Universal Credit: Private Rented Sector

Stephen Lloyd Excerpts

Tuesday 9th January 2018 Westminster Hall

[Stephen Lloyd (Eastbourne) (LD)]

I beg to move,

That this House has considered the effect of universal credit on the private rented sector.

It is a privilege to serve under your chairmanship, Mr Gray. It was good to obtain this debate, and I am delighted that a range of colleagues have come to speak on such an important issue.

This is indeed an important debate. We all know and read about the challenges with the lack of housing across the UK. Some 1.2 million to 1.3 million people on housing benefit or local housing allowance are in the private rented sector. Most of us will know from our constituency casework that many private sector landlords are reluctant to let to people on housing benefit. My supposition, which is clearly proved by the evidence, is that the universal credit roll-out, up until the recent changes in the Budget, would not acknowledge the issues and the challenges and frustrations for private sector landlords not wishing to rent to people on benefit and certainly not to those on universal credit, and that without a default payment direct from the Department for Work and Pensions to the landlord, even more people in the private sector will pull out of the whole area. That has proved to be the case.

How did we get to this situation? I remember that when I was last a Member of this place, I served on the Select Committee on Work and Pensions and I repeated ad nauseam to the then Secretary of State, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), that one fundamental flaw of universal credit was the insistence that the tenant should receive the full housing benefit and pay it on to the landlord. I understood the argument; I understood that that was about encouraging responsibility. My frustration—I argued this very assertively in numerous Select Committee sittings—was that the problem with ideologues is that they fit the facts to their ideology, rather than recognising that facts are facts. I was sure, from my own experience as an MP and from talking to colleagues, that sadly many tenants on universal credit would not pass the money over to their landlords, for one reason or another, and that that would make the private rented sector even more nervous about letting to people on housing benefit.

[Ruth George (High Peak) (Lab)]

The hon. Gentleman is making an excellent speech on a very important issue, and I apologise because I will have to attend the Finance (No. 2) Bill Committee shortly. A landlord who came to my surgery had 20 tenants on universal credit, of whom 18 were in arrears and nine had to be evicted. That is at this very early stage of the roll-out, when full service has not yet come to my area. Does the hon. Gentleman agree that those are the sort of facts that do not fit into the theory of universal credit?

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[Stephen Lloyd]

I appreciate the intervention. It is good to see the hon. Lady here, and I entirely agree with her. She gives a strong example, which any Member of Parliament, from any party and anywhere in the country, who supports people on universal credit and works with people in the private rented sector will know to be true.

At that time, there was a coalition Government and a Conservative Secretary of State. People can check the record: I said again and again, “This is going to be a car crash,” but that was ignored. We move on to 2015—I am giving a bit of context. The Government carried on rolling out universal credit, and we had numerous examples, such as that which the hon. Member for High Peak (Ruth George) has just given—others in the Chamber will have had experience of such things over the past two years—of the fact that without that default, fewer and fewer private landlords are letting to people on universal credit, and that those who are see tenants falling into arrears. Section 21 evictions are going through the roof. It is just utter madness. We now move to 2017.

[Mr Jim Cunningham (Coventry South) (Lab)]

I congratulate the hon. Gentleman on obtaining this timely debate. I am sure that he will agree that through a lack of social housing, more and more people are being forced into the private sector, but rents are going through the roof. I agree with him about private landlords. We have only to watch television documentaries on this issue to see what the situation is. We see two or three blocks of people being moved out because the private landlord can get more money as a result. It is also a public scandal that in London and other places, there will be four or five people sharing the same house because they cannot afford the rent singly. I am sure that the hon. Gentleman would agree that we should have stronger regulation in that respect.

[Stephen Lloyd]

I thank the hon. Gentleman for the intervention. He raises an important point about the public sector, because housing associations and councils have also been badly affected. It is just that broadly speaking—again, everyone in this Chamber knows this, because we are experienced politicians—the public sector will be more patient and understanding as it waits for payments from universal credit. Usually, private landlords simply cannot wait, not because they are mean or what have you, but because their business model does not allow them not to be paid for month after month. As a result, there is a spike in section 21 evictions.

We now get to the Budget. Finally—although I would like to think that this was partly due to my lobbying I know that it will be thanks to many other people in this Chamber and outside—the Chancellor of the Exchequer took on board some of the fundamental criticisms that I have been making of universal credit, for years frankly, about default payments to landlords, and some changes were made. At last! It was five or six years since I had been arguing for that and advocating it, but better late than never. It will make a difference, and that I approve of. However, it is only the first part of the journey in relation to automatic default rental payments to landlords. It is the beginning, but it does not include people who are not already on automatic payments. As I understand it—the Minister may provide clarification—it also does not include all those people to whom universal credit has already been rolled out over the past few years. And it does not start until the spring. It is a step in the right direction and an acknowledgement from the Government that they made a mistake and they finally want to try to put it right, so I approve of it, but there is still much further to go.

[Dr David Drew (Stroud) (Lab/Co-op)]

Does the hon. Gentleman accept that this is one of the fundamental flaws? Local authorities have decades of experience of dealing with housing benefit, both in the public sector and, more particularly, in the private sector. We have thrown all that expertise away, which is so counterproductive. Does the hon. Gentleman agree?

[Stephen Lloyd]

I appreciate the intervention. Not only do I wholly agree, but the decisions are completely irrational. One thing that I am finding out from the Residential Landlords Association and others is that there is not adequate communication between the DWP, local authorities and landlords, so even though, in theory, it seems from the changes in the Budget that there is the beginning of an understanding from the Government that default payments will be necessary to prevent a complete car crash, there is still a long way to go towards understanding that they have made the system so complicated that things will still be very hard for residential landlords. What does that mean? It means that they will pull out in droves.

Currently, 1.2 million people are on housing benefit or LHA in the private rented sector. There is a housing crisis in this country. This is not the debate to discuss that, but we have a housing crisis; we all know that from our constituency surgeries. The Government could convert that 1.2 million to 2.4 million; it could double the number of tenants moving into the private rented sector, because the capacity is there. However, that will happen only if the Government make it easy—very straightforward—for private landlords to take on someone who is on universal credit and give them a roof over their head, and if there is that automatic default payment that is, as it says on the tin, automatic.

If I am a landlord and I take someone, or am willing to take someone, on universal credit, and give them a flat or a house, a roof over their head, the automatic situation—by mutual agreement with the tenant, I accept that that is important—would be for his or her payment on universal credit automatically to go straight into my account, the landlord’s. I was in business for years before I went into politics, and I can absolutely guarantee that despite the challenges with some tenants on universal credit, in the eyes of landlords, ultimately, a business is a business, and if a landlord is getting their payment directly into their business bank account every month—or every two weeks, as I would like, but that is another issue—then, as a business, they will look favourably on that particular group. That is something that I really urge the Minister to consider.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the hon. Gentleman on securing this debate. On the issue of the automaticity, as he might term it, of the payments going to the landlord, does he agree that in parts of the United Kingdom, such as Northern Ireland, where we have negotiated that, it has not led to an increase in rent arrears? There are other problems, but rent arrears are not a big one. We have also negotiated the twice-per-month payment, which helps both landlords and tenants to know that the rent is being paid and the tenant to know that he or she is not going into arrears.

[Stephen Lloyd]

I thank the hon. Gentleman for that intervention; I was going to come to that point in a moment, but I will come to it straightaway. In Northern Ireland—I think five or six years ago, way before we reached the crisis that we have had over the past couple of years—the politicians negotiated default direct payments to landlords. They also negotiated that the payment should be every two weeks. I am reliably informed by colleagues from Northern Ireland that at the time the DWP—again it was under the then Secretary of State, the right hon. Member for Chingford and Woodford Green, if my memory serves me—did not want to budge and insisted that that would collapse the entire thing. However, as Government Members have discovered, when my friends in the Democratic Unionist party dig their heels in, they dig their heels in. I pay tribute to them on this one, because the DUP, and I think the Social Democratic and Labour party as well, said, “No, we are not budging. It must be a default payment.” Do you know what? It was. It worked. It is the same computer system, folks. The previous Secretary of State—the one who has just gone—kept saying, “It is much more complicated, you can’t just change it.” Do they use a different computer in Northern Ireland? I do not think so, because as we all know, they are part of the United Kingdom.

The other thing that the Stormont Government negotiated was payments every two weeks. The percentage of rent arrears in Northern Ireland for people on universal credit is almost zero. In England, as we all know from our constituency surgeries, we have section 21s in the private sector going through the roof, or private landlords coming into our offices and saying, “That’s it, we are pulling out of universal credit. We’re not going to touch it.” Meanwhile the local authorities, housing associations and councils, which are under horrendous stresses and strains at the moment, are asking where all these additional people are going to go.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

The hon. Gentleman is making a good speech with some considered suggestions for the Government. On the point he has just made, does he also agree that landlords who are fearful about delays in people accessing universal credit might actually have a wider problem with renting not just to people on benefits but to people on lower incomes who they fear might need to receive benefits in the future? That will not be very helpful when, in most constituencies, one in five houses is in the private rented sector.

[Stephen Lloyd]

I thank the hon. Gentleman for that intervention and welcome him back. I agree entirely, because universal credit is just one area. It is one side of the impact of what has been an ill-thought-through policy.

[Wera Hobhouse (Bath) (LD)]

I thank my hon. Friend for securing this important debate. Is it not important that the Government take away the freeze on the housing allowance cap, in order to make sure that housing benefit reflects market values, because otherwise the benefit does not keep up with the market value of the private sector?

[Stephen Lloyd]

My hon. Friend makes an important point. I think that is something that needs to be considered, particularly as regards the further caps that have come in over the past couple of years. I think those are unsustainable.

[Melanie Onn (Great Grimsby) (Lab)]

Has the hon. Gentleman given any consideration to the issue of 18 to 21-year-olds who are on universal credit and have no recourse to any funding for the housing element? Very often they will be on a lower wage, as obviously the minimum wage for younger people is lower than that for people over 25. There are big issues for the sector and I think it will ultimately end in a rise in homelessness among that group. Does he agree?

[Stephen Lloyd]

I agree. As regards that particular age group—unless they have some sort of bank of mum and dad—in our surgeries we are already seeing that young people are tremendously adversely affected, both by the lack of housing benefit at that age, and, frankly, some of the issues around universal credit.

Another issue that has not been properly addressed, and I would welcome hearing about this from the Minister, is that there is a portal for public sector housing and councils and housing associations to access as regards people in their area, or their tenants, going on to universal credit, but there is not one for the private sector. I urge the Minister not to tell me that there is, if she has been told that by her civil servants, because I have been told by all the residential trade associations that there is not, or it is not working.

At the risk of misquoting Tony Blair, who kept saying, “Education, education, education,” I want to talk about evidence, evidence, evidence. All those years ago, when I and others first challenged the then Secretary of State, the right hon. Member for Chingford and Woodford Green, in the Work and Pensions Committee, saying, “You must understand, if you retain the original plan, which is that all the money goes to the tenant and the tenant pays the landlord, it will be an absolute disaster,” I did not have evidence. I just had a hunch, based on years of experience dealing with thousands of people. I just knew that, as did many others. Where are we now? We are five or six years down the line, and I want to provide some evidence.

In the past 12 months, the RLA reports, one in three landlords has attempted to evict a tenant; 60% were due to rent arrears, and the majority of those were on universal credit. This means not only unnecessary suffering for tens of thousands of housing benefit recipients, but it poses a threat to the future of benefits claimants ever succeeding to rent in the private sector, because once a tenant has a bad record, it is extremely difficult to unwind.

Secondly, a recent study carried out by the RLA shows that almost 87% of landlords would not be willing to let their properties to claimants of universal credit, while 38% have already experienced universal credit tenants going into arrears. Where are we going with this madness? I remind everyone of the percentage of rent arrears among those on universal credit in Northern Ireland. A recent study commissioned by Crisis—a homelessness charity—and the Joseph Rowntree Foundation found that 90% of local authorities were concerned that universal credit would increase homelessness, which it has, because of section 21s. The list of evidence goes on and on.

The RLA has found that 73%—Minister, these are the facts, the stats and the evidence—of its thousands of members,

“lack confidence in renting to tenants on the Credit due to uncertainty that they will be able to recover rent arrears.”

Another major landlords’ trade association, the National Landlords Association, found that only one in five of its members would let their properties to tenants on universal credit. I have already talked about Crisis. The trade association for letting agencies, the Association of Residential Letting Agents, which many hon. Members deal with, found that

“34% of ARLA Propertymark letting agents who we surveyed told us that they had seen a reduction in landlords renting to Universal Credit claimants.”

The list goes on and on, so it is time to fix it.

This is what I propose to the Government. I am delighted that the Chancellor of the Exchequer listened to me, the MP for Eastbourne, and made those amends in the Budget. I suspect that a few others probably had a little more influence than me; but, heck, like all politicians, I have been banging on about it for years so I will take the credit. So there have been some adjustments, but where do we go next? I ask the Minister to report back to the new Secretary of State, with whom I worked in coalition and whom I congratulate on her position, and persuade her to go to the Chancellor and do what it takes to make defaults to landlords, by mutual tenant-landlord agreement, automatic; and to go over to Northern Ireland, see their minority Government colleagues in the DUP, find out exactly what their computer programme does that allows colleagues in Northern Ireland to do automatic default payments, follow their two-week advice—I would do the same on that—and implement it across the country.

I believe that what would happen is that the housing stock capacity in the private sector would go up exponentially—even potentially double—because of what I mentioned earlier. Despite the challenges with tenants sometimes being on benefit, the prejudices that landlords sometimes have against them are often founded on the reality that landlords do not feel secure that they will receive the money. I am absolutely certain that if landlords know that they will get a default payment, over a couple of years there will be a substantial increase in the amount of private rented stock available to people on universal credit, and that could make a significant difference in reducing homelessness.

There is an opportunity for the Government. Despite the ideological and fundamental errors that underpin some elements of universal credit, finally, after years and years of banging on the door, they are beginning to change. Thank heaven! Now that door is open, the Minister and her Government have an opportunity to be game changers and to convert universal credit into what I believe it always should have been: a decent benefit. One of the key things they need to do is around the default payment, which I have debated this morning. Along with that—this is my other favourite—I would go to the current Secretary of the State at the DWP and ask her to have a word with the previous MP for her constituency, the former Chancellor George Osborne, and ask for the £3 billion back. He took that out after 2015, when the Liberals were defenestrated at the election; he slashed £3 billion a year out of universal credit, which was supposed to be about the work allowance.

If we get that money back and properly convert what should be a default payment to landlords, we can produce what universal credit should have been, and was originally designed to be: a progressive, positive benefit that gives people transformative opportunities. After five years of it being a complete car crash in so many ways, I believe that the Government finally understand that. I urge the Government to make my day and, possibly, that of the former Secretary of State, the right hon. Member for Chingford and Woodford Green, and to make automatic payments as a default to landlords. I ask that they to do it instantly, they do it in both the private and public sectors and they do it now.

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[Stephen Lloyd]

I appreciate the Minister’s response. She is absolutely right that the changes announced at the Budget show that the Government were listening. Some Opposition Members are slightly frustrated though, because we had been making our criticisms for a long time and an awful lot of people had to go through a very difficult period, even possibly losing their homes, before the changes were made. However, this is a step in the right direction and I urge the Minister to continue to press with her colleagues to keep going.

We all know that there is a severe housing crisis across the country. Regarding universal credit and the changes in the default payment, if the Government were prepared to go that one step further, working with the Residential Landlords Association and others, there would be an opportunity to open up significantly the private sector to universal credit claimants. That would significantly reduce the homelessness challenges we face, and I urge the Government to keep pushing.

I am grateful for the support in today’s debate. We all understand that there are good things about universal credit, but a lot of the roll-out has been a car crash. However, it is getting better. I urge the Government to keep listening to us and, most importantly—

Motion lapsed (Standing Order No. 10(6)).