Local Housing Allowance

David Linden Excerpts

Wednesday 15th March 2023 Westminster Hall

[David Linden (Glasgow East) (SNP)]

It is a pleasure to see you in the Chair for this afternoon’s proceedings, Ms Elliott.

As others have done, I commend the hon. Member for Arfon (Hywel Williams) for securing the debate, which is short but none the less important. We have had an interesting discussion, with thoughtful contributions from the right hon. Member for East Ham (Sir Stephen Timms) and the hon. Members for Strangford (Jim Shannon) and for Neath (Christina Rees).

The debate of the hon. Member for Arfon allows my party to place on the record our asks on local housing allowance rates. For example, we want to see LHA increased in line with average rents. Likewise, we have called on the British Government to support renters by suspending the shared accommodation rate for under-35s and care leavers, which I believe remains a massive social injustice.

As we know, in November the Secretary of State confirmed that LHA rents for the 2023-24 financial year

“will be maintained in cash terms at the elevated rates agreed for 2020-21.”—[Official Report, 17 November 2022; Vol. 722, c. 24WS.]

My party has pushed the British Government to ensure that the approach to LHA rates does not go back to that taken by the pre-pandemic cuts, which made the private sector totally unaffordable for people in receipt of benefits in some areas, especially when we take cognisance of the long-term shortage of social housing that blights many of my constituents. We cannot have a conversation such as this without recognising the enormous damage done to social housing by the right-to-buy policy and the failure to build more social housing after that.

Ministers’ decision to maintain LHA rates at cash terms in 2023-24 means a further freeze for private renters and places additional and needless pressure on tenants, which in turn adds to pressure on the discretionary housing payment funding pot. Through discretionary housing payments, my colleagues in the Scottish Government are supporting tenants who are under severe financial pressure. In reality, the Scottish Government are plugging some of the gaps caused by the crumbling of the UK social security system here in Westminster.

To highlight one particular example, since the introduction of the punitive bedroom tax, the SNP Government in Scotland have spent £350 million on mitigating it. That has been done by way of discretionary housing payments, which in effect means that the bedroom tax is not in operation north of the border. The hon. Member for Arfon will correct me if I am wrong, but the situation in Labour-run Wales means that the bedroom tax is not necessarily mitigated—something their colleagues in Scottish Labour often forget to mention in Holyrood.

Obviously it is great that SNP Ministers have chosen to act to protect people from the bedroom tax in Scotland, but it is just one of the many areas where the devolution framework comes under strain, as spending decisions in Scotland are frankly taken to paper over the cracks of poor welfare policy made here in London. The inescapable reality is that every penny we spend on the discretionary housing payment to deal with Westminster’s heartless social security agenda is a penny less spent on devolved competences such as education, transport and health.

In summary, Ministers must do better and this Government must act urgently to improve some of the problems with local housing allowance that I and others have outlined today. Failure to do so, I am afraid, only highlights the need for Scottish independence, and for decisions about Scotland to be taken in Scotland—not to languish in the Whitehall in-trays of Tory Ministers the people of Scotland did not vote for.

[Ms Karen Buck (Westminster North) (Lab)]

It is a pleasure to respond for the Opposition under your chairmanship, Ms Elliott. I congratulate the hon. Member for Arfon (Hywel Williams) on securing this important debate. This is a niche issue for many people, yet it is so incredibly important. Rents are the single largest item in most families’ budgets. Not being able to pay the rent has the consequence of forcing families into poverty and also risks homelessness, as we have heard—I will return to that point in a minute.

I wish that, just occasionally, we could have a debate such as this with more than one Department present—it would be a good experiment and brilliant to have that opportunity. It is absolutely impossible to consider local housing allowances in isolation from housing policy. The fact that the housing market is so fundamentally broken is driving the crisis in rents and unaffordability, and therefore the pressure on the local housing allowance. The attempt to bear down on the local housing allowance drives up homelessness and has consequences for other Government Departments. It would be good to be able to hold two Ministers to account for the policies they pursue and their two different agendas, which usually—and in this case—involve a toxic pass-the-parcel game of responsibility and blame, with consequences for both.

As we have heard, the Government have accepted the need to uprate benefits in line with inflation this year—indeed, they have been proud of that fact. I do not think that should be a cause for congratulation. It should be the most absolutely fundamental principle of social security policy, yet they completely fail to accept that that same principle should apply to the local housing allowance. I would like the Minister to explain exactly why in this one area of policy, which affects the largest item of a family’s budget, the Government do not seem to believe that inflation exists. Of course, inflation does exist and, as we particularly heard from the Chair of the Select Committee, my right hon. Friend the Member for East Ham (Sir Stephen Timms), rents are soaring across the country, but probably most severely in London.

There are two consequences. First, over 800,000 households in the private rented sector face a shortfall between their rent and their local housing allowance. Some 57% of all universal credit households in the private rented sector have that shortfall. Secondly, dipping back into the issue of housing policy, it forces households into the absolute worst end of the private rented market. In this place, we discuss what has happened to households stuck in the poorest quality housing and the conditions that people are forced into if they are concentrated at the bottom end of the market, even if they can get it, have been a big media theme over the course of this winter.

Although we are discussing the freeze that has happened, in particular since 2020, this is also not a new phenomenon. Since the Government reduced the LHA from the 50th percentile to the 30th, there has been a continuing series of freezes, of which this is only the most recent. It was all based on the belief that the setting of the LHA levels would be bound in itself to influence rents, because it was understood or believed that such a large proportion of the private rented sector was funded by it. That was only ever partially true, or only true in some places, and always failed to recognise that even in a broad market rental area, there are different housing markets, and what applies to one part of the private rented market will not apply to others.

We know that the blind spot over the local housing allowance uprating can be seen in the homelessness statistics, as well as being felt by tenants in the shortfall between actual rents and the support available. There is an average monthly shortfall between rent and local housing allowance of £100 a month. It is indisputably true that the shortfalls are driving tenants to lose their homes. The end of a private rented tenancy is the single largest contributor to homelessness almost everywhere in the country.

[David Linden]

Does the hon. Member agree that the Government have to look at the picture in the round? When someone is evicted from their home, it is ultimately the state that picks up the cost. We should consider local housing allowance a preventive spending measure and the Government are short-sighted on the issue.

[Ms Buck]

I absolutely agree with the hon. Gentleman that homelessness is a cost on the central Government budget and on local authority budgets as well.

We have seen homelessness soar. Rough sleeping is up by 74% since 2010 and by 26% in the last year; there has been an 83% rise in the number of children who are now living in temporary accommodation as a result of homelessness. One in 23 children in London is now homeless. The squeeze on local housing allowances is undoubtedly a major factor driving that situation.

I have no doubt that the Minister will refer to discretionary housing payments, but, as my right hon. Friend the Member for East Ham has made clear, they make only a tiny contribution towards the total cost of budget shortfalls. Those payments have been cut by one fifth in 2021-22, and again this year. In any event, they are restricted in various ways, including by the fact that they are only ever meant to be temporary, so they are not, and never can be, the answer to the fall in local housing allowance.

The poorest, the most vulnerable and those with the least bargaining power in a toughly competitive private rented market, among them families with hundreds of thousands of children between them, are forced to deal with evictions, with frequent moves, and with all the disruption that homelessness causes to education, employment and caring allowances.

As Policy in Practice demonstrated in an important research report yesterday, the broken housing market also drags a substantial number of higher earners and higher-rate taxpayers into means-tested benefits such as universal credit via the housing allowances system, which is a completely unintended consequence of the freeze.

Investment in social housing—a way of ensuring that those with the lowest incomes can enjoy secure and affordable homes—is by far the best solution to this crisis. A better managed private rented sector would also be good for tenants. We have been promised action on that for years but we are yet to see it. All of these things would be better for the public purse, too. In the meantime, freezes in the local housing allowance make no sense whatsoever and only serve to make a bad situation worse.

--- Later in debate ---

[Mims Davies]

I hope to come that before I conclude my remarks. On the “no impact assessment” point made by the hon. Member for Arfon, we will publish an equalities analysis to the House of Commons Library, and I know the hon. Member for Glasgow East (David Linden) will keenly watch for that. On the recent question regarding shared rooms, there is an issue with the quality of data on room entitlements, so, if the hon. Member for Arfon writes to me, I will share with him further what I can best do to provide that.

[David Linden]

I am grateful to the Minister for giving way. I spent a bit of the afternoon reading the Government’s White Paper on health and disability, and have actually been very encouraged by one part of it that talks about the importance of transparency in decision-making processes in the DWP. Will the Minister confirm that there will be a change of culture now in the transparency and publication of some of these things, which, recently, some of us felt to be a bit murky?

[Mims Davies]

The hon. Gentleman points out the many questions he is asking about transparency, and I welcome that. Where policy is in development, we need to protect it, but, ultimately, if it needs to be transparent, I am very happy, where suitable, to share it.

On the point made by the right hon. Member for East Ham and others about temporary accommodation, it is, of course, an important way of ensuring that no family is without a roof over their heads. We are committed to reduce that need for temporary accommodation by preventing homelessness. We are investing £366 million into the homelessness prevention grant to support local authorities to prevent homelessness. The key point, and our main duty, is how best to support people so that they are not in that situation. I very much understand that, and I am keen to respond about how we are trying to do a little more about that.

It is important for Members to understand that the local housing allowance is not intended to cover all rents in all areas. In April 2020, in direct response to the covid-19 pandemic and the influx of new claimants because of the pandemic, we increased local housing rates to the 30th percentile of local market rates, costing nearly £1 billion and giving claimants on average an extra £600 in 2020-21. We have maintained that increase since then, ensuring that all those who benefited from the increase continue to do so.

I recognise that there are circumstances where extra help is needed, which is where we distribute the discretionary housing payments according to local need. Those payments play a critical role in providing support to the most vulnerable households in meeting their housing costs. Since 2010, we have provided nearly £1.6 billion in DHP funding to local authorities.

Of course, the competitive nature of the private rented market is driving up prices, alongside the annual review of LHA rates. I say to the hon. Member for Westminster North and the Chair of the Select Committee, the right hon. Member for East Ham, we are absolutely determined to work around the quality and supply challenges that are ultimately driving that. Overall, the DWP Budget measures today represent £3.5 billion over the next five years to boost workforce participation.

In conclusion—