Universal Credit: Private Rented Sector

Debate between David Drew and Margaret Greenwood

Tuesday 9th January 2018 Westminster Hall

[Margaret Greenwood (Wirral West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate the hon. Member for Eastbourne (Stephen Lloyd) on securing this really important debate. Many valuable contributions have been made, from which it is really clear that people are experiencing real hardship as a result of the impact of universal credit on ability to pay rent. The example provided by my hon. Friend the Member for Lewisham, Deptford (Vicky Foxcroft) clearly demonstrates the effect of delayed payments, and my hon. Friends the Members for Batley and Spen (Tracy Brabin) and for Newport East (Jessica Morden) spoke about the specific difficulties that single parents face in having a secure home.

It really is important that the Government take action to address the problems with universal credit in the private rented sector. Approximately 5 million households —just over 20% of the total—are in private rented accommodation, and a quarter of those are families with children. That figure is predicted to rise to just under a quarter of all households over the next five years. Some 1.2 million households currently receive housing benefit in the private rented sector, one third of which are in low-paid work and require support to help top up their rent. Prolonged delays in receiving an initial payment of universal credit have led to many claimants being in rent arrears and at risk of eviction.

The Residential Landlords Association has reported that landlords have become increasingly reluctant to rent to universal credit claimants. Two thirds of private landlords are basic rate taxpayers not on high incomes, so they need rents to be paid on time in order to pay their own bills. That puts increased pressure on the social housing sector and local authorities. Councils hit by cuts in funding from central Government are having to set aside large amounts of money to support people affected by the impact of universal credit. Newcastle City Council is spending more than £390,000 of its own resources to support UC claimants, including £88,000 to cover rent arrears; there is more than £1.2 million in uncollected rent across a tenancy base of just 27,000, purely as a result of universal credit. Nearly three quarters of the spending on discretionary housing payments by Conservative-controlled Bath and North East Somerset Council in this financial year has likewise gone to supporting universal credit claimants.

The Government announced a number of changes in the Budget that were designed to address the problems with universal credit. We welcome them as far as they go, but they do not go anywhere near far enough. For example, from February, the Government are to remove the initial seven-day waiting period, so that the wait built into universal credit at the start of a claim will be five weeks rather than six. That is still too long for people on low incomes, who in many cases are unlikely to have savings to tide them over for that period. According to the English housing survey, 66% of private renters have no savings. We need up-to-date statistics on the timeliness of payments, so that we know exactly how long people in each local authority are waiting and whether the five-week target is being met. Will the Minister make a commitment to publish regular statistics on this matter, rather than ad hoc releases when it suits the Government?

From this month, it will be possible for someone to obtain 100% of their estimated universal credit as an advance payment, which will then have to be paid back over a maximum of 12 months. However, the maximum advance for people who made an initial universal credit claim in the run-up to Christmas was only 50%, which will undoubtedly have meant hardship for many families.

If it is possible to estimate someone’s universal credit for the purpose of giving them an advance and to pay that advance within five working days, or on the same day when someone is in immediate need, why do universal credit claimants still have to wait five weeks for an initial payment to be made? Again, will the Minister make a commitment to publish regular statistics on how many people ask for advance payments, how many people receive them and the default rates on repayments? Ministers have stated repeatedly that universal credit is designed to mirror the world of work, but with 58% of new claimants who are moving on to universal credit being paid either fortnightly or weekly prior to claiming, it is time for all claimants to be offered fortnightly universal credit payments.

The Government announced that from April they will introduce a two-week run-on between a housing benefit claim and a new universal credit claim. Again, that is welcome, although it will only help people who have already been claiming housing benefit. The Government have also said that they will make it easier for direct payments to be made to landlords. However, it appears that that is principally aimed at ensuring continuity where a tenant whose housing benefit is already being paid directly to their landlord moves over to claiming universal credit. That is positive, but my Opposition colleagues and I would like to see all tenants offered the option of direct payments. For vulnerable people, who need payments to be made quickly, the need to negotiate with the Department for Work and Pensions for direct payment of housing support to a landlord can take time and effort.

Surely all tenants should have the right for payments to be paid directly to the landlord, and not just those who are vulnerable and have difficulty managing their money. Direct payments provide security for landlords renting to people who are claiming universal credit, providing them with the confidence that they will be paid. Direct payments are especially helpful in the case of people who have formerly been homeless. Private landlords may be much more wary of renting to them, and people who have been homeless may not have had recent experience of managing large bills, such as rent.

The DWP has been working with Crisis on a pilot project in Newcastle whereby people who have been homeless or who are at risk of homelessness because of arrears can have their claimant commitment relaxed while they focus on their housing situation, and they are also offered the opportunity to have their housing support paid directly. Will the Minister, as a matter of urgency, consider issuing guidance to work coaches to identify people who may be in rent arrears and proactively offer them direct payment of housing support? Claimants often appear to be unaware that it is possible for this to be done.

Landlords themselves do not appear to think that the changes announced in the Budget are enough. In a survey carried out by the Residential Landlords Association into the reaction of private landlords to the changes to universal credit, 64% of private landlords said the changes did not give them more confidence to let properties to tenants in receipt of universal credit.

Overall, one of the key reasons for arrears is the level of local housing allowance. LHA rates simply have not kept up with sharply rising rents. They were first cut by the coalition in 2011, and then increases were capped at 1% in both 2014-15 and 2015-16. A freeze was introduced in April 2016, which will last until 2020. According to research by the Chartered Institute of Housing, private sector rents in England grew by an average of 14.6% from May 2011 to May 2017, while wages increased by only 10% in the same period.

That inadequate housing support continues in universal credit. In fact, there is no housing support at all in universal credit for people aged between 18 and 21, unless they are in one of the groups of people who are protected, such as care leavers. Also, the national living wage is set at a lower rate for people under the age of 25, and the chief executive of the Financial Conduct Authority has recently warned about the high levels of debt being incurred by young people just to cover basic household bills such as rent.

[Dr Drew]

Will my hon. Friend give way briefly on that point?

[Margaret Greenwood]

I am sorry, but I am really short of time and so cannot give way.

We are all shocked by the sight of people sleeping in the streets. Will the Government think again and restore housing support in universal credit for people aged between 18 and 21?

Overall, the number of working households claiming housing benefit in the private rented sector has more than doubled since 2009. We know that many people, especially many young people, have not just been priced out of home ownership but are finding that their income does not even cover their rent. The DWP’s own data show that only 7% of private renters claiming housing benefit are unemployed and seeking work. The rest are either already working on low incomes or are currently unable to work.

Just last week, it was reported that the Stop Start Go charity in Manchester has opened new bedsit accommodation for working people who are homeless because they cannot afford the cost of accommodation in the city. On one night in December, a third of people sleeping at the Booth Centre for the homeless in Manchester were actually employed. The DWP’s own data show that the number of people in work who are being placed in temporary or short-term accommodation rose from 15,500 in August 2013 to more than 22,000 by 2015. Research by the Joseph Rowntree Foundation found that the private rented sector has grown by a third over the last 12 years, but the number of tenants being evicted has also grown; 7,200 more tenants lost their homes in 2015 than in 2003.

Labour is committed to increasing the national living wage to £10 an hour across the age range; to building at least 100,000 council and housing association homes for genuinely affordable rent or sale; and to reforming universal credit so that it meets its original principles of making sure that work pays and reducing poverty. Labour will also end insecurity for private renters by introducing controls on rent rises, as well as introducing more secure tenancies, landlord licensing and new consumer rights for renters. That is the real way to make work a route out of poverty and to reduce the need for people to claim housing support.

The Government simply refuse to recognise the scale of the shortage of truly affordable housing that exists. At the same time, they are failing to provide housing support at a level that will at least enable people to cope with the consequences of Government inaction and to meet rising rents. In the Budget, the Chancellor conceded:

“House prices are increasingly out of reach for many”.—[Official Report, 22 November 2017; Vol. 631, c. 1057.]

Yet he offered more of the same on housing. There was no new Government investment in affordable homes and nothing for private renters. The need for someone to have a roof over their head—a home where they can bring up their family—is a basic human need. By 2021, it is estimated that some 7 million people will be claiming universal credit, more than half of whom will be in work. Where will they live if their wages do not cover their rent and housing support does not make up the shortfall? It is time for the Government to heed the warnings from landlords, the voluntary sector and Opposition Members, and to pause and fix universal credit.