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Rent Restructuring

1.30 pm

Mr. Iain Coleman (Hammersmith and Fulham): I am grateful for the opportunity to have a debate that will highlight a range of concerns on the Government's rent restructuring policy, which was the subject of a recent statement. It is a fantastically complex area, and the moves arise from broad decisions announced last December.

I pay tribute to my right hon. Friend the Secretary of State and his team of Ministers for having taken the time to listen to concerns expressed to them by tenants and by Members of Parliament. Significant concessions and alterations to the original proposals have been made, which I welcome. Last summer, I invited the noble Lord Falconer of Thoroton, then Minister for Housing, Planning and Regeneration, to visit my constituency. Not only did he visit a flagship housing development in Fulham of which we are especially proud locally, but he spent two hours meeting local registered social landlord officers and tenant representatives to hear their concerns about the Government's proposals. There remain, however, major concerns. My objective today is to highlight those and to ask my hon. Friend the Minister whether she can offer us any comfort on them.

The proposals, inevitably, have proven especially controversial in high-value areas among the few tenants who have found out about the potential impact on their rents. Although the proposals are broadly sensible as they affect the majority of tenants across the country, there are particular problems in areas of high capital values. I do not accept the premise that the notional value of a property should be a major determinant in the calculation of the overall rent of that accommodation.

Inevitably, the proposals affect families living in areas such as my constituency, where property prices are exceptionally high. Although that aspect of the formula affects tenants scattered across the country, those in London, particularly inner London, will be most adversely hit. The decision that capital values should be the second major criterion in calculating tenants' rents raises this question: why should a postal worker living in a three-bedroomed flat on the 14th floor of a tower block in Fulham pay £25 or £35 a week more for his accommodation than his counterpart postal worker living in a similar property in Newcastle? Why should a nurse living in designated key worker housing in a new development in Hammersmith pay significantly more than another NHS worker living in similar accommodation in Hastings?

During the past decade, my borough has acquired a record second to none among London councils in developing new affordable housing. In practice, the proposals bring into question how affordable that accommodation will be for future generations and especially for the key public workers who are so vital in any well-balanced and cohesive local community. Council rents in London have risen higher during the past decade than those in any other region. The practical effect of the proposals will be that many London tenants will face rent rises well above inflation rates every year for the next decade.

There are particular concerns about the rents that could be charged to housing association tenants. Housing associations are to be allowed to increase their

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rents to the new target level as soon as they re-let existing properties. This means that tenants living in self-contained two-bedroomed accommodation in a converted house in Fulham, where, as I have remarked, property prices are exceptionally high, will pay vastly different rents for identical flats located in the same house. I must ask my hon. Friend the Minister, where is the cohesion and fairness?

Indeed, if some of the more avaricious registered social landlords pursue such a policy, and it appears that some plan to do so, it will clearly be inconsistent with lettings for new developments where the grant assumption set by the Department will be based on a phased movement to the new formula rents for existing tenants. The inevitable consequence will be that applicants, especially poorer applicants, will be deterred from accepting housing association property. My local authority, in common with most others across London, has a strict one-offer policy on permanent accommodation. That will place some tenants at risk of being found to be intentionally homeless if they decline an offer of a property because of the new target rents being set rather than the existing rent regime applying, which is what I advocate.

The Government's introduction of the council tax benefit restriction scheme in April 1998—I recognise that this is not a policy for which my hon. Friend the Minister is responsible—is a nasty and regressive measure which saves the Treasury a miserly sum. As a consequence, poor tenants are penalised in my constituency if they are entitled to receive council tax benefit, as the level of benefit available to them is capped at band E. Some tenants are forced to pay up to £14 a week, or £700 a year, extra out of their already meagre benefit allowances. A further measure artificially to hike poor tenants' rents will again penalise poor tenants for living in high capital value areas, and it cannot be justified.

Will my hon. Friend the Minister examine this problem to see whether the Government can come up with a solution for a situation whereby housing associations, whose average rent is due to rise under rent restructuring, in practice increase rents for re-lets faster than rents for existing tenants?

Next year in Hammersmith and Fulham, the local authority will be required to set the rent for each home. The weekly rent charged must not exceed £85 for one-bedroomed accommodation, £90 for two-bedroomed accommodation, £95 for three-bedroomed accommodation or £100 for four-bedroomed accommodation. Those caps will rise annually by the rate of inflation plus 1 per cent.

Although I have said that the caps are welcome, I fail to understand the justification for increasing the cap by the extra 1 per cent. Why must rates always rise above inflation? Will the Department undertake to review the margin above inflation of the cap, if it can be demonstrated that the waged income increase for council and housing association tenants has increased by less than the average rate of increase in earnings? In recent years, the lowest paid workers' wages have not kept pace with average earnings.

Ms Karen Buck (Regent's Park and Kensington, North): Is my hon. Friend aware that in several London

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authorities, including his and mine, the take-up of the working families tax credit is among the lowest in the country? Does he agree that part of the reason is that people entering the workplace find the added incentive insufficient to cover their housing bills? Does he agree that this policy may exacerbate that tendency?

Mr. Coleman : My hon. Friend makes a good point, and I share her concerns.

A recent study showed that the increase in lower quartile incomes was only half the increase in median incomes. I am sure that my hon. Friend the Minister will agree that the poorest members of society who are working should not have to spend an ever-increasing proportion of their already moderate incomes on accommodation when those of us who are earning far more do not. It has been calculated that, by the end of the 10-year phase-in period of the Government's proposals, council rents will have risen by approximately one sixth. That amounts to £1.2 billion a year before taking inflation into account. Can my hon. Friend the Minister confirm that figure or, if she disagrees with it, advise me of her Department's estimate of the extra rent that council tenants will be paying at the end of the 10-year period?

Concern has been expressed about the value for money that the rent restructuring proposals represent for tenants who are affected by them. In Hammersmith and Fulham next year, some rents will rise by as much as £4.09, or 4.31 per cent., a week. I am advised by my director of housing that only 101 dwellings, representing less than 1 per cent. of the council's housing stock, will have a weekly rent reduction.

One of the claims that the Government have made in favour of the proposals is that the new structure of rents will allow tenants to choose whether to pay more for a better property or to save money by choosing a less popular property. That element of choice will, of course, be welcome when and where it applies. However, in reality it will not apply in inner London, where the demand for social housing is so great that it massively outstrips supply. Unless there are exceptional changes in their circumstances, tenants in inner London will find that their ability to choose where they live and how much they pay for a different quality of accommodation is virtually zero.

In my experience, most tenants would be prepared to consider paying higher rent if there were a commensurate increase in the level of service that they received. More caretakers, more security, better planned maintenance and more generous decoration allowances—those are the sorts of enhancements to services that tenants will want and expect if they are expected to pay more rent. An extremely complex formula in the Government's summer consultation paper shows that nationally tenants next year will get only £1 in every £2 of the increased rent in extra or improved services. Will the Minister comment on the accuracy of that calculation? Can she offer tenants any comfort by assuring them that they will receive genuine enhancements to services if their rents are increased?

In my borough, the Government proposals will lead to higher rent increases in the next 10 years than in the past decade—I remind my hon. Friend that the majority of that was spent under a Conservative

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Administration—despite the fact that we have proved that London rent increases have been well above average during that time. The average rent increase in Hammersmith and Fulham over the past 10 years was 23.2 per cent., compared with the projection based on the current proposals of 29.5 per cent. over the next decade. That will apply particularly to one and two-bedroomed properties, which represent 73 per cent. of my local authority's housing stock. If we can demonstrate that the increase will lead to improved services, I believe that tenants will accept it. If not, they will not understand why they are asked to pay significantly more for no obvious gain.

I recognise that the Government have made strenuous efforts to respond sympathetically to the representations made to them by elected representatives and those landlords who have expressed concern about the proposals' practical implications. However, some of my hon. Friends and I would have preferred the Government to agree to defer the implementation of these policy changes for a further 12 months to allow for much wider consultation with tenants.

The overwhelming majority of tenants remain blissfully ignorant of the proposals. However, in the past few weeks increasing numbers have become aware, some have written to me expressing their surprise and anger about the lack of consultation and asking where the mandate for the implementation of the policy comes from. Will my hon. Friend the Minister examine ways of further ameliorating the effect on tenants who live in high capital value areas?

I am, however, pleased that the Government have agreed to a simplified commencement of implementation as from April 2002. I am also pleased that, in answer to a written question from my hon. Friend the Member for Bolton, South-East (Dr. Iddon), my hon. Friend the Minister gave a commitment to have further consultations with local authorities and tenants' groups. What will those consultations mean in practice, and how will they be carried out, especially with tenants groups?

I am pleased that in the same answer my hon. Friend gave a commitment to review the policy constantly and to annual monitoring and fuller research of the policy in practical and operational terms. What will the three-year review that she recently announced cover? Will any issues be excluded from the review; if so, what will they be? How will the potential poverty trap implications be monitored in practice? How will local authorities, the National Housing Federation, tenants' representatives and Members of Parliament be involved in specifying the nature of the issues to be monitored and researched?

The Government's restated commitment to the future of public housing is very welcome. I recognise that Ministers have tried to assist those of us with serious worries about the impact of the proposals on some of the most vulnerable people in our constituencies whom we are bound to represent.

The Chartered Institute of Housing has responded in the past few days to the Government's proposals by emphasising that basing rents too much on house prices will inevitably create rent differentials throughout the country. It pointed out that if rents in some areas are too high, they will have an adverse effect on work incentives, trapping tenants in unemployment and adding to social

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exclusion. I agree with the institute and hope that the Government will continue to work with tenants, landlords and Members of Parliament to ensure that the policy does not, in practice, penalise the very people it was designed to assist.

1.46 pm

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Ms Sally Keeble) : I congratulate my hon. Friend the Member for Hammersmith and Fulham (Mr. Coleman) on his success in the ballot and on raising this important topic. Before responding to the details of what my hon. Friend said is a complex policy on rent restructuring, I want to make two commitments absolutely clear. First, the Government are committed to ensuring that social housing remains affordable for people on low incomes. Secondly, we are committed to ensuring that low-income people and communities can continue to live in areas of high value, such as those in inner London. I accept the hon. Gentleman's point about rents in areas of high value, and the Government have taken steps to deal with that. I shall come back to that later.

Our policy on rent restructuring is part of the Government's wider housing agenda. The aim is to close the gap between rents in different sorts of social housing and, as my hon. Friend said, to pave the way for greater choice for social housing tenants. That applies not only to different council properties in the same area but to different sorts of social housing tenure, because at present the perception that housing association rents are high can be a bar to people who might consider applying for that sort of housing. We want a sensible structure of rents so that tenants can choose whether to pay more for a better property or to save money by choosing a less popular property. To achieve that, we are establishing a common basis for social rents throughout England by linking rents to both the value and size of the property and to manual earnings in the area. The new rents must be affordable and we are linking them to local earnings to ensure that. They will not be market rents. Rents in the social sector throughout most of the country will generally remain well below what a tenant would pay for the property from a private landlord. I said that that will apply throughout most of the country, because some areas have very low demand and different trends in property prices.

To put the matter in perspective, average manual earnings in London are around £19,000 a year, or £370 a week. Average local authority rents in London are around £60 a week. Someone on average manual earnings spends around 16 per cent. of his or her income on housing. We have not used average earnings because that would distort the position, particularly in London. The calculation takes no account of contributions from anyone else in the house who is also earning. That can be contrasted with someone renting in the private sector—I am sure that my hon. Friend knows the figures better than I do—in which average London rents are usually more than double those in the social sector for less space. It has not been possible to track trends over time, but I would be interested in doing that. I am confident that the ratios are good and ensure that rents are affordable.

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We recognise that any increase is a financial pressure, especially for those on low incomes, and the need to protect tenants from large or sudden rent increases. We acknowledge the need for a smooth and gradual progress from existing rents to the new system. We must protect tenants, local authorities and housing associations during that period by ensuring that sensible and predictable changes in rents take place each year. We have therefore built in four safeguards. I pay tribute to my hon. Friend and other colleagues, for lobbying for them.

The first protection that we have built into the system is that the move to new rents will take at least 10 years for most properties, and longer for others. For local authorities and registered social landlords, 10 years is a reasonable period during which to come to terms with changes to the financial structure.

Secondly, we want rent increases limited to the retail prices index plus 0.5 per cent. and £2 a week in any one year. That will help keep rents affordable and will mean that, if local authorities apply the formula, rent increases will be less during the coming decade than in the past 10 years.

Thirdly, we have capped the upper limits on rents. That will be £100 a week for a four-bedroomed property, and less for smaller dwellings. Where rent is already above the upper limit, it will be frozen or reduced. Each year, the limit of the cap will be increased by RPI plus 1 per cent.

Fourthly, local authorities can apply aggregate increases for the first year. That will particularly benefit those areas where there is wide divergence between property values—the peaks and troughs that affect my hon. Friend's constituency.

Those safeguards mean that there will be only a gradual change in rents for tenants. We have done some sums; it is likely that changes in rents nationally, as a result of rent restructuring, will be only half the increase of the past decade. Average rents in London are likely to move broadly in line with the national average. However, I will be careful when talking about rents for the next few years because housing associations and local authorities will remain responsible for setting rents. We should like local authorities to follow our policy, and we will influence their approach through the housing subsidy system, but we cannot take decisions for them. However, were Hammersmith and Fulham to decide to follow our policy on rents for next year, its average rent would go up by between £2.70 and £3 a week.

My hon. Friend asked what tenants will get out of rent restructuring. It is not the case that all council tenants will face a rent increase. The rents of about one in five council tenants will fall in real terms, which is a direct and positive outcome for them. More than 60 per cent. of social tenants receive housing benefit and will continue to receive that protection after the impact of rent restructuring.

My hon. Friend asked about the improvements that council tenants will see in their housing. I point to the Government commitment to make all social housing decent by 2010; that will include tackling the £19 billion backlog in council house investment, which we inherited. We have already made a start and the amount that we have allocated for housing investment is already

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twice that which the last Conservative Government planned for 1997-98. We plan further rises in investment. It is also right that tenants should make a greater contribution to the cost of the upkeep of their property as quality improves.

My hon. Friend asked about consultation. Considering the quantity of information available on the proposals, substantial opportunity has been provided for comment and discussion. The information that has been circulated through local media means that many people will be aware of what is happening. We consulted widely on the rent restructuring proposals last year, before announcing our decision in December 2000 in the housing White Paper. We consulted again this summer about the changes that need to be made to local authority housing subsidy so that it does not hinder progress towards the new rents.

Mr. Coleman : I am listening carefully to my hon. Friend. I recognise that the landlords were consulted widely before last December. Will she tell me or give me some practical examples showing exactly how housing association tenants were consulted? In my constituency, and I suspect in the constituencies of my hon. Friends, the vast majority of tenants were never consulted, know nothing about it and remain in blissful ignorance to this day.

Ms Keeble : It is hard to give examples that would cover the whole country, but I have seen reports based on housing authorities consulting their tenants at the time of the consultation on our proposals, which we carried out this autumn. It is clear from local newspapers that a number of local authorities did that. I find it hard to believe that all people are in blissful ignorance.

This issue has come up in meetings that my Government colleagues and I have attended, and there have been clear discussions among some tenants or tenant organisations about the proposals and the possible implications. I accept that it is impossible to say that every tenant knows what has happened, but there has certainly been more discussion and consultation than the Government are often given credit for.

Ms Buck : I certainly would not expect my hon. Friend to be able to answer a question of such specificity during this debate. However, I am afraid that I share with my hon. Friend the Member for Hammersmith and Fulham

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(Mr. Coleman) the confident view that most individuals had no idea about the implications of restructuring until, at the most, two or three weeks ago.

I wonder whether the Minister could write to me and my hon. Friends giving examples of letters or news reports where actual representations were made to tenants before, say, the beginning of November on the implications of rent restructuring.

Ms Keeble : I will certainly do that. I can think of local newspaper articles that I have seen, and I will arrange for us to track back and find out what happened. Clearly, local authorities will be consulting from here on in, as they take decisions about what to do about their rents for next year. We have clearly said that they have discretion in a number of areas.

I would like to deal with a few particular points that my hon. Friend the Member for Hammersmith and Fulham made. Housing associations are free to decide how quickly they move their rents to the levels required by rent restructuring, although they should aim to complete the process as far as possible in the next 10 years. We have advised the chair of the Housing Corporation that where housing associations do not need to put their rents up to remain financially sound, they should not be pressed to do so. I shall undertake to raise my hon. Friend's concerns with the chair of the Housing Corporation because it is in the interests of the council housing sector and housing associations to ensure that some equity is achieved.

My hon. Friend has also raised issues about different constituencies and the impact in different parts of the country. It remains a responsibility of local authorities and registered social landlords to decide rent levels and patterns. Local authorities will set rents for 2002-03 in January or February next year. A number of issues will not be resolved until then.

I want to leave one last thought with colleagues. Great attention has been devoted to the detail of the implementation of this policy. I would place it fair and square against the backdrop of housing policy as a whole. In government, we have to take a view across—

Mr. Nicholas Winterton (in the Chair): Order. I regret to tell the Minister that, although we thank her for her reply, the time is up.

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