Housing Costs (Reformed Welfare System)

Debbie Abrahams Excerpts

Tuesday 3rd March 2015 Commons Chamber

[Teresa Pearce]

It is true that solutions can be found. Sadly, no one seems to have found them yet in my part of south-east London.

The Work and Pensions Committee looked at the problems that are faced by people on housing benefit. They are discriminated against when looking for private rented accommodation. For families, that makes trying to find a roof over their heads an uphill struggle. Given that tenancies typically last for six to 12 months, private renters often have to move just as they have settled in. Children who live in such places have their life chances restricted and their education disrupted, and are often not registered with a doctor. That cannot be acceptable.

Private landlords may be reluctant to rent accommodation or provide temporary accommodation to claimants for a number of reasons. It might not just be general discrimination, but might be due to constraints that are imposed by mortgage lenders, who say that they are not allowed to provide longer tenancies, or due to fears that local authorities will fail to allocate housing benefit in a timely manner. Giving private renters the option of allowing the housing benefit component of their universal credit payment to go directly to their landlord might allay those fears and enable private renters to control their finances more easily. The Government must work with private sector landlords to address their concerns about universal credit and offer greater support to those who rent property to housing benefit claimants. That work must start now.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I grateful to my colleague on the Work and Pensions Committee for giving way. I met my key local social housing provider on Friday. It said that there was a 15% gap in rent collection between those on universal credit and those not on universal credit. That is manageable over a year or so, but over the longer term it will create huge problems. I wonder whether my hon. Friend wants to comment on that point.

[Teresa Pearce]

That is a valid point. It is something that we all encounter locally when we talk to housing providers. It needs to be addressed, so I thank my hon. Friend for her intervention.

Another problem for private renters is that the change to local housing allowance is further restricting their access to the widest selection of available properties. Local housing allowance rates match only the 30th per- centile of homes within a broad rental market area. The Government reduced that from the 50th percentile. I believe that that needs to be re-evaluated urgently, especially in London. Rents have risen, but the local housing allowance was frozen in 2012-13 and uprated by 1% in 2014. There has been a reduction in the number of homes that can be rented out at that rate.

An analysis by Crisis shows that across Britain, one in 10 local housing allowance rates for 2015-16 is 5% or more lower than the estimated 30th percentile of local rents. Those include 77 rates that have already benefited from an additional increase due to the targeted affordability fund. As was outlined in the Select Committee’s report, analysis by the Institute for Fiscal Studies shows that rent levels did not decline as a result of the cap. In fact, the most recent rental figures show a 1.8% rise across the stock in England and a rise of 2.4% in London. That is well above the recent 1% cap and means that additional properties will fall out of the reach of those on benefit.

Private renters should not have to choose between having a roof over their heads and eating, but increasingly that is becoming a daily choice for many people in my constituency. The Government should consider increasing LHA rates by more than 1% annually in more pressured areas. Although the Committee welcomed the introduction of the targeted affordability fund as a means of increasing LHA levels in areas of higher rents, some areas may see rents rising by more than the maximum of 4% a year. The Government should amend the targeted affordability fund so that it can be paid at higher levels in areas where rent increases are greater than 4%. It should also use available rents rather than stock rents as a measure for the rental increase.

Rents are currently unaffordable across the private sector. In 2012, the Money Advice Trust stated that rent arrears were the fastest growing debt problem it had encountered and that the number of calls it received on the issue had risen by 37% on the previous year. At the end of 2014, the National Landlords Association reported that almost a third of private landlords had seen arrears that year. There were a record number of evictions of renters across the social and private sector in 2014 as a result of a combination of factors, including the bedroom tax, benefit sanctions, increased numbers renting with the reduced LHA rate, and rising private sector rents.

Recent figures from Crisis have also shown that the No. 1 leading cause of homelessness now is eviction from a private tenancy. The figures highlight not just the lack of affordability for renters when having to manage competing living costs, but how unsustainable rising rents will be for the private rented sector without Government intervention.

The Government must continue to monitor homelessness levels and take action to mitigate the impact on households and local authorities. The Department for Communities and Local Government reported that rough sleeping increased by 14% in autumn 2014. I am regularly contacted by constituents who tell me that they cannot be housed by their local council because they are not in priority need and that they have no option but to live in overcrowded accommodation with family members or to couch-surf, which is code for sleeping on the floor of a friend’s house. If they can be housed, they have been told that their only option is temporary accommodation. In my local area of Bexley, people are often temporarily accommodated in Manchester and Bolton, which means having to uproot their children from school and leave their support networks behind.

It always worries me greatly that, while a number of landlords are reputable, a number of others are not. There are private landlords in my constituency who line their pockets while renters struggle to pay their rent. I wrote to Her Majesty’s Revenue and Customs and the Treasury in November to ask about the Let Property campaign, which was launched in September 2013 to target the residential property letting market. Specifically, I wanted to know whether it had been successful in closing the tax gap on let properties, but the responses I received were not encouraging. They said it was too early to tell, but one of the figures they did give me was an estimate that the tax gap on letting income was just over £500 million. It is absolutely disgraceful that public money is going to landlords who do not then pay their way or their tax. We need to address that urgently.

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[Sheila Gilmore (Edinburgh East) (Lab)]

Hon. Members agree that there are serious problems when payments of housing benefit rise so high. We disagree on our analysis of how it came about and what we should do about it. Unless we tackle the underlying issues, we will simply trim the edges, to the detriment of many households and families. As the Office for Budget Responsibility says in its review of spending on benefits and pensions, the main drivers for the increase in housing benefit are increases in rents and the number of people on low wages who have to claim housing benefit to make ends meet. The OBR was concerned that those two things would continue to be drivers in the coming decade unless action was taken. There is very little—I would say virtually nothing—in the steps that the Government have taken since 2010 to tackle those problems. Indeed, they may have made them worse.

We were told by Ministers during the passage of the Welfare Reform Bill that the private rented sector had become so intrinsically dependent on the housing benefit market that rents would fall as a result of the changes. Rents have not fallen. In many places, they have risen considerably above inflation. That is certainly true in my city, in the city represented by the Chair of the Select Committee and in London. The DWP accepts that this is the case. For the private rented sector, it has introduced additional payments in some areas to top up the local housing allowance—after it previously made reductions—because it accepts there is a growing gap between the actual rents available to people who want to rent and need housing benefit, and the payments they would otherwise receive. The promises that rent would fall as a result of the policy have not come about. I hope that in looking to see what savings are supposed to have been made, those additional payments will be factored in.

We are repeatedly told that this policy is about saving money. I think the Minister from a sedentary position said, “Oh, it’s about £1 million a day,” but that was based on the Government’s original statement that the policy would save about £500 million a year. Other experts said, at a very early date, that it would be lucky to be somewhere nearer £350 million, and that does not take into account the very high cost of discretionary housing payments, which are a cost to Government and so detract from any savings made. It is therefore not correct for the Government to say what they say.

For individuals, households and families, the impact is extremely serious. This is not the same, as is often said, as what happened previously in the private rented sector, dating back to about 1998 when size was taken into account. This is an impost on people now, whether they can move or not and whether there is anywhere for them to move to or not. One of the amendments tabled during the course of the Welfare Reform Bill by the Opposition—it was followed up through the House of Lords and incorporated into a private Member’s Bill that was not allowed to progress in this House recently—proposed that if people were offered a suitable alternative house and did not take it, then the cut in their benefit could apply. For many people, however, that just is not practical. I have just checked yet again, as I do constantly, the number of houses available for social rent in my city. This week, there were 54 in the whole city. Of those, 31 were one-bedroom, but eight were sheltered. The people affected by the bedroom tax are by definition under pension and retirement age, and so would not qualify for those eight.

[Debbie Abrahams]

That is not just the case in my hon. Friend’s city. In Oldham in my constituency, 2,048 people are affected by the bedroom tax and there are only 50 properties for them to move into.

[Sheila Gilmore]

I thank my hon. Friend for her intervention.

In Scotland, the priority given to people who are homeless—a much wider definition of homelessness has been adopted by the Scottish Government—means that there is real competition for smaller houses. The majority of people who present as homeless are single people, so they too need the small houses that other people are trying to fit into.