Housing Benefit (Amendment) Regulations 2010

Baroness Hollis of Heigham Excerpts

Monday 24th January 2011 Lords Chamber

[Baroness Thomas of Winchester]

My Lords, it is no secret that when these regulations were first announced I had deep concerns about them, as I made clear in the housing debate that the noble Baroness, Lady Hollis, introduced at the beginning of last November. When the Social Security Advisory Committee’s very critical report was published, the Government modified their original proposals in two important ways, as we have heard: in relation to the timing of the changes and in allowing direct payments to landlords in certain circumstances.

The nine months of breathing space for existing claimants is welcome to give them more time to find alternative accommodation if necessary, although it will be paid for by bringing forward the moving of LHA rates from the median to the 30th percentile for new claimants. Also delayed is the introduction of the cap on LHA payments and a reduction in the maximum number of bedrooms that a claimant is entitled to, from five to four. Overall, the change in the phasing means that some claimants will be hit by the cut a year earlier than they might have expected, while others will have a bit more time before the cuts bite.

Turning to the other concession, direct payments to landlords, I am glad that the Government have now agreed to widen the criteria that local authorities should consider in order for this to happen, although I find the wording of this concession quite convoluted—perhaps deliberately so, in order to give some flexibility—so perhaps the Minister can help me. The wording is:

“From April 2011, in cases assessed under the local housing allowance arrangements, local authorities will be able to pay housing benefit direct to the landlord where they consider that it would help the customer to secure a new tenancy or remain in their current home. It follows that the rent must be at a level that they can afford. We will work closely with local authorities to ensure that this provision is used in very specific circumstances where landlords are reducing rents to a level that is affordable for customers”.—[Official Report, 14/12/10; col. WA 170.]

I am glad that the Government are providing guidance to local authorities because to me these three sentences could mean three different things. I am not an expert in these matters, but they do not quite seem to hang together.

While I am talking about welcome news, we must not forget the two provisions in the original announcement of, first, an additional bedroom to be included in the size criteria used to assess HB claims in the private rented sector for an overnight carer of a disabled person or someone with a long-term health condition and, secondly, a large increase in the discretionary housing payments. Both those measures are very welcome.

The $64,000 question remains, however, as all the speakers so far have said: will these housing benefit regulations mean that landlords will reduce their rents, thus bringing the huge housing benefit bill down, to general rejoicing by taxpayers and the Government, or will it mean that not enough landlords will, or can afford to, reduce their rents low enough for LHA claimants, that the discretionary housing payments will be spread too thin to make much difference and that therefore thousands of people will face eviction, child poverty will increase and local authorities will eventually have to pick up a very large bill?

Many statistics have already been given and I will not add to them. We all know why the bill for housing benefit has ballooned—there is nowhere near enough social housing throughout the country and so councils have turned to the much more expensive private rented sector, with buy to let becoming a popular way for people with capital to cash in on the shortage of rental accommodation. While there may be a percentage of greedy landlords who are able to charge unjustifiably high rents—the noble Lord, Lord Best, referred to them and gave a figure—is not the real truth of why the HB bill is so high not that housing benefit has inflated rents but that there are huge numbers of low-paid and unemployed people who qualify for housing benefit?

It is clear that, as my noble friend Lord German has said, London with its high rents is in a category of its own, even though a lot of the boroughs are receiving the cushion of the bulk of the discretionary housing payments. To those of us who live and work in London, the mix of housing works to everyone’s advantage, as the noble Baroness, Lady Sherlock, said in her powerful contribution. If a large number of the low-paid workforce who receive LHA are forced to move out even of Greater London, then everyone suffers, because life in central London depends on low-paid workers; we do in this House. Of course we all understand that low-paid or unemployed people on housing benefit with large families cannot expect to live for ever in high-end houses or flats in central London, although I am quite sure that very few actually do. However, we know that a lot of families will be forced to move in the next couple of years, as the noble Lord, Lord Adebowale, said. We just hope that this will not mean that they will be pushed out of the reach of good employment and transport, thus exacerbating the situation.

The real worry about these regulations is that dropping to the 30th percentile could have a devastating effect on these families all over the country, many of whom find life a struggle even now. This regulation is the one that could cause evictions, particularly in housing hot spots outside London, such as Brighton and Cambridge, with landlords not having to reduce their rents because they can always find someone not on housing benefit to pay the going rate.

What we need, and what I called for in our debate in November, is what the noble Lord, Lord Best, calls for in his Motion: an independent review of housing benefit in the private rented sector. I know that the Minister will say that this happens automatically in his department, but we need an independent review to be set up and to alert Parliament quickly if the worst fears of some of the relevant organisations in this field, which have already been mentioned, are being realised. Many groups are warning of the dire consequences of the effect of these regulations in today’s difficult economic climate, particularly for single parents and disabled people. The noble Baroness, Lady Wilkins, may say more about disabled people shortly. What would reassure many of us who are concerned about these changes is to hear that the Government will take swift action to alleviate the situation if they are wrong and the organisations are right. I look forward to my noble friend’s reply.

[Baroness Hollis of Heigham]

My Lords, I declare an interest as chair of Broadland Housing Association. I will not follow my noble friend Lady Sherlock, the right reverend Prelate and the noble Lord, Lord Adebowale, in talking about the human stress, distress and misery potentially in waiting for so many thousands of families with children in our country. Instead, I want to do something different; I want to challenge the very premises behind the Government’s strategy, which I think are false.

We have been here before, with the Housing Finance Act 1972 and especially in the late 1980s when the Tory Government again pressed up rents on the grounds that they should subsidise people, not property. We on the Labour Benches pointed out then what would happen. The selfsame money that had been spent on new homes was now being spent on housing benefit, which in turn trapped people out of work and left us with a shortfall in housing. Now the Government are trying to rectify a problem of their own creation by capping HB. They believe, falsely, that HB is driving up private sector rents, that the HB bill has grown because of those increased rents and that, by capping HB, they will press down rents.

The second fallacy is that this policy is consistent with universal credit—a policy for which I applaud the noble Lord, Lord Freud—which seeks to bring more people into the labour market. On the contrary, I fear that these HB caps, together with the unpleasant and bizarre policies of Mr Pickles, will have the reverse effect. Let me unpick this a little. The Minister says that as 40 per cent of the tenants of private rented sector properties receive HB—a rather disputed figure—HB rates determine rents. However, he will be aware, I am sure, of two very simple statistics from his own department. First, as quoted by the noble Lord, Lord Best, the DWP’s own figures show that the increase in housing benefit has been caused not by increased rents but by increased demand for HB from more tenants in both the private and public sectors. Only 13 per cent of the increase in HB can be attributed to private sector rent increases. In other words, the increase in the HB bill has not come about because HB has driven up rents and, therefore, has sought to catch up with the rents that it has inflated. Instead, the HB bill has risen because more and poorer people are claiming HB, including those in low-paid work. That is a fact.

The second statistic is also from the DWP. An Answer to a PQ in August 2009—I do not have later figures—showed that 48 per cent, or nearly half, of all those receiving local housing allowance had, on average, a shortfall of £23 a week. This was because their contractual rent was higher than their HB. Some will have been in work, others on income support and so on. I do not know how they made ends meet. For those in shared accommodation, paying single-room rent, the HB research for the DWP showed that 87 per cent of young people faced a shortfall, on average, of £35 a week. I dread what will happen now that we propose to raise the age at which single-room rent can be claimed from 25 to 35. I repeat: 48 per cent found that their HB did not cover their rent. If the Minister is right and their HB then did not press down on their contractual rent—however much the tenants would have wanted and needed it to—why does he think now that by cutting HB 18 months later he will press their contractual rent down? It is a triumph of hope over history. It was not happening 18 months ago and landlords tell us that it will not happen this time either. SSAC confirms this. Nine in 10 landlords will avoid anyone on HB. Why? Because they can now let to other people at the rents that they seek to charge. In other words, the Government do not control, as they believe they do, the rents of the private rented sector. It is a fallacy. Indeed, preliminary findings from current research suggest that, whether housing benefit claimants account for 20 per cent or 70 per cent of the private rental market, it makes no difference at all to local rent levels. HB levels, and therefore the Government, do not shape the market, full stop.

--- Later in debate ---

[Lord Freud]

I thank the noble Lord for his intervention. Very elegantly, I have an answer for him on my next page—although, of course, I am not reading, I am keeping carefully to my text in this important area. The noble Lord, Lord Best, suggested that the review should be published after a year and we considered that point very carefully, but given the implementation timescales for these changes, particularly the transitional protection arrangements that we have introduced, I think that one year is too soon for a meaningful piece of evaluation research. Many housing benefit recipients will not be affected by the changes until well into 2012. We will therefore make the findings available in early 2013, with initial findings available in the spring of 2012 and an interim report in the summer of 2012.

[Baroness Hollis of Heigham]

That is very helpful of the Minister. I fully understand his reasoning for why the report may therefore need to come out somewhat later than the noble Lord, Lord Best, originally proposed. Will the Minister also be giving us details about what is happening with rent levels, the 30th percentile, CPI and as a result, if necessary, the continued rebasing of the 30th percentile figure to ensure that it does not drift down because of the effect of CPI?

[Lord Freud]

I thank the noble Baroness for that. If I have one minute when I finish my prepared speech, I will try to touch on the CPI.

With regard to further reporting after what I have just described, I am not convinced that it would be appropriate to commit to an annual report on these reforms when so many other welfare changes will be made, as the noble Baroness has pointed out—not least, the introduction of the universal credit. I suggest that we ask the authors of the independent review to recommend whether they think that a follow-up evaluation will be necessary. As I said, I am happy to commit to the independent review that I have described.

Before I close on the CPI, I should point out that it is designed to bear down and we are locked into it for the years 2013-14 and 2014-15. Thereafter it is up to the Government to decide whether rates using that methodology go out of kilter.

These changes are important. We have put in a lot of transitional support along with a comprehensive programme of practical support to help local authorities implement these measures so that we can finally reform housing benefit and make it fit for purpose. There is no doubt that these statutory instruments are sensible and proportionate. They must go ahead and I commend them to the House.