My Lords, I shall speak to Amendment 12A, which entirely supports Amendment 7, so eloquently moved by the noble Baroness. In fact, I think that I prefer her speech to mine. However, my amendment has a slightly different take on the same set of issues, as it has been prepared by the Residential Landlords Association, which represents its member landlords. I have no interest to declare as a member of any landlords’ association, but I draw attention to other housing interests in the register.
It is important to note that the amendment’s call for a review of the impact of capping rent increases in local housing allowances at 1% next year, rather than at the consumer prices index level, comes from the landlord side as well as from those excellent bodies Shelter, Crisis and the others representing tenants. If the case made from the perspective of tenants does not win the argument, perhaps the points made by the landlord representatives will prove convincing.
Why is there a need for a special review of how rent increases in the private rented sector in comparison with increases in help with rent from local housing allowance are likely to work out in the years ahead? I suggest that there are two distinct reasons why the capping of local housing allowance at 1% per annum irrespective of levels of real rent increases in the marketplace is critical. First, the local housing allowance can represent half or even more of the total benefits received by those out of work and can represent most of the support which many of those in low-paid jobs receive from the state. That means that there are huge repercussions for tenants where a gap opens up between the actual rent that must be paid and the local housing allowance received to cover it. Cutting housing support means the tenant finding the money to meet the shortfall on the rent out of income intended for food, heating and other essentials.
High housing costs greatly increase the level of child poverty—the issue of concern to my noble friend Lady Howe. Department for Work and Pensions statistics analysed by the Joseph Rowntree Foundation this month show the child poverty rate in England at 19% before housing costs are factored in, but at 28% afterwards. Where housing costs are lower, that
huge impact does not show up. In Scotland, for example, the child poverty rate is the same as for England excluding housing costs, at 19%. It rises to 21% when housing costs are taken into account, far short of the 28% figure for England because of England’s high housing costs. Help with housing therefore makes a very real difference to the number of households in relative poverty.
Not providing enough money to pay the rent for those who rely on income from benefits simply means a cut to the other benefits that they receive. For tenants in the private rented sector, the reduction in living standards in real terms resulting from the Bill could well be doubled: first, from the gap in direct help with income between 1% and whatever inflation turns out to be and, secondly, from the gap in housing help between 1% and whatever rent increases over the next three years turn out to be.
Secondly, there are consequences where support for housing costs is cut not only for those receiving benefits but for the housing market—the availability of accommodation. Obviously, it affects the attitude of landlords towards providing accommodation for those on modest incomes if they are subject to tough rent controls. In most parts of the UK, there are plenty of other people desperately keen to find a rented home—students, mobile single people who share, and, as we know from excellent new research by the Building and Social Housing Foundation, increasing numbers of working families with young children who would have bought a home in times past but now cannot afford the deposit and mortgage costs. The acute housing shortages in so many parts of England mean that landlords are most unlikely to reduce rents to assist those in receipt of local housing allowance. Rather, as the Residential Landlords Association survey cited by the noble Baroness, Lady Hollis, shows, landlords will avoid lettings where LHA rent controls could apply, and will go for lettings on the open market.
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Gradually squeezing out that part of the rented sector puts more pressure on the social housing sector—housing associations and councils. Of course, that stock was diminished by right-to-buy sales of council housing. The building of social housing in the past 30 years has been at one-quarter of the level of the preceding 70 years. Now those landlords have massive waiting lists. There are consequences for the taxpayer if private landlords do not house lower-income households: the cost to local authorities of stacking families in temporary accommodation—hostels and bed and breakfast hotels. One London borough now has 2,320 families in temporary accommodation. In 2010, the figure was 610. That is an increase of more than 350% in less than three years, and expenditure will escalate wildly if we have to return to using those temporary solutions, including bed and breakfast hotels, at costs far higher than for private rented sector renting. I do not need to add that the social consequences for families of homelessness and having no fixed abode are horrendous.
As from April 2012, a cap on rent increases at the consumer prices index level was introduced in place of using the retail prices index or, indeed, the increase
applicable in the wider market. That change came in combination with other restrictions on rents eligible for the local housing allowance. The noble Lord, Lord Freud, explained that the Government’s hope was that landlords would set rents that reflected those new constraints, but he made clear that the cap on rent increases at CPI levels would be for just two years initially and agreed, as the noble Baroness, Lady Hollis, explained, to review the position at that point to assess any impact on the rental market.
Sadly, although we are less than one year into the new regime, it is clear that the measures are not driving down rents. Rents have been rising in most areas by more than RPI inflation, despite the tough downward pressure on rents through LHA caps. It seems extremely unlikely that the Bill’s extension of the controls—not just to extend the limitation of increases to CPI levels beyond two years but to enhance the squeeze by the 1% limit, probably well under half the likely CPI increases—for three years makes a requirement for a thoroughgoing review much more significant.
The amendment, echoing the sentiments expressed by the noble Baroness, Lady Hollis, would ensure that that review will take place and that the Government will be encouraged thereby to act on the results. If present trends towards homelessness and, consequently, higher costs are revealed, the Government will have the mechanism to lift the 1% cap.
I have one last point. Can the Minister explain the Government’s intention in relation to the special case of London? We have been led to understand that one-third of the gains from the 1% cap on LHA payment increases are to be recycled to support the higher rent increases in the London area. We know that London rents have been increasing by twice the level of inflation—6.7% last year, for example—and excluding London from the 1% cap would ease pressures there. However, it would be more than helpful if the Minister could explain how this arrangement, which would of course make the housing position of the capital even further out of step with the rest of the country, be implemented in practice.
I am sure that we should take note when landlord groups and tenants’ groups are unanimous, and I look forward to hearing from the Minister on whether her department, not just to save tenants but to prevent further diminution in supply of accommodation, with its costly consequences, will be able to respond positively to my amendment.