Housing: Spending Review

Baroness Hollis of Heigham Excerpts

Thursday 4th November 2010 Lords Chamber

Moved by

[Baroness Hollis of Heigham]

To call attention to the impact on housing need and provision of the Budget and the spending review 2010; and to move for Papers.

[Baroness Hollis of Heigham]

My Lords, I declare an interest as chair of Broadland Housing Association and I thank organisations, from the Chartered Institute of Housing to the Royal Institution of Chartered Surveyors, led by Michael Newey, for their helpful briefings.

Effective markets depend on a rough balance between supply and demand. The prosperous have a housing market; for others, like dominoes, the pressures at the lower end of owner occupation cascade down through the private rented sector and collapse onto social housing—each displaces the vulnerable on to the tenure below. It is going to be carnage and it is utterly indecent.

I start with owner occupation. Given unemployment fears, muted wage growth, the increasing fiscal squeeze and deteriorating consumer confidence, Ernst & Young expects a double dip housing recession. Why? Most lending bodies now require a 25 per cent deposit—£40,000 on an average home—which people with university debts as well will find impossible to obtain. In 2006 there were 245,000 mortgages with a 10 per cent deposit; there are now 28,000. Without parental assistance, the first time buyer will now be 38 and will have lingered 10 to 15 years longer in the private rented sector.

He will be joined by a second group—owners who have become unemployed. Why? Because now, of all times, the Government are effectively halving the mortgage support they give to families on benefit; halving the interest rate from 6 per cent down to 3.65 per cent; halving the capital covered; and doubling the wait before support kicks in. Many families will face arrears and repossession and be forced back into the private rented sector without the hope of ever rejoining owner-occupation.

As a result, the private rented sector stops being a transitional tenure for young people and becomes a decade-or-three stay for them and for hundreds of thousands of poorly paid professionals who cannot buy, joining the many hundreds of thousands of the low-paid who may be on housing benefit but who cannot access social housing. How will private landlords respond? Rents in the private sector will probably rise, according to the National Landlords Association. Yet housing benefit will fall, not just capped at the top end but also, far worse, capped to cover not, as now, the average rent of 50 per cent but only rent of 30 per cent. So 70 per cent of rents will be higher than that and unaffordable in the market.

It gets worse. Let us project that forward. For the decade 1997 to 2007, rents increased by 70 per cent and CPI, the new inflationary index for benefit, by around 20 per cent. By 2020, housing benefit based on CPI will have fallen so far behind private rents that it may cover only 10 per cent of available property. In Manchester, it will cover only 5 per cent of available two-bedroom flats. In Ashford and Winchester, not a single two-bed home could be affordable on HB within 10 or 12 years. Yet, say government, reduced housing benefit will press down on landlords’ rents. That is key to their case. But it will not, because landlords have so many alternative tenants that they can raise rents. Most landlords do not have to let to private tenants on HB at whatever the price.

Only some 20 per cent of those in the private rented sector are on HB. It is not enough to have market leverage—not when surveyors report some five or six applicants for every rented property. The DWP’s own recent research quotes a major landlord in Bradford, saying, “Seriously, the next people I get in won’t be from DSS. I can’t do this any more”. The NLA says that in future 54 per cent of landlords will not rent to benefit claimants, half will not reduce their rents and nine in 10 will avoid taking anyone on HB. The result? Alex Fenton’s Cambridge research shows that if tenants try to meet that shortfall not covered by HB, perhaps 60,000 families with some 40,000 dependent children will be in severe poverty, below the poverty line. Instead, he expects around 200,000 families to face eviction, including 31,000 pensioners and 72,000 families with children. It is indecent.

Yet the Government say that the cuts to HB are essential to cap a soaring HB bill. Let us unpick that, because it is a myth. HB is not being pushed up by a few high claims but because more and poorer people are claiming. There are a few large families—refugee families, reconstituted families—who may need homes with more than four bedrooms. In Hackney, the Guardian reports that, of those 32 families in five-bed properties who will lose on average £1,200 per month, 31 are from a long-established Orthodox Jewish community. Will they become severely overcrowded in a smaller home? Will they instead be rehoused in two four-bedroom houses at higher HB bills? Or will they be scattered? It is indecent.

However, despite the grandstanding of senior Ministers, the DWP’s own stats show that, since 2000, over half of the increase in the HB bill—it is 54 per cent—comes not from the few high claims but from more private, poorer tenants claiming. They are in low-paid work, disabled or elderly. The 52,000 of them who are on pension credit stand to lose £11 a week, or four years’ worth of future pension increase. That is not decent. So, over half the increase in HB is coming from more people claiming. A sixth, or 18 per cent, comes from the rise in private sector rents, although that is by far less than house prices. Another 18 per cent comes from the Government pushing up, by policy choice, social housing target rents and the last 10 per cent comes from more social tenants claiming as the job market tightens.

There may be greedy landlords but the key driver behind increased HB has been more, poorer people coming into the private rented sector together with the Government's own demand that RSLs raise rents—full stop. Scare stories about vast bills make headlines; they should not make policy. Shelter estimates that 82,000 families may have to move. As families arrive in a spiral of debt and distress, the receiving authorities do not have the jobs, services, health or school places for them. Camden may lose 800 families, some to Enfield, which consequently expects an increase in overcrowding in its private rented sector. Slough says that there is no point in families going there when it has 6,000 on its waiting list. They would,

“push up costs and cause massive distortion to local prices”.

The truth is that homes are cheap only where there are no jobs, so I would ask the question that the noble Lord, Lord Tebbit, asks: should the jobless from Middlesbrough move to London where there may be jobs but no homes, or should the homeless from London move to Middlesbrough where there are homes but no jobs?

Added to this is the pressure for those people allowed only the shared room rent until they reach 35, not 25 as at present. Even before the cuts, Shelter had shown that, in much of the country, there was no such accommodation. Half of it explicitly bars DSS and 87 per cent of people already in a shared-rent room have a deficit on their HB bill of £35 a week. In future, if you are in a one-bedroom flat and lose your job, you lose your home. If you share a flat with an abusive partner and get him out, if you are on HB you lose your home—think of the power that gives him. Now you have to find a shared room, if you can, with strangers who you fear may threaten or abuse you, or thieve. It is indecent. Private rents will rise, HB will fall and evictions and homelessness will soar, while the safety net of social rented housing tears apart. All of the downward pressure—the falling domino effect of owner occupation going to private renting with private renters facing eviction—has made the need for social housing even greater. I now turn to that.

For decades, social housing has broken the link between poverty and poor housing—and I have been so proud of it. Inside Housing, the trade magazine, headlined on its front cover of 29 October, in huge capitals:

“The End of Social Housing, 1945-2010”.

How? First, the Government are savagely reducing by over 60 per cent the new build programme—at the cost, incidentally, of thousands of construction jobs. Half of the allocated £4 billion will go to the 60,000 to 70,000 houses already in the pipeline, with £1.9 billion going to new build at 80 per cent of market rent to provide insecure, intermediate tenancies. A billion quid builds 10,000 houses, plus land, so in all that is 80,000 or 90,000 new build. The Government say that we will have 150,000. Where is that coming from? It is coming from the increased rents of new, insecure and intermediate tenants who, nationally, will see their rent for a three-bed house treble from £83 a week to £249 a week. Only those with well above-average earnings can pay an unassisted intermediate rent, and they will be expected to move on and out quite quickly from that tenure because it is insecure.

There will be some; but virtually every tenant going into my housing association is on benefit. So the DCLG’s capital programme is paid for by the rents of a few transient non-HB tenants, alongside the increased HB bills for the DWP churned through the rent book. It is smoke and mirrors.

To add to the folly, the higher the new rent—and, therefore, the higher the housing benefit—the harder it is for any tenant to re-enter work. Cheap rents help people back into work. If, however, housing benefit is deliberately reduced by tying it to CPI while rents rise with the market, then arrears mount. Where will people be evicted to? More expensive bed and breakfasts? Vandalised cars? Street doorways? It is indecent, and it gets worse.

The non-dependent adult deduction rate will double up to £90 a week, netted off parents’ housing benefit and their council tax benefit because a low-paid adult son lives at home. If he leaves, his parents will underoccupy and be required to move. If he stays, he may be better off not working. Stable estates? Stable families? Nye Bevan’s “living tapestry of a mixed community”?

Even more vicious is the proposed 10 per cent cut in housing benefit for anyone on JSA for 12 months or more. Why? If people refuse work preparation now, let alone a job, their JSA is already sanctioned. If unemployed claimants are respecting the JSA rules, you cannot sanction them, and that does not suit the Government. So instead the Government are attacking an unconnected benefit, housing benefit, to give the longer-term unemployed a further whipping even though their lack of a job may be none of their making. It is horrifying.

Just over one-third of those on JSA are also on housing benefit—the rest either are owner-occupiers or live at home. Let me unpick the stats for two places. Wolverhampton has six claimants for every job, and if they were to be sanctioned tomorrow on housing benefit, 1,116 families would lose 10 per cent of their benefit. In Norfolk the figures are 5,000 jobs, mainly casual, and 15,600 claimants, and under these rules 1,254 families would be sanctioned tomorrow.

What does my housing association do? Evict them in due course? Into what? Severe overcrowding? Squatting? Cardboard boxes, perhaps? Or we could let the arrears mount and instead balance our books by cutting out retrofitting to lift pensioners out of fuel poverty. Evictions or increased fuel poverty—that is not a decent choice.

To conclude, we are looking at mortgage lending being at its lowest in 10 years, house-building and the construction industry in crisis, private rents rising as the sector gets swamped, housing benefit cut to 30 per cent, then 20 per cent and then 10 per cent of private rents, social housing as we know it ending—all the dominoes falling over as misery cascades down the tenures. And what really matters is that thousands and thousands of families in just a few months will face debt, stress, eviction and homelessness. Weeping children, desperate mothers, defeated fathers—how dare we do this? It is carnage among our own people, and we should be ashamed.

--- Later in debate ---

[Baroness Hollis of Heigham]

My Lords, I thank all those who have taken part in today’s debate. It has been distinguished, illuminating and powerful, although so many questions remain to be answered that I am sure that the debate will have to continue over the months ahead.

It was quite striking that the Minister had little support from her own Benches. What there was was heavily qualified, even in the gallant efforts of the noble Lord, Lord Brooke. What came out of today’s debate for me was, first, the request from all around the House to slow down. As the noble Lord, Lord Best, the noble Baroness, Lady Thomas, and my noble friend Lord McKenzie said, let us take our time and defer the proposals—which are possibly due in April—to ensure that we reduce the misery of continuous hassle and movement for the families who will be on the receiving end of these changes. Let us slow down.

The second message for the Minister is to reflect, review and research. My noble friend Lord McKenzie asked the key question. The core of the Government’s policy is their belief that by cutting or capping housing benefit, they will reduce the level of rents in the private sector and thus reduce the deficit. When asked on what evidence that was based, the Minister said, “It is a suggestion”. A suggestion, my Lords! We are going to inflict carnage and misery on thousands of families on the basis of a suggestion. It is not acceptable for any Government to behave in this way.

Finally, the Minister must be aware from the temperature of today’s debate of the very serious reservations all around the House that these policies will need to be modified. I hope that the Government will modify them. If they do, they should have a much better evidence base from the relevant departments. If they do not, I hope that the House of Commons will modify them. I say to the Minister that if these policies come unmodified to your Lordships’ House, I very much believe—if today’s debate is anything to go by—that this House will insist that the Minister modifies her positions. We shall see. I hope it does not come to that. I hope that the Government will take today’s debate seriously. On that basis, I beg leave to withdraw the Motion.

Motion withdrawn.