Housing Benefit: Social Housing Units

Lord Freud Excerpts

Monday 25th January 2016 Lords Chamber

[Baroness McDonagh]

To ask Her Majesty’s Government what assessment they have made of the additional expenditure on housing benefit paid to private sector landlords as a result of the reduction of social housing units.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

The latest data show that the number of social and affordable rented housing units in England has increased by 46,000 since 2010 and now stands at more than 4 million. Over the last two years, overall real spending on housing benefit fell for the first time in a decade. In 2014-15, housing benefit expenditure in the private rented sector was £9.1 billion, the lowest figure since 2010-11. This year, it is forecast to fall to £8.9 billion.

[Baroness McDonagh (Lab)]

Unfortunately, I have to say to the Minister that my understanding of the figures is very different. Is it not correct that, in the last year of the Labour Government, 33,000 social housing units were built, renting out at 40% to 50% of market value? Last year, 9,500 units were built—a drop from 33,000 to 9,000. Is it not the case that most families are being pushed into expensive “affordable” housing or private renting? Will the Minister confirm that, as of last year, the housing benefit bill had increased by £2 billion over the last five years? Does the Minister not agree with me that the Government’s affordable housing strategy should be renamed unaffordable—unaffordable for the British taxpayer and unaffordable for families?

[Lord Freud]

I am afraid there were a lot of inaccurate figures there. Under the last Labour Government, the number of social and affordable rented houses fell by 420,000. Since 2010, it has gone up by 46,000. We have just seen the expenditure come down, because we have got people into work: people in work do not require support from housing benefit, and their numbers have come down. The numbers in the social rented sector are down 2% in the last year and the numbers in the private rented sector are down 5%. The figures that the noble Baroness was promoting are really quite wrong.

[Baroness Gardner of Parkes (Con)]

Is the Minister aware that there are abuses in the system through which private landlords let properties to people who need them very badly? In the past, there was a ridiculous situation whereby, if you were prepared to let your property for £X, the council would tell you that you could get £2X for it, so immediately any sensible landlord charged £2X. Is he also aware that other people required their tenants who were getting housing benefit to pay extra to them as private landlords and to say nothing about it? Something has to be done to ensure that that does not continue.

[Lord Freud]

We inherited a system under the local housing allowance which was based at 50% of the average rate. Clearly, that was too high and encouraged some landlords to move up to that central rate, even though their houses were not worth that amount. We have now put a series of controls on how the LHA works.

[Baroness Warwick of Undercliffe (Lab)]

My Lords, can the Minister comment on the changes in housing benefit in respect of supported housing for the most vulnerable people? Can he confirm that the Government’s plan to limit housing benefit in the social housing sector to the local housing allowance will only apply to tenants of working age in general needs housing and not to the homes of the most vulnerable?

[Lord Freud]

We are having a very substantial study done on the supported housing sector. That will come out later this year and we are looking at what our policies should be to support that sector.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, as private sector rents are normally higher than social rents, this could lead to an increase in housing benefit paid to private sector landlords, if the volume of private sector rental properties available is outstripped by demand from those renting there instead of in the social sector or from those who cannot afford to buy a property. Does the Minister agree?

[Lord Freud]

No, you have to look at the round trip. A single person in a three-bedroom place, say, may move out to the private rented sector. That might be more expensive, but then you can take a family, who are very expensive in the private rented sector, and put them in the cheaper, social rented sector. That round-trip effect in somewhere like Enfield is worth £2,500 a year to the state; the typical figure for a place such as Lincoln would be more than £600 to the state.

[Lord Skelmersdale (Con)]

My Lords, is there not a direct relationship between the amount of capital that local authorities are allowed to spend and the number of council houses built by those authorities?

[Lord Freud]

My Lords, we are looking to double the housing budget to more than £20 billion over the next five years. We are committed to 400,000 new affordable housing starts worth £8 billion—£1.6 billion of that is going to the rented sector. This is from a Government that are really trying to get housing back after the last Labour Government in 2010 left housing starts at the lowest level ever since the 1920s.

[Baroness Sherlock (Lab)]

My Lords, let us put a couple of facts on the table. The Government said they are going to spend £20 billion on housebuilding this Parliament, of which only £1.6 billion will go on affordable housing. Under the welfare reform Bill that the Minister is dealing with at the moment, the OBR has said that 14,000 fewer social housing units will be built as a direct result of the plan to force housing associations to cut rents. How does that help bring the housing benefit bill down?

[Lord Freud]

I just repeat what I said: we are spending £20 billion to have 400,000 new starts. That is more than this country has seen. Where there might be a policy that may have a pressure, we will look at that but, overall, we are determined to get the houses built in this country.