Benefit Cap (Housing Benefit and Universal Credit) (Amendment) Regulations 2016
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Baroness Lister of Burtersett (Lab)
My Lords, I thank the noble Lord, Lord Kirkwood of Kirkhope, who is in practice my noble friend on these issues, for praying against the benefit cap regulations. The first-year review of the cap unsurprisingly found that caring responsibilities, especially for young children, represented one of the main barriers facing capped families looking for work. According to the equality analysis, 16% of existing capped households—more than 3,000—contain a child aged under one. Of these, more than 2,000 are headed by a lone parent and the great majority of those are women. Yet even under the current punitive regime this group is not expected to seek work when their youngest child is so young, so what is the justification for including them in the cap? Surely, on the logic of the High Court judgment that led to the welcome exclusion of carers in these regulations, as we have heard, those caring for infants should also be excluded. The equality analysis indicates that the number of households containing a child aged under one is now of course likely to increase. Can the Minister give an estimate of how great this increase is likely to be?
The new cap will affect a much wider group of families over a wider geographical area. In my own region of the east Midlands, the number of households affected is expected to increase from 800 to 5,000—a rise from 4% to 11% of those affected nationally. In order to avoid the risk of the arbitrary effects to which the noble Lord, Lord Kirkwood, referred, the IFS suggests:
“It would be sensible for the government to set out a clear vision of which families it thinks receive excessive amounts of benefits and why”.
I look forward to the Minister enlightening us.
It still beats me how, as the Government claim, it can be in the best interests of these children for them to be driven further into poverty in the name of some theoretical future life chances, especially when the earlier IFS evaluation showed that only a tiny fraction of those affected had moved into paid work. Its more recent analysis suggests that it is not likely to be that different now. Moreover, there is evidence to indicate that cutting benefits can be counterproductive because impoverishment reduces job-seeking capacities. If all one’s energy has to go into getting by, that does not leave much over for presenting oneself as a suitable job applicant to employers.
As I cited during the passage of the Bill, according to last year’s Supreme Court judgment the department is misinterpreting the best interests requirement when it argues on the basis of the theoretical best interests of the generality of children rather than the actual best interests of children whose parents’ income is driven below what Parliament has deemed necessary to meet their needs. I very much concur with what the noble Lord, Lord Kirkwood, said about the basic principle of this cap, which I am opposed to.
Both the UN Committee on Economic, Social and Cultural Rights and the UN Committee on the Rights of the Child have recently expressed deep concern about the impact of the reductions in the cap. This is also referred to in the report just published by the Committee on the Rights of Persons with Disabilities. The fears of these UN committees are likely to be borne out given the recent warnings of, for example, the Chartered Institute of Housing. It is quite clear from the revised impact assessment that children are still disproportionately affected. In his Statement on the recent UNCRC concluding observations, the Minister for Vulnerable Children and Families called on government colleagues to reflect on the committee’s recommendations,
“for example, by reflecting the voice of the child fully in the design and implementation of policy”.—[Official Report, Commons, 17/10/16; col. 23WS.]
There is no evidence of the voice of the child here.
Despite being pressed a number of times during the passage of the Bill, there is also still no mention in the revised impact assessment of the application of the famous family test. The best that we got during the Bill was a letter from the Minister, which turned up in my junk email folder, assuring us:
“The Government has fully considered the family test criteria as an integral part of the policy development process”.
This is not how the DWP advises other government departments to present the outcome of the application of the family test. It simply is not good enough. Perhaps the Minister prefers not to spell out the impact on families of a policy that the impact assessment shows will disproportionately hit children and lone mothers.
Returning specifically to the impact on children’s rights, I draw attention here to the Equality and Human Rights Commission’s note on priority issues for implementing the concluding observations of the UNCRC. It would,
“highlight, for an urgent response, the recommendation of the UN CRC for the UK to ‘[c]onduct a comprehensive assessment of the cumulative impact of the full range of social security and tax credit reforms introduced between 2010 and 2016 on children’, and to revise the reforms where necessary to ensure the best interests of the child are”—
I stress are—“a primary consideration”. I would welcome the Minister’s response.
Lord Best (CB)
My Lords, on the face of it withdrawing help from very poor people, which is the effect of lowering the overall benefit cap, seems extremely harsh. It has two justifications, as I understand it, in addition to the obvious aim of saving money and reducing the national deficit. First, it is hoped that it will fiercely encourage those affected to seek out a job, since that would exempt them from the constraints of the cap. Secondly, the effect of the cap reducing support in housing benefit could be to persuade landlords to reduce rents. It seems that neither of these hoped-for outcomes will be very successful.
On the jobs front, the previous imposition of a benefits cap seems to have pushed less than a quarter of those affected into a job, leaving the great majority to take the hit in a straightforward reduction of their standard of living. The noble Lord, Lord Kirkwood, and the noble Baroness, Lady Lister, have spelled out the obstacles to the new measure getting people into work.
On the housing side, could the lowering of the cap achieve savings to the Government without hardship to those whose benefit is cut by coercing private landlords to trim their rents? Landlords who concentrate on tenants who need housing benefit would, it is argued, have to settle for a lower rent if tenants cannot pay, otherwise they would be faced with an empty property.
Of course I understand that the Department for Work and Pensions, propelled by the pressure of the Treasury, wants to reduce the housing benefit bill which, frustratingly, keeps rising as rents rise, but such is the scarcity of inexpensive homes to rent in London, and increasingly throughout the country, that private landlords do not cut rents when housing benefit tenants are given less to spend on rent. Instead, landlords simply stop letting their properties to people in receipt of housing benefit. More than three-quarters of private landlords will not consider housing anyone in receipt of HB, and those who are already letting to such tenants are increasingly unlikely to renew assured shorthold tenancies when they conclude after six months or a year.
The new cap is estimated by the Chartered Institute of Housing to hit 116,000 families containing 319,000 children. It comes on top of the local housing allowance caps and freezes, which are biting already. Although the impact of the new measure is greatest in London, despite the higher level of the cap there, all areas are affected. IFS figures show that families with three children face the most severe cuts. Half of them are facing a gap between their housing benefit and their rent of more than £100 per week. No private landlord is going to reduce rents by anything approaching that level.
So, in housing terms, the most likely impact of the new measure is the gradual elimination of privately rented accommodation for households which, for a host of reasons, are not in employment. Although tenants may try to make up the shortfall between their housing benefit and their rent by drawing on loans, help from friends and using up resources provided for food, heating et cetera, this is untenable for a sustained period. Debts and arrears are highly likely, and private landlords can see this coming. It is safer and more profitable to let to tenants who need no HB support.
What follows is likely to be an increase in homelessness. Housing associations and councils cannot take in all those rejected by the private rented sector. I know the Minister has done sterling work in extracting funding from the Treasury for discretionary housing payments to offset the impact of earlier benefit cuts. His efforts have reduced the deficit-cutting savings for the Government, but they are not a stable way to fend off homelessness in the face of continuing benefit cuts.
I will soon have the honour of piloting the Homelessness Reduction Bill through your Lordships’ House if and when it completes its stages in the other place. It will be a really helpful measure to prevent homelessness and provide more relief for those who face homelessness, and I am delighted that the Government are supporting it. However, this legislation, if it completes its stages in the other place and meets with approval in your Lordships’ House, cannot swiftly turn the tide and conjure up more rented homes within the reach of those who receive housing benefit. Market forces dictate that, if housing benefit does not cover the rent, private landlords will simply not let to these households.
I agree with the noble Lord, Lord Kirkwood of Kirkhope, that additional support to help those hit by the latest cap get a job is definitely needed before inflicting upon them a very significant cut in their income. Locating and assisting those affected in the private rented sector may not be easy, but several thousand council and housing association tenants are also affected. Councils which focus on these tenants are to be commended. Housing associations trying to help tenants with skills training need to be informed by their local councils of which tenants will be affected by the new benefit cap. They can then target support with financial advice and training on those people. The National Housing Federation points out that not all councils are sharing these data with their local housing associations. Support from the Minister in making sure this data-sharing happens would be very valuable.
Welfare Reform and Work Bill
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“(c) the accommodation is owned by a fully mutual housing co-operative within the meaning of paragraph 12(1)(h) of Schedule 1 to the Housing Act 1988 (local authority tenancies etc);(d) the accommodation is owned by a community land trust within the meaning of section 79 of the Housing and Regeneration Act 2008 (English bodies).”
Lord Best (CB)
My Lords, I rise to speak to Amendments 50 and 51, the first two amendments in the group, in my name and those of the noble Lords, Lord McKenzie of Luton, Lord Shipley and Lord Kerslake, and to support the other amendments in the group that follow in the names of the noble Lords, Lord Ramsbotham and Lord Kerslake, and the noble Baroness, Lady Meacher.
We return to the rent cuts of 12% over four years for the housing associations and councils. This will achieve savings for the Treasury in housing benefit of approaching £2 billion per annum by 2020 and every year thereafter. The problem is that, although the major developing housing providers can absorb this unwelcome loss of income by reducing the extra services they supply, and/or doing a bit less new building, and/or running down their reserves, some housing bodies cannot take the hit. The aim of Amendments 50 and 51 is to prevent the rent cuts impeding the vital work of these organisations.
There is no margin for a rent cut where the organisation, or the specialist part of a larger housing provider, does not currently make any surplus to set aside, either because rents are carefully kept at a level that covers only loan costs and management and maintenance costs—as with the co-ops and community land trusts covered by Amendment 50—or because the provision of extra services means that existing rents are barely enough, as with the supported housing and extra care housing for older people covered by Amendment 51. The 12% rent cut would clobber the housing associations in these categories for very slim pickings for the Treasury.
I couple my comments on these proposed rent cuts with an equal concern about the proposal that housing benefits for all social housing tenants should be capped at the level for private sector tenants—that is, at the local housing allowance ceilings. Again, the tenants of the major housing providers, whose rents are mostly way below those in the private sector, should not be too hard hit—although, as an aside, I am very worried about some of those aged under 35 who would suddenly get only the shared accommodation rate. But, the biggest problem of the LHA rent cap is, again, supported housing and extra care schemes for older people, where the rents are much higher than for a similar home let by a private landlord because, of course, the work of the provider of supported housing goes far beyond simple property management and maintenance. The LHA private sector cap is clearly entirely inappropriate for supported housing. Applying it in April 2018 for all those who become tenants after 1 April 2016 would mean that very few of the residents who move in just two months from now could continue to stay in this specialist accommodation in two years’ time. Where would they all go if the projects have to close or the supported accommodation has to be switched to general needs housing?
In response to these points on rent cuts and benefit caps, and following representations from many charities working in this field, including Riverside, St Mungo’s Broadway, YMCA, Crisis, Homeless Link and the National Housing Federation, the Minister has taken some very constructive decisions that he will, no doubt, spell out tonight. I am delighted that the noble Lord has determined that housing under all the categories in my amendments—including the housing co-operatives, community land trusts and almshouses, which were of special concern to the noble Lord, Lord Ramsbotham—are to be taken out of the rent cuts while better arrangements are determined, with increases in rent permitted in line with the existing regulations for the time being.
I welcome the Minister’s decision to work in close collaboration with the relevant specialist providers to use a one-year moratorium on rent cuts to devise a satisfactory basis for determining the funding arrangements for supported housing. This is entirely sensible and the Minister will be able to take into account the findings from an important supported housing review by Ipsos MORI, which he has instigated. I am grateful to him for the care and attention he has given to this matter and for today’s important announcement.
Lord Kerslake
The proposal with regard to the exemption and flexibility for the regulator in those difficult circumstances is entirely welcome. Although it does not go as far as I sought, it is a very helpful move indeed, so I thank the Minister.
Lord Best
My Lords, this has been an excellent debate. Many thanks to the noble Lord, Lord Shipley, my noble friends Lord Listowel and Lord Kerslake—I was pleased to hear him say that he welcomed the announcement by the Minister—and the noble Baroness, Lady Hollis, who may have been satisfied to some extent on the process. We should have a chance to debate these things in the future. I thank the right reverend Prelate the Bishop of Durham, who told us about the work of Framework, a typical housing association, which is feeling very nervous and which, I hope we are pretty well fully reassured, will not go out of business as a result of these measures—that will just not happen. I also thank the noble Baroness, Lady Manzoor, my noble friend Lord Ramsbotham, for championing the cause of the almshouses, the noble Lord, Lord Young of Cookham, for joining in very helpfully; and the noble Baroness, Lady Warwick. She continues to feel fearful but I hope that she gained the distinct impression that it would be a bad idea to hold back on the basis of thinking, “The Government will probably let us down; the rents won’t meet what is required”.
For some years I chaired one of the housing associations—Hanover, which runs the most extra care housing schemes in the country. I thought to myself, “Knowing what I know, would I say to my board that it is too risky to go ahead with an extra care scheme in these circumstances, because by 2018 we may find that there is no money on the table and we will go out of business?”. I would say from the chair, “Let’s go for it. I don’t believe we’re going to be put out of business”, but I fully accept that some of my fellow board members might take a more cautious view. That is the anxiety that remains until the Minister is able to come up with something that has a watertight guarantee. However, his words tonight were as reassuring as we could expect them to be.
I echo the Minister’s tribute to the many organisations that have beaten a path to his door. I am sure that they were much more influential than myself or anyone else in this House because they bring the real experience of the front line through to the ministerial office. I am delighted that he is deeply committed to engaging those same organisations in the process that now follows to find a permanent solution.
However, best of all, I am very pleased that the Minister has been able to announce that, while the review takes place and Ipsos MORI comes up with its research, with the providers being part of the process of finding a permanent solution, rents can be increased by CPI plus 1% in these schemes. That will keep the wolf from the door. I have pleasure in begging leave to withdraw the amendment.
Social Housing Sector
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Lord Best (CB)
My Lords, the review to which the Minister refers is extremely welcome. Has he heard the news that the major housing associations providing extra care housing for older people, which saves the state an enormous amount of money in hospital and residential care fees, have put their programmes on hold awaiting the outcome of this review? If he has heard that news, could he respond to the urgency of the situation?
Lord Freud
We are talking to the relevant supported housing associations—it is a variegated sector. There are a couple of issues that are concerning them at the moment, and this is one of them. We are looking, as we develop a dialogue, to get a policy that works for this sector as soon as we possibly can.
Welfare Reform and Work Bill
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Lord Best (CB)
My Lords, I rise to support the amendments in the name of my noble friend Lord Kerslake and to speak to Amendment 108 in this group. These amendments all address the implications of the Government’s plan to require housing associations and councils to reduce their rents by around 12% over the next four years. It has often been said that rent controls were the reason for the private rented sector declining from more than 60% of the nation’s housing after World War II to a meagre 8% or so by 1990. For sure, the new rent cuts will also have unintended consequences.
The Government, in the DWP’s impact assessment for this measure, justify the rent cuts on the grounds that housing association rents have been increasing at a much greater rate than those of private landlords, but it has been government policy that associations should raise their rents toward market rent so that social housing grants can be cut. The higher rents have been necessary to enable associations to borrow more to compensate for grants being reduced from some 90% of the costs of a new home down to around 15%. Lower grants and higher rents have meant more people needing housing benefit. Although previous Conservative Housing Ministers have said, “Let housing benefit take the strain”, now Ministers responsible for welfare want to dramatically reduce housing benefit expenditure and the rent cuts are intended to save nearly £2 billion per annum by 2021 and every year thereafter. These savings will have significant negative consequences for the Government’s housing policy.
The housing associations, whose incomes will have fallen by £1.6 billion per annum by 2020-21, and annually thereafter, can try to make up the difference in three ways. First, they can cut their development programmes, which would damage the Government’s hopes for the building of substantially more homes, as explained by my noble friend Lord Kerslake. Secondly, they can cut their revenue costs; a number have already announced that their added-value programmes will be axed, such as tackling anti-social behaviour, supporting loss-making specialist housing, helping people into work, reducing tenants’ energy costs and so on. Removing these local services means extra costs for society elsewhere. Thirdly, associations can reduce the surpluses that some have generated in recent years, but these surpluses have been ploughed back into housing and services, as well as being important in satisfying lenders, from whom the housing associations have been borrowing some £3.5 billion a year on excellent terms. With increased risk, raising loans will be more difficult and more expensive.
Lord McKenzie of Luton
My Lords, Amendment 107 calls for certain types of property to be excepted from the provisions of the rent reduction scheme. It was assumed when it was drafted that it would have the same effect as Amendment 109 in the name of the noble Lord, Lord Best, and others. I acknowledge that Amendment 109 seems to have garnered a broader range of support and doubtless this has much to do with the credibility of the person whose name is at the top of it as well as the substance of the drafting.
The scope of this exception is built on the coverage of the regulations which widen the protection from the benefit cap. It is intended to include supported housing where the landlord is of a specified type and provides, or causes to be provided, care support or supervision to claimants; supported accommodation where the landlord is a specified third or social sector provider and care, support or supervision is provided to residents; third and social sector refuges, including local authority refuges where a claimant is accommodated because they are fleeing domestic violence; and local authority hostels providing care, support or supervision.
The Government’s briefing note on these clauses indicates that they are minded to align exceptions to the policy with exemptions that apply to the rent policy set out in the rent standard guidance. We would support this as far as it goes as its coverage would include PFI schemes, temporary social housing and short-life leasing schemes for the homeless, residential and nursing homes, student homes and key worker accommodation. Perhaps the Minister will confirm that this is still the intent and say why, therefore, more could not be put in the Bill.
Despite this, it is considered that the specialised supported housing definition included in the rent standard is too limited. The guidance itself has indicated that interpretation has not been without difficulty. For example, it says that the exemption from social rent requirements of specialised support in housing is usually limited to those properties developed in partnership with local authorities or the health service and which satisfy all of the following criteria. The scheme should offer a high level of support for clients; no or negligible public subsidy should have been received; and the scheme should have been commissioned in line with local health and social services or supporting people strategies and priorities. I paraphrase.
Adopting the definitions in the housing benefit and universal credit regulations—which is what this amendment and the amendment of the noble Lord, Lord Best, do—will provide a wide enough basis for an exemption from Clause 21. The reason we need a comprehensive exception from the policy in this respect has been abundantly clear from the range of submissions we have received. As the submission from Homeless Link sets out, the type of accommodation we are referring to—let us call it supported housing—caters for a wide range of tenants with specific needs requiring various degrees of support. It points out that this provision is generally more expensive to build, manage and maintain. The fear is that the rent reduction measure will lead to a loss of existing supported housing schemes, with fewer schemes being developed in the future. Those who bear the brunt will be the homeless, those with mental health problems, people fleeing domestic violence, those with learning disabilities and those with drug and alcohol problems. Denying them the chance of decent accommodation and care and support will only push the costs elsewhere in the public sector as well as impairing the life chances of those whose quality of life is under challenge.
We have been presented with examples of projects that will fall by the wayside, including from Riverside, with a third of its supported housing schemes being at risk; St Mungo’s, with a cumulative four-year loss of projected income of £4 million; and the YMCA, with the potential end to a housing project for 170 16 to 17 year-olds. Indeed, Riverside has set out a range of stark facts. It states that early Riverside projections indicate the impact of the rent decrease policy will be a reduction in income in excess of 16% over four years, a cumulative total of almost £100 million, which it says will reduce its operating margins by 9.5%. Riverside owns and manages around 4,600 units of supported housing. Housing associations as a whole manage 105,000 units of supported housing, which is 3.7% of all stock managed. The level of savings forgone, it is suggested, as a result of an exception for supported housing, would be modest.
Having moved this amendment, I hope it puts us on the same page as the noble Lord, Lord Best. I look forward to hearing from him to see whether we can forge a common position. I beg to move.
Lord Best (CB)
My Lords, I speak to Amendment 109, which covers the same issue as Amendment 107, moved by the noble Lord, Lord McKenzie of Luton. Of course I entirely support that amendment, which was so well presented by the noble Lord. In both cases the amendments look for an exclusion from the proposed 12% rent cuts for supported housing as defined in housing benefit and universal credit regulations. I am grateful to the noble Lords, Lord Kerslake and Lord Shipley, and the right reverend Prelate the Bishop of Rochester for supporting this amendment, and to the noble Lord, Lord Horam, who spoke earlier in favour of exceptions and exclusions for cases of this kind. I also offer sincere thanks to Members from all sides of the House who signed a letter to the Times, co-ordinated by the National Housing Federation just before Christmas, expressing the hope that the Government would give favourable consideration to the case we are making today.
The specialist housing organisations that fall within this definition—such as St Mungo’s Broadway, the YMCA and many small charities—would suffer a major blow from the 12% reduction in income from their rents. These are the organisations on the very front line, providing supported housing for those with mental health, drug and alcohol problems, homeless people, care leavers, those fleeing domestic violence, as well as veterans and older people needing care and support.
The vulnerable people these charities support inevitably require higher spending than for general-needs renting. The charities working for them operate on the margins of viability and can easily be pushed over the edge. As well as supported housing being provided by specialist bodies, many of the larger housing associations have been keen to include schemes of this kind within their wider stock, but these social businesses cannot absorb loss-making projects. It is very hard for them to sustain this specialist provision if supported housing becomes a financial liability.
Management costs are not the only ingredient that means supported housing must have higher rents than the norm. There are higher maintenance costs due to the higher turnover of tenants, greater wear and tear, more voids between lettings, more arrears, and even significantly higher insurance premiums. Yet without these housing schemes it is certain that a lot of people will suffer the most acute deprivation, including living out on the streets. Moreover, the wider impact on society from neglecting their needs will be immense. The Homes and Communities Agency found that supported housing work produced a net positive financial benefit of some £640 million—more than six times the savings that the Government would obtain from cutting rents by the fourth year of this rent-cutting policy.
The accommodation covered by the amendment has already been given special status in respect of the new benefit cap and exemption from the so-called bedroom tax. Therefore it seems entirely consistent to exclude these hostels and specified accommodation schemes from the requirement for rent cuts. The Government have stated that it might be possible for an organisation which could face extinction as a result of the rent reductions to apply for a waiver from this requirement. However, there are two flaws in this approach to solving the problem now facing housing.
First, the specialist charities requesting a waiver face ongoing uncertainty and an unknown, potentially bureaucratic and time-consuming process to decide the somewhat extreme question of whether they will become insolvent rather than just be completely undermined by losing so much income. Secondly, the waiver route does not address the issue of supported housing provided within their wider role by larger housing associations that do not face financial ruin but which are likely to pull back from pursuing this kind of accommodation if rent cuts render supported housing loss-making.
If an association with wider objectives has to improve its financial viability by closing its supported housing schemes, the effect will be just as bad as forcing a small charity out of business. This is where we get into the issues raised by the Minister on the difference between exempting organisations by providing a waiver if they look like they are going bust because of the rent reductions, and excluding categories of housing—the category in this case being supported housing.
I know that the last thing the Government want is to undermine housing provision for those in the most acute need, with all the extra expenditure for the NHS, social care, the justice system and the rest which would follow. I believe that the Government already have a concession of this kind in mind, but confirmation of the position by the Minister is needed urgently because the process for a rent reduction on 1 April, with the sending out of thousands of notices to tenants and local authority housing departments, which will be very hard to rescind, must begin at the end of this month.
I must conclude with a footnote, albeit a rather important one. The Government are also planning to introduce another constraint: a cap on housing benefit for council and housing association tenants at the same level as for tenants of private landlords; that is, at the local housing allowance level. This ceiling is not a problem for the great majority of housing association properties since their rents are lower than in the private rented sector. The noble Baroness, Lady Hollis, suggested that they are something like 40% to 50% lower. But, of course, rents for supported housing—the kind of housing that private landlords do not provide—are obviously much higher.
For example, a homeless project for people with mental health and/or drug and alcohol issues is currently charging £119 per week, but the relevant local housing allowance maximum for an ordinary one-bedroom flat is £84 per week, so the new cap at LHA levels would mean a loss of £35 per week per flat for the project. A purpose-built autism scheme for enabling people to move out of institutional care would face a shortfall of £90 per week per flat, even though the scheme saves huge sums compared with the costs of leaving people in the institutional setting.
Welfare Reform and Work Bill
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“(5C) Regulations under this section shall provide for an exception to the benefit cap for a person or couple who have been placed in temporary accommodation by a local housing authority in pursuance of its duties under section 188, 190, 193 or 195 of the Housing Act 1996.
(5D) The period for which the exception in subsection (5C) applies shall not exceed 39 weeks beginning with the date on which accommodation was first provided under any of the duties specified.”
Lord Best (CB)
My Lords, the noble Earl, Lord Listowel, and the noble Baroness, Lady Manzoor, have added their names to Amendment 73, which covers similar ground to Amendments 86 and 90A in the same group. I am grateful to both Shelter, which has just released an important report on the alarming rise in homelessness, and the Local Government Association—I declare my interest as a vice-president of the LGA—for their input.
The amendment addresses one specific housing aspect of the proposed new benefit cap. Of course, it is because of the high level of housing costs that, in so many cases, the benefits to which some families are currently entitled will exceed the Government’s new cap, as several noble Lords have already remarked. If the cap is set at £385 per week outside London, then the family in south Wales paying £65 per week for their council house is unlikely to be adversely affected. However, where an identical family lives in private rented accommodation in the south-east with a rent of £250 per week—and for a family with more than two children rents can sometimes be appreciably higher—they are in big trouble.
Earlier pleas for local, not national, caps have led to a differential for London, as we heard in our earlier discussion, but one level for London and one for every other region is pretty crude. The position is in fact rather worse in much of London, where a family may face a rent of £350 per week, as against a proposed new cap of £440 per week for all support—that is, leaving the family with just £90 per week to cover everything else after paying their rent. It is high housing costs that so often cause the problem of high benefit costs. This is an overarching problem facing the cap and it is going to cause huge problems for tenants, landlords and the Government.
This amendment covers only a narrow aspect of the problem but it is a highly significant one. It covers families and individuals placed in temporary accommodation by their local authority. Families accepted as homeless by local authorities under the Housing Act 1996 have to be found somewhere to live. To meet their statutory duty to house these homeless households, councils make use of temporary accommodation, which is usually provided in the private sector via a housing association or directly by a private landlord. Not only will the rent for this temporary accommodation be relatively high because of the high turnover and high management costs but councils have to add an administrative charge on top. The total rent, therefore, is likely to mean that the family’s requirement for support takes them well over the new cap.
However, the family cannot go anywhere else—they are homeless, or just about to be so—and must accept the temporary accommodation on offer. They cannot negotiate over the rent: it is predetermined for them. They are stuck, but often only temporarily. Hopefully, in due course, with help from the local authority and often from one of the homelessness charities, the family will find its way into somewhere more permanent and at a more reasonable rent. However, while in the temporary accommodation, there is no option but for the rent to be paid, even though this would absorb almost all available support within the cap.
This amendment, therefore, looks at an exemption for those in temporary accommodation for a fixed period of 39 weeks. This is the same period of grace as for those who have lost their job. Those who are made redundant or whose employer goes bust, or those who lose their job for other reasons, need time to get a new job. It would be counterproductive to penalise a tenant by imposing an immediate benefit cap with the likely outcome of them incurring debt and/or having to move away from work opportunities. In just the same way, those who lose their home require a few weeks, at least, to secure a new place to live.
The Minister will well remember the amendment I proposed to the previous Welfare Reform Bill for a period of grace from the benefit cap for those who lost their job. On that occasion, the Minister generously decided to improve upon my suggestion of a 26-week period of grace, substituting a 39-week period. I now look forward to the same treatment for those who have lost their home and had to move to temporary accommodation. These people too need a period of grace to get back on track. The 39-week grace period would apply when a council accepts a household as homeless or about to become so. This would enable the rent to be covered in their temporary accommodation for a sufficient period, and in many cases enable them to secure new employment and/or find a proper home, hopefully at a more reasonable rent.
I am familiar with one case where a family lost their shorthold tenancy in Hillingdon. The landlord decided not to renew their tenancy—I guess because he was planning to raise the rent above the level for which housing benefit and local housing allowance has been available. The family became homeless and were housed in temporary accommodation in Slough. The two children remained at their schools in Hillingdon by getting up extremely early and getting home very late, with their mother also travelling daily from Slough to desperately try to retain links to job opportunities in Hillingdon. She succeeded, somewhat against the odds, and the family is settled, albeit paying a higher rent, back in their home borough.
A period of grace prevents drastic decisions being taken to move families to a low-cost area miles away, far from work opportunities, schools and networks of family and friends. The 39-week grace period makes complete sense, as the Minister’s earlier amendment did, which provides this same period of grace for those who lose their job. A precedent exists already for exempting a family that has to move in dire circumstances. This is the exemption for households supported in temporary accommodation because they are fleeing domestic violence. There are precedents, therefore, both for a 39-week grace period and for exempting vulnerable groups that have to go into temporary accommodation.
I am rather nervous the Minister may respond that, as with other cases where a household has difficulties with support for housing costs, the allocation of funds to local authorities for discretionary housing payments, or DHPs, could take the strain. I know that the noble Lord, Lord Kerslake, will pick up on this point, with particular reference to the difficulties of stretching the rationed DHPs in London. Picking up the cost of rent for families in temporary accommodation whose benefits are capped already absorbs up to 60% of the discretionary housing payments in some London boroughs. The lower cap will mean an additional call on DHPs that will be positively overwhelming in the hardest-pressed places, bearing in mind that these discretionary payments are meant to fill so many other gaps, not least where all are agreed that the so-called bedroom tax should not be payable. Moreover, it is hugely increasing the administrative burden on councils to ask them to exercise discretion on a case-by-case basis on a much bigger scale.
The other grounds on which the Minister might suggest that this amendment is not a good idea is that the new lower cap will coerce councils into negotiating lower rents with landlords. But local authorities are already finding it extremely difficult to persuade landlords to enter into these temporary accommodation agreements, and the existing financial system—quite properly aiming to keep families out of bed-and-breakfast hotels—already strongly incentivises councils to get the rents down. Therefore, I do not think that there is mileage in this argument.
Would there be a cost to government in allowing a period of exemption from the cap for those placed in temporary accommodation? Yes, but this is time-limited and a concession that represents a trifling expenditure in the wider context and saves huge costs—perhaps lasting a lifetime—if councils, in fulfilling their statutory duties, feel compelled to dispatch families to the cheapest areas of the country where their employment prospects are much lower, children are likely to be badly hit by changing schools and all the family will miss local networks of friends and family. I hope very much that this amendment appeals to the Minister. I beg to move.
Lord Freud
The noble Earl will be aware that an enormous amount of research is conducted in this area. I will write to him with anything specific that I can on our research proposals.
Lord Best
I thank all noble Lords who have participated in this mini debate, and particularly the noble Lords, Lord McKenzie of Luton and Lord Kerslake, for their contributions to one of the key housing aspects of the wider debate on the benefit cap. The noble Lord has found a fundamental flaw, as he sees it, in the argument in favour of temporary accommodation being exempted: that there will be no incentive for those who are placed in such accommodation to move for the full 39 weeks, because as soon as they do they will no longer be exempt from the cap. This is a consideration I shall have to ponder in some depth, and I am grateful to the noble Lord for explaining it. I fear that the position already is not that the vast majority of people will not be affected by this arrangement, because we know that an awful lot of families are being moved well away from the place where they are most likely to get a job, where their children go to school and where they have their family and friends close by to help them. A high proportion of families are now having to move a long way away because of the need to keep down the cost of temporary accommodation. We will have to think some more about this issue, but in the mean time, I beg leave to withdraw the amendment.
Welfare Reform and Work Bill
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Earl Cathcart
Yes, I imagine that it is before the eight weeks as well. As I said, I found the figure of 90% to be quite extraordinary, so I do not believe that it is working in the social housing sector either. All this could have been avoided if the rent had been paid direct to the landlord.
In addition, in October 2012, a survey of more than 1,000 landlords carried out by the Residential Landlords Association and the Scottish Association of Landlords found that more than 91% of landlords were less likely to rent to tenants on benefit as a result of the decision not to automatically make the payment of the benefits direct to the landlord. Not making the payment direct to the landlord is not helping the landlords and not helping the tenants; indeed, all the evidence backed by Shelter, Crisis and the Money Advice Trust has been that paying it direct to the landlord was popular with tenants. They were assured that their rent was covered before they decided how else to spend their money.
I believe that in Northern Ireland the benefit is to be paid direct to the landlords, as, too, in Scotland. Therefore, why not in England? Amendment 104BB would give tenants the free choice to have the housing element of their universal credit paid direct to their landlord. I hope my noble friend will look favourably on these three amendments, and give landlords, tenants and, indeed, me an early Christmas present. I beg to move.
Lord Best (CB)
My Lords, I support Amendment 104B in the name of the noble Earl, Lord Cathcart, to which I have added my name. This would empower local authorities and the DWP to give landlords details of entitlement to housing benefit—in future to the housing element in universal credit—where a prospective tenant gives written consent for this information to be imparted. In parallel to efforts to come down heavily on so-called rogue landlords, the Government should try wherever possible to be supportive of good landlords, of which there are, thank goodness, plenty of examples. The nation needs a strong, responsible private rented sector. Legislation should surely be supportive of those willing to invest in decent rented housing, perhaps particularly in rural areas, where some large landowners often act in a similar way to a local housing association.
However, we know that many landlords are nervous of offering a tenancy to those on low incomes who could have difficulty paying the rent, particularly now that welfare reforms have diminished benefit support for these households. Landlords who want to do the right thing, who charge reasonable rents and who are keen to help those in their local communities should not be deterred; they can be reassured that prospective tenants have an entitlement to universal credit and can afford to take on a tenancy, so long as those responsible for administering benefits are willing to explain the position. If officials administering benefit do not feel able to discuss an individual case—even where, as in the amendment, the individual gave written consent for this—I commend the idea that they be required to share enough information with each landlord to enable them to make an informed decision.
Perhaps I could also stand in for my noble friend Lady Meacher and add support to Amendment 104BB, which is also in the names of the two noble Earls, Lord Listowel and Lord Cathcart. This also addresses a new barrier to private landlords accepting low-income tenants. It calls for the facility for payment of the housing element in universal credit to be made direct to landlords where the tenant requests it. I know the Minister was able to give some reassurance on this score to councils and housing associations by ruling that direct payments should be made easy where a tenant is eight weeks or more in arrears, and also by allowing direct payment of rent from day one for the most vulnerable tenants. However, a lot of private landlords will simply not let to anyone on benefits—that is, in receipt of the housing element of universal credit—if there is the prospect of an eight-week loss of rent before a tenant’s request for direct payment can be activated. For the private rented sector, direct payments seem sensible from the perspective of tenants as well as all those who want to encourage private landlords to be helpful and supportive to those in receipt of benefits. I support these amendments.
The Earl of Listowel (CB)
My Lords, I will speak briefly to my Amendment 104BB. I am grateful to the noble Earl and my noble friend Lady Meacher for adding their names to it, reflecting our earlier debates about the great concerns around increasing homelessness. Clearly these amendments are important because we wish to encourage landlords to take low-income tenants to address that homelessness. I declare my interests as noted in the register as a landlord.
I will not go into the details of this amendment because the noble Earl did that already. My concern is that paying HB directly to claimants may compound the homelessness issue we discussed earlier and contribute to a reduction in social housebuilding. Many of those receiving housing benefits may already be in debt, feel tempted to use their rent to pay off such debts and consequently become homeless. It may be that the eight-week limit that has been discussed will protect them from that. Social landlords are concerned that direct payment to tenants of HB may lead to tenants accruing arrears. Pursuing arrears is a costly business. Social landlords already face reduced incomes thanks to the reduced rents that this Bill introduces. Consequently, they may have less money to build more homes and we may see an impact on the building of social housing. I have two questions for the Minister on the effect of the move to direct payments of HB to claimants. What level of cost to social landlords does the Minister anticipate arising from that move to direct payments? What impact on homelessness, if any, does the Minister anticipate?
Welfare Reform and Work Bill
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Lord Best (CB)
My Lords, I support Amendment 62C, in the names of my noble friends Lord Low of Dalston and Lady Hollins. This is one of a number of amendments to the Bill addressing issues of special concern to charities seeking to help homeless—very often, young homeless—people.
I see the tension here between the objectives of the Department for Work and Pensions, which is so very concerned to see the huge housing benefit bill reduced, and the objectives of the Department for Communities and Local Government, which of course wants to see rising homelessness reduced. It is not going to be possible for the objectives of both departments to be met and a balance between these conflicting aims has to be achieved. It is utterly pointless for the DWP to win in cutting the benefit bill for housing costs if the homelessness position deteriorates further. The supposed savings will then look very paltry, not least when set against the costs to other government departments in physical and mental health, social care, criminal justice and more. This anxiety that cost-cutting measures will undermine homelessness charities is reflected in the list of 12 charities seeking to persuade your Lordships to accept this amendment, as set out by the noble Lord, Lord Low, with Crisis as the co-ordinator of their efforts. They are a roll-call of nationally important charities trying very hard to tackle the horrors of homelessness.
Amendment 62C addresses a key concern of the charities, which has been very well spelled out by my two colleagues: that the vulnerable 18 to 21 year-olds who come within the priority categories set out in the amendment will no longer be able to get enough financial help with their rent to obtain the accommodation and support which they need and which the charities and local authorities can organise or provide for them if the rental funds are forthcoming. If the charities have to turn away young people because they are denied access to sufficient support with their rent, then street homelessness—as the noble Baroness, Lady Hollins, has said, it has doubled in London since 2011—will get worse. That means more young people sleeping rough and facing the cold, the abuse, the violence and the illness that goes with that.
Later amendments in my name also address the same issue of the problems which will emerge if benefit payments for housing—in this case, the entitlement to the housing element in universal credit—are reduced for vulnerable young people. The other reductions, for us to discuss in detail later, which potentially affect housing costs for young homeless people are, first, the proposed 1% per annum cut to social housing rents, which could put some social housing charities out of business and, secondly, the new idea that rents in social housing should be capped at the local housing allowance levels set for private landlords, although the charities’ rents may include special support services that no private landlord would ever supply.
I am making the overarching point in respect of all these cuts that the DWP’s earnest desire to reduce the costs of housing benefit—in future, of universal credit—really must avoid crushing efforts to help those who are or will be homeless. To save time in our later deliberations, I simply flag up the common policy point which relates to all these amendments, since the Minister may want to respond in the round. I hope that he can provide reassurance that the DWP’s different ways of reducing benefits for housing will stop short of squeezing those people in the most acute difficulty and those bodies desperately trying to help them.
I think all of us, and every Government I have worked with over the last 45 years, have been clear that we must give special attention to trying to ensure that young people at risk of homelessness are supported. If we fail, and yet another young person ends up living on the streets, it is incredibly hard for that person to keep away from crime, alcohol, drugs, depression and ill-health and to get back on their feet, as we all know and as was so well illustrated by the example quoted by the noble Lord, Lord Low.
I feel sure the Minister gets this and has no desire for the Government’s welfare cuts to pull the rug out from under the charities that are trying so hard to address the evils of homelessness. This amendment would remove one of the new threats to these bodies continuing their vital work by ensuring a range of vulnerable young people are not going to be denied housing support just because they are aged 18 to 21 and will be in at least no worse a position to pay their rent than those who are older. Indeed, 18 to 21 year-olds may have a greater need for help simply because they are young. I commend the amendment to the Minister and hope he will be able to tell us that Government recognise the case being made and have no intention of harming the vital work of the charities that can offer a life-saving lifeline to very vulnerable young people.
The Earl of Listowel
My Lords, I rise very briefly to support the amendment of my noble friends. On a visit to a Centrepoint hostel in Soho several years ago, I spoke with a very young girl—16 or 17 perhaps—and asked her why she was there. She said that her mother had a new boyfriend who did not want her around. The OECD said in its report on family formation that this country will overtake the United States in the 2030s in terms of the numbers of young people growing up without a father in the home. We have to think about the changes in families and about the Children’s Commissioner’s report on the sexual exploitation of children. Most sexual exploitation takes place within the family, from people within the family who the children know. Some 90% of lone parents are going to be women, and if different men are regularly coming into the household, this issue of girls in such households having worries about sexual exploitation or being sexually exploited also has to be considered. I commend the amendment to the Minister.
Housing: Underoccupancy Charge
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Lord Freud
The noble Baroness is right that there is quite a lot of variation in the regional responses. I gave the example of the north-west, where there had been a reduction of 22%. The two regions that have reduced the smallest amount in England and Wales are the north-east, and Yorkshire and Humber. Other areas, such as London, the east of England and the north-west are the outliers on the upside. The other two have had the least-efficient response to this policy.
Lord Best (CB)
My Lords, I know that the Minister feels immense sympathy for those people who are unable to move, such as the tenants in Knowsley, where I was on Friday, who cannot downsize even though they wish to. They have taken a big hit in their standard of living. Will he join with me in commending the resilience and fortitude of those families that have taken a drop in income as a result of the so-called bedroom tax and borne a disproportionate share of the burden of deficit reduction?
Lord Freud
The noble Lord is quite right to make the point that this is about deficit reduction, for which this has been an important policy. It has now had savings of £1 billion over that period. People have had a range of responses, but the most important is that many people have gone into work or moved off the benefits system, mainly by going into work. That is 70,000 of the 90,000 reduction.
Housing: Under-occupancy Charge
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Lord Freud
There are a substantial number of homes available each year. There are about 1.4 million single-bedroom social housing homes and, on the HomeSwapper site, there are now 55,000 one-bedroom homes and 142,000 two-bedroom homes to swap into.
Lord Best (CB)
My Lords, I congratulate those housing associations on keeping down their arrears through very heavy investment and a lot of hard work. I congratulate the Minister on producing and continuing to produce large sums of discretionary housing payments, which have been very important in alleviating some of the misery caused by the so-called bedroom tax. Will the Minister confirm that, although they obviously reduce the savings to the Treasury, the discretionary housing payments, which have saved a lot of people, will continue at their current levels or at higher levels in future?
Lord Freud
The current year figure is running at £125 million, which is very high and up substantially—by more than £100 million—on the figures that we were looking at in 2010. I obviously cannot make any commitment at this stage on its future levels—that will go into a spending review—but clearly this has been an important way of making sure that this policy goes in without the kind of impacts that some people were concerned about.