Rent Officers (Housing Benefit and Universal Credit Functions) (Local Housing Allowance Amendments) Order 2015

Debate between Emily Thornberry and Chris Stephens

Monday 23rd November 2015 General Committees

[Emily Thornberry (Islington South and Finsbury) (Lab)]

I beg to move,

That the Committee has considered the Rent Officers (Housing Benefit and Universal Credit Functions) (Local Housing Allowance Amendments) Order 2015 (S.I. 2015, No. 1753).

May I start by saying what a pleasure it is to serve under your chairmanship, Mr Pritchard? There is a strange sense of déjà vu about so many of our recent debates on welfare reform, and nowhere is that more the case than when we talk about housing benefit. Sharpening his axe in the early stages of the last Parliament, the Chancellor set his sights on the growing housing benefit bill as a prime target for cuts. Despite cooking up no fewer than nine different ways to cut entitlement, the coalition Government nevertheless ended up with an annual housing bill more than £4 billion higher than the one they inherited.

How did that happen? The explanation is simple: thanks to a lethal combination of a low-wage economy and the lowest level of house building since the 1920s, the number of people claiming housing benefit has shot up. That is fuelled almost entirely by the 64% increase in the number of claims by working tenants in privately rented accommodation. It is important to make the point that housing benefit can be claimed by those in work—the poor in work. There has been a huge increase in the number of those people needing to claim housing benefit because the price of housing is so high.

Local housing allowance—or, in layman’s terms, housing benefit in the private rented sector—was always seen by Ministers as particularly low-hanging fruit. Despite the rhetoric of the emergency Budget of June 2010, which referred to “excessively generous payments” of housing benefit, the whole point of local housing allowance was to ensure that these payments would not be more generous than they needed to be.

It worked like this: in any given area, rates were set at the median of local market rents and, more importantly, they would rise or fall in line with those rents each month, ensuring that the cheaper half of the rental market in each area would always be affordable to low-income tenants on housing benefit. So, not luxury accommodation but the bottom half of the housing market would be available to those on housing benefit, including those in work and those out of work. While that system was not necessarily perfect, it seemed the fairest possible way of controlling costs and limiting tenants’ choices to a reasonable degree, while ensuring that low-income tenants would not end up getting priced out of large parts of the country—their country, where they have been brought up. That system, along with the principles it stood for, was completely turned on its head by changes introduced by the coalition.

First, the coalition Government changed the calculation of local housing allowance rates, lowering it from the 50th percentile to the 30th percentile, so that people on housing benefit could only rent from the bottom 30th percentile of properties in a particular area, which dramatically reduced the number of properties available within the limits of housing benefit. In making that change, the Government insisted that

“at least 30 per cent of private rented sector accommodation will continue to be affordable to people who depend on Housing Benefit.”

How did that go? It did not go well, and it should be obvious by now that that is absolutely not how local housing allowance reforms have played out.

The reason is that the move from the 50th percentile to the 30th percentile was only the first of many changes that, in combination, have seen housing benefit become increasingly disconnected from the actual cost of renting. Particularly damaging in boroughs such as mine, Islington, was the overall cap on local housing allowance rates. The cap means, for example, that claimants living in a one-bedroom flat can under no circumstances claim more than £250 per week in my area. If the Minister believes he could find a flat on that budget in my constituency or in any part of inner London, frankly, good luck to him.

The problem with these caps is that they seem to be set at completely arbitrary levels, with no reference whatever to the costs that tenants are actually facing. If hon. Members consider how much they are allowed to cover their housing costs for staying in central London, they might appreciate why £250 per week for a one-bedroom flat is very challenging indeed.

On top of that, the Government changed the rules on uprating, breaking completely the link between local housing allowance rates and actual rents. Instead of rising in line with market rents, local housing allowance rates were first uprated in line with the consumer prices index before increases were capped at a maximum of 1% for a period of two years. In breaking the link with rent inflation, the Government’s expectation was that the changes would

“bear down generally on rental values being met through Housing Benefit.”

If it wasn’t so sad, it would be funny. We know full well that the effect has not been to bear down on rent levels in any area. Not only has it completely failed to do that, it has not had the slightest impact on the rate at which rents are increasing. According the Office for National Statistics, private sector rents across the country rose by an average of 2.7% in the last 12 months. Given that there is no impact assessment attached to the Government’s proposals, we asked the House of Commons Library to examine some of the effects. Its analysis of the proposed freeze is that if rents continue to increase at the same rate over the next four years, the effects would be nothing short of devastating.

[Chris Stephens (Glasgow South West) (SNP)]

Has the shadow Minister read Shelter’s analysis stating that it would be virtually impossible to find a private rented home in 60 local authorities by 2019?