Housing Benefit

Jenny Willott Excerpts

Thursday 10th March 2011 Westminster Hall

[Dame Anne Begg]

Very often, partly because of the publicity and the tabloid headlines, the assumption is that people on housing benefit are always out of work, when that is certainly not the case. In fact, in London it is particularly important that if low-paid people are to get work and to have work incentives, housing benefit must be set at the right level. The danger is that the gap between what they can get in housing benefit and what they can afford is too great; they end up not being able to get accommodation in the area in which they are working, which is even more important.

[Jenny Willott (Cardiff Central) (LD)]

Is one of the problems not the fact that local housing allowances have driven up rents for everybody in the private rented sector, including people who are working? That has had a knock-on impact on both those who are receiving the LHA and on those paying all their rent. Even where the difference between those who are not receiving LHA and are paying the rent themselves is 90% of LHA rates, that is higher than it would have been had the rents not been driven up in the first place. It has a much broader knock-on impact across society.

[Dame Anne Begg]

Earlier in my contribution, I said that I do not believe that is the case in Aberdeen. Wherever the housing supply is less than the housing demand, it is the lack of supply and the ability of those in work to pay higher rents that drives up rents, not the level set for the local housing allowance. It is a chicken and egg situation. Why was the local housing allowance set at that level for that broad rental market area? It was because of the average house rental price in that area.

The hon. Member for Cardiff Central (Jenny Willott) will have constituents in the private rented sector who will already, without any changes, be supplementing the local housing allowance out of their other benefits, in order to be able to afford the house. If rents were being driven up to local housing allowance levels, we would have seen a much smoother curve in the cost of all housing. All housing would cost the local housing allowance, but very often it still costs a lot more. That has been the problem that many are facing. It may be true in some areas, but that is what one hopes the research will find: that in the odd area a large number of people in the private rented sector are also on housing benefit. I understand that Blackpool is one of those areas. In such areas it may be the case that private rents have gone up to the LHA.

However, I do not believe that would be the case in more affluent areas. Unfortunately, in areas where that has happened, unless landlords reduce rents, we are still in a cycle of people not being able to afford the housing or to get other housing that they can afford, because of the changes. I have not said anything about the changes from the 50th to the 30th percentile: that also comes into play in a different area.

I was going to say something about the importance of housing benefit to work incentives. Perhaps that is something the Minister could answer. We know that housing benefit is to be in the universal credit, but we do not know the details of how it will be treated. One fear is that if housing benefit comes in as a flat level rather than the actual cost of the housing occupied, there might be a disconnect between what someone has to pay out and the effective withdrawal rates, so universal credit would not operate as it is meant to and ensure that works pays in all cases.

I am coming to the end of my comments, and I appreciate that I have not covered everything in the document. I mentioned that I held a housing summit—predominantly for housing associations but including those in the social rented sector in my constituency. The reason for that was that it became apparent that not only were there knock-on effects from the private rented sector that would result in higher demand for their properties, but there are also Government proposals that would affect them directly.

The biggest one that worried housing associations and the social rented sector is the under-occupancy rule, as it will affect all social rented housing as well as the private rented sector. The fear is that there will not be enough accommodation of the appropriate size for people to move. Consider the case of parents in their late-50s occupying a three-bedroom house, because it was the family home in which the family grew up before leaving. They have fallen out of work, which might be exacerbated by the increase in the state retirement age to 66. In their late 50s or early 60s, for the first time in their lives, they are now dependent on housing benefit in order to pay the rent, but they will only get housing benefit for a one-bedroom property, because that is all they will qualify for. Can the Minister say how the amount they get will be calculated? It could be, in an area such as Aberdeen, that what they pay for their three-bedroom council house is less than they would get in local housing allowance, even after the changes, for a one-bedroom flat in the private rented sector. There is a false economy if they are being forced to move into something more expensive, which they will get because it is in the private rented sector.

I could be flippant and say that there will be plenty of one-bedroom flats available because all the 25 to 35-year-olds will have had to move out of them to go into shared accommodation. However, I do not think that the 60-year-old mum and dad are going to move into the equivalent of a one-bedroom student flat, which a younger person has moved out of. This will cause great anxiety and worry. A lot of people will probably stay where they are, but they will be very short on the rent.

I know that the Minister is particularly concerned about pensioner poverty, but a large group of people who have fallen out of work towards the end of their working lives and who cannot get their state pensions until they are 66 will get caught up in this issue; it will not affect people who are over pension age, but it will affect those who are just below it, whose last years before they get the state pension will be spent living in poverty. They could become the group with the highest levels of poverty. The issue really must be considered. The social rented sector is particularly worried, because a lot of those people are already in the sector, and there is simply not enough stock to allow people to be moved around and housed according to the new occupancy rules.

When Labour was in government, many Opposition Members said it would be unfair for older people to have to sell their houses to pay for their care. They also said that it would be unreasonable for them to have to sell their houses because the council tax was too expensive. However, the Conservative coalition Government are saying that it is perfectly acceptable for those living in the social rented sector to have to move at a time in their lives when they should be settling down and moving towards retirement. The issue is a great concern, and people are very exercised by it. In rural areas, of course, there may not be houses of the appropriate size because they do not exist. People will therefore face an enormous shortfall between their rent and what they can get under the occupancy rules because of where they live.

I could say a lot more, but I am conscious that I have taken up a lot of time.

--- Later in debate ---

[Jenny Willott (Cardiff Central) (LD)]

A number of hon. Members have mentioned that the Government’s proposals have been driven by the portrayal, in the right-wing media, of scroungers and so on. While I agree with hon. Members who say that that media portrayal is inaccurate and unfair, we should also make it clear that the Government’s proposals are not driven by that portrayal.

Today, the Liberal Democrats have been called the nasty party. Although the hon. Member for Brighton, Pavilion (Caroline Lucas) was not a Member of this place prior to the general election, the principle was established in the previous Parliament that there should be a cap on housing benefit on local housing allowance. The hon. Member for Aberdeen South (Dame Anne Begg) will remember, when we were both members of the Work and Pensions Committee in the previous Parliament, that the principle that nobody should be entitled to a house of more than five bedrooms was introduced by the previous Government on the basis that it was not fair that people should have an endless capacity to have houses that were costing taxpayers a significant amount of money. We can therefore argue about where the cap should be set, but the principle was set, and hon. Members in all parts of the House agreed that there should be a cap of some sort to ensure that there is fairness for those working on low incomes and to ensure that they do not feel at a disadvantage in their communities in comparison with those who are not working and are receiving LHA.

As I have said, I was a member of the Work and Pensions Committee in the previous Parliament. One recommendation that the Committee made, in one of the final reports that we published in the previous Parliament, was that there should be additional rooms available on LHA for people who need carers. I would like to put on record that I am really glad that the Government have now introduced that. When we took evidence prior to the election, that situation seemed to be very unfair, and the evidence we took included some upsetting stories about how that had affected people’s lives. I am glad, therefore, that that has been put right.

I want to flag up a number of issues about which I have concerns, and I would be grateful if the Minister were to respond to them in his summation. One concern relates to the broad rental market areas, which have been an issue for a period of time. The Committee looked at that issue in the previous Parliament and raised it as a concern. However, the Government are proposing to change the centile, so that LHA will be based on the 30th centile. Whether the BRMAs are working effectively becomes an even more important issue, because it has an even more noticeable impact on the amount of LHA that claimants can receive as a maximum.

Some BRMAs have serious internal problems within an area, which then create barriers to the labour market. The most often quoted example is the city of Cambridge. The area covered by the BRMA includes the city centre, which has very expensive properties, and a significant rural hinterland, where the properties are very cheap. That means that the centile is skewed by the large rural areas. If people then end up living in those areas, the jobs are not there and it makes it difficult for people to access the labour market. The opposite effect, as the hon. Member for Aberdeen South has said, has been seen in Blackpool, where the cheap areas are in the town centre and the rents there have been driven up by a significant amount. That has effectively priced working families on low incomes out of the town centre and made it difficult, particularly in a job market that is heavily reliant on seasonal work, for people to keep their accommodation.

As well as the well-known examples of Cambridge, Blackpool and others, there is a significant problem in London, where the BRMAs are enormous. People moving from one area of a BRMA to another are not moving within a small area. It may be that there are entire boroughs within a BRMA where there is almost no affordable accommodation for people receiving LHA. I know that a number of London MPs are concerned about how exactly that might work. The principle, therefore, of changing the centile from the 50th to the 30th, if the BRMAs work properly and effectively, might not be too problematic. Where BRMAs are not working, however, where they are too big or where they have internal problems, those issues will be exacerbated by the move from the 50th to the 30th centile. I hope that the review of the housing benefit proposals, which was mentioned in the other place by Lord Freud, the Minister with responsibility for housing benefit, will look at BRMAs, which have not been examined properly, have been a problem for a number of years and have not been taken seriously.

In Wales, BRMAs are coterminous with local authorities, which seems to be more effective because it tends to involve a smaller area. People tend to have their community, and, as the hon. Member for Brighton, Pavilion has said, their support network—their friends and family—that they need to be able to stay in work, and they tend to be in the same local authority area. By reducing BRMAs to a more practical size, we may be able to overcome a lot of problems that might otherwise arise with the change to the centiles.

On the shared accommodation rate—I shall probably call it the wrong thing as well in this debate—I share the concerns raised by other hon. Members. I completely understand the rationale behind it of ensuring that people who are receiving LHA are not at an advantage over people who are working and not receiving benefit. My personal view, however, is that it seems to be based on a London-centric view of the world. In London, a lot of young people under the age of 35 live in shared accommodation. For those working in London, it is difficult to afford a one-bedroom property. Outside London and outside of the expensive parts of the UK, in a lot of areas young working people under the age of 35 are perfectly able to rent a one-bedroom flat. That is certainly the case in my city, Cardiff. We may find that we are putting young people up to the age of 35—I would like to think that that is young—at a potential disadvantage, in comparison with other people.

[Dame Anne Begg]

I agree wholeheartedly with what the hon. Lady is saying, but it is actually much harder for those who are dependent on housing benefit to lead the kind of shared life that I think the Government envisage. Students sharing flats are not dependent on housing benefit and are therefore not hidebound by the rules of housing benefit and what can be rented as a result of housing benefit, and neither are groups of young professionals who might be sharing a house or a flat. They are not hidebound by the rules of tenancy agreements and what is legal and what is not illegal. Part of the problem is the lack of houses in multiple occupancy to which people on housing benefit can have access.

[Jenny Willott]

The hon. Lady makes a valid point. In areas of my constituency, a large number of students live in shared accommodation. If they are in a house in multiple occupancy, most students are not going to want to share with somebody who is on housing benefit, partly because it makes it difficult for council tax exemption and things like that. As soon as there are different people with different exemptions and different rules, as the hon. Lady has said, the financial arrangements for a household may become complicated.

Finally, the other issue about which I have some concerns is the move to uprating rents in line with the consumer prices index, rather than with average rents. The issue is a difficult one to resolve, and I completely understand why the Government have decided to propose the change. Increasing the local housing allowance in line with rents has, in large parts of the country, driven up rents significantly. As the hon. Lady has mentioned, if we set the LHA at the median rent, and if all the landlords currently charging less than that bring their rent up to the median, then the median rises. Rents inevitably go on an upward bend, which has happened in significant parts of the country.

I appreciate that the Government are tackling that issue to ensure that it does not happen and that people have a fair crack of the whip. No only are there implications for the vast amount of money that the Government are spending through the LHA, but there is a knock-on impact on those who are not receiving the LHA in a local area and are renting privately. It can make it even more difficult for those on low incomes to afford appropriate accommodation.

I have some concerns, however, about uprating rents in line with the CPI. The index reflects inflationary increases, but it is not designed to reflect changes in the housing market. I am glad that the Government will be reviewing the decision in a couple of years—2014, I think—after seeing the impact. If the LHA is not keeping track with what is happening in the rental market, we could end up with a big gap separating those on the housing allowance and those paying rent. That might have a serious impact on those people’s ability to get into work, as well as all the other positive things the Government are driving forward.

A number of hon. Members have mentioned that the whole situation is driven by our not having enough social housing in the UK. It is crucial that we build more social housing, if we are to tackle any of the issues.

To get in my party political pop for the afternoon, both the previous Labour and Tory Governments sold off more than they built, which is why we are in such a mess in the first place. After the Thatcher-Major Government, by 1997 there were 1.1 million fewer social homes, which is a huge number. Then, after 13 years of Labour in power in this country, there was still a drop of another 250,000 in social housing. By the time Labour left power last year, there were 1.7 million families on housing waiting lists, which is such a vast number that it will take much greater changes than those to the housing benefit rules if we are to do anything about it.

I am glad that the Lib-Dems in government are ensuring that something will happen. The Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hazel Grove (Andrew Stunell), announced that more than 150,000 affordable homes will be built over the next four years. That is a start, although clearly not enough when we have such a massive deficit of social housing in this country. At least it is progress in the right direction, rather than going backwards. I hope that, whatever we think about the changes, people will fall in behind the building programme to ensure that it happens, so that we can make some progress and people can afford homes to live in.