Local Housing Allowance

Debate between David Linden and Karen Buck

Wednesday 15th March 2023 Westminster Hall

[Ms Karen Buck (Westminster North) (Lab)]

It is a pleasure to respond for the Opposition under your chairmanship, Ms Elliott. I congratulate the hon. Member for Arfon (Hywel Williams) on securing this important debate. This is a niche issue for many people, yet it is so incredibly important. Rents are the single largest item in most families’ budgets. Not being able to pay the rent has the consequence of forcing families into poverty and also risks homelessness, as we have heard—I will return to that point in a minute.

I wish that, just occasionally, we could have a debate such as this with more than one Department present—it would be a good experiment and brilliant to have that opportunity. It is absolutely impossible to consider local housing allowances in isolation from housing policy. The fact that the housing market is so fundamentally broken is driving the crisis in rents and unaffordability, and therefore the pressure on the local housing allowance. The attempt to bear down on the local housing allowance drives up homelessness and has consequences for other Government Departments. It would be good to be able to hold two Ministers to account for the policies they pursue and their two different agendas, which usually—and in this case—involve a toxic pass-the-parcel game of responsibility and blame, with consequences for both.

As we have heard, the Government have accepted the need to uprate benefits in line with inflation this year—indeed, they have been proud of that fact. I do not think that should be a cause for congratulation. It should be the most absolutely fundamental principle of social security policy, yet they completely fail to accept that that same principle should apply to the local housing allowance. I would like the Minister to explain exactly why in this one area of policy, which affects the largest item of a family’s budget, the Government do not seem to believe that inflation exists. Of course, inflation does exist and, as we particularly heard from the Chair of the Select Committee, my right hon. Friend the Member for East Ham (Sir Stephen Timms), rents are soaring across the country, but probably most severely in London.

There are two consequences. First, over 800,000 households in the private rented sector face a shortfall between their rent and their local housing allowance. Some 57% of all universal credit households in the private rented sector have that shortfall. Secondly, dipping back into the issue of housing policy, it forces households into the absolute worst end of the private rented market. In this place, we discuss what has happened to households stuck in the poorest quality housing and the conditions that people are forced into if they are concentrated at the bottom end of the market, even if they can get it, have been a big media theme over the course of this winter.

Although we are discussing the freeze that has happened, in particular since 2020, this is also not a new phenomenon. Since the Government reduced the LHA from the 50th percentile to the 30th, there has been a continuing series of freezes, of which this is only the most recent. It was all based on the belief that the setting of the LHA levels would be bound in itself to influence rents, because it was understood or believed that such a large proportion of the private rented sector was funded by it. That was only ever partially true, or only true in some places, and always failed to recognise that even in a broad market rental area, there are different housing markets, and what applies to one part of the private rented market will not apply to others.

We know that the blind spot over the local housing allowance uprating can be seen in the homelessness statistics, as well as being felt by tenants in the shortfall between actual rents and the support available. There is an average monthly shortfall between rent and local housing allowance of £100 a month. It is indisputably true that the shortfalls are driving tenants to lose their homes. The end of a private rented tenancy is the single largest contributor to homelessness almost everywhere in the country.

[David Linden]

Does the hon. Member agree that the Government have to look at the picture in the round? When someone is evicted from their home, it is ultimately the state that picks up the cost. We should consider local housing allowance a preventive spending measure and the Government are short-sighted on the issue.

[Ms Buck]

I absolutely agree with the hon. Gentleman that homelessness is a cost on the central Government budget and on local authority budgets as well.

We have seen homelessness soar. Rough sleeping is up by 74% since 2010 and by 26% in the last year; there has been an 83% rise in the number of children who are now living in temporary accommodation as a result of homelessness. One in 23 children in London is now homeless. The squeeze on local housing allowances is undoubtedly a major factor driving that situation.

I have no doubt that the Minister will refer to discretionary housing payments, but, as my right hon. Friend the Member for East Ham has made clear, they make only a tiny contribution towards the total cost of budget shortfalls. Those payments have been cut by one fifth in 2021-22, and again this year. In any event, they are restricted in various ways, including by the fact that they are only ever meant to be temporary, so they are not, and never can be, the answer to the fall in local housing allowance.

The poorest, the most vulnerable and those with the least bargaining power in a toughly competitive private rented market, among them families with hundreds of thousands of children between them, are forced to deal with evictions, with frequent moves, and with all the disruption that homelessness causes to education, employment and caring allowances.

As Policy in Practice demonstrated in an important research report yesterday, the broken housing market also drags a substantial number of higher earners and higher-rate taxpayers into means-tested benefits such as universal credit via the housing allowances system, which is a completely unintended consequence of the freeze.

Investment in social housing—a way of ensuring that those with the lowest incomes can enjoy secure and affordable homes—is by far the best solution to this crisis. A better managed private rented sector would also be good for tenants. We have been promised action on that for years but we are yet to see it. All of these things would be better for the public purse, too. In the meantime, freezes in the local housing allowance make no sense whatsoever and only serve to make a bad situation worse.