Welfare Benefits Up-rating Bill

Lord Best Excerpts

Monday 11th February 2013 Lords Chamber

[Lord Best]

My Lords, my contribution to this debate considers the implications of the Bill for the nation’s housing. However, in the wider debate I align myself firmly with those who believe that there are better ways to reduce the national deficit than by cutting living standards for the poorest. For example, I note the announcement today of the Government’s intention to raise more funds—that is, more than were previously planned—through inheritance tax. I have made my own proposals in this House for other measures that would spare those on the lowest incomes; for example, by reducing the non-means-tested single person’s council tax discount, rather than reducing council tax benefit for current recipients. I do not enter this debate with the belief that cuts to the incomes of the very worst-off are an essential part of deficit reduction.

Turning to housing matters, I shall highlight three ways in which housing will be affected by the 1% limit on benefit increases. First, the new 1% cap on increases to local housing allowances—the housing benefit for private sector tenants—will accentuate the reluctance of landlords in the private rented sector to offer new tenancies or renew existing tenancies to those who rely on benefits. The new cap on rent increases on its own might not look significant but we have seen a succession of limitations on local housing allowances and another one is bound to affect landlord attitudes.

If the landlord puts up the rent by more than the 1% limit for the local housing allowance, the shortfall for the tenant to make up—the gap between the actual rent to be paid and the amount received by way of the allowance—will widen, taking more out of the tenant’s meagre income that is needed for other costs. Of course, as landlords will note, these extra pressures on tenants’ incomes make rent arrears more likely. The last thing that these landlords want is the hassle and expense of evictions. I was glad to note the special help through exemption from the 1% LHA cap for areas with the highest rents. But, because of the reductions to other benefits, a household in London is still likely to lose more than £500. This obviously increases vulnerability to getting into trouble with rental payments.

The Government had hoped that the caps and ceilings they have already applied to their support for housing costs would lead to private landlords lowering rents accordingly. But in most areas—very prominently in London and the south of England—rents have gone up instead. Last year, they increased by 7% in London and 3.4% across England and Wales. Landlords have been able to charge these rents because they can let to tenants who are not in receipt of benefits. Because so many new households in reasonably paid jobs are now unable to buy, landlords in much of the country can choose to take in these better-off homeseekers in place of those who need benefits.

As rents rise and the incomes of those in work do not keep up, more working households are requiring help with housing costs. New figures from the Building and Social Housing Foundation show that the proportion of housing benefits going to people in work is rising significantly, and working households now account for 90% of all new claimants. Caps on local housing allowances, therefore, affect the hard-working families whom the Government want to protect. Discouraging private landlords from letting to those in receipt of benefits means more working households, as well as those without a job, being left with nowhere to go.

This brings me to the second likely effect of the Bill: the adverse impact on social housing. The decline in home ownership, and the resultant ability of private landlords to choose to house those on rather higher incomes, magnifies the importance of the social housing providers. However, I fear that the Bill—not on its own but, as in the private sector, in combination with other reductions in support for tenants—will make things more difficult. A large proportion of housing association and council tenants derive income from benefits due to fall in real value for three years. If the gap between 1% and inflation, particularly inflation of food and fuel prices, is modest, this extra burden may not be too disastrous; if the gap is wide, as the noble Lord, Lord Kirkwood, has set out, those affected will really be struggling by year three. Even so, the 1% uplift is unlikely to be catastrophic; rather, it is the cumulative impact of this latest cut, on top of earlier reductions in help, which is likely to be pretty devastating for several hundred thousand social housing tenants, and therefore for their landlords, too.

I detect a gradual awakening to the magnitude of the problem that one of these changes will bring. This is the “underoccupation penalty” for those deemed to have a spare room. I named this the “bedroom tax” some 18 months ago and, although these words have been strongly criticised, I stand by them. I will spare your Lordships at this late hour another analysis of the truly awful consequences for 660,000 social housing tenants of this penalty, levy or tax. However, already I note that this measure is, understandably but unfairly, turning tenants against their social landlords, who will be required to collect the bedroom tax next April at an average of £14 per week per household. The anxieties of these housing providers about their ability to extract the money from hundreds of thousands of tenants, some of whom may already be in debt, is compounded by the knowledge that the Bill will mean that the real income of many of their tenants is now destined to fall. Combine this with the impending imposition of council tax at 20% to 30% for the same people, and the financial position of social housing tenants, and therefore of social housing, looks increasingly fragile. Throw in the new regime for paying housing benefit in big monthly sums directly to tenants, who face horrendous choices in juggling debts and spending on very low incomes, instead of the benefit going straight to the landlord, and the risk multiplies that rents do not get paid.

To those social housing tenants struggling with these new burdens, including bedroom tax, council tax, and caps on other benefits, the Bill before us may be the final straw. If landlords take the strain because arrears mount, and evictions and emergency housing cost a fortune, the housing associations and local authorities will have less money to support their local communities; to do all the preventive work that helps families to get on; to regenerate the neighbourhoods where they work; and, which brings me to my final point, to fund their production of additional homes.

The final way in which housing is likely to be affected by the Bill relates directly to the commitment of the Department for Communities and Local Government to addressing the very reason why welfare expenditure on housing costs is so high and is continuing to rise, not fall. This underlying cause of the UK’s appalling housing situation, now affecting almost every household in their 20s and 30s, is the acute shortage of homes that they can afford. This pushes up prices and rents, absorbing disproportionate percentages of income in return for questionable quality.

Housing shortages push up the welfare bill and mean taxpayers having to subsidise more people and to higher levels than in our competitor countries. Each year, the UK’s national housing deficit—the accumulating gap between extra homes required and new homes built—is growing by more than 100,000. This has to be reversed and DCLG Ministers are determined to get more homes built. That policy addresses the cause of rising housing benefit costs rather than the Department for Work and Pensions’ capping of benefits, which treats only the symptoms and simply penalises the victims of housing scarcity. Regrettably, the Bill will make the task of DCLG Ministers more difficult.

Private sector housebuilding must be boosted, but even if housebuilders got back to building at the levels of the boom years before the credit crunch of 2008, we would still be constructing far fewer homes than the number of households formed annually and still be adding to the national housing deficit each year. It is essential that the social housing sector massively boosts its output. I declare my interests as chairman of the Hanover Housing Association and president of the Local Government Association and stress the value of councils themselves building more homes once again.

With a steady source of secure income from their rent rolls, social landlords can borrow at low interest rates and can grow significantly with only modest capital subsidies. The disruption caused by the forthcoming succession of cuts to support for their tenants will hold back this potential for growth. Social landlords are making much increased provision to cover expected rent arrears. This diminishes the resources available for new work. The loss of income also reduces the confidence of their private sector lenders and deters ambitious development programmes which the nation desperately needs.

This is not a good Bill for housing. Directly in the private rented sector and indirectly but very significantly in the social housing sector, this latest instalment in the cumulative impact on very low-income households is likely to mean not just personal hardship for tenants but a negative influence on the whole housing scene and an undermining of other government departments’ genuine efforts to tackle not the symptoms but the cause of this country’s immense housing problems.