Income-related Benefits (Subsidy to Authorities) (Temporary Accommodation) Amendment Order 2010

Lord Knight of Weymouth Excerpts

Thursday 2nd December 2010 Lords Chamber

Moved by

[Lord Knight of Weymouth]

That this House takes note of the Income-related Benefits (Subsidy to Authorities) (Temporary Accommodation) Amendment Order 2010 (SI 2010/2509).

[Lord Knight of Weymouth]

My Lords, I am pleased to see the Minister, the noble Lord, Lord Freud, in his place. Such is the generosity—indeed, the philanthropic nature—of the noble Lord, Lord Taylor of Holbeach, particularly with his time this week, that he has become a bit of a fixture on the Front Bench. I therefore thought that he may be replying to the Motion—perhaps he is—but we will wait and see.

The order builds on a scheme that my party introduced this year when in government to control the cost of housing benefit awarded to claimants living in temporary accommodation. The current scheme applies only to claimants in temporary accommodation that is leased or licensed by a local authority from a private landlord. The order that we are debating extends the scheme to accommodation where the landlord is a registered housing association. On that very narrow basis, I say at the outset that it is reasonable.

This Take Note Debate has been tabled better to understand the ever changing environment of housing benefit in which this order will operate from April next year. In particular, I am keen to understand how it relates to the statutory instruments that were published this week and reported on by the Social Security Advisory Committee: the Housing Benefit (Amendment) Regulations 2010 and the Rent Officers (Housing Benefit Functions) Amendment Order 2010. Like the order that we are debating today, they limit the amount of housing benefit that can be awarded under the local housing allowance arrangements from April next year by removing the five-bedroom local housing allowance rate so that the maximum level is for a four-bedroom house; by introducing absolute caps so that local housing allowance weekly rates cannot exceed £250 for a one-bedroom property, £290 for a two-bedroom property, £340 for a three-bedroom property and £400 for a four-bedroom property; by removing the £15 weekly housing benefit excess that some customers can receive under the local housing allowance arrangements; and by setting the local housing allowance rates at the 30th percentile of rents in each broad rental market area rather than the median.

These orders are extremely controversial, in stark contrast to the order that we are debating now. However, it is difficult to scrutinise today’s order properly without understanding the effect of these two later ones because, in essence, if the effect of the other housing benefit changes is as bad as some people fear, they will increase the pressure on temporary accommodation. This, in turn, is important, given what the Explanatory Memorandum to today’s order says about the consultation response. Paragraph 8.2 of the Explanatory Memorandum states:

“Concern was generally raised that local authorities would be required to find alternative accommodation for a number of households in more expensive areas or in larger properties”.

It goes on to say that,

“the extent to which private landlords will be willing to renegotiate lease payments downwards, thereby sustaining existing tenancies, is not clear at this stage. The National Housing Federation Practitioners Group estimated that up to a quarter of its members’ stock could be at risk”.

I note that at paragraph 7.4 of the Explanatory Memorandum, the Government say that fixing the level of subsidy to March 2013 will,

“help maintain the supply and quality of temporary accommodation”.

On that basis it is clear that the Government are also concerned about the supply of temporary accommodation. Therefore, I ask the Minister what the Government's own assessment of the effect of these changes is on the supply of temporary accommodation. Can he then tell us what additional demand he anticipates from the other changes to housing benefit that are being implemented through the other orders tabled this week? In doing so, he may also want to reflect on what the Social Security Advisory Committee said in its report on the changes. The document states at page 4:

“The Committee’s report recommends that the Government should not go ahead with the package of amendments proposed. The Committee raised a number of concerns about the scale and impact of the changes, and the serious effect this would have on customers claiming Housing Benefit who are living in the private rented sector, particularly those claiming according to Local Housing Allowance rules”.

On the same page, the document states:

“The Committee challenged the case for change that was put forward by the Department for Work and Pensions. They felt it was contradictory to suggest that Housing Benefit reform is needed to ensure the housing choices of benefit recipients are geared to a similar level that people in work are likely to achieve, as Housing Benefit is also available to people in work. In addition, the Committee found no evidence to suggest that the housing choices made by Housing Benefit customers are excessive, noting research which suggests that the Local Housing Allowance arrangements are not unduly favourable compared to low income working households”.

The document continues:

“The Committee commented on the Government’s increase in funding for Discretionary Housing Payments which they note represents around 4% of the total cash losses that will result from these measures. They believe this increase will be insufficient to allow local authorities to provide adequate support, even for vulnerable customers, to meet their rent or find suitable accommodation”.

I shall talk about vulnerable customers later.

Finally, the report states:

“The Committee concludes that the Housing Benefit measures represent a high risk approach to managing the cost of Local Housing Allowance cases”;

and states on page 26:

“Apart from the potential financial hardship, the human costs, the child poverty and other wider negative impacts of these proposed changes, we also see them as being out of step with the broader thrust of policies to incentivise work and to make work pay”.

The Minister may also want to reflect on what Shelter said this week. It stated:

“But this will not change the fact that when these changes will come into force, 134,000 households will be uprooted from their homes. It is extremely disappointing that the government has ignored the advice of both its own advisory committee and voices across the housing sector in ploughing ahead with these damaging proposals”.

The uprooting of 134,000 households means a massive new pressure on temporary accommodation. Will the changes in this order help or hinder in meeting those pressures?

Given that the Government’s own impact assessment on the high-level impact of the local housing allowance measures shows a staggering 936,960 household losers from these changes and that the average loss per household will be £12 per week, does the Minister agree that the Shelter estimate is probably quite cautious at 134,000 households? What is his analysis of the geography of this misery? The University of Cambridge study commissioned by Shelter shows a halving of the proportion of affordable neighbourhoods if these changes are implemented. This study suggests that there will be no affordable neighbourhoods in the City of London or Kensington and Chelsea, and less than 10 per cent in Hammersmith and Fulham, Islington and here in Westminster. It looks as though that will result in large numbers needing to use the time to readjust of up to nine months that is now generously offered by the Government, with large numbers needing to move out of the middle of the city to more suburban boroughs. Do the Government share this analysis, and is the Minister confident that this displacement will happen smoothly? Or should these authorities be trying urgently to increase the supply of temporary accommodation to meet their statutory responsibilities?

Does the Minister have any confidence that this temporary accommodation will be close to the schools for the children who are affected? Has he seen the article in today's Financial Times, which reports a shortage of 68,000 school places already, half of which are in London? The Government’s impact assessment on their housing benefit changes states:

“Children who experience disruption to their schooling, particularly in the run up to examinations may do less well than pupils who are otherwise similar”.

Is it not the case that unless the Minister is confident that he has enough supply of accommodation to avoid these effects, these poorest children will suffer this damage to their life chances? What is his estimate of the extra cost to families of children travelling long distances to school if they are from those 134,000 displaced households—if Shelter’s figures are correct?

My final question is on the impact on those with disabilities. The Government themselves state that some individuals may have to move out of the local authority area. They will be forced out of homes that have been adapted to meet their needs. Is this group not the most likely to be in need of temporary accommodation because of the need to wait for housing from the limited supply of stock that meets their individual needs to become available? Does the Minister truly have confidence about the supply of temporary accommodation that has the necessary adaptation for these vulnerable people?

I have raised a number of important questions. I know that some of this is complicated as we start to try to understand the consequences of the Government's changes to housing benefit, of which this order is an integral part. I look forward to some answers. I beg to move.

[Lord Best]

My Lords, I am grateful to the noble Lord, Lord Knight, for allowing us a chance to review some of these questions. Perhaps the position can be most simply expressed by recognising that the intention is to reduce the housing benefit bill by some £2.25 billion per annum by the end of this Parliament. That is £2.25 billion a year that will not be paid through housing benefit to landlords. There are only two parties from whom this money can come; one is the landlord by accepting a lower rent, and the other is the tenants by finding the balance from their own resources, including other benefits—since most are on benefits of different sorts, or pensions. Which of these two parties is more likely to take this very substantial £2-and-a-bit billion hit?

The first question is, I suppose, whether people can move to a different place where they can find accommodation for which the rent will be covered in full. The noble Lord, Lord Knight, looked at the numbers that may be involved, and it does not seem likely that if people move from central London they will find vacant properties in cheap areas on the scale that would be required. They are much more likely to have to stay put and face the eviction that may follow if they cannot pay their rent and all the hassle and trouble that that brings simply because there will not be places available in other areas. There are also social and welfare costs for the boroughs into which any large-scale movement of people would go. There are questions about school places and the other facilities that people will need and, if these are the poorest boroughs, the local authorities concerned are the least capable of finding the social and welfare resources to help those people.

Will landlords reduce their rents? Some landlords will reduce rents simply because the market served by local housing allowance claimants is so large that in some areas there will be nowhere else to go. These are areas with a high proportion of people in receipt of local housing allowances. They are areas of the lowest demand and there may be no work for people who move there. However, in great tracts of the country, landlords are not going to reduce their rents. I chair the Property Ombudsman service, which managing agents of private landlords sign up to to handle their complaints, and I have been talking with those agents about how they are approaching this issue. Their advice to their landlords will increasingly be not to let to those on benefit as they will not be able to pay their rent. Quite a few landlords will already not let to people on benefit, and I think it is quite likely that, as agents are telling me, more landlords will not only say that they will not reduce the rent, but that in future they will not have people on local housing allowance in their properties because they suspect that they will get into arrears and difficulties and that it is not worth the hassle. There are plenty of other people to whom those homes can be let, so when a shorthold tenancy expires, the next people will not be on benefit. The outcome will be a reduction in the amount of letting to those on local housing allowance because of the hassles that people are expecting.

This morning, I talked to the person who manages the rent guarantee scheme for a rather smart outer London borough. The local authority has produced a very good scheme that gives landlords a guarantee of the rent, provided they take people on housing benefit. Landlords have resisted taking people on housing benefit in many cases because rent is paid on a four-weekly basis instead of a monthly basis, because arrears may accrue or because the local authority’s administration may mean delays. In order to overcome this reluctance, this local authority and others elsewhere have a rent guarantee scheme so that if the landlord takes these people, the rent is guaranteed. Unfortunately, this officer working in the outer London borough tells me that landlords are already saying that although the borough will guarantee the rent, they will not carry on using the scheme because too many hassles and hazards have been introduced by the prospect of housing benefit cuts. This means that this unfortunate officer in that outer London borough is not able to house the people who he is mandated to look after, because the private sector will turn its back on them wherever it can. I know that in some areas it cannot, where the market is so weighted in favour of those on benefit and where there will have to be rent reductions. The trouble is that it may be found that those rent reductions are taken out on the tenant because the landlord who gets less rent in the lowest areas, where property quality is often lowest, may not put back much into their investment if they are getting a lower income from it. The deterioration of those properties may result from that.

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[Lord Knight of Weymouth]

My Lords, I am most grateful to all noble Lords who have taken part in what has been a helpful debate. I am also grateful for the support that I have had from Shelter and the Chartered Institute of Housing. I am mindful of the challenging journey to Luton that awaits my noble friend Lord McKenzie and I wish him success in it, so I shall be brief. I simply say to the noble Lord, Lord German, and others who were worried that I might have strayed slightly from the job in hand, that I had a call from the office of the noble Lord, Lord Freud, to ask what my interest was. I said that I was interested more in the context than in the detail of the order, so I hope that what I have said today was no great surprise. We shall come back to the substance of these issues, on which I look forward to debate with noble Lord, Lord Freud. I am grateful to the noble Lord, Lord Taylor of Holbeach, for being able after a very long and arduous week to give us a very useful explanation of the order.

Motion agreed.