Welfare Reform Bill
Lord Best Excerpts(12 years, 11 months ago)
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Lord Best
My Lords, I am speaking to Amendments 12, 14 and 49. I know that amendments to my amendments have been put down and I will say a few words about them. I understand—I hope this is the correct procedure—that my Amendment 14, as amended, is consequential on Amendment 12. It is Amendment 12 that I shall concentrate on now.
These amendments cover the new underoccupation penalty for council and housing association tenants, the so-called bedroom tax for those on housing benefit. I am very grateful to the noble Baroness, Lady Hollis of Heigham, for her support, and to the noble Lord, Lord Kirkwood of Kirkhope, and the right reverend Prelate the Bishop of Ripon and Leeds, for theirs. Since the noble Lord, Lord Newton of Braintree, asked for his name to be added to the list, although of course only four are allowed, I know the amendment has support across all of your Lordships’ Benches. The amendment also comes with the backing of an impressive list of concerned charities and voluntary bodies led by the National Housing Federation and Shelter, to which I am very grateful for their hard work.
The amendment seeks to prevent a change to the definition of underoccupation currently used by the Department for Communities and Local Government. The Bill paves the way for a much tougher test than at present, with a hefty underoccupation penalty—a cut to the housing benefit—for those whose accommodation fails the new test. Currently, as the Housing Minister Grant Shapps made clear in October, a household in council housing or a housing association home is deemed to be underoccupying only if it has two or more bedrooms above the basic bedroom standard. One spare room is permitted. Under the Department for Work and Pensions’ proposed new definition, one so-called spare room would not be allowed.
Under the fierce new test, a family would be counted as underoccupying if, for example, two teenage girls were not sharing the same room, or if an older couple, one of whom is below pension age, have a two-bedroom flat. All those deemed to be underoccupying will have to move and downsize to somewhere smaller. If they do not, even if there is simply nowhere smaller for them to move to, then they must pay the new penalty. Six hundred and seventy thousand households receiving housing benefit will be caught in this trap, rising to some 740,000 in the years ahead. If they do not move out, they will be charged an average of £13 per week, which will have to come out of their low earnings or their other benefits, which are meant to cover food, fuel, clothing, and specifically not housing. These are by definition very poor households, and the new tax will represent a significant reduction in their living standards.
This may sound a heartless measure, but the Government’s objectives are not dishonourable. The intentions are to reduce the high cost of housing benefit in respect of tenants who stay put, or to free up bedrooms for larger households where existing tenants are persuaded by the new penalty to downsize. I fear that neither of these perfectly understandable objectives will be achieved by this measure.
First, it seems improbable that this will raise tens of millions of pounds. Those deemed to be underoccupying who seek smaller homes as a consequence may well have to move into the private sector, where rents, and therefore housing benefit, will be much higher, costing the DWP an extra £50, £60 or more a week. Secondly, the savings for the DWP will often translate directly into costs imposed on councils and housing associations. These bodies will have to assume the role of tax collectors, extracting the average £13 per week penalty from each tenant who does not move, which will prove to be an administrative and financial nightmare. To see who should be sharing a room, a landlord will need to keep track of the age and gender of each child. They will need to measure the bedrooms to see whether they can fit in two beds. They will need to find out whether family members are living at home or have actually moved out. It will require an army of snoopers to see who must be deemed to have a spare room.
If tenants will not pay or cannot pay, the saving to the DWP simply becomes a cost to the council or the housing association in arrears and bad debts. Less money for social landlords means fewer improvements, fewer regeneration schemes, and fewer much-needed new homes. Since the underoccupancy issue is a much more significant one in the north, affecting 46 per cent of working-age tenants in the north-east, and 43 per cent in the north-west, this tax takes money out of local economies in places that most need it. In Bradford, for example, one of the big housing associations has calculated that if it cannot collect all the payments, and has to take the hit in lost rent, it will cost £2.7 million per annum, which it can ill afford. That excludes the heavy cost of evictions—pointless evictions, since so often there will be nowhere cheaper for the household to move to—wherever the landlord cannot keep tolerating rising arrears.
Lord Best
My Lords, I am deeply grateful to Members from all parts of the House for their support. I am grateful to the noble Lord, Lord McKenzie, for the refinement to my amendment, which I fully accept. I hope noble Lords who have spoken will allow me not to summarise the excellent points that they have made and go straight to a few words about the Minister’s very helpful remarks. I congratulate him on bringing an extra £30 million this evening to alleviate the problems created by this legislation. Perhaps I could just pick up on two key points that he made.
The first is the suggestion that the proposed new definition of underoccupancy would bring social housing into line with the private rented sector. Tenants in the private rented sector are unaffected by this measure. They operate within a quite different framework, whereby the maximum of the local housing allowance is calculated for them based on this tight definition of underoccupancy but with the opportunity for the tenant to use the cash—the benefit—for something smaller, perhaps in a better area, or larger, perhaps in a less popular neighbourhood. In any case, those in the much more expensive private rented sector are predominantly younger, single and childless households, more than half of which stay for less than two years, and a third for less than one year. Unlike those in social housing, they seldom comprise a family needing a long-term home in which to bring up their children.
Secondly, the concession that the Minister has brought to us this evening would allow discretionary housing payments to be made to people whose properties have been specially adapted for a disabled member of that household. The discretionary housing payments would also be available where a foster child is coming into the property. These are excellent exclusions, or opportunities, at any rate, for a discretionary payment to kick in. One could list a whole lot more. Indeed, as one gradually looks at this, one begins to do just that. Why not include people with other disabilities—perhaps a family where, as the noble Baroness, Lady Hollis, suggested, a carer comes to stay periodically to provide respite for a parent? Perhaps an exception could be made where an elderly person has a spouse aged only 60. As things stand, they would both have to move or pay up.
The Minister says that everyone must pay their part and, on average, £14 per week is the part that many households will have to pay as the penalty charge. Even if it is £12, or £22 at the other end, I suggest that these are serious sums of money for many people in very low-income households, if they stay put. The option of moving does not exist for a lot of them.
I think this is the moment at which I would like to test the opinion of the House.
“(3A) In relation to a dwelling of which the landlord is a local housing authority or a registered provider of social housing, regulations under this section shall not permit the housing cost element of the universal credit to be less than the actual amount of the liability in a case where a household has no more than one spare bedroom.”
Baroness Hollis of Heigham
My Lords, I will be very brief. The amendment indicates our very real concerns about the effect of all these cuts to housing benefit. We fear that if there is any reverse in our decision today on underoccupancy, housing associations will face mounting arrears, and spend more time and employ more staff chasing deficits in rent. As a result, there will be even less chance for those housing associations to build the new housing stock we badly need. I know the Minister thinks my fears are exaggerated. I hope he is right. The House has alleviated most of my concerns, but we cannot properly calculate the behavioural effect of all these changes on tenants. The Minister is evidence based—something we all welcome and respect—and he wants UC to work, as we do. I therefore hope that by the time the Bill has gone through its full passage in both Houses he will, if it is appropriate, find the resources to ensure that we have the research to undertake an independent review of its effects on tenants in social housing. Frankly, if we do not have that protection, I fear the worst. I beg to move.
Lord Best
I support the amendment. We already have up and running, thanks to the good work of the Minister, a really first-class piece of research looking at the impact of the housing benefit changes on families, poverty and a whole range of issues. I strongly congratulate him on taking that suggestion seriously and bringing forward a significant piece of research. It engaged a consortium of the top people at Oxford University, Sheffield Hallam University, Ipsos MORI polling and the IFS. I wondered whether that team might have its work somewhat extended to embrace the research suggested by the noble Baroness. It would not involve quite as much work because it would examine the 150,000 or so households that will now be affected by the underoccupancy arrangements. There is much important research to take place.
Lord Freud
My Lords, I acknowledge and commend the contributions of the noble Baroness and the noble Lord to the debate on policy. Both of them, particularly the noble Lord, Lord Best, played an important role setting up the independent research that the department has already commissioned around the local housing allowance. More recently, as noble Lords are aware, we have announced research looking at direct payments in the social rented sector. However, I must complain bitterly at the improvement to the negotiating position of the consortium that the noble Lord mentioned. When we carry out research, we always have open competition and no one is favoured. We choose the best researchers.
I place real value on independent research. We need robust evaluation on the impact of welfare reform on housing provision. I know that we are taking some steps in housing benefit reform where we need to monitor the risks. I know that there are risks, and we have all discussed them. That is why proper research, considered properly and taken very seriously, is right at the heart of the protections that we are looking at in this area.
I fully support the intention behind this powerful amendment. I want to go on record as saying that. I can tell noble Lords that the department is currently in the process of planning its research programme for 2012-13 onwards, subject, I have to add, to available funding—and I hope that noble Lords do not take that away from me in other ways. I intend to cover the size criteria and underoccupancy in housing benefit. We are considering separately how to evaluate universal credit. Noble Lords will be aware of the constant-piloting clause that we approved in Committee, which provides for a radically new way of looking at this important benefits system.
All research commissioned by the department is published. I am sure that noble Lords will accept that it is not necessary to provide for this research in the Bill. I know that this is a probing amendment and we will look to providing this research at the right time. With those reassurances, I hope that the amendment can be withdrawn.
“Payment of housing costs
(1) This section applies to payments of the housing cost element of the universal credit.
(2) Payment of the housing costs element of the universal credit must be made to a person’s landlord where that person has requested or consented to such payment in agreement with their landlord.
(3) Regulations made by the Secretary of State may prescribe the circumstances in which subsection (2) does not apply.
(4) Regulations made by the Secretary of State shall prescribe the person who is to be treated as the landlord for the purposes of this section and shall make provision as to the discharge of liability consequent upon the making of any payments to the landlord.”
Lord Best
My Lords, the amendment relates to the payment of help with housing costs—at present in housing benefit and later as the housing cost element of universal credit. The Minister has announced that in future the payment for rent must go directly to the tenant, not, as is possible at present, to the landlord. The amendment preserves the current option for the tenant to choose that the rent should be paid straight to the landlord where the tenant thinks that that will help with their budgeting and housekeeping.
When I introduced a similar amendment in Committee, I pointed out that private landlords were already often very reluctant to take on tenants in receipt of housing benefit or local housing allowance. However, where the benefit is paid straight to the landlord, thereby minimising the chances of arrears, the reluctance of landlords can be much reduced. There is backing for the amendment from the private sector—the Residential Landlords Association, the British Property Federation and others. There is also backing from social landlords. This morning at the LGA, I addressed a conference on housing finance and was surprised at how strongly local authorities expressed their view that the direct payment of rent to tenants would lead to arrears and difficulties for councils in handling housing accounts. The amendment is also strongly supported by those who represent tenants—residents in the rented sector. Associations of residents in social Housing—TARAs—Shelter, Crisis and others are right behind the amendment, not least because surveys have shown that a high proportion of tenants would wish for their rent money to go to the landlord.
The Government have agreed that this choice will be available to those of pension age. This amendment would extend that possibility to make this kind of sensible choice available to all tenants. The housing associations organised a pilot of their own in which they experimented to see how things worked out when rent was paid directly to the tenant. They found that arrears increased from 3 per cent to 7 per cent. If that was applicable generally, the cost to the housing association sector would be some £320 million a year in additional arrears. Local authorities have a similar stock of social housing which would double the figure to some £640 million a year. Housing associations also discovered that their administrative costs were very much higher when the rent did not come straight to the landlord in the form of housing benefit or—in future—the housing element of universal credit. The extra costs on administration for that are estimated at £100 million.
If housing associations face those kinds of costs, the hazard is that lenders will not be so keen to lend to them. The Council of Mortgage Lenders is in favour of the amendment, as are the individual lenders, because they worry that housing associations will get into difficulties if they do not get the rent that they need. The Minister has set up some important pilot schemes to test ways of assisting tenants to handle the money provided for rent, and new arrangements for low-cost banking may be developed in the months and years ahead. However, the Minister undertook to look further at the option of giving more vulnerable tenants the right to choose to have their rent paid to the landlord. I know that he has been considering how a fast-track arrangement might be implemented to switch the payment of rent from tenant to landlord when arrears are mounting.
These changes would be useful but they do not address the fundamental problem. Surely the best approach is to continue to give tenants the right to choose to have their help with housing costs paid directly to their landlord, and not to give them the temptations which are bound to be placed in their path if sums, perhaps in the region of £500 or £700 a month, were paid to them, and possibly used to satisfy the requirements of loan sharks and less salubrious lenders and creditors, rather than paid to their landlord. Can we not preserve the existing right of tenants to choose to be assisted in their budgeting? I beg to move.
Baroness Howe of Idlicote
My Lords, having listened to that explanation from my noble friend Lord Best, I have been completely converted to this approach. I certainly appreciate that the Minister is trying to educate people better to take care of their own finances, but the choice already exists for the individual tenant to decide whether to pay for themselves or to opt in to a system which is, from what we have heard, more satisfactory and reassuring to the landlord—whether a local authority or whoever. As all of us in this House are beginning to get a little older and, sometimes, a little forgetful, perhaps that is a helpful thought for later, when we get even more forgetful about things such as paying our rent.
All I am saying is that this sounds the better way to do things. I am all for running courses to help people to cope better with their finances, but from the point of view of not wasting money, this is clearly a way forward.
Lord Freud
I am saying that we are working really hard with the banks and the banking community to make sure that we have an escrow arrangement of that nature, and we are doing this at several levels. We can have a general agreement, which I shall discuss with the banks as a whole, to provide a generalised protection. However, I am quite interested in getting particular banking products that will provide a simple bank account and elaborating on what could be a new level of support for some of the poorest people in our community. We have a one-off chance with universal credit to ramp up support for the poorer people in our community, and we are putting a lot of energy into achieving that. I have talked about this before. It is one of the hidden gains that we can get out of the introduction of this new system. Rather than people living on drips of money from here and there, we can really start to help them, supporting them in managing their finances and getting true independence. This is a core part of what we are going to be doing with universal credit, and part of that relates to housing. Housing will be a major part of people’s total income stream. We are not doing this for fun or to annoy anyone; this is absolutely part of what we are trying to do with universal credit.
I need to deal with one other point—the issue of safeguards raised by the noble Baroness, Lady Lister. We are concerned about the safety and welfare of claimants and, where we have a concern, we need to put direct payments in place. There are vulnerable groups who are not able to manage the potential freedoms, and for them we will make sure that we go on with existing arrangements for direct payments.
We have commissioned a consortium led by Professor Paul Hickman—I am sorry, but this is a bit of an announcement late at night—from the Centre for Regional Economic and Social Research at Sheffield Hallam University to evaluate the effects of direct payments to claimants in the six demonstration project areas, which I shall announce soon. The other key team members are Dr Kesia Reeve, Peter Kemp of the Oxford Institute of Social Policy, and Stephen Finlay from Ipsos MORI, names that I know that the noble Lord, Lord Best, approves of. That will give us a cumulative understanding of the impacts of direct payments and inform the detail of delivery under universal credit.
Research published by the Joseph Rowntree Foundation in 2007, Paying Housing Benefit to Claimants, on both private and social tenants’ experiences of and their hypothetical attitude toward the management of their own housing benefit confirms that a significant proportion of social tenants have the potential to manage their own housing benefit payments. We will also have an advisory group for the demonstration projects and a wide range of local government, money advice, voluntary sector and other external stakeholders who will be invited to join that group.
We had a slight exchange about what “choice” means and we have been teasing each other about the imbalance of power when you have choice. It concerns us that while there is theoretical choice today, only 5 per cent of people take it. As it stands, tenant choice does not go far enough, which is why I am concerned about it. I hope that the noble Lord, Lord Best, will accept that we are making incredible efforts here to be transformative and not to undermine the housing sector, and on that basis will feel that there is enough going on for him to withdraw this amendment.
Lord Best
My Lords, I am very grateful to all of those who have joined this debate. I am sure that we all feel much reassured by the passion that the Minister brings to this subject and by the genuine efforts that he is making to see that the behavioural change that he wants is triggered and that the disadvantages of going down this route are mitigated. The excellent research that he is announcing tonight—and I thank him very much for it—might show that it is not possible for only 20 per cent of the tenants within the social sector to be regarded as vulnerable and to have their rent paid directly and that there is a rather larger number.
However, I think the Minister is keeping an open mind as to what proportion of the sector will get their rent paid directly, and I greatly welcome him saying how much he is concerned not to undermine the social housing sector, the production of new homes, the sector’s lending and the security of income within that sector. If those discussions with bankers fail and the products do not materialise, we must place our faith in the Minister and hope that he will recognise that the difficulties still exist and that rent direct to the landlord is going to be necessary for a larger proportion of people. On that basis, I am happy to withdraw my amendment.
Welfare Reform Bill
Lord Best Excerpts(12 years, 12 months ago)
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Lord Freud
My Lords, the best piece of information I can provide the Committee on that question is that it is the noble Lord, Lord Kirkwood of Kirkhope. I think I am reduced to going back to the basic principle that there should be a limit and we have set that limit at the equivalent of £35,000. We are going round in circles slightly.
Lord Best
I thank the Minister for helpful and hopeful words about the transitional arrangements—the 26-week period of grace that was the subject of my amendment. On my other amendments relating to excluding sheltered and supported housing and temporary accommodation, I think the Minister was saying that that was still a work in progress, so my hopes are not dashed on that.
The overarching point that I have repeated a little here is that it is fair enough to have a limit, if the Government, for political or wider reasons, believe it to be necessary, but the limit affects people in very random ways. If you live in a nice three-bedroomed council house in Wales—as I described it earlier—costing £85 a week, you will have £415 left to spend on other things. If you live in a crummy flat in the East End of London at a rent of £325 a week, you will have an awful lot less to spend out of your £500 on all the other things you need. The cap hits people in a rather random way, which is why I have been arguing that we should take housing out of the equation and look at the other factors where the fairness principle might have greater applicability.
The underlying question I would leave with the Minister is: how are we going to manage the movement of people from a high-rent area of the country—they may be in privately rented property or have a number of children—to the cheaper areas of the country? We are looking at something like 200,000 people and 50,000 households. The Minister has suggested that some people will deploy savings, but savings will run out quite quickly if they are being dipped into at an average rate of £93, and for some people up to £150, per week. Such people do not have large amounts of savings and their savings will run out quite quickly. We know it is rather improbable that landlords will drop rents dramatically to cover these and other benefit caps.
In most cases we do not expect people to be going out to work—90 per cent of them are not required to go out to work—so although some might be coerced or incentivised to go out to work, the great majority of the 50,000 will still be in homes where they will not be able to stay because the gap between what they will receive to pay their rent and the rent itself is too wide. They will have to leave. Are we making contingency plans for this movement of a couple of hundred thousand people from the more expensive parts of the south-east and south-west to the inexpensive parts of the country? The move will be expensive.
I pick up on the point made by the noble Lord, Lord McKenzie, about the cost of this cap. If people stay put and wait until they are evicted, an eviction will cost the housing association or social landlord something like £9,000. It is not just the legal costs but the fact that when the people move out you have to redecorate the house and you have a period of vacancy. All those things add up. We reckon that an eviction costs about £9,000, but if people go voluntarily and we can move in at the right time and do things in a more sensible way, the cost is about £2,500. However, on average you are looking at the landlord paying several thousand pounds when people move out.
There is also the question of providing education. When people arrive in new areas, their children will need to attend new schools. Social services departments will have to be notified if children are under the care of social workers. All these things will cost an awful lot of money, let alone just the simple transportation of people’s belongings, the cost of their rail fares and the costs involved in searching for a new home. All this is incredibly expensive. If we are to move 200,000 people because we feel, for whatever reason, that it is not fair for them to continue to occupy homes in expensive areas, are we putting in place the contingency plans that the local authorities in particular will need to get their heads around?
Lord Freud
My Lords, I thank the noble Lord, Lord Best, for that area of inquiry. We are looking to get early support for families in a number of ways well before the cap comes in. We are looking at a process whereby families on benefit face the same choices that low-income working families face. We are looking to achieve significant behavioural change through this measure. I assure the noble Lord that we are working hard with local authorities and other departments as well as with the devolved Administrations on the implementation of this measure.
Welfare Reform Bill
Lord Best Excerpts(13 years ago)
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Lord McKenzie of Luton
My Lords, I think that the noble Lord, Lord Best, wishes to speak.
Lord Best
My Lords, in speaking to Amendment 99AC in this group, I am very grateful to Shelter, Homeless Link and the National Housing Federation, which have formulated a series of amendments here and given invaluable advice to all of us.
It turns out that the new benefit cap is really about two factors: children and housing. As was so clearly demonstrated by the noble Baroness, Lady Tyler, and the right reverend Prelate, because the cap is not adjusted to take account of the number of children in a family, larger families will be hardest hit. The other factor for which no allowance is made in the crude calculation of the benefit cap is housing costs. No account is taken of the fact that families in otherwise identical circumstances have to pay very different amounts for their housing, not out of choice but because of where they live, what type of landlord they have and the size of home that their family requires.
Rents are far higher in some areas than in others. In London and the south-east, rents may be four times the levels in the cheaper areas of the north of England or, say, south Wales. If the accommodation is in the private rented sector, again rents can be several times higher than in the social, council or housing association sector. Of course, accommodation costs will be higher if you have a larger family. Heaven help you if you have, say, three children—let alone four, as in my own family—and you are in the private rented sector and you live in the southern half of England. If you cannot find a job, you are probably going to have to move, most likely to a cheaper area where, unfortunately, employment prospects are likely to be even worse, or you will face homelessness.
The cap is very much about housing, and the way that it is applied relates directly to housing costs. Where a family’s entitlement to benefits exceeds the cap, the cut to their state support is to be achieved, in the first instance, by cutting their housing benefit. The DWP calculates that some 50,000 households will be affected. On average, they will lose £93 per week from the amount that they can contribute towards their rent. This shortfall, which cannot possibly be covered by cutting back on food, clothing, heating and so on, rises to a colossal £150 per week for some 7,500 families. The cap also raises the prospect that some families who will have to move in 2012, because of caps on housing benefit and local housing allowance already announced, will be hit again and uprooted for a second time when this overall cap reaches them in 2013.
Amendment 99AC in my name seeks to address this fundamental flaw in the proposal for a benefit cap by excluding the housing benefit component from it. This would not save all those affected since the largest families will be left with virtually nothing with which to pay their rents if they are not to fall below the poverty line. However, it recognises the extreme consequences, even for those in smaller households, of having to pay today’s market rents in so many areas. Removing the housing benefit element from the cap would greatly moderate its effect upon already very poor households.
The DWP itself points out in its impact assessment that households are very likely to go into rent arrears, which means landlords and the courts incurring the expense and effort of evictions, and local authorities facing the increased cost of handling homelessness. Shelter research shows that out-of-work families with just two children will face a shortfall in what they receive for their rent in the private rented sector in all inner London boroughs and many outer London boroughs, from Hounslow to Haringey to Newham. Those with three children will face this problem in every London borough and in 82 per cent of all local authorities throughout the south-east of England.
I may be pre-empting the Minister’s response but the problem would be solved if private landlords and housing associations charging the highest rents were to cut dramatically the rents of their tenants receiving housing benefit or local housing allowance. However, we should remember that housing benefit and local housing allowance are being cut and capped in several other ways, including through the high rent caps and the restriction to the lowest 30 per cent of rents. Therefore, in total, some pretty hefty rent reductions will be necessary. I fear that there is simply no chance of private landlords, who now have lots of new customers because so few younger households can afford to buy, slashing rents to accommodate the extra cap. Rather, Amendment 99AC seeks to remove much of this problem by taking housing benefits out of the equation.
In the next set of amendments, I will look at some of the ways in which the problem might be mitigated. However, this overarching amendment seeks to remove from the problem of a simple, overarching benefit cap the housing costs that make such a big difference to who is and who is not affected by the new overall cap.
Lord Best
My Lords, I am speaking to Amendments 99AA, 99AB and 99D. We now return to housing matters. I have already made the point that it is high housing costs that so often will push families over the cap. High housing costs do not of course equate to housing quality. A £350-a-week two-bedroom flat in outer London can be to far lower standards than an £85-a-week three-bedroom council house with a garden in the north-east, yet the outer London family in Newham has only £150 left within the £500 cap after paying their rent while the well housed family in the north-east has £415 left to meet other needs. I have argued for the housing cost element in the benefits received to be taken out of the equation to create greater fairness. That change would render several of my amendments in this group redundant, but I turn to them none the less.
Amendment 99A calls for a period of grace for those affected by the new cap during which the claimant would remain entitled to full benefits. Only after this period—my amendment suggests 26 weeks—would the total benefit cap be applied. Without this concession, many families in private rented accommodation in the south of England will see the benefits for their housing costs cut, forcing them to look immediately for alternative housing elsewhere. Current housing benefit regulations allow for a 13-week period of grace from restrictions on the rent that they have been paying independently up to that point, so the claimant who could afford to pay the rent until they lost their job will get that rent covered in full for 13 weeks even if it breaches the maximum levels of local housing allowance. A longer period is allowed for households that have suffered bereavement. For them there is a 52-week period of grace. It seems entirely right that a proper safety net should be available to a family that faces a sudden change in circumstance to give them a chance to get back on their feet.
It is generally agreed that an important function of the benefits system is to provide such a full safety net for those suddenly hit by redundancy or relationship breakdown. If, from the very day that such a drastic change of circumstances has struck, the family has a substantial shortfall to find between their benefit for housing costs and the rent that they must pay, then a major setback becomes a real crisis. How much better to give the household some weeks to secure a new job, or indeed to move home without having to present themselves as homeless. How much more cost-effective to give people the opportunity to get back into work rather than having to move the family to another area where rents are lower and jobs likely to be scarcer, all the while accumulating rent arrears and seeing the chances of a settled life with a proper job taken from them.
If they are going to have to move to a cheaper part of the country, at least they must have time to make all those arrangements and, hopefully, secure employment in the new place. We all know that the cap is intended to reinforce the message that work pays and a life on benefits is not sustainable, but it will affect newly unemployed households that have a strong desire to work but have lost their jobs because of factors outside their control. Rather than penalise people who are doing all they can to make a swift return to employment, the arrangements should see people through a difficult period so that they can re-establish themselves for the long term.
Where relationship breakdown and the loss or desertion of the main breadwinner is the trigger for the benefit entitlement that is now to be capped—the DWP’s impact assessment shows that more than half the households affected by the cap are likely to be headed by lone parents—a precipitous application of the new limit seems likely to lead simply to homelessness. This compounds the harm and distress experienced by the children. Surely it makes more sense to allow those lone parents to look for a suitable job following separation, make arrangements for childcare—so often relying on grandparents, who themselves will need to make new arrangements—and get back on their feet in a sensible way, and to ensure that for the children the loss of a parent is not followed by the loss of a home.
At the same time, a breathing space allows those responsible for paying benefits to untangle the complexities, calculate entitlements in relation to tax credits and other exemptions and handle the administration. With local authorities continuing to look after housing benefit during the interim period before the universal credit arrives—at least six months—there is already enough opportunity for delay in handling these claims. The period of grace would help those paying the benefits as well as those receiving them. I am confident that the Minister will be able to respond positively on this one, as it seems in no one’s interests to deny families the breathing space in receiving the benefits that sees them through a bad patch, rather than forcing themselves into a crisis—into homelessness and, in all likelihood, into long-term worklessness.
My second amendment in this group, Amendment 99AB, seeks to exempt homeless households in temporary accommodation from the overall benefit cap. Again, this would be redundant if my earlier amendment to exempt all housing benefit from the cap was accepted. It is therefore a fallback amendment. It seems anomalous for those placed by their local authority in temporary accommodation, quite often outside their own borough and already in the cheapest neighbourhoods, to be penalised for paying too much for their housing. Such households have no choice over the accommodation that they occupy and therefore cannot seek to reduce their housing costs or cut their cloth to suit their means. Local authorities are already restricted in their choice of where they can put those deemed to be homeless by restrictions on the housing benefit payable for temporary accommodation. The housing benefit subsidy will not cover more than the local housing allowance, less 10 per cent, using the previous marker of the 50th percentile. Councils then charge an administrative fee of £40 a week in London or £60 elsewhere, which is added to the household’s housing benefit claim. The total rent payable in relation to the homeless household will be higher for temporary accommodation of this kind and therefore, alongside the family’s ordinary benefits, is more likely to take them over the proposed total housing benefit cap.
An additional complication is that at present the Government’s Homelessness Code of Guidance for Local Authorities prevents councils from arguing that a homeless household should use other benefits to top up the payment for their rent. This is an understandable restriction, since the state believes that the income of families for their subsistence living should not be reduced below a minimum level. This means, perfectly reasonably, that councils securing accommodation in the private rented sector for workless homeless families cannot turn to the families themselves to meet any part of the rental shortfall caused by the extra cap.
Already inner London authorities such as Westminster City Council are exporting homeless households to outer London boroughs. They will have to work within tougher constraints in future, but it is hard to see the sense of placing an overall benefit cap that reduces the benefit for housing costs for these homeless families. They are already being moved away from support networks—friends, grandparents et cetera—and penalising the family by cutting their income to the point when they cannot afford the accommodation to which they have been sent would seem to place both them and the council that sent them in an impossible position.
Is the idea that the local authority, having accepted responsibility for the homeless household, will be expected to support the family financially to stay in the temporary accommodation to which they have been sent? While such an arrangement would enable the family to remain there, the extra costs falling on the local authority would seem a very unfair transfer from the DWP to local councils. Or is the intention that the local authority must make arrangements to ship homeless families still further away, with all the logistical problems that implies?
Wherever families are sent, the costs of temporary accommodation are going to be high in relation to mainstream private renting and considerably more than social housing rents. Those placed in bed and breakfast accommodation cost an average of £325 per week back in 2008-09 across the whole of England, so moving people long distances may not achieve very great savings in these particular cases. It will certainly make it more difficult for people to find work in areas where they do not have local knowledge and contacts. The move is bound to disrupt children’s education; Shelter has found that 43 per cent of parents in temporary accommodation said that their children had missed some school and one in 10 had children who had lost out in a school place entirely. Moreover, because the maximum level does not rise according to the number of children in the family, as we have heard so clearly today, it is not clear that there is anywhere in the country to which the local authority could send a homeless family if it comprised several children. I know that the Government are planning changes to temporary accommodation funding for 2013. I hope that this presents an opportunity to overcome the incompatibility between the high cost of procuring temporary accommodation and the new overall benefit cap. Perhaps the Minister could reassure us of the position on that.
Amendment 99D in my name seeks to exempt people living in supported or sheltered housing from the extra benefit cap. This seems a fairly obvious exclusion when one thinks about it. Specialist housing for individuals and couples with support needs, usually provided by housing associations or charities, is clearly much more expensive than plain housing with no extras. Service charges will push up the total that is eligible for housing benefit. However, this housing has been created specifically to help those with particular needs in a cost-effective way. If people had to leave, it is improbable that they could be accommodated more cheaply elsewhere. No purpose would be served by imposing a cap that forced out vulnerable people who would have to be rehoused immediately at higher cost somewhere else.
This change seems an essential measure. For example, it would cover couples in sheltered housing where one person is below pension age, even if the other is well above it. It would also cover those younger people who are not eligible for disability benefits of any kind but who have experienced a range of traumas and vulnerabilities and who are being helped to seek training or employment, but who are not yet work-ready and need the continuing help of specialist supported housing for a little while longer. Once again, this small amendment would become redundant if the overarching principle was accepted that housing costs, which vary considerably from one household to another, should be taken out of the calculation of the cap.
I conclude where I began: the benefit cap is very often about cutting support for housing costs. However, housing benefit and local housing allowance have already been the subjects of serious reductions, and the imposition of the additional total benefit cap seems likely to have grave consequences. Removal of the housing component would address a good number of the unforeseen circumstances and represent a triumph of good sense. I look forward to the Minister’s response to my amendments.
Baroness Tyler of Enfield
My Lords, I add my support to the two amendments in this group to which I have added my name. I shall speak to Amendment 99AAA, which stands in my name, on the issue of kinship carers.
Amendment 99ZB, already moved very cogently by the right reverend Prelate, would remove child benefit from the calculation of the cap. There is much that I should like to say on this but in her recent contribution the noble Baroness, Lady Lister of Burtersett, made a very powerful case about the unfairness of including child benefit in the calculation of the cap. Frankly, there is little that I can add other than to say that if the Government were to accede to this amendment, there would be not just huge applause but real consensus around this table that children should be protected, whatever happens to adults. Whatever is thought—and probably not shared—about the perceived shortcomings of adults, children should always be protected.
Amendment 99C deals with the exemptions of particular groups from the benefit cap. This is the subject of Amendment 99AAA in my name regarding kinship carers. I will be very brief but I want to say a few words about why kinship carers are so important. A kinship carer might, for example, be an uncle, aunt or grandparent who takes in children from other members of the family to avoid that child going into council care, with all the trauma and expense to the state that that creates. The purpose of this amendment, which is essentially a probing amendment, is to see whether the Government indeed intend to exempt family and friend carers from the cap. The architecture is already there; Clause 93(4) provides for the introduction of regulations to make exemptions to the cap, and the amendment would include family and friends carers among those exemptions.
Welfare Reform Bill
Lord Best Excerpts(13 years, 1 month ago)
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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.
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.
The Earl of Listowel
My Lords, before I speak to my amendment in this group, perhaps I may follow the noble Lord, Lord Best, in his concerns about the impact of this move to an underoccupation penalty, particularly on families. It was encouraging to hear from the Minister the results of his survey and some positive outcomes to the changes whereby people will look for work, or think of getting a lodger. However, what concerned me about his comments were the large numbers who might go into arrears. I have observed from my experience of young people leaving care and of other families that people leading chaotic lives tend to think from day to day.
Therefore, given the example given by the noble Baroness, Lady Hollis, if a family in bed and breakfast accommodation were offered a three-bedroom house that seems to suit them but may be too large, they may say, “We will take it and deal with the arrears when they come. We will not think of the future”. Then they end up in arrears and in serious difficulty because they are not able to cope with the worry of being in debt and they do not know what to do. I am grateful to the noble Lord, Lord Best, for highlighting the fact that this issue needs close attention from the Government, and I look forward to learning more about it. He has a good point. This is a serious worry with the underoccupation penalty.
The noble Lord also raised the question of foster carers. Under the current absurd arrangement, foster caring and providing a room to a foster child would not count as a room and in this scenario would count against one. I am not expressing that very clearly, but I think your Lordships understand what I mean. I suppose it might be argued that this will be an incentive for some people to foster if they have a spare room. If the Bill is changed to be made sane, they would not be caught by this part of the legislation.
However, I have two further thoughts. First, there is a real question as to how far one should professionalise foster caring. People should go into foster caring because they love children and want to provide a good home to a child. I know that there is a debate about the professionalisation of foster care but, in principle at least, people should be motivated by caring for children, not making a bit of extra money or saving some money. Secondly, the harms that may arise from this proposal by far outweigh any potential benefits of that kind. If such families get into arrears there is perhaps the cost to the mental health service as the family breaks down under stress. There is the cost to the education system as their children fail. One needs to look at the bigger picture rather than just think about short-term savings.
Perhaps I may sum up. I apologise for using my laptop on this occasion; however, I cannot get internet access today and I was unable to download my notes and print them out. My Amendment 85 is modelled on the previous amendments of the noble Lord, Lord Kirkwood, and I apologise to the Committee because I drafted my amendment rather poorly. I should have referred to children looked after by local authorities rather than those cared for by them. My intention is to gain an assurance from the Minister that families who have their children looked after by a local authority may retain a room for that child to return to when he is ready. While a few children are adopted from care, most return home sooner or later, and it is right that they should have a room when that happens. It is important for the parents to retain a sense that their child remains their child and that they remain the parents. That is important because their children will normally still love their parents, however they have been treated, and will need to feel there is a place for them in their parents’ home. It is important also because the child will eventually return. Generally, we should strongly encourage these parents to retain their sense of responsibility for their own children. An experienced child and family social worker has reminded me that it will also be important for the child to know that his parents will be keeping a room for him. He will need to feel that he is still wanted and there is still a home for him with his parents.
In the year ending 31 March 2011, 3,050 children were adopted out of a population at that time of 65,520 children who were being looked after. Very few children, then, were adopted. Children who are subject to residence orders, or are being cared for informally by the Ryder family, are all the more likely to return to their families. Barnado’s has expressed concern about these children. This matter was also raised by the noble Baroness, Lady Tyler of Enfield, at Second Reading. There is a separate amendment in this group, which I support, on those particular groups of children.
I would be most grateful if the Minister could reassure me that families whose children are looked after by a local authority would not normally be subject to the underoccupation penalty. I apologise if the problem with my drafting has made it more difficult for him to reply. I would certainly find a letter acceptable if that seemed more appropriate in the circumstances.
I will not speak to my Amendment 86 because my understanding is that the benefit arrangements for care leavers are such that the concern I had is not an issue. I look forward to the Minister’s response.
Welfare Reform Bill
Lord Best Excerpts(13 years, 2 months ago)
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Lord Best
My Lords, my set-piece speech was going to cover a number of housing issues. To my slight surprise, housing has featured in an awful lot of your Lordships’ contributions and my speech is virtually redundant. Even at this late hour, however, I might be able to add one or two new points, because a couple of new reports have come out in the past 48 hours, specifically to help our debate today, dealing with housing benefit reforms, the restrictions and the cuts. Having a total benefit cap which impacts on housing is probably the seventh, or just possibly the eighth, restriction on housing benefit. With this underlying intention of the Government of saving some £2 billion per annum from the housing benefit bill, the question has always been: will that burden of an extra £2 billion fall on the tenants or on the landlords? The hope has been that the landlords will reduce rents to the new levels and that it will not be the tenants, who are, after all, some of the poorest people in this country, who will suffer from the benefit reductions.
The report that came out yesterday from the British Property Federation and the Chartered Institute of Housing looks at whether benefit reductions will lead to landlords reducing rents. The report takes it on a historic basis as well as a contemporary one. I am afraid that, although we must await the much more extensive research project which the Minister has put very properly in hand—I have congratulated him on doing so—it does not appear that benefit reductions will lead landlords to reduce rents. Therefore, the burden and the pain of cuts will fall upon very poor households and may impact on homelessness.
The second ingredient I was going to explore concerns the payment direct of housing benefit to social housing landlords or the local housing allowance to private landlords and the new measure which involves the benefit being paid instead to the tenant. The tenant would handle the money and would have to pass it on to the landlord in due course. A National Housing Federation report that came out today has done an opinion poll of tenants to see how they feel about the independence that this would give them and the preparation for work that this might help with. However, the outcome of this opinion poll is that 93 per cent of tenants felt strongly that their rent should go to their landlord. Perhaps they think that they do not want the temptation of using that rent for something else or simply want the convenience that the rest of us have with mortgage payments being made by direct debit to the building society and thus not giving us the temptation of handling that money.
We have to reckon that some people have difficulties of their own and that their budgeting could be very complicated. Some will have debts and sometimes people who are after them to repay those debts will be a lot nastier than social landlords. Today’s opinion poll confirms that paying rent to the landlord is a sensible option. Picking up on something said by the noble Baroness, Lady Gardner of Parkes, is it so likely that landlords will accept tenants at all unless the rent is paid directly to that landlord?
The third ingredient on which I was going to speak at more length is the penalty if one is found to have a spare room somewhere in one’s property in social housing if you are under pensionable age. It is expected that 670,000 households will be discovered to have a spare room and will be required therefore to downsize to something smaller or to face the cost of a reduction in their benefit, averaging between £8 and £11 a week. It will be taken from the other benefits that they receive and will be calculated without regard to any housing costs. Those averages are, of course, averages and in some areas the cost per week would be very much higher.
This seems to be a cruel reduction in people’s entitlements when one bears in mind that it may be physically impossible for some people to move to a smaller home. Of the people affected, 180,000 are in two-bedroom accommodation and would be required to move to a single-bedroom place. But, last year, there were only 68,000 vacancies in social housing in one-bedroom accommodation. Even if we allocated all the one-bedroom accommodation to people who were downsizing, which we cannot do because we have a lot of other people in priority need, it would take several years before people could move down from their two-bedroom property to a one-bedroom property. In the mean time, to penalise them seems very unfair. I am afraid that I do not have a new report out to tell noble Lords about that third ingredient.
I hope that the Minister will take account of the fact that so many of your Lordships today have hit upon housing and housing benefit reforms as a really important aspect of this Bill. Indeed, we will put amendments before him, which we hope he will consider favourably.
Housing Benefit
Lord Best Excerpts(13 years, 6 months ago)
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Lord Freud
My Lords, there seems to be some evidence that landlords were able to benefit from the local housing allowance regime in that we saw its rates go up rather faster than rents for non-housing benefit recipients.
Lord Best
May I underline the thanks of everybody who is worried about the impact of housing benefit cuts for the Minister’s action in setting up this independent and rigorous review of the housing benefit consequences? Will he tell the House when it will start, who will be carrying out the review and whether it will include not just people who have to leave because they are evicted or cannot afford the new rent but those who stay put and may face considerable hardship finding the rent from their other benefits and allowances?
Lord Freud
My Lords, I am pleased that we have a stunning consortium to do this work. It is led by Ian Cole from the Centre for Regional Economic and Social Research at Sheffield Hallam University, with other key team members being Peter Kemp of the Oxford Institute of Social Policy, Carl Emmerson of the Institute for Fiscal Studies and Ben Marshall from IPSO Mori. It is a stunning group and is going to build an understanding of the impacts of the housing benefit changes right the way through from people who move to those who stay—the noble Lord was concerned about them—at national and local levels, and it will integrate that with wider housing and labour-market evidence. A lot of this will be econometric analysis. The group will report the findings to me finally, as agreed, in spring 2013, but there will be interim reports next year.
Housing Benefit (Amendment) Regulations 2010
Lord Best Excerpts(13 years, 10 months ago)
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Lord Best
My Lords, I shall speak to all three of these Motions, but in particular, to the third one standing in my name. I share the concerns of the noble Lord, Lord Knight of Weymouth, that the changes introduced by the regulations and the order are likely to have very serious consequences. The Government expect the cumulative effect of the eight caps, reductions and restrictions on housing benefit and local housing allowances, of which two are the subject of regulations before us today, to achieve savings of over £2 billion each year by 2015. What is not certain is where the impact of these changes will fall, as the noble Lord, Lord Knight, indicated.
The charities working in this field have produced excellent briefings for us. Those have come from Shelter, Crisis, Citizens Advice, Homeless Link, Barnardos, Family Action, along with the Chartered Institute of Housing and the National Housing Federation, with support from the Local Government Association and some impressive work once again from the Greater London Authority. These bodies all note the likelihood of several thousand tenants facing homelessness. Apart from this wrecking the life chances of the families concerned, the charities point out that the extra costs of homelessness could more than outweigh the housing benefit savings. Homeless Link notes that, on conservative estimates, if even one quarter of those identified as at severe risk were to become homeless, then all the gains from the housing benefit cuts would be lost.
The charities also point out, as has the noble Lord, Lord Knight, that a greater number—over 900,000—of tenants who stay put when their benefits are cut could be forced to find the balance from their very low incomes: state pensions; incapacity benefits; jobseeker’s allowance; or, for a fifth or so of these tenants who are in low-paid work, from their very modest earnings. I do not believe it is the intention of Ministers to increase the number of homeless households, which would, in any case, be self-defeating and counterproductive, nor do I believe that the Government intend to impoverish nearly 1 million very poor households with the equivalent of a cut in their pensions and other benefits of an average of £12 a week for each household. If that was the outcome, set against the coalition Government’s commitment that the effects of reducing the deficit should not fall disproportionately on those least able to take the strain, then the housing benefit changes would have to be deemed a terrible failure.
Rather, it is hoped that, away from the very high-value areas that claimants will have to leave, landlords will reduce rents to accommodate all or most of the fall in housing benefit/LHA payments. If so, to a large extent it will be landlords not tenants who take the hit. This would certainly be a desirable outcome where landlords are abusing the HB arrangements. The analysis by the Department for Work and Pensions suggests that 13 per cent of the rise in housing benefit is attributable to greedy landlords increasing rents to squeeze more out of the system. Thirteen per cent is not a huge proportion of the rise in costs, but nevertheless, it is worth addressing.
I think the new measures will indeed lead to some landlords reducing their rents. In some parts of the UK, particularly where unemployment has been very high and may go higher, a very high proportion of tenants are in receipt of housing benefit. If landlords are not to risk serious arrears, they will have to adjust to lower rents. In some places, current market conditions mean that the alternative of selling the rented property into owner-occupation will not be an option. Landlords may be resentful, they may even lose money—I fear they will not be investing and improving their properties—but, like it or not, they will have to go with the lower rents if that is all the tenants can pay.
Just how widespread will this be? In how many cases will it be the landlord not the tenant who absorbs the cost of the cuts? Talking to private landlords from different areas, I think there are opportunities for rent reductions where the local housing allowance is paid direct to landlords—as is facilitated by these regulations, avoiding the danger of arrears, which can lead to evictions that are costly for landlords as well as traumatic for tenants—and where the required reduction is relatively small, say 5 per cent of the rent. In such cases, good will toward good tenants, combined with the hassle and costs of replacing tenants, will incline many landlords to make modest rental concessions, particularly in not raising rents as soon as the opportunity arises, but there are definitely finite limits on the extent of this restraint. Even a 5 per cent rent reduction will be a problem for a lot of landlords. Five per cent of rent might exceed the margin, the profit from letting, after taking account of mortgage repayments, management and maintenance costs, an allowance for vacancies and so on. Some buy-to-let landlords with relatively high debts on their property could be in difficulty if they were to cuts rents by 5 per cent. Moreover, the figures in the DWP's impact assessment indicate that a 5 per cent rent reduction would not be enough to close the gap, to remove the new shortfall between benefit and rent, in the great majority of cases. It would appear to cover less than 90,000 cases out of a total of well over 900,000.
There is another reason to fear that landlords will not implement the hoped-for rent reductions. Since demand outstrips supply in so many areas, landlords can simply opt to reject those on benefit. Already a high proportion of landlords and their agents will not accept those on HB. These tenants cannot put down a deposit or pay rent in advance. Local authorities, unhappily, often take some time to process HB applications and early arrears can mount. Rent is paid on a four-weekly basis while landlords expect it on a calendar monthly basis and, however unfounded, there are fears by landlords and their agents that those on HB will be troublesome tenants. The compensation has been that LHA can pay up to the level of the middle rent for the area, the 50 per cent marker, but now that the maximum is to be reset at 30 per cent, this advantage is lost. Where they can, it seems likely that more landlords and managing/letting agents will avoid letting to those in receipt of HB. I am told by the staff in local authorities who seek to secure privately rented accommodation for vulnerable households in their area that previously helpful landlords are already pulling back, even where the council guarantees the rent and gives back-up support for tenants.
The underlying problem is, of course, the overall acute shortages of available homes. With more demand than supply, experts, such as Professor Michael Ball at Reading University, predict rent rises, not rent reductions. Until mortgages are plentiful again without requirements for large deposits, the private rented sector will have a ready market of young people who cannot buy. If landlords stop letting to those on benefit, properties will be available to absorb some of this growing demand, but that would, in the absence of sufficient housing, exacerbate the problems for those reliant on benefit.
It is very far from certain that many landlords will reduce rents, and it is possible that more landlords will withdraw from letting to those in receipt of these lower benefits. Since we now rely on the private rented sector to house nearly a million poorer households, this would be very bad news, but, as the Merits Committee notes, the DWP's impact assessments states that,
“it is impossible to quantify the indirect impact of the measures with any degree of certainty as it is not possible to predict the behavioural effects on tenants or landlords.”
It is for this reason that I have brought forward the resolution in my name that is before your Lordships today.
The resolution proposes a wholly independent, rigorous review reporting to both Houses of Parliament on the impact of the HB changes: on children; on homelessness; on whether mitigating measures, including the modest sums available in discretionary housing payments, are making a difference; on whether local authorities are being put under intolerable pressure, not least in handling the extra social and welfare costs if there is an influx of low-income households into their area; and so on. Thankfully, existing tenants are being given an extra nine months before facing these HB changes, with none affected before December 2012, so a first review one year from now can cover only new lettings, not the existing stock. The feared mass migration out of central London will not have begun in earnest before 2013 but I suspect it will become apparent quite early if landlords are not reletting vacant properties to those on the new benefit levels, in which case the review would enable Government to take corrective action. We know from the concessions made in response to the highly critical Social Security Advisory Committee’s report that swift action can be taken if required.
Last week I met the Minister and I believe he shares some of my concerns. I am hopeful he will be willing to make a significant statement today in response to the proposition in my resolution. An independent report next year could provide the basis for the Government to make “in-flight” corrections to amend or suspend some of these regulations and to prevent the dramatic changes to the HB system, leading to a potential national tragedy for so many low-income households.
Lord German
My Lords, I thank the noble Lord, Lord Knight, for his agreement that he is not going to pursue the annulment and also for his support of the noble Lord, Lord Best. The Motion will meet the problem we are all facing—what might happen in the future. In some ways, it is like trying to judge between those who know the next winner of the Grand National and those who believe that it is an art form to study the form and decide which direction to take. Essentially, this whole issue rises or falls on an assessment of how the market will behave.
I want to consider the agreement between the former Labour Government and what the Government are trying to do today. The noble Lord, Lord Knight, said that we should go ahead with the £15 that was made available to people who could negotiate a smaller rent and we should take that away. That was a proposal that he quite rightly made while in government. There is a general agreement that the costs of local housing allowance and housing benefit must be reduced and contained. There is a question which we are all struggling with about the speed with which we do it. There probably will be a consensus in the overall ambition but a difference in the speed by which we achieve that.
There is an agreement that the current expenditure trends, as shown in the impact assessment by the DWP, are unacceptable and unsustainable. Continuing as we are from the evidence that we are given, private sector rents will be driven up, the gap between housing benefit paid in social housing and in the private housing sectors will be extended, and the difference between average earnings and private sector subsidised rents will be widened. That is unacceptable. We know from the figures that the average impact of these measures on households in the private sector will be £12 a week, but of course there are great disparities in that. The figure is £12 a week across the whole of Great Britain but if you look at the difference between Blackpool and London, you get a huge variation. That was a figure which the previous Labour Government alighted on as one of the reductions they would make, but for a much smaller group of people than that which is proposed now. So it sounds remarkably like we are moving in a direction in which people want to travel but not necessarily at the speed at which everybody wants to go.
There has been the critical Social Security Advisory Committee report and its priority is the impact of the regulations. That is its job, not dealing with deficit reduction. Nevertheless, the report quite rightly said, “Do not implement this, but if you are choosing to implement it, here is a range of things you should do to make these changes work”. I am pleased that the Government have accepted the majority of these, in particular the delaying and phasing for current recipients of housing benefit.
There is a quite distinct issue relating to London in this variation. One in four of housing benefit households in London is affected by these measures and the primary impact in London is that the average figure across London for the change in rent to be paid by these allowances is £22. However, 17,000 of the 21,000 losers as a result of a cap on the rent are located in London, so there is a London issue which is almost unique within Great Britain. I read in the other place the evidence given in the form of the committee report and the committee discussion and there was a sense that people were seeing the whole of Great Britain through the prism of London. That is a dangerous process and we may have to look at London separately because in the rest of Great Britain the average impact of these changes on rents is £9.84 a week. In a period when landlords have low interest rates on mortgages, this may be the right time for them to absorb this change.
I will return to the London problem later. First, I would like to look more closely at the impact this figure of £9.84 will have on household rentals around the rest of Great Britain. Essentially, the difference of view which I hear on this issue is around this central question. The noble Lord, Lord Best, said it just now. Will landlords reduce their rents to meet the new levels set by Government? This is fundamentally an issue about the operation of the private rented sector market.
The Government essentially influence about 40 per cent of rents in Great Britain. In terms of pure economics, the state must surely have a prime influence on the level of general rents because it pays the rents of 40 per cent of the properties. It is not quite a monopolistic situation, but the Government are a major purchaser of tenancies in the country.
How has this market operated until now? On the one hand, it seems that tenants have found properties for rents at levels which they know the Government will pay; on the other hand, landlords have set their rents at the level which the Government will pay. There is no incentive on either side to adjust or to deal with this matter. In straightforward terms, it is a market in which the principal and largest purchaser has not really had much influence over the price paid.
Will the changes make a difference? I sincerely hope so, but we are talking of market behaviour. It cannot be an exact science. That is why it is essential that the spirit of the Motion of the noble Lord, Lord Best, is followed and a full evaluation and measurement of the impact are carried out just as soon as the first complete annual cycle of the new regime has ended. We need to know whether the desired changes which it is assumed will be brought about as a result of the measures have taken place.
The market is more likely to work in the direction that the Government want if the state enters the market as a negotiator. Currently, there is no incentive for the state to get the best rental price. We are talking about an incentive that is, first, a copper-bottomed guarantee of rental income, which the Government can provide—the Government are backing the money being provided—and, secondly, a direct payment to the landlord if they accommodate the changes. That is an important concession which the Government have made as a result of the report by the Social Security Advisory Committee.
I welcome the additional funding for housing benefit specialists to intervene in negotiations with landlords, but I have to ask the Minister two questions. First, do those people have the right skills to enter a negotiation market where previously they dealt with a different set of criteria and a different environment? Secondly, is the funding which they are making available to enable the negotiation to take place sufficient?
The big question for London is: is there a ready supply of non-housing benefit tenants ready to fill the properties if landlords are not prepared to reduce their rents? That is why I suppose that such a huge portion of the new funding for discretionary housing benefit and assistance is going to London. Will the Minister confirm that the Government will ensure that the most vulnerable are protected and recognise the distinct market pressures which make London so different?
I accept, of course, that there is mobility of tenancies in London. As a relatively new Member here who has had to seek to rent a property in London during the week, I have found that tenancies move very quickly—you will not expect to take a long time looking over a property as you might normally do in other parts of the country. A quarter of a million moves take place each year in inner London alone, which demonstrates to me that people seem to want to move rapidly. Having moved several times in my life, I must say that it has been the most horrendous part of my life that I can remember; I would prefer not to move at all because it is such an unpleasant exercise. I suppose that there is a different quality to life in London which means that people like to move around more rapidly.
However we judge this matter, we have to recognise that the reason for pressure on the funding of private sector rents is a shortage of social housing in this country. I hope that the Government’s ambitions for the net number of new properties in the social sector will be achieved, but much more can be done in this field by way of other arrangements with private funding. Much more imaginative use of private funding can be made to create more units of social sector housing. We need to dwell on that matter because this is an equation. If we want to make sure that the balance of the equation is right, we need more social housing in our country. We must remember above all else that people need and deserve a proper roof over their heads. In all the initiatives that we take to keep public expenditure under control, we must not lose sight of this fundamental aspect of a decent society.
Poverty
Lord Best Excerpts(14 years, 4 months ago)
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Lord Best
My Lords, I congratulate all those who made their maiden speeches today. We have a wealth of new talent among us. I also congratulate the noble Earl, Lord Clancarty, who has rejoined us on the Cross Benches, on his powerful contribution. As president of the Local Government Association, I must welcome the noble Lord, Lord Shipley, particularly. He will be another strong voice for local government, which will be very important in this era of localism and devolution of power from the centre to local government. He brings us expertise from the public and private sectors; from academia in a very distinguished form; and from the arts, which Newcastle and Gateshead have done so much to promote over recent years.
Most of all, the noble Lord has been a councillor for 35 years and since 2006 has been leader of Newcastle City Council. Newcastle has seen the most incredible transformation in recent years. I have followed its progress wearing various hats in the housing world and as the father of a student at Newcastle University, which has entailed endless visits to that vibrant and exciting place. Over the years in which the noble Lord and his predecessor, the noble Lord, Lord Beecham, who we will shortly welcome here, have been responsible, they have done so much to change a great city. I congratulate the noble Lord on a most eloquent and articulate speech, and we look forward to many more contributions of that high calibre.
I thank the noble Lord, Lord McKenzie of Luton, very much for introducing this debate. He has drawn attention, among other aspects of the ways in which the Budget impacts on people in poverty, to the problems that will be created by reductions in housing benefit. I want to share with your Lordships some thoughts on the ways in which the housing benefit cuts may have an effect.
The intention is that the Budget will see a reduction of some £2 billion each year in the amount paid in housing benefit, which means that a hit has to be taken either by the landlords or by the tenants. There are no other sources from which we can draw that £2 billion of savings each year. In other contexts, I will explore with your Lordships some of the impacts on landlords in facing a situation in which their rental income is likely to reduce but today I want to concentrate on the impact on tenants.
The cuts that are to face tenants who receive housing benefit, or in the case of those in the private rented sector the local housing allowance, are in several different forms. The first is the cap on rents in the London area. Although we may hear shock-horror stories of a handful of families with many children who have received as much as £2,000 a week for their accommodation, these are very few and far between. The new cap is to be set for the largest families at £400 per week. One would think that that is quite a large sum, but it is not so in inner London where that is the amount required to house families. Indeed, it is impossible to find accommodation in many parts of inner London at that price.
This will mean that the families whose rent is currently well in excess of this figure will have to move away from inner London to accommodation elsewhere, which is likely to be incredibly disruptive of family life. For example, there may be children at school, carers close at hand, people with disabilities who know a particular area and have no desire to leave it, people who go to a hospital locally and wish to remain there, and people in a range of circumstances who will find it very difficult to relocate to other parts of the country in order to avoid the gap which could be, in the case of inner London, several hundred pounds a week between the rent that will be paid in the future and the actual costs of their accommodation. We need to think ahead to how we will handle the exodus of the lowest income households from the high-priced areas of inner London.
There is also the cap that comes from using the 30th decile instead of the 50th decile in determining the housing benefit for a household, which is a complicated business. It means that in a lot of cases people will again, all across the country and not just in London, find that there is a gap between what they receive in housing benefit and the market rent in the area in which they are located.
Other reductions follow on top of those. If you are living in accommodation deemed to be too large for your needs, there will be a housing benefit cap relating to the size of accommodation in which you are living. If, for example, you are in a three-bedroom council property but it is deemed that you could well do with only a two-bedroom or a one-bedroom place to live, you will be required to move or you will not receive the full rent to continue where you are. The problem with that is that councils have built over the years five times as many three-bedroom homes as they have built of any other size. The actual opportunities to move to the smaller accommodation, until we build more homes, may be rather complicated. If you are living in a tower block, it is likely that you are a single person. Local authorities have been reluctant to put children into the three-bedroom accommodation in towers because of the impact on family life. These are restrictions that families will face.
There is a further restriction if you are on jobseekers’ allowance and are unemployed. Whatever efforts you are making to secure employment, if you fail to do so your housing benefit will be cut by 10 per cent after a year of looking for a job, even if you are in an area of high unemployment. Even if you have been demonstrating that you have been trying your very best to get employment, you will still see a deduction from your housing benefit.
I accept that in some cases landlords will be willing to cut the rents and take a lower rent than they have in the past. That is particularly the case in those low-value areas where a large proportion of those tenants coming to them are on housing benefit. That is not the case in London and in the high-value areas where there will be plenty of choice of other people to accept. Frankly, landlords would be ill advised very often to take anyone who was in receipt of housing benefit. Those people will have to move on and it is not at all certain to where they will move.
We heard about the spiral of arrears, followed by evictions, followed by homelessness, which seems to be a likely outcome in far too many cases. For other people, there will be attempts to struggle on and find the full rent to stay in the accommodation or to move into accommodation elsewhere even though there is a gap between the housing benefit received and the rent that must be paid. That gap would have to be filled from the income support or other benefit being received by—let us remember—some of the poorest people in society. It will be extremely difficult for people to meet that gap out of the income they receive from the state on benefits calculated specifically to exclude any housing costs. They are benefits paid in order to cover food, heating and other costs, but not housing. To fill that gap from within their benefits will be extremely problematic for the poorest households.
Perhaps I may suggest four ways in which the Government might need to respond to the position in which they find themselves. Few people doubt that housing benefit requires an overhaul. It is a very complex arrangement which could do with changes. First, I suggest that we need to phase the cap for those London households which will have to move to the edges of London or beyond. We will need to take that more gently and slowly than at the moment—at the anniversary of your rent coming up—and suddenly finding a colossal cut in what you can pay to your landlord.
Secondly, the discretion for local authorities to make up the difference requires a larger fund than the one that the Government have set aside. They have said that £60 million is available to councils to top up those families and individuals for whom there is that gap. The £60 million is against a backdrop of a £20 billion a year housing benefit expenditure. That £60 million will not go very far. It would go towards two to three families in each local authority area for a year. The sum for local authorities and the discretion that they have needs to be increased.
Thirdly, it would be wise if job centres could certify that people had done their very best to get jobs and they should not have their housing benefit cut by 10 per cent. Finally, I would ask the Minister to ensure that there is now dialogue with Citizens Advice, Shelter, the Chartered Institute of Housing and others who have ideas on how one can make the most of a very difficult situation.