Welfare Reform and Work Bill

Baroness Warwick of Undercliffe Excerpts

Tuesday 17th November 2015 Lords Chamber

[Baroness Warwick of Undercliffe (Lab)]

My Lords, last week in my capacity as chair of the National Housing Federation, I hosted a briefing on this Bill. One of the speakers was the chief executive of an NHF member organisation, St Mungo’s Broadway. St Mungo’s provides supported housing for about 3,600 people a year. On any one night, about 2,500 people are in its hostels, semi-independent housing or care homes. St Mungo’s provides vital support to help people to gain the skills and confidence to recover from homelessness and to live as independently as possible. The CEO was enormously concerned that, under the Government’s plan to reduce social housing rents as set out in this Bill, it will not be able to deliver for homeless and vulnerable people on anything like the same scale. Taking into account the rental income that it had anticipated over this period, it expects to lose £4 million, and local authority cuts over the same four-year period will mean further falls in income. These cuts will mean that St Mungo’s will have to stop running some of its vital supported housing schemes. Their residents have slept rough, been in prison, have a mental health problem or a significant physical health condition; more than half have a substance-use problem, and their problems often overlap. They need skilled and intensive housing management and support. Who else will provide it if schemes like these are forced to close?

Housing associations up and down the country will face the same dilemma. They are committed to building the homes the country needs and will do all they can to continue with this vital work, but we underestimate at our peril the impact of the 1% rent reduction over the next four years. The result is an estimated loss of more than £3.85 billion in rental income. This will have a significant impact on all associations; it will have a particularly severe impact on the provision of supported housing for vulnerable people, including domestic abuse refuges, homelessness hostels and homes for veterans and people with disabilities. Like the right reverend Prelate the Bishop of St Albans—I thought he set out the issues extremely well—and many other noble Lords in this debate today, I am deeply concerned that the rent reduction will result in a serious lack of provision for people with complex problems and high support needs.

I have had numerous examples from all over the country. I will mention just two: Framework in Nottingham estimates losing 240 high support units over the next four years, and Riverside based in Liverpool says that 32 of its 102 supported housing schemes will become loss-making as a result of the rent reduction. As well as this, the policy will add greater cost to the public purse. The Homes and Communities Agency recently estimated that the net financial benefit of specialist housing was about £640 million overall. Excluding specified accommodation from the rent reduction measure would result in a reduction in the overall savings delivered by this policy of around £93.5 million in year 4—over six times less than the savings that specialist housing offers the public.

As others have said, the Government have acknowledged that,

“the rent reduction measures may disproportionately impact on supported housing and may cause a reduction in service provision”.

The Bill was amended in another place to allow the possibility for organisational waivers. But the cost structures used by health, care and support providers are complex, and vary across the sector. The development of a waiver formula that is consistent and fair would be extremely challenging. As my noble friend Lady Andrews and other Members of this House have done already in this debate, I urge the Minister to agree that specified housing—in other words, housing for vulnerable people—should be excluded from the rent reduction requirement. I hope that the House will support this.

There are two other issues I want to touch on: the impact of the rent reduction on stock transfer organisations, and the impact of the benefit cap on housing affordability and temporary accommodation. Stock transfer organisations inherit from local authorities housing stock that needs improvement. They generally start out with a business plan that involves increasing rents in accordance with guidelines set by the regulator, and they use this anticipated revenue to underpin borrowings to undertake the much-needed improvements.

This means that the organisation’s finances are extremely tight in its early years of operation. The rent reduction will cause many of these organisations to struggle to deliver improvements promised to tenants at the time of the transfer. In some cases their financial viability will be put at risk. In regard to the benefit cap, a secure and decent home is often the starting point to help people back into work. The Bill’s proposal to lower the benefit cap to £23,000 in Greater London and £20,000 elsewhere will make housing unaffordable for thousands of families. This affordability challenge is not restricted to families renting in the private rented sector. The NHF’s modelling shows that a couple with three children would not be able to afford the average housing association rent on a three-bed property in any region. In London, families would face a shortfall between benefit and rent of £27.79 per week. The weekly shortfall under a £20,000 cap ranges from £37.40 in Yorkshire and Humberside to £67.35 in the south-east, based on the current rent agreement.

A lower benefit cap will have a particularly significant impact on families living in temporary accommodation. Temporary accommodation is a vital part of the homelessness safety net and is used by local authorities to house people who otherwise would need to be placed in more costly emergency interventions such as bed-and-breakfast accommodation. People placed in temporary accommodation by local authorities have little scope to move to reduce their housing costs, and are likely to be further from the job market. If they are no longer able to keep up with rent payments in temporary housing due to the cap, they may find themselves homeless again, and it is likely that local authorities will struggle to rehouse them. I hope the Minister will agree that people living in temporary accommodation should be treated in a similar way to tenants in supported exempt accommodation and have their housing costs omitted from the calculation of the cap.

The current system for regulating social rents is overly rigid and confusing. Currently rents are fixed by the Government, at either a percentage of the local private rent or the lower social rent level. Because private rents vary hugely across the country and do not rise and fall in proportion to local wages, housing association homes are much less affordable for customers in some places than in others. Surely it makes much more sense for housing associations to be able to set rents that reflect local market conditions and customer circumstances, within an overall envelope set by the Secretary of State. I urge the Government to give housing associations that flexibility.

The Bill will have some significant unintended consequences for the housing of some of the most vulnerable people in society. I hope that the Minister will be prepared to look carefully at exempting specified housing from the rent reduction. Will he agree to meet some of the providers of these schemes to hear their concerns first hand?