Housing Costs (Reformed Welfare System)

Teresa Pearce Excerpts

Tuesday 3rd March 2015 Commons Chamber

[Teresa Pearce (Erith and Thamesmead) (Lab)]

I am pleased to have the opportunity to participate in this debate. It was very well opened by my hon. Friend the Member for Aberdeen South (Dame Anne Begg), who is a dedicated and inspirational Chair of the Work and Pensions Committee. I want to put on the record my thanks to her for the way in which she has chaired the Committee and for all the things I have learned from her. She is the epitome of the iron fist in a velvet glove, and she manages to be both reasonable and radical at the same time.

I am speaking in this debate because I am a member of the Select Committee, and the Chair has already gone through some of the recommendations in our report. Given the importance of the report, it is disappointing that, a year on, we are still waiting for the Government response. I hope that the Minister will address that matter.

It is indisputable that we are the middle of a housing crisis. House building is down, homelessness and rough sleeping are rising, and houses are unaffordable for many people. The lack of social housing means that those with legitimate claims and in desperate need are deemed ineligible or not in priority need as local authorities try to implement housing strategies to manage demand with a only very few houses to allocate.

The private rented sector has filled the vacuum caused by the lack of affordable and social housing. As a result, the private rented sector in London has grown by 75% in the past 10 years. In my constituency, it is now common for families to live in private rented accommodation, although they previously either owned their own home or lived in social housing. Yet the ever-growing private rented sector is still failing to meet the demands of renters. It is easy to reduce discussions about housing costs to an evaluation of numbers and statistics, but the truth is that covering housing costs is crucial to securing a stable home life and a stable society. Affordable housing costs give families certainty and freedom from the fear of eviction, and help to foster communities.

Costs are spiralling out of control. The cost of renting has soared while wages have dropped. The lack of regulation in the private rented sector and the limited supply of housing in comparison with demand mean that private landlords are currently free to set their own prices. The cost of renting privately has increased consistently since 2009, and rents reportedly increased in London in 2012-13 by nearly 8%.

It is not surprising that so many people, both in and out of work, require help with paying their housing costs and have to resort to housing benefit. The number of in-work housing benefit claimants rose from 439,000 at the end of 2008 to more than 1 million in May 2014. The latest statistics also show that there were just under 4.9 million housing benefit claimants at the end of November 2014—increased from 4.2 million in November 2008—of whom 67% were in the social rented sector, but the rest were in the private rented sector.

The Committee’s report illustrated that the cost of housing benefit is rising, while the most vulnerable are failed when they rent privately. Over the past year, as a constituency MP, I have seen a spike in the number of people contacting my office who have been told that they are ineligible for social housing, but cannot secure private rented accommodation. That is due to a combination of factors, but one that has made things very difficult for people is the change in local housing allowance. Constituents tell me that when they go to the local authority, they are just given a list of private letting agents. The problem is that nearly all those on the list say that they do not take any tenants on benefits. Constituents are spending time and resources searching for suitable properties only to be told that they cannot be helped. That means that a large section of the private rented sector is unavailable to claimants, and that they are often forced to take poor, substandard property that fails to meet their needs.

[John Hemming]

We have found in the west midlands that private landlords are often willing to take people on housing benefit if they have a 6 Towns type of account that reserves the funds. There is a solution in the system as it stands. Perhaps that needs to be investigated. Obviously, 6 Towns does not operate across the country, but perhaps there are solutions that can be found within the current policy.

[Teresa Pearce]

It is true that solutions can be found. Sadly, no one seems to have found them yet in my part of south-east London.

The Work and Pensions Committee looked at the problems that are faced by people on housing benefit. They are discriminated against when looking for private rented accommodation. For families, that makes trying to find a roof over their heads an uphill struggle. Given that tenancies typically last for six to 12 months, private renters often have to move just as they have settled in. Children who live in such places have their life chances restricted and their education disrupted, and are often not registered with a doctor. That cannot be acceptable.

Private landlords may be reluctant to rent accommodation or provide temporary accommodation to claimants for a number of reasons. It might not just be general discrimination, but might be due to constraints that are imposed by mortgage lenders, who say that they are not allowed to provide longer tenancies, or due to fears that local authorities will fail to allocate housing benefit in a timely manner. Giving private renters the option of allowing the housing benefit component of their universal credit payment to go directly to their landlord might allay those fears and enable private renters to control their finances more easily. The Government must work with private sector landlords to address their concerns about universal credit and offer greater support to those who rent property to housing benefit claimants. That work must start now.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I grateful to my colleague on the Work and Pensions Committee for giving way. I met my key local social housing provider on Friday. It said that there was a 15% gap in rent collection between those on universal credit and those not on universal credit. That is manageable over a year or so, but over the longer term it will create huge problems. I wonder whether my hon. Friend wants to comment on that point.

[Teresa Pearce]

That is a valid point. It is something that we all encounter locally when we talk to housing providers. It needs to be addressed, so I thank my hon. Friend for her intervention.

Another problem for private renters is that the change to local housing allowance is further restricting their access to the widest selection of available properties. Local housing allowance rates match only the 30th per- centile of homes within a broad rental market area. The Government reduced that from the 50th percentile. I believe that that needs to be re-evaluated urgently, especially in London. Rents have risen, but the local housing allowance was frozen in 2012-13 and uprated by 1% in 2014. There has been a reduction in the number of homes that can be rented out at that rate.

An analysis by Crisis shows that across Britain, one in 10 local housing allowance rates for 2015-16 is 5% or more lower than the estimated 30th percentile of local rents. Those include 77 rates that have already benefited from an additional increase due to the targeted affordability fund. As was outlined in the Select Committee’s report, analysis by the Institute for Fiscal Studies shows that rent levels did not decline as a result of the cap. In fact, the most recent rental figures show a 1.8% rise across the stock in England and a rise of 2.4% in London. That is well above the recent 1% cap and means that additional properties will fall out of the reach of those on benefit.

Private renters should not have to choose between having a roof over their heads and eating, but increasingly that is becoming a daily choice for many people in my constituency. The Government should consider increasing LHA rates by more than 1% annually in more pressured areas. Although the Committee welcomed the introduction of the targeted affordability fund as a means of increasing LHA levels in areas of higher rents, some areas may see rents rising by more than the maximum of 4% a year. The Government should amend the targeted affordability fund so that it can be paid at higher levels in areas where rent increases are greater than 4%. It should also use available rents rather than stock rents as a measure for the rental increase.

Rents are currently unaffordable across the private sector. In 2012, the Money Advice Trust stated that rent arrears were the fastest growing debt problem it had encountered and that the number of calls it received on the issue had risen by 37% on the previous year. At the end of 2014, the National Landlords Association reported that almost a third of private landlords had seen arrears that year. There were a record number of evictions of renters across the social and private sector in 2014 as a result of a combination of factors, including the bedroom tax, benefit sanctions, increased numbers renting with the reduced LHA rate, and rising private sector rents.

Recent figures from Crisis have also shown that the No. 1 leading cause of homelessness now is eviction from a private tenancy. The figures highlight not just the lack of affordability for renters when having to manage competing living costs, but how unsustainable rising rents will be for the private rented sector without Government intervention.

The Government must continue to monitor homelessness levels and take action to mitigate the impact on households and local authorities. The Department for Communities and Local Government reported that rough sleeping increased by 14% in autumn 2014. I am regularly contacted by constituents who tell me that they cannot be housed by their local council because they are not in priority need and that they have no option but to live in overcrowded accommodation with family members or to couch-surf, which is code for sleeping on the floor of a friend’s house. If they can be housed, they have been told that their only option is temporary accommodation. In my local area of Bexley, people are often temporarily accommodated in Manchester and Bolton, which means having to uproot their children from school and leave their support networks behind.

It always worries me greatly that, while a number of landlords are reputable, a number of others are not. There are private landlords in my constituency who line their pockets while renters struggle to pay their rent. I wrote to Her Majesty’s Revenue and Customs and the Treasury in November to ask about the Let Property campaign, which was launched in September 2013 to target the residential property letting market. Specifically, I wanted to know whether it had been successful in closing the tax gap on let properties, but the responses I received were not encouraging. They said it was too early to tell, but one of the figures they did give me was an estimate that the tax gap on letting income was just over £500 million. It is absolutely disgraceful that public money is going to landlords who do not then pay their way or their tax. We need to address that urgently.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before the hon. Lady addresses any further points. She may have been able to count, but she has now spoken for 12 minutes. I trusted her to speak for 10 minutes, so I trust that she is going to wind up very soon.

[Teresa Pearce]

I will finish by saying that I think this is a most urgent issue. I do not usually quote from Conservative manifestos, but the 1951 Conservative manifesto said:

“Housing is the first of the social services. It is also one of the keys to increased productivity. Work, family life, health and education are all undermined by overcrowded homes.”

That was true then, and it is true now.

[Chris Heaton-Harris (Daventry) (Con)]

It is a pleasure to take part in this debate. I am sorry that I missed the first couple of minutes of the speech by the hon. Member for Aberdeen South (Dame Anne Begg), because she speaks very sensibly on this issue and many Government Members listen to what she has to say about it. I will pick up on a couple of points she made.

The hon. Lady has spoken in the past about the amount that we spend on housing benefit. It was a matter of concern to us all that the housing benefit budget seemed to be getting out of control in the run-up to the last general election. In fact, the housing benefit bill was forecast to rise over the current Parliament from £21 billion to more than £26 billion. This Government’s reforms have only pegged back that increase by about £2 billion a year, which, given the potential growth in the budget, is not very much at all.

The hon. Lady spoke about how the spare room subsidy has been working in practice. Like the hon. Member for Birmingham, Yardley (John Hemming), my constituency surgeries were visited by many people when the policy was first mooted, perhaps because they were scared by stories that were being circulated at the time about how it would affect them. There was a general lack of knowledge about discretionary housing payments and who can receive them for. I am pleased that we were able to help every person who came through the door of my constituency surgery advice centre seeking help in that area, and all received discretionary housing payments.

Interestingly, Daventry and District Housing, which serves a huge area of my constituency, saw the policy change coming down the line. It is a good housing association in many ways because it talks to its tenants on a regular basis and gets to know them, and it therefore made sure that they were ready for the change. Most tenants in Daventry and District Housing accommodation knew that the change was coming, and knew that discretionary housing payments were available and how to access them.

I sit on the Public Accounts Committee, which discusses these matters—I will mention the report that the hon. Member for Aberdeen South spoke about in moment—and it is fairly obvious that different parts of the country, different housing associations, and different councils have acted in completely different ways over this change. They have probably acted in their best local interests, which is fine, but it has led to different outcomes in various parts of the country that all have remarkably significant and different pressures on them.

In one of my first years on the Committee, its Chair, the right hon. Member for Barking (Margaret Hodge), took us to see a primary school and surrounding housing estate in her constituency. We had been talking about health and housing inequalities, and the trip was to see how primary education was working. I acknowledge that the pressures on housing in Erith and Thamesmead, or in Barking and Dagenham, are completely different from those in my constituency, and that is why local experts and housing associations in that area know their tenants well.

The interesting background to this debate concerns an area of spending that was constantly growing and needed to be brought under control—however we paint the picture, the Government’s moneybags were not particularly full when they came to office in May 2010, and although they are a bit better now, there are still tough decisions to be made. Such decisions must be based on fairness—I know that some Opposition Members do not consider this measure to be fair at all—and we must consider how we change a policy that is already enacted for those in the private rental housing sector but not for those in the public rental sector.

At this point I should say that I rent out a house. My private property in Lincoln is noted in the Register of Members’ Financial Interests and I rent it to a private sector tenant who to my knowledge is not on any type of benefit. There is a proper debate to be had about this issue, which was started in no uncertain terms by the previous Government.

This Government brought forward their proposals with the safety net of discretionary housing payments. I do not want to disagree with the hon. Member for Erith and Thamesmead (Teresa Pearce) because she will know her local area much better than I will, but perhaps I misheard her. She was talking about warrants for evictions, and perhaps she meant from the private rental sector.

[Teresa Pearce]

indicated assent.