Housing Benefit (Amendment) Regulations 2012

Lord McKenzie of Luton Excerpts

Monday 15th October 2012 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, these regulations introduce the underoccupancy reductions for working-age social sector tenants. They also support the implementation of the annual CPI uprating of local housing allowance. The regulations are regarded as being compatible with rights under the European Convention on Human Rights. This policy was debated at length during the passage of the Welfare Reform Act. On top of that, many noble Lords came to the briefing session that I ran for MPs and Peers before the summer Recess. I am grateful for their input. I do not intend to go over old ground. There is nothing new in the regulations that we did not debate during the passage of the Act. The purpose of today is to look in detail at the working of the regulations.

As I have said, there are two main purposes to the regulations. First, they make two changes to support implementation of the measure to uprate the local housing allowance by CPI from April 2013. The current provision to review existing LHA cases on the anniversary date of the claim will be abolished from January 2013. Instead, all claims will be reviewed annually on 1 April when the new LHA rates are set. This brings LHA in line with annual changes to other benefits. There will also be provision to review a case if the rent changes throughout the year, so that tenants will not have to wait until the annual review date.

Secondly, the regulations introduce restrictions to housing benefit for working-age claimants who are living in the social rented sector and occupying accommodation larger than their household size requires. The same size criteria that are applied to claimants living in the private rented sector will be used to determine whether accommodation is being underoccupied. These changes will result in a 14% reduction to housing benefit for those underoccupying by one bedroom and a 25% reduction for those underoccupying by two bedrooms or more. The average reduction in housing benefit will be £14 per week for those affected.

The reasons for reform are clear. As noble Lords are aware, this is part of a package to contain housing benefit expenditure. Importantly, there are more than 250,000 households living in overcrowded accommodation in the social rented sector in England—they need more space. We cannot justify paying housing benefit to cover the cost of extra bedrooms while others struggle in cramped accommodation. People who rent from a registered social landlord or local authority have in large part had their rent paid in full through housing benefit. This is not the case for those who receive housing benefit for a privately rented property. They have to make hard decisions about what is affordable to them and where to live, as do people who pay their own rent in full. It is time for those in the social rented sector to make similar choices. Some tenants may look to meet any shortfall in housing benefit by increasing their hours of work or taking in a lodger.

Crucially, this change will provide an impetus for landlords to manage their stock more effectively and help us address the real shortage of homes. There are approaching 1 million extra bedrooms in the social sector that are being paid for by housing benefit for working-age customers. This is indefensible. It is a waste of valuable housing stock. Interestingly, there is already evidence within the industry of a change in management of stock since the policy was announced. Seven local authorities and 11 housing associations in the West Midlands have come together as the West Midlands Making Best Use of Stock partnership and agreed to pool at least 150,000 homes to allow tenants easy access to properties across the region. The partnership hopes that this will enable people to find a house with the exact number of bedrooms that they need in order to avoid underoccupation.

Landlords across Merseyside have also developed a region-wide home swap scheme in response to the size criteria. Twenty housing associations and five councils are taking part; they own a total of 107,000 homes between them. Of these homes, 2,000 have been identified as underoccupied and they believe that another 5,200 could be underoccupied.

We expect to see positive behavioural changes among housing benefit tenants in the private rented sector, following our earlier reforms. Some claimants have said that they will look for a job to make up any difference between their rent and housing benefit and others will look for more affordable tenancies. This supports our view that the changes are both proportionate and measured.

During the debates on the Welfare Reform Act, I made a number of commitments to noble Lords and I will take a moment to update you on these issues. I know that some are concerned because the regulations do not define what constitutes a bedroom, including the room size. However, in practice, others take a different view. After discussions with the National Housing Federation, the Riverside Housing Association and others, we have concluded that most welcome the flexibility that comes with not including in the regulations a definition of what constitutes a bedroom. Some landlords made it clear that defining this in legislation would introduce a system that might involve them having to measure every room. So we are leaving it to landlords to specify the size of property, as they are best placed to do that. We expect the information that they provide to be reflected in the level of rent charged and to match what is agreed in the tenancy agreement.

In previous debates I said that we would think about costs to landlords as part of our engagement with other departments. We are working through the financial impacts on local authorities with the Department for Communities and Local Government as part of the new burdens protocol. That department has also funded the Chartered Institute of Housing to produce guidance for landlords. Making it Fit was published in May and included information on how to model and assess any risk to rental income. My department has met local authorities and advice organisations during the development of this policy. We have also produced comprehensive guidance to help them prepare for the changes in April next year. This includes a toolkit with model letters, leaflets and posters designed to heighten awareness among claimants.

On the next issue, we are adding £30 million to the discretionary housing payments fund from 2013-14. This is aimed at helping claimants living in significantly adapted accommodation and foster carers. I said that I would keep a watchful eye on this. We are currently talking to local authorities and are considering carefully how best to allocate this money. A decision will be made later in the year. I will also keep the discretionary housing payments funding under review.

There has been much debate over whether there should be specific exemptions from the underoccupation reductions for different groups. A presiding principle in the development of this policy has been simplification. For a policy to be administered easily and simply there must be few exceptions.

I have heard concerns that we are relying too heavily on the DHP fund and that there is not enough in the fund to help all those who will be affected. But we do not expect DHPs to be available to everyone who sees a reduction in their housing benefit due to underoccupation. The additional £30 million is targeted at those in adapted accommodation and foster carers. We have added a realistic sum based on what we can afford.

Finally, I should like to confirm that as far as the research timescales are concerned, the monitoring and evaluation will be for two years from April 2013 to March 2015. Initial findings will be available in 2014 and the final report in late 2015. We hope to start the formal commissioning process in the next month or so. We currently envisage that the evaluation will include small-scale primary research with a range of social landlords in local authorities across England, Scotland and Wales. Different types of authority, including a range of urban, rural, county and district local authorities, will be included. These will be selected to cover a range of different housing market demands so that we can explore the effects of the size criteria effectively.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his introduction to these regulations, which as he has explained cover two main areas: the introduction of size criteria into the social rented sector and the process for uprating the local housing allowance by CPI. I should say at the start that we oppose the regulations, particularly those related to underoccupation. The introduction of the size criteria— I think that we should adopt the Lord Best terminology and call them the bedroom tax—via the Welfare Reform Bill was hotly contested and rightly the subject of government defeats in your Lordships’ House. As noble Lords will recall, the hammer of financial privilege was ultimately deployed by the Government to get their way on the bedroom tax, and a £13 million top-up to the discretionary housing budget paid for by increased pain on the bedroom tax does not adequately address the strong reservations that are being expressed. Nor does it compensate for the misery that these regulations will bring to potentially hundreds of thousands of households. As the Minister has explained, the impact assessments make it clear that the regulations could affect 660,000 housing benefit claimants living in the social rented sector. They could mean an average loss of housing benefit of £14 per week, which is £700 a year.

Of course underoccupation in the social rented sector should be tackled, and many councils have a variety of schemes to do this. We would certainly support the arrangements and partnerships referred to by the noble Lord in presenting the regulations, but seeking to tackle it by curtailing housing benefit, as these regulations provide, is simply not acceptable. Indeed, it does not address the situation where under-occupation as defined is most prevalent—among older tenants. One of our objections to this policy is the lack of practical alternatives that tenants face. The uprated impact assessments make it clear that there is generally a surplus of three-bedroom properties and a lack of one-bedroom accommodation, so in many areas there are simply insufficient smaller properties for tenants to move into. I would also ask the Minister how far the Government think it reasonable for someone to move and thus uproot their family from existing networks of support—100 miles, 200 miles or perhaps 300 miles. If someone has to leave a job to move to a smaller property, will that be treated as good reason for the purposes of a claim for JSA, and does the Minister have any data on the average cost of moving home?

How practical does the Minister consider some of the various options that are laid out for tenants to consider, such as making up a shortfall from income? What other income does the Minister have in mind which is not taken into account in a housing benefit calculation in the first place, and which would of course gradually have a 65% taper in any event? Does the Minister specifically include disability benefits in this consideration? If it is savings, perhaps the Minister can tell us what the average working-age household savings are and how many weeks’ shortfall in housing benefit at £14 a week they would cover? It is suggested that moving into work or increasing working hours would be a solution. So far as moving into work is concerned, what happens if there is no work, and why does the Minister consider that the incentives to come in with universal credit are insufficient of themselves to encourage people into work? For how many households does the application of the WCA determine that somebody is not fit for work?