Lord Best
Main Page: Lord Best (Crossbench - Life peer)Housing and Planning Bill
Lord Best Excerpts“( ) The regulations shall not apply if the Secretary of State determines that the cost for a local authority of assessing the incomes of its tenants would be disproportionate to the additional rental income achievable from this provision.”
Lord Best (CB)
My Lords, Amendment 75A would enable the Secretary of State to exempt a local authority from the requirement to raise rents for those earning over £30,000 outside London, or £40,000 in London, if the administrative costs of collecting the extra money would absorb a disproportionate amount of the extra cash. What would be disproportionate in terms of the cost of assessing incomes and collecting the extra rent? I accept that this is subjective but surely if more than one-third or more than 40% of what is obtained in additional rent goes on securing that additional rent, a line must have been crossed. If charities spend 40% of the donations they raise on raising the money in the first place, they come in for huge criticism. High earners could rightly protest if so much of the extra rent serves no useful purpose at all.
Is it likely that admin costs really could absorb up to 40%—or more—of the extra income raised? We have heard just how much work is likely to be involved in obtaining these higher rents. If the same cost as for housing benefit claims was possible, using the housing benefit team to do the job, it seems from the evidence we have had from a number of local authorities that the cost would be between £30 and £40 for each household investigated. Around one-third of tenants, on average, would have to be assessed as these are the tenants not receiving housing benefit. That is a smaller number than the numbers for housing benefit, so there would be fewer economies of scale and higher costs than for administering HB. With universal credit comes the change to the councils’ role, with councils having a smaller role in its administration, and piggybacking on the housing benefit process will no longer be possible, quite apart from the complications of the interaction between universal credit and housing benefit, as set out by the noble Baroness, Lady Hollis. So the admin costs for the higher rent regime will rise.
Let us take the figure as being somewhere between £30 and £40 a throw, not forgetting that there are set-up costs, such as the new computer program, and the costs of the appeals system, as well as the costs of returning overpayments of rent and compensation when mistakes have been made. The £30 to £40 per tenant not on housing benefit looks tight. Now let us consider the circumstances of an individual local authority. In an area of relatively high incomes for council tenants and a big gap between council rents and market rents—that sounds like central London—there may be some serious money to be raised. Conversely, in an area of low incomes for almost all council tenants and only a narrow gap between council rents and market—private rented sector—rents, there will be very little extra money to collect from higher earners.
I will try an example. In an unnamed local authority in the northern half of England, market rents are only £20 per week above council rents, and never more. The most that could be gained here from a higher earner is £1,000 per annum, which would be payable by any tenant earning more than £40,000, on the basis of the 10p in the pound taper. No tenant would be paying more than this, however high their income goes. We know that an average one-third of tenants will need to be assessed because they are not claiming housing benefit but we also know that nationally only 7% will actually be earning above the £30,000 threshold—£40,000 in London.
In my example, a smaller proportion than nationally will be in the higher earners category, perhaps 3% instead of the national figure of 7%. So for every 100 tenants, assessments will be necessary for 33— one-third—and extra rent will be collectable from seven, perhaps in this case only three because the area has fewer high earners. The 33 being assessed will cost, say, £1,200 per annum. The three will contribute, not the maximum of £1,000 per annum—£20 per week—but, perhaps, £300 per annum, yielding £900 per annum for the three of them, which is less a return in extra rent than the administration costs in my—possibly fairly extreme—northern local authority example.
Baroness Evans of Bowes Park
We fully intend to reimburse local authorities for reasonable costs and need to establish which costs are relevant. We would not expect the Government to write a blank cheque. We expect that some local authorities may be more efficient than others. To reiterate, we will reimburse all reasonable costs.
Lord Best
My Lords, I thank all noble Lords who have joined in the debate. I thank the noble Lord, Lord Kerslake, who reminded us of his earlier amendment asking for a pilot scheme. If ever I saw a case for a pilot, this is it. Surely we need to test this out on the ground in a few places to see what the costs and the realities are.
I am grateful to the noble Baroness, Lady Bakewell, and to the noble Lord, Lord Campbell-Savours, who listed all the things that have to go into the administration of the scheme—processes for verification, data matching, combating fraud, market-rent setting and the rest. I am grateful for the support of the noble Lord, Lord Kennedy of Southwark, and I am also grateful to the noble Lord, Lord Stunell, who made the point that an artist rather than a scientist may be behind the definition of “market” in the context of market rent. However, the Minister has given us some reassurances and I want to pin a good deal of hope on them.
The recovery of reasonable costs leaves the matter open. I was a bit alarmed by the impact statement coming up with a figure which I calculated to be about £15 per case, which is about half what is currently spent on housing benefit cases. I think that we will see a higher figure for these cases than for housing benefit cases. The figure of £15 given in the impact statement looked rather low, but no doubt that is all to play for and it is the Government’s intention that costs will be fully reimbursed. Possibly more important is the recognition by government that there will probably be some cases where it is not worth going out and collecting the money because the administration costs will exceed, match or be very close to the amount that will be raised. I am sure that the Local Government Association will have a good deal to say about this and that there will be some tough negotiations there, but I think that we are left with some hope that, where the administration costs are disproportionately high, the Government will not proceed with the scheme. I beg leave to withdraw the amendment.
Lord Campbell-Savours
My Lords, the noble Lord, Lord Young of Cookham, referred to a conversation. The conversation means the review. I go back to what I have said before. My noble friend intervened on me to say that the review to which he was referring was a review carried out by the Government. The Bill is quite clear that the landlord under a fixed-term secure tenancy of a dwelling house must carry out a review to decide what to do at the end of the term. Again I ask: what is in the review? What matters will the local authority have in mind when it is reviewing the tenancy at the end of five years? If Ministers cannot answer me now they can write to us and let us know precisely what they are. The local authorities will be interested.
On the question of increased supply, I go back to the comments of the noble Lord, Lord Young of Cookham. When we talk about supply we do not have to talk exclusively about social tenancies. We can talk about houses that are purchased on the open market. In the town where he lives, Cookham, and in Maidenhead, where I live, builders tell me that you can build in this country a three-bedroom house for £80,000 to £85,000. That same house in Maidenhead or Cookham would be on the market now probably for £350,000 to £400,000. What is the difference? The difference is in the land value. If we were to address the issue of land values within the United Kingdom and bring them down to what they should be we would not have this problem of having to make increased provision of social housing. We would be able to sell people brand new two or three-bedroom houses at sensible and reasonable prices and this Bill, as I have said before, would be unnecessary. The problem is in land values. So when we deal with supply let us look not only at social housing; let us look at the cost of land.
Lord Best (CB)
Noble Lords will be glad to hear that I am not going to enter a debate on land value taxation. I speak to Amendments 82C and 82D. I am also going to say something about Amendment 82F in my name and in the names of the noble Lords, Lord Beecham and Lord Stoneham.
It is important to note that this provision relates only to future tenancies. That makes it so much better than the pay-to-stay arrangements which cover everybody who is already a tenant and may feel a sense of insecurity as a result. Existing tenants are not affected by this. That means the 4.4 million tenants in social housing should not worry so much about it. The amendment seeks to extend the minimum period of a tenancy from two years to five years and the maximum period from five years to ten years under these arrangements.
My amendment is not a very good one, I have to confess. I do not think it is terribly helpful. It would be better to stay with the Localism Act 2011 which the noble Lord, Lord Stunell, has explained to us. This gave local authorities the power to have short-term tenancies, but most local authorities of all political persuasions have decided that they do not want to go along with this. It is not very helpful. That is fine. They have that power available to them. I think we should probably leave things as they are.
It does not seem helpful, certainly, to the people who live there to be told that there is a mandatory limit on the time that they can stay before a rather nebulous review takes place. The housing associations have the opportunity to have shorter-term lettings of this kind. They also do not make much use of this. I have been chief executive of a housing association. I do not think we ever bothered with fixed terms of this kind. We wanted people to have a home to move in, settle down and stay. That was a service in its own right, getting people who had often had rather insecure lives the security to put down roots, send the kids to school and all the rest of it.
It is also, perhaps slightly surprisingly, the case that the new-look private landlords are the build-to-rent developers who are now building blocks of flats using insurance-company money, pension-fund money, who are coming into this business. They are interested in longer leases than the traditional six-month or 12-month shorthold tenancies. They see the sense of people staying.
Some noble Lords may have visited the build-to-let properties being built at Olympic Village. There are four-year leases, and people are talking about seven-year leases. It is a marketing ploy for them. It distinguishes them from the old-look private landlords. I think, therefore, that the tendency is to try to give people greater security of tenure, time to settle into places.
Amendment 82F is a little more specialist, but it seems important. As I read the schedule to the Bill, this part of the schedule says that the old-style secure tenancies will continue. If somebody moves because the council has required them to move—fair enough, the estate is being demolished or the tenant is being decanted temporarily. They move out but they do not lose their security of tenure. That is fine, but what the schedule says at the moment is that, if you apply to move, if it is your choice to move—perhaps it is an exchange with another tenant or a transfer to a new home—then you would lose your long-term security. This means that you would be ill advised to do so. If I was advising that tenant, I would say, “That is probably not a good idea, to lose your security of tenure”. This goes against the idea that we are extremely interested in stopping under-occupancy in this country. People will be moving very often to downsize, making way for other people who can move in, who may be overcrowded elsewhere. We want people to move and make best use of social housing. We do not want them to be frightened of doing that. It might be the mother fleeing violence—it is her decision; she wants to move elsewhere. It might be the overcrowded family getting the chance to move to somewhere bigger—they do not want to lose the security that they have at the moment. The amendment would delete that requirement. The Minister might explain to me that I am interpreting the provision inaccurately and that we have nothing to fear, but it looks as if the schedule, by removing security of tenure for people who transfer of their own volition, would be a bad move.
There does not seem to be any need for this, other than a kind of inbuilt feeling that people should feel a little bit insecure about their lives, which I do not feel is what those in the world of providing social housing want to happen. I would leave the Localism Act as it stands.