearly nonsense, and I am sure that the Minister will explain how that will be put right in future.

[Baroness Hollis of Heigham]

Am I right in believing that, to become a foster carer, you must have a spare bedroom? If you have a spare bedroom, you are hurt and hit by the HB rules.

[Lord Best]

I fear that that is exactly the position. Others may wish to come in on the amendment about foster parents.

Amendments 43 and 83 would not require an underoccupying tenant to move out where there was simply nowhere for them to downsize to—the fundamental point behind the amendment of the noble Baroness, Lady Hollis. For example, the National Housing Federation has demonstrated that about 180,000 social housing tenants would be classified as underoccupying their two-bedroom homes and would need to move on, but that only about 68,000 one-bedroom social housing flats come available for letting in a year. Even if every one of the one-bedroom flats was allocated to those who are downsizing—which of course would be impossible as there are serious demands from tens of thousands of other such households—it would take years before they could be accommodated.

In the past, we built social housing between the world wars and afterwards. Mostly, we built three-bedroom housing. Now we have a lot of households that require something smaller, but we do not have enough houses to put them in. Here, again, the impossibility of people moving means that the exemption would kick in. If they were expected to downsize into less secure private rented properties, rents are likely to be much higher and therefore the benefit costs, the universal credit costs, would be much higher—about £66 per week more in south-east England. That is not a great saving. The housing benefit bill would be likely to rise dramatically although people were occupying less space.

Moving creates the familiar barrier to employment. Moving to somewhere with a higher rent itself intensifies demand on the private rented sector, which will push up rents more generally.

Of the amendments, my preferred option is to define underoccupying as exceeding the bedroom standard plus one—that is, having two “spare” bedrooms. That would cut the gains to the Government from the underoccupation penalty to 150,000 households from the 670,000 that the Government are expecting to be caught by the new penalty.

If the Government cannot accept that, I hope that, alongside the exclusion for older people—the category most likely to be underoccupying at the moment— exemptions could be put in place for disabled people in adapted property, recipients of disability allowance, families classified as underoccupying because foster children are not counted, those unable to move because no suitable alternative exists, and those in supported or sheltered housing where a spouse or partner dies or leaves them and who are below pensionable age and would be compelled to move out. Added together, those exemptions would certainly reduce the hardship and extra costs implicit in the underoccupation penalty. I look forward to hearing comments from other noble Lords and the reaction of the Minister.

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An exemption for those underoccupying by only one bedroom, as put forward in Amendments 44 and 84, would result in a reduction in the level of envisaged savings by a very substantial amount—an estimated £300 million annually. We do not automatically allow claimants one extra bedroom in the private rented sector. So there is a substantial affordability issue behind those amendments.

[Baroness Hollis of Heigham]

My Lords, perhaps I may press the Minister on that key point. He has quoted a figure of £500 million for HB savings. The impact analysis that I think most of us were working off gave a figure of £700 million. If that figure is correct—it may have been overtaken by further refinement from the DWP—it would mean that, for less than half the cost of the savings, he would take some 80 per cent of those worst affected out of the equation. That seems to be very good value.

[Lord Freud]

My Lords, without us rambling through the papers, I think that the figure is £500 million, of which £300 million is a very substantial proportion.

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[Lord Freud]

My Lords, perhaps I may conclude on the point raised by the noble Baroness, Lady Hollis. The confusion is between the £0.5 billion that we start to save annually in 2013-14 and the £770 million figure that she quoted from the impact assessment. It represents two years of savings on a GB basis, which is appropriately discounted and deflated.

[Baroness Hollis of Heigham]

My Lords, it is nice of the Minister to give us those figures, but is his £300 million the amount set off against the £500 million, or is it set off against the £770 million?

[Lord Freud]

No, it is £300 million set against £500 million—so 60 per cent.

I have already talked about the behavioural responses. I move to the point raised by the noble Lord, Lord Rix, about the number of bedrooms, the size of the rooms and box rooms. Again, we discussed that issue briefly in the previous set of amendments when the noble Lord, Lord Foulkes, raised the window tax. It is the social landlord’s responsibility to specify the number of bedrooms in a property but, as I said, we are looking at this, including the size of the bedrooms, to explore whether it is an issue.

Amendment 35 of the noble Lord, Lord Rix, relates to support for mortgage interest payments and is connected with Schedule 4, concerning the payment of housing costs for pensioners. I understand only too well why noble Lords are seeking reassurance that assistance with eligible mortgage interest costs will continue to be provided for homeowners, including those with long-term disabilities. In fact, I met only yesterday representatives from Mencap to discuss these matters.

Approximately 430 claimants have purchased their properties through the shared ownership scheme known as HOLD—rather less than the 1,000 figure that has more generally been quoted. The Government want disabled people to continue to access suitably adapted homes, whether through a mortgage or housing benefit. The Homes and Communities Agency continues to support the provision of shared-ownership homes where this is a local priority, including shared-ownership homes under HOLD. The agency is holding ongoing discussions with lenders on the provision of mortgages for HOLD. Support for mortgage interest is intended to provide a reasonable level of help for homeowners but has never been intended to cover all of a person’s housing liabilities. As noble Lords can see from the draft regulations, help will continue for homeowners. So I see no need to set out in the Bill specific reference to mortgage interest payments. We propose to continue using the same standard mortgage interest rate for all claimants. As to Schedule 4, a housing credit element with broadly the same rules as housing benefit will be introduced into pension credit to ensure that low-income pensioners continue to receive help with their rent.

Regarding the point raised by the noble Lord, Lord Best, on providing incentives for pensioners to move, our approach to this issue will, over the long term, help to ensure that people are in suitably sized accommodation before they become pensioners. Our expectation is that the proportion of pensioners needing to downsize will in future be lower than it is now. As several noble Lords mentioned, the Localism Bill includes measures specifically aimed at helping pensioners to downsize and will help to increase mobility in the social rented sector for this group.

[Baroness Hollis of Heigham]

Could the Minister at some point, not necessarily today but in due course, set out the stats on the number of pensioners underoccupying and what his projection is of the time it will take for numbers to diminish?

[Lord Freud]

I would be happy to circulate the information to noble Lords.

On the social sector size criteria measure that we are introducing through Clause 68, we will use the time before its introduction in April 2013, as we are already doing, to explore fully the implications for claimants and landlords. We acknowledge that the impact will not be the same across all regions; we will work with stakeholders to look at those variations as we move towards implementation.

Let me repeat: I value these debates and hope that they continue on a constructive level as we move forward.

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[Lord Freud]

My Lords, I said earlier that we are working on the detailed implementation of this. It would be premature to make judgments on that. We need to develop strategies to ensure that those problems do not arise.

[Baroness Hollis of Heigham]

In that case, can I ask the Minister to amplify his stats for us when he writes to us next? He has talked several times, over the few Committee days we have had, about a £60 million discretionary housing fund, and how it is going up threefold, and so on. I am not keeping a tight list, but I think we have now overspent that by approximately five times. Could he tell us—given that there are some 400 local authorities—even on a per capita basis, how it works out? On average an authority can only help 700 families, out of—for instance, in the Norwich situation—some 20,000-odd families that are in rented accommodation.

I believe that those people affected, who will not readily afford it, are probably more like 7,000 rather than 700. Could the Minister give us the assumptions, or the stats, behind that £60 million figure as to what this would mean in a typical local authority, per 1,000 rented homes, for a period of, say, six months, or what percentage of those families you could typically expect to support? So that, per 1,000, that £60 million would extend to 20 families for six months, or 50 families for six months. Then we can get some idea of how that money connects to all the various issues for which this will, apparently, be the solution.

[Lord Freud]

Yes. I always prefer to answer rather than write, but I think I will on this occasion go to paper. It may be that the noble Baroness prefers paper.