Baroness Hollis of Heigham
Main Page: Baroness Hollis of Heigham (Labour - Life peer)Housing and Planning Bill
Baroness Hollis of Heigham Excerpts
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con)
My Lords, before responding to the specific amendments on the sale of high-value vacant housing, I will say a few words about more detail on the policy of the Bill as a whole. Last Thursday I undertook to the noble Lords, Lord Beecham and Lord Foster—and I am sure there were several other noble Lords—that I will ensure that your Lordships will have a timetable of secondary legislation in a week or so. Later this week, I shall write to all noble Lords setting out the timetable for laying, and in some cases debating, the secondary legislation.
As I said on Thursday, and as noble Lords have pointed out during our debates, there is a healthy set of regulations to follow, but I hope to provide an overview of what your Lordships can expect and when. The finer grains of details may be subject to change—my senses tell me to expect some debate at Report, for instance—but I hope the general outline will be helpful. In addition, I have asked my officials to provide policy notes in lieu of secondary regulations wherever possible with the ambition that these will be sent to noble Lords before Report. These will build on the policy fact sheets and the information sheets which we have already circulated to noble Lords. The noble Lord, Lord Foster, also asked me to confirm again today our response to the DPRRC report and I can reconfirm that that will be done by Report.
Before responding to the specific amendments, I will respond to a suggestion from my noble friend Lady Hollis—I have just called her my noble friend but I am sure she will not be offended—during the previous Committee discussion about setting up a working group with the LGA, the housing practitioners and others, to ensure that any fraud experienced through right to buy in the local authority sector is not repeated when we extend the right to buy to housing association tenants. I did watch the “Dispatches” programme over the weekend. I am delighted to confirm that I am happy to commit to setting up a working group with the local government sector and others to learn from their experiences in operating right to buy. For example, such a group could gather evidence about what has worked and what has not worked so well. It could also potentially build on the experience of a number of local authorities in tackling fraud more generally.
In extending the right to buy to housing associations, we are keen to ensure that we identify where any potential abuses could arise so that the right to buy goes from strength to strength and helps more people to achieve their dream of home ownership. We would also be interested in exploring whether such a group could usefully input on other related issues, including, for example, the provision of additional homes by local authorities that enter into an agreement with the Secretary of State following the sale of high-value vacant properties. This proposed working group will further extend our extensive engagement with local authorities and other stakeholders on high-value vacant housing. It will also help to inform our consultation with local authorities, representatives of local government and relevant professional bodies on the determination that will set out the payment required from each local authority.
Baroness Hollis of Heigham (Lab)
My Lords, before the noble Baroness moves on, I say thank you for the firm proposal. Whatever our views about the Bill—and they are very divided—the one thing that we all want is, as far as possible, to build abuse out of the system. I am glad that the noble Baroness had the chance to see the “Dispatches” programme, which confirmed some of our worst fears. Many of us have had similar experiences to boot. I am very pleased that the Minister has responded to that, and I hope that with the help of the noble Lord, Lord Porter, she will be getting together a really strong group to do exactly as she suggests.
Lord Campbell-Savours
On that matter, what happens if the working group comes up with conclusions which we are unable to resolve during the course of Committee or Report because the group reports after the Bill becomes law? What happens in those circumstances? That is my first question.
My second question is this. The Minister may recall that we were given an undertaking—two weeks ago now, I think—that we would receive information on starter home demand figures in the various parts of the United Kingdom. Despite repeated references to them in the Chamber by me and others, we have simply not received them yet.
Baroness Williams of Trafford
I take the noble Lord’s point. A local authority may be disadvantaged for quite a period of time if the payments were not made very often. I shall take that point away and consider it.
Clause 75 seeks to amend Section 34(4A) and Section 43(4A) of the Housing Act 1985 to add to the list of matters to which the Secretary of State may have regard when considering whether to give consent to a local authority wishing to dispose of housing. These amendments will mean that if a disposal of housing by the local authority to another person or body could result in a reduced payment to the Secretary of State under Clause 67, the Secretary of State may choose to take this into account, among other factors, when deciding whether to give consent to the disposal. Making this change will ensure that there is important clarity on the issues that the Secretary of State may choose to take into account when organisations are considering such transfers and that he or she can consider if disposal of housing by the local authority to another person or body could result in a reduced payment.
Clause 76 is a technical amendment to Section 11 of the Local Government Act 2003, existing legislation which concerns the pooling of capital housing receipts. It replaces the existing power in Section 11(5) which enables the Secretary of State to set off payments owed to a local authority under that section against any payments the Secretary of State is liable to make to the local authority, with a more limited power which mirrors the provision in Clause 68 of this chapter. Like Clause 73, this aims to simplify accounting arrangements by reducing the total number of payments made between the Secretary of State and a local authority.
Clause 77 deals with the interpretation of certain terms used in this chapter, the great majority of which are self-explanatory. However, I would like to mention one term in particular. Housing “becomes vacant” for the purposes of this chapter,
“when a tenancy granted by the authority comes to an end and is not renewed expressly or by operation of law”.
We have discussed this previously. There may be some circumstances where a high-value home would become vacant under this definition but we would not want it to be counted in the vacancy rate set out in the determination. The power in subsection (2) will enable such exclusions to be made. Providing this power through regulations will provide flexibility to ensure that if circumstances change over time, or if a need for further exclusions is identified in the future, this can be addressed more quickly.
The department is engaging widely with local authorities and other stakeholders and no decisions have been made yet on the circumstances in which housing that becomes vacant may be excluded from the chapter under subsection (2).
Turning now to the specific amendments, Amendment 69A seeks to end the duty for local authorities to consider selling high-value housing as it becomes vacant three years after the Act is passed. Noble Lords have provided many considered lines of debate today but I do not believe the amendments would have the effect they envisage or be beneficial to local authorities or to people in need of new homes. While they would prevent the duty to consider selling from applying for six months following a vacancy arising and would end the duty after three years, the requirement for payments to the Secretary of State would not be changed. The Secretary of State would still be able to make determinations, which would be based on the sale of high-value housing that is expected to become vacant, but these amendments would mean that local authorities would no longer have to consider selling their vacant housing to make the payments.
This moves away from the intentions outlined in the Government’s manifesto. The legislation is framed to provide local authorities with some flexibility on what housing to sell and how to make payments to the Secretary of State. The duty is an important part of this to ensure the payments are focused on high-value housing, both in the calculation by government and the way they are met by local authorities. These amendments would move away from the aims of the policy. Six months is a very long time for a property to sit vacant before the duty to consider selling arises, particularly given the need for housing across the country. On this basis, I hope the noble Lord will consider withdrawing the amendment. When the question is asked, I hope noble Lords will withdraw their opposition and allow the clauses to stand part of the Bill.
Baroness Hollis of Heigham
Can the Minister help me on a question that we have been pursuing through several Committee days? It is clear that there will be a time gap—even if one accepts the push in policy, which of course I do not—between selling more valuable property and the deployment of the money to fund housing association discounts. Housing association discounts will be required on day three after the Bill gets Royal Assent. The sales to fund it may take a year, two years, three years or four years to come through to fund the presumed demands that will come very quickly in the direction of local authorities.
Therefore, many local authorities will instead be levied in view of their sales. The information I had from my authority, Norwich, this morning was of a housing revenue account of around £50 million facing a loss of £7 million a year on its rental income as a result of the 1% reduction. The levy, in lieu of sales, because of the delay in sales coming through, is likely to cost up to—we do not know yet—£11 million. A quarter of its net housing revenue account will, therefore, be lost to funding housing association discounts until—and if—the sales come through in lieu
Can the Minister tell us when local authorities will have some idea what that levy is likely to be? Will it be governed by the pent-up demand or otherwise of housing association tenants? Will the Minister expect this to be rationed so that it proceeds on an equal path along with the diversion of local authority resources through high-value sales? How exactly will this work? At the moment, it stands to wreck my local authority’s housing revenue account.
Baroness Williams of Trafford
My Lords, that is precisely why we are engaged with local authorities to make sure that we get this policy right. The noble Baroness has given me some figures for Norwich. I do not doubt that she is correct, but could she send me the figures so that I can have a look at them and perhaps comment on them?
Lord Campbell-Savours
We need to know which one it is because it directly affects people’s incomes. Will the Minister not intervene at this stage and give us the information that will help us in the debate?
Baroness Hollis of Heigham
I would suggest that the noble Baroness should do that because otherwise an awful lot of speeches could be made on false assumptions.
Lord Shipley
My Lords, I rise to speak to Amendments 69D, 70E, 76A and 79C in this group. I have already declared my vice-presidency of the Local Government Association in Committee, but in view of what I am about to say, I will simply draw attention to it again.
The noble Lord, Lord Best, covered all the key issues on pay to stay, although I will say something further when Amendment 81 in this group has been spoken to. These amendments basically challenge the nature of Clause 78, which is about a mandatory approach to local authorities. They require an element of discretion for local authorities to make decisions that they think are best for their areas. It is difficult to understand why, if it is voluntary for housing associations to do this, it is not voluntary for local authorities. The noble Lord made clear that there is to be a change in the nature of what the Government have been proposing on pay to stay, so the “cliff-edge approach” that he talked about is apparently no more—although we have yet to see the detail. I associate myself with what the noble Lord said about the lower sum being better.
Will the Minister give some further thought to the administrative cost to local authorities and others of pay to stay? I think that the cost will be much higher than the Government currently think. On a later group we will come to the issue of access to HMRC data, but it would be easier to raise the thresholds than simply apply a taper, partly because so much of what is being proposed could relate to levels of household income that exist a number of months before the information is made publicly available under HMRC timescales. The Government need to be very careful about the administration and bureaucracy that will be put in place, particularly relating to the taper, whatever its level—and let us hope that it is the lower one.
My objection to what the Government have been proposing on pay to stay is that it reduces the aspiration to work more and actually encourages people to work less. If they are to lose out with the amount of rent they have to pay it is not worth their while to work, or work as much, so there will be a tendency for people to decrease their hours, with a growth in part-time working. That is particularly dangerous in the public sector, where pay levels are not that high. It might encourage people to work less and take qualified people away from public-facing duties.
I say to the Minister that I hope that it is understood that any extra income deriving from higher rents should be kept for reinvestment in the housing stock locally. I know that there are discussions on that. In the end, the requirement for social housing for rent is such that this cannot be seen as some kind of source of taxation for the Treasury to get its hands on. Actually, money needs to be reinvested by local authorities in providing the right level of housing for their areas.
I hope to come back at a later point on Amendment 81 in this group, which relates to the delegated powers that the Secretary of State will have—but I will wait until a later moment to do that.
Baroness Hollis of Heigham
My Lords, I will speak to this group of amendments, and in particular in support of Amendment 69D, which would make pay to stay voluntary for local authorities.
The government argument for RTB for housing association tenants is the level playing field—or, as the noble Lord, Lord Porter, said, similar treatment of people on either side of the street. The Government have also proposed pay to stay, under which so-called high-earning council tenants outside London on £30,000 a year between them—£15,000 times two—were to pay a full market rent. But whereas for housing associations pay to stay is voluntary, for local authorities it is compulsory. We need the level playing field of the noble Lord, Lord Porter.
As the noble Lord, Lord Best, absolutely rightly said, whereas housing associations can retain any proceeds from this, local authorities must send theirs to the Exchequer. The reason for that, according to page 56 of the impact analysis, is that the policy of sending the proceeds to the Exchequer will help the Government “reduce the deficit”. Will the Minister tell us why council tenants have a special duty to reduce the deficit while housing association tenants do not?
Secondly, how does this interact with the 1% social rent reductions? Let us assume that a local authority family with two children on gross £30,000, net £24,000, income a year might now have a social rent of about £100 a week for a three-bedroom house. Social rents will be coming down 1% a year, while market rents will grow, it says, with overall private-rental inflation. So the gap between the two will therefore widen. With the push to market rents, if that family’s rent rose to £150 a week, they would get housing benefit; if it rose to £250 a week, their housing benefit would be £100 a week. Even the Government think that that is daft.
So the Government are now proposing, as the noble Lord, Lord Best, said, that rent increases should be tapered and should not apply to those on housing benefit. What would be the result? As the noble Lord, Lord Shipley, asked, what family on housing benefit would increase their pay and lose their housing benefit firewall? Work incentives would be badly damaged. Fraud would certainly increase—and, incidentally, contaminate HMRC records. Part-time work would move into the grey economy and couples would come to more informal living and financial arrangements, and so on. In a single-parent household, with an adult son living there, what happens to adult non-dependent deductions? Around 25% of their income is taken into account in determining HB. The son may move out—and then there lurks the threat of the bedroom tax.
And how—I am puzzled by this—will all this interlock with universal credit? If you are on HB, you will not be paying market rent; but what happens if you are on universal credit? The Government say, in their consultation exercise, that they will consider the links to UC “in due course”. That is very odd. DCLG is treating housing benefit and universal credit as two separate streams of benefit. Having sorted HB, they will turn to UC. But of course, as the Minister must know—and I am sure that she does—UC is absorbing HB. UC will be based on monthly real-time information. Pay to stay—ultimately part of UC; whether the Minister or the department are fully aware of this or not, I do not know—will be based on out-of-date tax records, perhaps one year behind. So UC will be based on real-time information on a monthly basis, and housing benefit on the taper will be based on records perhaps a year out of date.
The effect for the tenant of the 20% taper on the move to market rent takes UC withdrawal rates—and there is not a word about this anywhere in the impact analysis, needless to say—from up around 73p in the pound, which is already a high work disincentive, as the noble Lord, Lord Shipley, said, to 93p in the pound. As a result of this, you work for 7p an hour. Would any of your Lordships do that? This really screws UC. There is not much point in rolling out UC—which I very much support and which was based on improving work incentives, which I very much support—if you return to pre-UC deduction rates, keeping just 7p in the pound.
Let us turn away from the effect on tenants to the effect on local authorities—again, as mentioned by the noble Lord, Lord Shipley. At the moment, tenants coming forward for housing benefit know that their finances will be scrutinised—of course they will be; it is an income-related benefit. But in future, as far as I can see, local authorities will need blanket information from HMRC on every adult living in a council home not already on HB, reversing separate taxation and matching it by household and address, in order to increase their rent on an individual, tailored basis. So, if you go down the street mentioned by the noble Lord, Lord Porter, almost every tenant could pay a different rent, personally tailored, for the same kind of property—or worse, based on out-of-date details of their previous year’s income.
At the moment, because rents are standard in local authorities, HB is fixed for the most part for 12 months at a time, apart from major reportable changes of circumstance. Yet even now, local authorities are unable to deliver HB as speedily as they would wish, while losing more and more staff because of their 40% cuts. Given, as we found with tax credits, that income fluctuates quite markedly over the course of the year with overtime, commission, children’s school holidays and periods of sick pay, will the tenants’ pay-to-stay rent fluctuate by the month alongside their income?
If it does not fluctuate, or the Government rely on end-of-year HB adjustments, tenants will find it impossible to avoid debt, arrears, poverty and probably eviction. But if it does fluctuate monthly, the local authority will find—as with tax credits—that the pay-to-stay rent it charges on a monthly basis is always a couple of notifications behind the facts and will never catch up. It will be a nightmare. As local authorities said in response to the very perfunctory consultation exercise as reported by the Government, their systems are not designed to do any of this. The Government breezily say that they can keep their administrative costs. But the system will crash—constantly.
Then, any extra rent goes to the Treasury. Local authorities already have the power to pursue an individual on more than £60,000 a year for a rent rise—what we call the Bob Crow amendment—if they see fit. But the last thing they will want to do is proceed with mass investigations of almost every council tenant—some will be on HB; those who are not will need to be investigated—at huge administration and probity costs. This is almost literally another poll tax. And the sums at the end of all this go not to local authorities but to the Exchequer.
Only local authority tenants, not housing association tenants, are being levied to fund huge discounts under the voluntary deal. Only local authorities, not housing associations, are required to pursue market rents. Only council tenants, not housing association tenants, may see their UC taper rise from 73p to 93p in the pound so that poorer council tenants get less financial support than the housing association tenant on the other side of the street of the noble Lord, Lord Porter, while having an identical property, identical family and identical income. Finally, only local authorities, not housing associations, are required to send the proceeds to HMT. Local authorities have become the whipping boy at every point in the Bill. Yet local authorities are publicly elected, fully accountable and entirely transparent bodies, open to the public and the press. None of that is true of even the best-run housing associations.
Baroness Williams of Trafford
No, I am afraid not.
Amendments 69D and 76A, tabled by the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, would have the same effect as the previous amendment: they would make the policy voluntary for local authorities. I have explained why that is not our preference.
The noble Baroness, Lady Hollis, asked how pay to stay would work with taxable years. We have not yet decided how it will work. We have not decided whether it will be calculated by looking at taxable income and we are also considering whether it should be based on previous income or current income.
Baroness Hollis of Heigham
Can the Minister help me on this? Under UC and so on, we are dealing with real-time information, where people’s income fluctuates month by month. Does this mean that the Minister will not be interested in that fluctuation month by month in terms of the taper? As far as local authorities are concerned, and as far as I can see, they will be required to have personally tailored rents, probably revisited every month, and a different rent for every house in the street. The Minister may go on to answer that, but as far as I can see, almost no thought has been given in all the papers that I have read to the interaction between what is proposed for local authorities and what a fellow department, DWP, is seeking to achieve.
Baroness Williams of Trafford
My Lords, on the interaction between UC and the policy, we are doing as a priority a piece of work to explore that relationship, but there will obviously be an exemption for those on housing benefit. Officials and I have given some thought to that very point about fluctuations from month to month—for example, for someone who is on a zero-hours contract. That is the very type of thing we are looking at in terms of making this policy fair, because there will be many situations where that is the case.
Baroness Hollis of Heigham
Does the Minister therefore not accept that the path that she appears to be going down is individually tailored rents which will fluctuate month by month, which local authorities will be expected to determine and collect?
Baroness Williams of Trafford
My Lords, I may not have articulated it properly, but that is the very sort of issue that we are looking into. I hope that in due course we will see an equitable conclusion.
The noble Baroness, Lady Lister, asked about the equality impact assessment. As if by magic, by the end of this week—in fact, as we speak—I believe that it is going on the Bill website, and I have asked for a copy to be sent directly to her. If by Thursday it is not with her she knows where to come.
Baroness Williams of Trafford
My Lords, I talked about council tenants on higher incomes benefiting from a taxpayer subsidy when many people in the private rented sector who are on lower incomes would not be able to avail themselves of such a subsidy.
Baroness Hollis of Heigham
Could the noble Baroness specify what form that subsidy takes? Certainly in the local authorities I am familiar with, the rents charged cover maintenance, repairs, collection, administration and the like, and receive no taxpayer subsidy—unless the Minister is saying that anything below market rent is a subsidy by definition, which I think is an absurd position. As far as I am aware, there is no subsidy. Perhaps the Minister can specify in what ways the taxpayer subsidises council tenants.
Baroness Williams of Trafford
As the noble Baroness says, the rents are below the market rent.
Baroness Hollis of Heigham
What the noble Baroness is saying is that every time private landlords’ rents go up, the subsidy to council tenants from the taxpayer is increased. That is Orwellian.
Baroness Williams of Trafford
My Lords, I think that we will have to agree to differ. I recognise that there are different opinions across the Committee on this, but I have made the point because social rents are lower than market rent.
Baroness Hollis of Heigham
Would the Minister please repeat her statement about the difficulties caused by rents changing as a result of this policy, particularly in the period between notification and payment? The whole push of our previous two hours’ discussion has been that she is producing a system in which every tenant will pay a different rent—probably month by month—according to what is happening to their earnings.
Baroness Williams of Trafford
I will repeat my statement. Rent setting is usually done around three months before a new rent year. Providing for a notice period of a year before the new rent comes in would mean that the rental amount would not be consistent with changes in household income over the notice period. However, I will return to rent reviews shortly.
Amendment 75B, tabled by the noble Lords, Lords Kerslake, Lord Beecham and Lord Stoneham, seeks to pilot the policy before full implementation. I recognise that pilots have some benefits in certain circumstances, but it would not be workable here as it would be unfair on tenants in those areas. The policy must apply nationally from April 2017. Although we will not be piloting the policy, I recognise that we need a strong approach to implementation. Local authorities have told us that they need time to put in place the arrangements for implementing the policy. That is a fair request. My department is pushing forward with engagement, and the next few months will be critical. We intend to issue guidance to ensure that authorities are ready to operate the policy, engage with tenants, and set correct rents from April 2017.
I will also take this opportunity to update the Committee on engagement with tenants. We need to make sure that they have the best source of information and advice. Our engagement strategy includes a plan to talk to tenant representative groups and Citizens Advice. For example, it will be important for them fully to understand the commitment I have given to bring forward a taper to ensure that rent rises are affordable.
Finally, Amendment 82A seeks an exemption for rent-to-buy schemes. I can confirm to the noble Lords, Lord Lansley and Lord Young, who tabled the amendment, as well as to the rest of the Committee, that the policy will not apply to tenants in a rent-to-buy or shared ownership property. I have already reinforced the point that the home ownership offer to tenants, particularly those on higher incomes, is very important. I would rather see those households taking up the offer of home ownership than facing higher rents under the policy for high income social tenants. I hope noble Lords will feel able to withdraw their amendments.
Lord Kennedy of Southwark
Many of the amendments in this group are probing ones and these matters would be better left to regulations. However, we come back to the problem: we have not got any regulations so scrutiny is extremely difficult. That leaves us having to put down amendments on these issues to try to drag out the Government’s thinking. At the end of the day, the amendments are on the Order Paper today only because the Government have sought to push the Bill through at such a pace and not wait for the regulations to be made.
Baroness Hollis of Heigham
My Lords, the Minister has now said twice that, under her proposals, any household paying a higher rent under pay to stay should, instead, be thinking about right to buy, and that she would prefer them to do that. If they are local authority tenants, can afford to do so, and wish to, they will already have taken this up. Why does she think they have not? One reason is that, with renting, changes in housing benefit and UC can be made in the course of the year if income fluctuates and circumstances change—the very situation which tax credits were devised to adjust. If you commit yourself to buying a property, no such consideration takes place of whether you can, or cannot, afford your mortgage repayments. If you are struggling with your income, your zero-hour contract has collapsed, or your partner has gone somewhere else, you are still stuck with it. Tenants may, therefore, have very good reasons—this obsession with pushing those who have chosen not to buy into right to buy, and whipping them there by virtue of the pay-to-stay rent policy, is disgraceful.
Lord Kerslake
Perhaps I could add one further point. It is perfectly possible to pilot this in a way that would not be inequitable to tenants. What you would be piloting is the information-gathering on income and how the different exemptions and changes might work on the ground. You do not need to change the rental position. What we really need to know is: does the system work in a way that is effective and fair? It would be perfectly possible to do that, modelling the system at local level without disadvantaging those tenants who were part of the pilot.
Baroness Williams of Trafford
My Lords, as I said earlier, I will get information about regulations in so far as I can by the end of the week. I cannot undertake to get information on exemptions by Report, but by the end of the week I will have as much detail as possible on some of the regulations that are coming forward and, most importantly, the timeline for them as well.
Baroness Hollis of Heigham
My Lords, I think we recognise that the Minister is doing her best to be helpful but does she not think that this is a little odd? She had a firm view about pensioners—that they should not be exempt from pay to stay—but she did not really have a clear view on whether any of the other groups mentioned in the amendment would be entitled to some consideration or exemption from pay to stay. We are in Committee, the Bill having gone through the other House, and the Minister still cannot help us—I am sure she would like to—as to who will be caught by this policy.
Baroness Lister of Burtersett
I am grateful to the Minister. She is clearly trying to be as helpful as she can be, but if we really are not going to have this information by Report, we will just go through all this again, which is in nobody’s interest. We are not asking for the actual draft regulations but the information about which groups will and will not be exempt. That is the least we can expect by Report. But on the basis that we are not going to get anything more now, I beg leave to withdraw the amendment.
Baroness Williams of Trafford
My Lords, I thank all noble Lords who have debated these amendments. I should say to the noble Lord, Lord Beecham, first, that I think that his letter may be in the post, just as the noble Lord, Lord Campbell-Savours, may have two letters in the post—this one and the one to which I referred earlier. I turn to the noble Lord’s various questions. He asked how many people in London were affected; there are around 46,000 social tenant households with incomes of over £40,000 who could be affected in London. That includes both local authority and housing association tenants, should the housing association wish to implement this.
I turn to the large group of amendments on income and rent setting. I start by reiterating the commitment I have given to introduce a taper, which will see rents rise gradually as income rises. I give advance warning that this commitment will be the basis of my response to most of these amendments.
I remind noble Lords of the purpose of the clauses to which the amendments relate. Clause 79 will set out a definition of high income and say how this will be calculated. It should be made clear that, in the context of the policy, the income threshold will apply only to the tenants or joint tenants and their spouses or partners. Clause 79 also allows that regulations can specify certain important aspects of that calculation, including the definition of high income for different areas, such as is the case with London; the clause also allows Government to specify what should, or should not, be treated as income for the purposes of the policy. As I mentioned earlier, when we are looking at possible exceptions of groups from the policy, Clause 79 would allow us to make sure they are not adversely impacted.
Clause 80 will make sure that landlords have the power to require the necessary information of households and that reasonable timeframes are provided for the submission of this information to the landlord. In the event that households fail to provide this information, Clause 80 would sanction that rents would automatically rise to a higher level than they may normally pay. This increase in rent should encourage prompt declarations, in a proportionate way. Protections under Clause 82 will ensure that rents will return to their normal levels once the necessary information is declared. This also applies to those tenants whose income falls below the high income threshold following a change of circumstances.
The noble Baroness, Lady Lister, asked me—I think in this group, although time blurs the groups into each other—about particularly vulnerable people who have had a crisis and are not able to provide information. As we work through this aspect of things, that will become clearer, but I am mindful of when that might provide a real problem, particularly for people in crisis.
Clause 83 will give local authorities the power to change tenancy agreements to apply the policy. This clause, most importantly, would give tenants the right to appeal the calculation of their income should they believe that they are incorrect. Clause 83 is fundamental in ensuring that tenants have the opportunity to challenge a calculation, and that a proper process is in place should they wish to do so.
Baroness Hollis of Heigham
I thank the Minister for giving way. We know that appeals procedures usually take several months; we also know from experience that people’s income fluctuates very widely. How would the Minister protect local authorities from having to recalibrate the rents to be charged each and every month to their tenants? How will the local authority ever stay on top of that information when the tenant is going to appeal continually and reiteratively, I suspect, on the basis of the misinformation of the local authority in imposing the last rent increase, which was based on information sent into them four, five or six months before? Surely, this is the point made by the noble Lord, Lord Kerslake—that the administration of this should have been piloted; then there would be a learning loop as to the problems. I would hate to have to do this, if I were in charge of housing in a local authority. The Minister is passing a nightmare over to local government with monthly, individually tailored rents as income monthly fluctuates.
Baroness Williams of Trafford
The intention is certainly not that tenants would pay different levels of rent every month. That is precisely what we want to get right—to reduce the administrative burden and reduce the anxiety for tenants, particularly those with varying incomes, either month to month or week to week. That is the type of thing that we will work through with this.
Baroness Williams of Trafford
My Lords, I am not going to give way.
Most importantly, Clause 83 will give tenants the right to appeal the calculation of their income, should they believe that they are incorrect. Clause 83 is fundamental in ensuring that tenants have the opportunity to challenge a calculation.
I will start with Amendment 70A, tabled by the noble Lords, Lord Best, Lord Cameron, Lord Kerslake, and Lord Kennedy. This amendment seeks to restrict the amount by which rent is increased within this policy. I have already outlined in some detail our commitment to introduce a taper to ensure that increases in rent are more closely linked to increases in income. This will ensure that rent rises are affordable and protect the incentive to find and keep work.
Amendment 71 seeks to establish a test of local affordability in rent setting. I thank the noble Lords, Lord Kennedy and Lord Beecham, for this amendment. The Government believe that this is best achieved through a correct setting of market rents within areas, and I have confirmed already that we are considering how this will work. We need to find an approach that can be easily implemented by local authorities but that is a fair representation of the market rental rate. This issue forms a key part of our engagement work with local authorities.
Noble Lords opposite have also tabled Amendments 72 and 77. Amendment 72 asks us to take into account the need to promote socially cohesive and mixed communities. I find this a slightly odd amendment, as I would have thought that the issue of low rents for households on high incomes is actually a divisive issue for communities. Social housing should be aimed squarely at those in real housing need, and it is absolutely right that when families need support they benefit from being in a mixed community. This is our policy.
However, there are more than 40,000 households with incomes of £50,000 or more who are benefiting from lower rents than their neighbours in the private rented sector. Far from being an issue, our policy aims to establish a level playing field across communities. It is worth pausing again here to consider the home ownership offer that the Government have for tenants of social housing, which they may wish to take up—but I am certainly not directing them to take it up.
Amendment 77 seeks to define high income in relation to average incomes in an area. Currently, the median household income figure is £26,000, which I should point out includes both working and non-working households. It is important to recognise that there are working households in the private sector on or below this median amount who are expected to find rents higher than that enjoyed by social tenants on similar incomes. On that basis, our starting threshold of £30,000 nationally is a fair point at which higher rents should become payable. I have already outlined our commitment to a taper to ensure that rent rises are gradual beyond this income threshold.
The noble Lord, Lord McKenzie, who is not in his seat, asked what constituted a household. There is a definition in the voluntary scheme; it includes tenants, joint tenants, spouses, partners and civil partners. That is the kind of thing that we are looking at.
The noble Lord, Lord Cameron, tabled Amendment 77A, which seeks to include a provision to take into account the variability of household income within the definition of high income. The amendment is unnecessary as we already have the power set out in regulations to treat variations in income within a year. That goes back to the point made by the noble Baroness, Lady Hollis. We certainly intend to cover this in regulations. There will be circumstances that are obvious candidates for inclusion, such as the death of a household member or a sudden and significant drop in income, but beyond that we must strike a balance between allowing a review of rent and minimising the burdens on landlords. We cannot have landlords constantly reviewing rents, for example, as the noble Baroness, Lady Hollis, suggested. There must be a sensible approach.
Amendment 79A, tabled by the noble Lord, Lord Shipley, and the noble Baroness, Lady Bakewell, seeks to put higher income thresholds in the Bill. We are not doing this as it would prevent us from bringing forward changes to the thresholds if the evidence supported a change. Our intention is to keep the policy under review and I am sure that that will be supported. I am sure—the noble Lord, Lord Shipley, confirmed this—that the purpose behind the amendment is to question the starting thresholds that were set at the Budget. We have said that rents should rise where household income is more than £30,000—£40,000 in London—but I once again draw attention to my commitment to put in place a taper. It will ensure that for those households on £30,000 the rental increase will be limited to a few pounds each week. While the starting incomes for thresholds are right, we have accepted that there is a need to protect work incentives and this is the purpose of the taper.
Amendments 79B and 79D concern the ability to raise rents where income information has not been provided by tenants. I thank the noble Lords, Lord Kerslake, Lord Beecham, Lord Kennedy, and Lord Low, for tabling these amendments as this is an important part of the Bill. I recognise why there are concerns about the power to raise rents for non-declaration. I will spend some time outlining how we see this power working. Tenants may be required to declare their household income and I have already outlined that we are thinking through the options for defining “income”. We are also considering what evidence is needed to support a declaration. It will be important for tenants to have plenty of time to gather this evidence and I have set out our intention to communicate this policy effectively to landlords and tenants groups.
It is, however, inevitable that there will be some households who, for whatever reason, do not declare details of their income. In these circumstances the Government face a choice. Do we make it a criminal offence or do we take a different approach? My preference is for the latter as a criminal offence seems entirely disproportionate. The power that we have taken therefore would give landlords the ability to set rents at the highest available in that area if there is a consistent failure to declare details of income. When I say “consistent”, I mean that there will be clear guidance for landlords on the amount of effort that they should put in to trying to contact tenants, and only when all of these approaches have failed should rents be raised.
I also make it clear that we do not see higher rental rates applying for the whole of the rental year. If raising rents for non-declaration spurs a household to take action to declare details of income at a later point in the year, the Bill allows for the rent to be set back to the correct level and regulations will set out this approach. I also give a firm commitment that we will clearly communicate this area of policy to landlords. Guidance will require them to set out the impact right from the start in all communications to tenants.
On Amendments 80B and 80C, tabled by the noble Viscount, Lord Hanworth, I refer back to some of the discussion on how reviews of rent could be treated. There will be certain circumstances in which a review of rent would be appropriate: for example, the death of a household member or a sudden loss of income. The power in question, however, deals primarily with circumstances when the income level of the household drops below the threshold for a high-income rent. In those circumstances we intend to use regulations to state that the rent levels should revert to the original level. This will include circumstances where rent has been raised as a result of non-declaration and it is subsequently determined that the rent level should remain as it is currently.
Finally, Amendment 82AA, tabled by the noble Lord, Lord Bassam, seeks a published review into the effect that the policy would have on community cohesion within all local authority areas. I have already expressed our intention to keep the policy under review and also explained my views regarding the detrimental effect that low rents for households on high incomes can have on communities.
Baroness Williams of Trafford
I did wonder, given that the noble Lord, Lord Bassam, was not in his place. I will just refer to the Marshalled List. The noble Lord is absolutely right, so if noble Lords could just ignore what I have said on Amendment 82AA.
I ask the noble Lord to withdraw the amendment.
Baroness Hollis of Heigham
I still have not got the faintest understanding of how pay-to-stay rents will connect with people’s incomes and UC. Clearly, universal credit is established on a monthly basis on real-time information and in due course will include housing benefit, if that is a flow of income. How often does the Minister expect pay-to-stay rents to be adjusted by the local authority over the course of the year in the light of changing incomes as reflected in UC—monthly, quarterly, yearly? Every answer has a distinct downside.
Baroness Williams of Trafford
As I think I have said to noble Lords on several occasions, this will be laid out in due course. Clearly, we would not want to be adjusting rents month in, month out for people. That is the sort of detail we will be working through, and it brings my thoughts back to a different policy brought in under the Labour Government—tax credits. You had to let the authorities know if your pay changed. The detail will be laid out in due course, as I think I have explained several times.
Baroness Hollis of Heigham
It is not a detail—it is at the core of local authorities’ ability to handle this scheme.
Baroness Williams of Trafford
As I said, details on regulations and timelines will be with noble Lords before the end of the week.