Housing Benefit

Jon Cruddas Excerpts

Thursday 17th February 2011 Commons Chamber

[Jon Cruddas (Dagenham and Rainham) (Lab)]

I think that I now have two hours and eight minutes in which to speak on the single room rate—only joking. This debate dovetails with the last debate on benefits uprating, as often happens with Adjournment debates, purely by accident. Today, we have also seen one of the most dramatic overhauls of welfare reform in this country. I want to make a few comments on the likely consequences of changes to the shared room rate, sometimes known as the single room rate, proposed by the Government. I do not do so simply to make party political points, but because I am concerned about specific, substantive consequences that might emerge for many young people in this country. My comments echo those contained in a letter dated 2 November to the Minister for Housing and Local Government from 16 of the country’s leading organisations providing housing and support services to homeless people.

Today we have seen a significant change in the Government’s proposed housing benefit reforms, with the removal, supposedly, of the 10% reduction for those on housing benefit after one year on jobseeker’s allowance. I suggest to the Minister that he might like to signal another change on the proposed benefit regulations. I doubt that that will happen, but I know that he will give thorough consideration to my points.

The shared room rate currently applies to single people under 25 on housing benefit in the private rented sector. Local housing allowance claimants who are single, under 25 and without dependants are currently eligible only for sufficient LHA to cover the rent of a single room in a shared house, rather than self-contained accommodation. Under measures announced in the comprehensive spending review, the threshold for the shared room rate will be increased to 35 years of age from April 2012. All single, childless adults under 35 will see their LHA cut from the current one-bedroom rate to the SRR. The Government estimate that 88,000 people will be affected by this change.

The Department for Work and Pensions housing benefit statistics show, however, that in August 2010 120,000 single people aged 25 to 35 years old were claiming LHA. The Minister might want to comment on that in his response, because it means that if the proposal goes ahead an additional 120,000 people will be competing for shared accommodation. That will be an issue not just in inner London, as we often hear in the House during debates about housing benefit changes, or even in outer London; the evidence suggests that it will affect tens of thousands of young—actually, not that young—people up to the age of 35 across the length and breadth of this country.

We know that the SRR causes considerable problems for young people, with many unable to secure or sustain affordable accommodation and left facing shortfalls, arrears and homelessness under the current regime. According to the housing charity, Crisis, the average loss will be £47 per week, with some people seeing their benefit entitlement literally halved.

Even at current LHA rates, the difference between the one-bedroom rate and the SRR rate can be substantial. For example, according to Shelter, the shared room rate stands at £71 per week on average, while the rate for a one-bedroom flat is £137 per week. In the east Thames valley, it is £88 versus £150 per week; in inner east London, it is £103 compared with an average of £235; and in Oxford, the figures are £80 and £150. In more than half of all areas, shared accommodation rates are about one third or more lower than one-bedroom LHA rates.

Everyone will admit that those are very high losses from a very low baseline. Currently, the maximum award of local housing allowance—housing benefit in the private rented sector—is only £107 per week for a one-bedroom property, and that falls to just £69 for SRR claimants. Obviously, that is before other cuts to housing benefits kick in, which will reduce those rates even further. LHA rates will drop from the 50th to the 30th percentile of local market rents from April, and many 25 to 34-year-olds will therefore suffer a double wave of cuts and, arguably, have no choice but to move.

For example, a 33-year-old on the Wirral is currently eligible for the one-bedroom rate and will receive £91 a week in LHA. The LHA cut will bring the one-bedroom rate down to £86 per week, but from that point they will be eligible only for the SRR, which is expected to be £56 a week, meaning a accumulative overall cut in the local housing allowance of some £35 a week. Cuts at that level will be replicated throughout the country and leave single adult households with unaffordable shortfalls in their rent. Many will have no choice but to move to cheaper accommodation. Crucially, however, owing to a lack of shared accommodation, many will be unable to find a single room and be forced to remain in more expensive self-contained accommodation, creating further shortfalls, the risk of eviction and, possibly, homelessness.

[Steve Rotheram (Liverpool, Walton) (Lab)]

Does my hon. Friend agree that the proposed changes will have a subsequent impact, increasing homelessness especially in areas where people already find it difficult to get accommodation?

[Jon Cruddas]

That is one of the points that I want to address in the long time that I have to develop my arguments.

Some 75,000 people claim SRR, so the change will more than double the number of claimants, placing significant further pressure on the limited existing pool of shared properties. According to housing charities that deal with the homeless, the vast majority of people affected by the change will lose their current accommodation; and they will have to go somewhere. It is unlikely that landlords will accept such significant reductions in rent, or that someone on a limited income will be able to make up such shortfalls. To confirm what my colleague just said, tens of thousands of people currently in self-contained flats will therefore be forced to seek shared accommodation, or they will arguably become homeless.

There is simply not enough shared accommodation available. Current claimants already struggle to find an affordable property, with DWP figures showing that some 67% face a shortfall between their benefit and their rent, averaging out at £29 per week, compared with 49% of all LHA claimants. On anyone’s account, that is a significant amount for people on a low income, and it will cause problems such as debt, arrears and homelessness, which all MPs will undoubtedly witness every week.

This change, as my hon. Friend the Member for Liverpool, Walton (Steve Rotheram) said, is likely to cause more homelessness, including, in the worst instances, rough sleeping. Apart from the impact on individuals, it is extremely costly to the public purse. Crisis estimates that the annual cost of homelessness per person is between £9,000 and £41,000 per year.

For vulnerable people who have been homeless or are leaving supported accommodation, care or prison, sharing is particularly inappropriate and can be extremely detrimental to their well-being. Currently, the only exemptions from the SRR are young care leavers aged under 22 and those who receive the middle or higher-rate care component of disability living allowance for people who are severely disabled and need a carer. Other people with serious disabilities or illnesses, mental health or behavioural problems, or who are vulnerable in other ways, will not be exempt and will be expected to share accommodation—a situation which, in many instances, will be inappropriate, as professional advisers argue.

As regards homeless people and those leaving an institution, 20 to 35-year-olds are already disproportionately likely to end up sleeping on the streets, while 27% of rough sleepers in London are aged between 26 and 35, and 36% of Crisis’s clients are in the age group affected by this change. The change will place significant barriers in the way of breaking out of the cycle of homelessness and undo progress that has been made by formerly homeless people who have now secured private accommodation. Charities working with young homeless people are often unable to move them into appropriate accommodation because of the SRR, and this problem must increase, all else being equal, as more people are restricted to the lower rate. A Crisis survey of schemes that help people to find private rented accommodation found that the low level of the SRR was the biggest policy concern.

There are consequences for hostels, too, as costly beds will become blocked with people unable to move on. For offenders leaving prison, sharing can be particularly inappropriate. There is already a problem with individuals under 25 bed-blocking probation hostel places because of the SRR, and that problem is likely to increase under the current proposals. It should also be noted that those convicted of serious offences are disproportionately likely to be in the same cohort of those aged about 25 to 34, and, for many, sharing with others poses particular risks. Reoffending costs the economy £13.5 billion annually, but stable accommodation reduces the risk of reoffending by some 20%.

What about people with mental and physical health problems or dependency issues? For these groups, sharing can cause particular problems, as they may have particular needs in relation to the type of accommodation that they can occupy or find it very difficult to get on with other people. There are fears that other difficulties such as bullying could result. People with dependency problems may have a negative effect on others in a shared property.

Moreover, we should consider parents or expectant mothers. Non-resident parents who want to maintain a good relationship with their children can have them to stay in a self-contained flat, but this is unlikely to be possible or appropriate in shared accommodation. When parents live some distance away, that could mean that they are unable to maintain contact with their children. Pregnant single women may have to return to a shared property with their newborn, precisely at the point when moving can be financially and physically unrealistic.

At a time of rising youth unemployment, this change risks penalising young people even further. Those under 25 already face a lower rate of jobseeker’s allowance and are therefore likely to struggle to make up even small shortfalls between the benefit and their rent. Competing with older tenants will make it even more difficult for them to secure affordable accommodation.

What about the impact on communities and houses in multiple occupation? This policy may increase the number of HMOs in deprived areas at a time when some local authorities are using recently introduced powers actively to tackle the prevalence of HMOs, which are often poor-quality properties run by unscrupulous landlords.

We should also consider the problems facing benefit recipients when searching for housing. Claimants can struggle to access shared accommodation, even where it does exist. Adverts for shared property are the most likely explicitly to bar benefit claimants. Research by Shelter suggests that as few as 7% of tenants in shared accommodation would let a spare room to a benefit claimant. Many house-shares are reluctant to let to benefit claimants because of real or perceived problems with the benefits system, such as delays in processing payments and the practice of paying benefit in arrears when rent is payable in advance.

The arguments that I have put forward have been technical, but it is useful to demonstrate the possible consequences in human terms, so I will report a number of case studies of single, homeless men that have been brought to my attention this week by various housing charities. The first is the case of a man with trust and gambling issues who moved from supported accommodation to a self-contained flat:

“He is working with a Tenancy Sustainment Team. He has always tried his best to work and LHA has supported him a little due to the low pay he is receiving. Moving him into shared accommodation would place him in severe hardship.”

Another case study is of

“A man with mental health issues, trust issues and who suffered from abuse as a child. He struggles to be around people.”

He, too, moved from supported accommodation to a self-contained flat and is supported by a tenancy sustainment team. The case study continues:

“To move him into shared accommodation would no doubt place him in either a homeless situation…or end up in prison.”

That is the advice of the professionals.

Another case is that of a young man who was moved on from supported accommodation:

“His main goal was to get accommodation so that he could bond with his child. He has anger issues and works with a Tenancy Sustainment Team worker. His child can now come and stay with him at his home from time to time. To move him to shared accommodation would affect the arrangements with his child that he waited so long for and could well place him back on the streets or lead him to abandon his accommodation. He struggles to support his child with the little money he has at present.”

Another case is that of a 24-year-old who has had one custodial sentence for a sexual offence and has breached his licence on more than one occasion:

“He is currently in a hostel having resided there for three and a half years, but due to pressure…he is having to be moved on. Probation are unwilling to allow him to reside in a shared house due to the risk he poses to females. Probation have advised that should he move into a shared house his offences have to be shared with the landlord and fellow tenants, which means this could put his safety at risk.”

Another case brought to me this week is of a 27-year-old client who is a sex offender. He has been living in a probation hostel and is ready to move on. He is vulnerable and requires ongoing, floating support. He needs self-contained accommodation because of sharing issues, particularly if females live at the property, visit it or stay with other tenants.

Another client has bipolar disorder and suffers from periods of extreme depression and paranoia. He is very concerned. He has been sectioned a few times and is worried about it happening again. He is being discharged and is having to return to a shared house. He finds others knowing about his condition very uncomfortable because there is still prejudice and misunderstanding about mental health issues. All those cases are concrete examples of the consequences of the reform that have been brought to my attention in just the last few days.

What is the Government’s rationale for the change? I will anticipate the Minister’s response slightly by offering a few reasons that he is likely to give. First, there appears to be an argument that many young people share houses and that, everything else being equal, many benefit recipients should therefore also share houses—thus the change to the single room rate. The Government will also argue that the age of the first-time buyer has risen. Although that may well be the case, it is not true that large numbers of people share properties. In fact, 2% of people share properties with someone who is not a relative or a partner. If the changes come in, 17% of those on local housing allowance will be in shared accommodation.

People who are not on housing benefit and who do share, such as young professionals in this city, do so largely out of choice so that they can live in a better location, live with friends or have more disposable income to save for a deposit to get into the housing market. It is simply not the case that the same characteristics apply for housing benefit recipients. What is more, people who are not on housing benefit have access to a much greater pool of properties because, as I have said, many landlords will not let to benefit claimants. People who are not on housing benefit generally have a choice about who they live with, which is rarely available to people on lower incomes.

Many who share accommodation by choice in the private rented sector will do so with one or two others. Largely, that will be more expensive, and so unaffordable on the SRR, claimants of which are therefore likely to have to share with larger numbers of people, with a higher turnover of tenants, and with little or no choice over with whom to share. Unlike students or young professionals, who tend to share with people whom they know or who have similar backgrounds, people on housing benefit often share with strangers, which can lead to inappropriate sharing situations, and suitability and security problems, and it can affect the sustainability of a tenancy. Supportive evidence is provided by the Joseph Rowntree Foundation, which has analysed the SRR and the views of claimants. It says that

“the prospect of sharing with strangers was a source of considerable anxiety”

and

“having to share with older people was noted to be particularly daunting, especially for female claimants.”

I tentatively suppose that the Minister will put forward a second argument: that landlords will lower their rents or people can be supported by discretionary housing payments. The Government have argued that people might be able to renegotiate rents, but, given such significant losses in entitlements—some could be halved—that hardly seems likely. With our housing department, I have done a survey of letting agencies and the current state of the housing market in our local borough. In the cheapest housing market in Greater London, there is no evidence of a lack of demand for such properties, and therefore no evidence of a downward flexibility in rents in our communities. I tentatively suggest that that is probably the case around the country.

The Government also make the case that they have increased the discretionary housing payments budget to help local authorities to give additional support where they consider it is needed. However, the amounts are insignificant. Our borough is, I believe, the fastest-changing community in Britain because of the dynamics of the city’s housing market. It is the lowest-cost housing market in Greater London, with the lowest rents, but it has taken the strain of the city’s demographic shifts in past 10 years. In total, I believe that we will receive some £120,000 of that discretionary money, but I tentatively suggest that that will not quite be enough because of the extraordinary flows of people caused by the broader housing benefit changes proposed by the Government.

I therefore suggest that the argument that the discretionary housing payments are significant enough to allow for the system to bed in does not stack up. Indeed, over a four-year period, the total DHP pot is £190 million. That is intended to help both those who currently experience a shortfall and those affected by all of the changes to the housing benefit system. To put that in context, the Budget announced £1.8 billion of cuts to housing benefit, and estimated a further £215 million saving from changes to the SRR.

The third argument that the Minister might come up with goes something like this: some LHA claimants chose to live in shared accommodation, so there cannot be that much of a shortage. Indeed, some housing benefit claimants do choose to share when they are in fact entitled to live in self-contained accommodation. For some people in some areas, sharing is appropriate, particularly if they have friends they can share with or if they were in a shared property before needing recourse to housing benefit. However, it is quite a different proposition to ask 120,000 to leave their current accommodation and try to find a shared property.

In conclusion, I urge the Government to rethink raising the SRR threshold, or at the very least to delay the measure to give local authorities time to ensure that there is sufficient housing stock to meet the increased demand for shared accommodation. I urge the Minister to reflect on what Centrepoint says when he considers the consequences of some of the changes that I have outlined:

“If young people are not supported to access affordable move-on accommodation, they will be forced to access expensive emergency and supported accommodation for longer periods. This failure to progress can lead to young people losing confidence and re-engaging in destructive behaviour patterns”.

While achieving savings in the short term, the proposed changes could lead to greater costs to the taxpayer in the medium to longer term. I urge the Government to rethink.