Housing: Spending Review

Baroness Thomas of Winchester Excerpts

Thursday 4th November 2010 Lords Chamber

[Baroness Thomas of Winchester]

My Lords, I fear that there will be a certain amount of repetition about housing benefit, especially after the speech of the noble Lord, Lord Best. I, too, shall focus on that point. Never has this subject hit the headlines so much as it has in the past month.

As soon as the changes were made known in the summer, many of us on these Benches felt uneasy, particularly at the haste with which they were announced. As far as I know, there has been no consultation with stakeholders and precious little real evidence of the impact that the changes will have. The Government simply seized on the increase of £5 billion in the housing benefit budget over the past five years as the rationale behind the whole policy. I am sorry to say that the resulting attempt to start to bring down the cost of housing benefit so quickly—starting next April with the cap—has the hallmarks of a panicky, Treasury-driven exercise done on the back of an envelope rather than a well thought-through DWP exercise, looking at a much wider picture of the impact of the changes.

As my noble friend Lord German said, it is all too easy to point to housing benefit claimants in central London and say that it is unfair on working people that those who are out of work can, only thanks to housing benefit, afford to live in a big house well out of the reach of hard-working families. Everyone is guaranteed to feel outraged about this, and I fear it is used almost as a proxy for the more widespread but far less colourful changes that will affect the whole country. I echo the paradox that others have mentioned that if all unemployed people are forced to move further away from our city centres, they are moving further away from areas with good employment prospects and may thus stay on benefit for longer. However, of course we must never forget that housing benefit is an in-work as well as an out-of-work benefit.

Staying with the private rented sector and the regulations soon to be tabled—they affect only the private rented sector—perhaps the most worrying of the imminent changes is the switch from rents being calculated as the 50th percentile of rents in a broad rental market area to the 30th percentile, which could result in a quite significant drop in local housing allowance; on average about £9 a week. This change will begin in October next year, and from then tenants will be affected at the date at which their tenancy agreement comes up for renewal. I hope that they will have the maximum time possible for this change, because in housing hotspots the drop could be a lot more than £9 a week. The worst-case scenario would be a huge increase in homelessness. Here I declare an interest as a patron of the Winchester Churches Nightshelter.

Of course, there are strict rules about who the local authorities can classify as homeless for rehousing purposes, and a tenant without children on local housing allowance whose income suddenly drops may not qualify. I gather that not all local authorities interpret the intentionality guidance in the same way, and I urge the Government to clarify the position. The welcome fourfold increase in the discretionary housing allowance budget surely will not stretch very far around all the country’s housing hotspots to help keep many tenants in their homes, particularly if unemployment rises significantly. Before leaving that point, I see no good reason why the cap on the four-bedroom rate and the upper limit for all property sizes should not be aligned with the change to the 30th percentile rate, so that the families who are affected by all three changes do not have their lives disrupted twice over.

The growth in the private rented sector is, of course, the result of the severe shortage in the provision of social housing over very many years, so it is little wonder that the housing benefit bill has been rising inexorably. I know that the Government believe that housing benefit has inflated rents, and that dropping the percentile should have the effect of lowering rents, but this is a terrible gamble with people’s homes, particularly when potential house buyers are continuing to rent because they cannot find the high deposits now demanded. What may happen is that many landlords simply will not let to LHA claimants if they can find richer tenants.

One change that the Government could make that would improve the situation straightaway would be either to give tenants the choice to go back to the system of direct payments so that landlords are guaranteed their rent, or for direct payments to landlords after the tenant had defaulted on their rent for just one month rather than two. We hear that 68 per cent of landlords in one survey said that this would make a huge difference to the decision whether to let to LHA tenants. We must also remember that not all buy-to-let landlords can themselves afford tenants to default. I gather that there are many repossessions in that sector.

What is needed more than anything else is a clear-headed look behind the ballooning housing benefit figure. I urge the Government to set up a short commission into the whole subject of housing benefit that would report back in no more than six, or even three, months. In spite of the increase in the discretionary housing allowance and the welcome news of an extra room for a non-resident carer, I have no confidence that the housing benefit changes announced will do anything more than increase homelessness and cause many vulnerable families to fall into poverty. I hope I am wrong.