Welfare Reform Bill

Noble Lords will be pleased to see that I shall sit down after this amendment. I apologise for trespassing on the Committee’s time. I am delighted that the noble Lord, Lord Best, was able to add his name to the amendment. As we know, housing benefit costs £21 billion a year, and the Minister, in his evidence to the Work and Pensions Committee, showed that between November 2008 and February 2010 the average rent paid to LHA claimants increased by 3 per cent, whereas in the non-LHA market rents fell by 5 per cent. The Minister therefore argued that LHA rates were inflationary because landlords increased rents to their level as HB claimants form 40 per cent of the market. Accordingly, if the Government reduced local housing allowance, landlords, he argued, would have to reduce their rents because LHA tenants were such a significant part of the market. Hence, LHA would be fixed in future according to the 30th rather than the 50th percentile of average rent levels and would rise only by CPI. This would bear down, he argued finally, on rent levels and on the LHA bill. I hope I have been fair to the Minister’s arguments. If I have not, I am sure he will correct me. If the Minister is right, there could be a valuable cut in LHA expenditure without pain to the tenant because the pressure would be bearing down on the landlord. If he is wrong, many of the tenants will find themselves unable to find or afford adequate accommodation in the private rented sector and arrears, evictions and homelessness will grow. Is the Minister right? I think he is wrong—but the truth is that we will not be fully sure until the changes have been in place for a couple of years and the outcome reviewed. The Minister is evidence-based—this is one of his many characteristics, and the Committee is delighted that he exhibits that towards us—and that is welcome. He has already agreed to one housing review, proposed by the noble Lord, Lord Best, earlier, which again is much welcomed: hence this amendment. We must find out, before too much damage is possibly done, whether cuts in local housing allowance cut private sector rents. I do not care about the time span of the CSR and that this may fall outside it; this is a matter for this Bill and I am sure that we want to have scrutiny—post-legislative scrutiny, if you like—of what is being done. I hope the Minister will give us that commitment today. Why do I believe the Minister is probably wrong that cutting HB will force down rents to make them follow the path of HB, which is the essence of his argument? First, I think he is wrong in his analysis of what happened between 2008 and 2010. Secondly, for the future, if the private rented sector was frozen with a finite number of tenants for a finite number of properties, then his reading that the market will find equilibrium might well be correct, but it is not and it will not be. What happened between 2008 and 2010? Yes, HB bills rose faster than rents, on average, but that was not because they were being pushed up by transparent local HA rates. Recent research from the Chartered Institute of Housing and the British Property Federation shows that it was mainly due to more people claiming in London and the south-east, where rents and HB are higher. In that period, LHA costs fell in two-thirds of the country, but in one-third they rose: in London and the south. The case load doubled from 400,000 to almost 1 million, and that growth was disproportionately in the south where rents are higher. In November 2008, the southern half of England provided 49.6 per cent of claimants and the north and the midlands provided 50.39 per cent. By March 2010, the share of the south—the high rent, higher HB area—had risen from 49.6 per cent to 52.27 per cent and that of the north and the Midlands had fallen proportionately. That is why the LHA bill rose. Had the case load numbers and composition stayed the same, the rents paid by LHA would have fallen by 1 per cent, not risen by 3 per cent. There is no inflationary loop back. The Minister’s argument rests on that fallacy. Why have more claims and claims for higher rents been made in London and the south-east? It is because of what is happening elsewhere in the housing market. Every year those who cannot enter owner-occupation, who increase the pressure on rents, and those who cannot enter social housing, who increase the pressure on HB, flow into the private rented sector. They are those in low-paid work, the disabled or the elderly. It is a sort of perfect storm. Owner-occupiers who cannot find the deposit are now lingering in the private rented sector for five or 10 years longer than they would have done a decade before. Council waiting lists have grown hugely as stock dwindles with sales while new build is simultaneously slashed, so social renters linger 10 or more years longer in the private rented sector as they wait and hope. Instead of the private rented sector being a transitional tenure, it is now often a long-stay tenure. Newcomers flow in, but existing tenants do not flow out. That is why rents rise. Problems in matching supply and demand in the other two sectors—owner-occupiers and social housing—are experienced as huge pressure on the private rented sector. Increase in that demand is far exceeding the modest increase in supply. With six, 10, sometimes 15 applicants chasing every PRS letting, landlords do not have to let and they do not and will not let to people on LHA. They have a choice. They do not let, they do not want to let and they have said so loud and clear. In addition, PRS rents are rising fast as a result of this pressure. Savills says they rose by 6.6 per cent in the past year, and some forecast even higher rises next year, at a time when CPI, although rising, will rise by far less. Therefore each and every year the gap between what will be covered by the local housing allowance and the rents actually being charged will widen. It is now at the 30th percentile. In three to five years it will slip down, probably to the 20th percentile. In six or eight years or so, it will slip to only those at the 10th percentile, making 90 per cent of privately rented homes unaffordable. In 10 years, in much of the south-east there may be virtually no affordable private rented sector accommodation for those on HB. We have had examples from Winchester where I think there is probably none. In the next decade, we expect only 5 per cent of two-bedroom flats in Manchester will be affordable to tenants under private HB. Looking backwards, between 1997 and 2007, rents increased by 70 per cent and CPI by 20 per cent. That is the gap. Because benefit was not operated by CPI, that gap was far narrower. In future, if that gap is to be replicated, people on the 30th percentile will be forced down and down until in various towns and cities virtually no private housing will be available. That is what I fear. I hope I am wrong but I doubt it. We need to know because the stakes for those on HB are far too high to leave it to the abstract economic theory of the markets. Forty per cent of those in the market may find themselves priced out because they have no leverage. For too many landlords, HB tenants are becoming the tenants of last choice. Alex Fenton’s Cambridge research shows that if tenants try to meet the resulting shortfall themselves, 60,000 families and their children will be in severe poverty and well below the poverty line. He thinks it is possible that 200,000 families will face evictions. He, too, may be wrong, but on behalf of vulnerable people we cannot afford not to know. We must keep this situation under review, so every two years we must restore the LHA level to the 30th percentile that the Government intend and not allow a downward drift to increase the cuts that fall on those least able to bear them. I hope that the Minister is willing to engage in that tracking and research, and to ensure that every two years we restore the policy intention of this legislation. All Ministers have an obligation, which I am sure he welcomes and shares, to ensure that the purpose and intent of legislation is respected. If there should be any deviations or additional factors, they should be able to bring it back to its original intent. All we are asking is that there is a measure in place to ensure that the legislation proposed by the Government will persist and not find itself drifting down, to the cost of homeless people across the country. I beg to move.