Lord Best
Main Page: Lord Best (Crossbench - Life peer)
Lord Best
My Lords, I am very grateful to the noble Baroness, Lady Ford, for initiating this debate. Practically no one in the country is better equipped to lead the charge on this subject than her. I congratulate the noble Lord, Lord Gardiner, on his excellent maiden speech. It is absolutely delightful to find another champion for rural housing in our midst, and I am delighted to have him with us.
I declare the interests that are set out in the register of interests. There are quite a lot relating to the field of housing, but what is not included is the fact that I currently chair a joint Department for Communities and Local Government and Local Government Association housing commission, looking at the role of local authorities in producing the new homes that are needed in every area of the country. We will be reporting to the Minister for Housing, Grant Shapps, and to the chair of the Local Government Association, the noble Baroness, Lady Eaton, in September. I cannot yet reveal the conclusions of that study. Suffice it to say that we will be underlining the fact that localism is vital when it comes to housing—doing things differently in every part of the country is essential. Local authorities already play a very entrepreneurial role in bringing together the private and public sectors and housing associations in ways that will be badly needed at this time of shortages in public money.
I shall confine my remarks this afternoon to the issues surrounding housing benefit and local housing allowances. This is an area of housing that few people understand and it may not get the attention that it deserves. However, we need to notice that in the Budget on 22 June there was a series of cutbacks to the arrangements for the personal subsidies that allow people to occupy housing on an affordable basis—both council housing and housing association homes, for which they receive housing benefit, and in the private rented sector, for which they get the local housing allowance.
It is worrying that the bill for housing benefits has increased. It is now somewhere around £20 billion a year, and it is not surprising that the Government want that figure reduced. The increases are because rents and unemployment have increased and the private rented sector has grown. Certainly the housing benefit system demands overhaul. It is much too complicated and savings are possible, but one has to consider whether the measures that were set out in the Budget will help or hinder the reform to the benefits system. Will they have an impact on the availability of rented homes for poorer households? Will they have an impact on the incomes of poorer households? Will they lead to more or less homelessness and overcrowding? My answers to these questions are all in the negative, I fear, and I am anxious about the way in which these cuts will impact on the whole housing sector.
We need the private rented sector to provide homes not just for better-off households, but for poorer households as well. The PRS accommodates some 50 per cent of the people whose homelessness is prevented by good advice from councils. It houses more than 1 million people who receive local housing allowances and it is an essential ingredient now that the amount of social housing we can build is severely restricted and so few people can buy their own homes because of the mortgage situation and the price of property.
We definitely need a strong private rented sector but I see dangers, which I will describe, that the new benefit and local housing allowance arrangements will deter landlords from letting to poorer households. They will confine their properties to those who do not require, or are unlikely in the future to require, any help with housing costs. I also fear that the outcome may be an increase in the number of people who have to move out of their existing accommodation because they get into rent arrears and difficulties with their rent, which leads to increased homelessness. That is very expensive for other services. Those who remain and struggle on with lower housing benefit and local housing allowances will find that the income they are left with to live on will leave them extremely poor, having taken out from their income support or other benefits an ingredient to cover the shortfall in their rents.
What are these cuts? The first is a cap on the highest rents, which will mean that in parts of inner London several thousand households will find themselves with local housing allowance that is substantially less than the rents that they are currently paying. They will have to move away from those areas because it is highly unlikely that landlords will reduce rents sufficiently to allow them to stay where they are. Eighty-five per cent of privately rented properties in Westminster will be above the cap and will be no-go properties for those on the local housing allowance. What kind of help will people get in relocating to other neighbourhoods? What help will they get with fares to discover what properties are available within their price range? Have we really thought through how this exodus from inner London will be carried out? It will be a large movement of population from the no-go areas where rents are above the level of benefits.
The second kind of cap will affect the whole country. Currently the maximum rent covered by the local housing allowance is that charged for a property in the middle of the price range—the fiftieth percentile. In future the limit will be the rent of the property at the thirtieth percentile in the bottom 30 per cent of the price range. Maybe it is good to keep rents down, but again there are many thousands out of the 1 million households that receive local housing allowance whose current rent is higher than the new cap. If landlords do not reduce rents as soon as these measures take effect, those tenants will be in serious trouble.
The effects will come in on the anniversary of the local housing allowance, which was set the year before. That will happen the day after the new measures take effect. People will suddenly find that their rents are a good deal higher than the local housing allowance that they receive. Will they sit tight and wait to be evicted—which is a very expensive process, costly for the landlord and local authorities—or will they try to find somewhere where they can overcrowd with another family; or will they move elsewhere?
The third cut is very significant, but more of a slow burn. Again, it has the worthy aim of keeping rents down. It results from the local housing allowance increases being limited to the rise in the consumer price index, rather than, as now, to the rise in actual rents in the market place. As for about 150 years, rents have gone up roughly in line with earnings, and the consumer price index lags behind earnings, gradually, local housing allowances will fall behind rents. Those shortfalls will once again hit the pockets of the poorest.
Other cuts increase the deduction from the local housing allowance if there are any non-dependants, usually grown-up children living at home. Rather than encouraging young people not to move out and put more strains on the housing market, that deduction, which will rise from about £45 per week to about £69 per week, which is knocked off your local housing allowance, may push people out or encourage parents to ask their offspring to leave home. Further cuts face those who receive housing benefit or local housing allowance and are in receipt of jobseeker's allowance.
Believe it or not, there are two more cuts to the local housing allowance, which I do not have time to rehearse today. I ask the Minister to prevail on her colleagues in the Department for Work and Pensions to make the case on the side of the Department for Communities and Local Government, and even the Department of Health, that considerable expense can be expected if the cuts go ahead. We need a longer transition period and more help for people in the interim as we try to bring down rents in this way.