House of Commons - Communities and Local Government Committee

Select Committee on Communities and Local Government Committee Eighth Report

2 THE EXPERIENCES OF TENANTS

16. Discussion of housing policy cannot focus exclusively on "bricks and mortar". In looking at the supply of rented housing, we first consider the experience of the people who live in rented housing: the tenants.

Perceptions of rented housing

17. Compared to ownership, renting is often seen as second best. Successive Governments' promotion of home ownership has inevitably reinforced this notion, and the current Government's focus on improving the affordability of market housing risks having the same effect. Home ownership may be a very good way to acquire an appreciating asset. If other forms of saving and investment provided similar rates of return, renting would become more attractive. But perceptions of renting are not simply about the financial advantages or disadvantages. Ownership is seen to confer a degree of control over the management and disposal of one's home which a tenant cedes to his or her landlord. If "an Englishman's home is his castle", that castle, it seems, should not belong to someone else.

18. In many other countries, renting does not have such negative connotations; and indeed many in England do not consider renting to be only for those who cannot manage to own their own home. We heard from Michael Gelling, Chair of the Tenants' and Residents' Organisations of England, who said:

I am quite proud of being a tenant and many people choose to be tenants. Not everybody is on benefits and it is not everybody's housing of last resort, and there is that kind of stigma that comes to the rented sector and we have to get rid of that.[

19. One key objective of any further reform of the private and social rented sectors has to be to challenge the unhelpful perception that renting is always second best. Whether from necessity or choice, significant numbers of people are and will continue to rely on the rented sector. Their needs and aspirations are every bit as important as those of homeowners.

Mixed communities

20. The concept of the creation of mixed communities was a significant feature of this inquiry. Many witnesses either supported the aim, or were already actively working towards it.[27] The term is most commonly associated with mixing types of tenure within neighbourhoods, streets and even blocks of flats. Within existing neighbourhoods, deliberate mixing of tenure is mostly aimed at introducing more owner-occupied households, with the ultimate goal of improving the experience of tenants and reducing social polarisation through ensuring a wider range of incomes within an area. In new developments, the aim is more likely to be the integration of social rented and shared ownership homes within new homes for sale on the open market.

21. Adam Sampson, Chief Executive of Shelter, told us "it is hard to disagree with the principle of mixed communities."[28] This comment reflects both support for the aim and the difficulty in pinning down what it actually means. Mixed communities should not mean some rationed and standardised mixture of people. Mixed communities should not be defined by what they are, but by what they are not. The aim is to avoid the mistakes of the past which concentrated deprivation and discouraged social integration.

22. Research has shown that a number of factors influence the degree to which a community is mixed: the variation of tenure, local authority allocations, market pressures, migration and the type of property.[29] No single factor in housing policy or practice holds the key to the development of mixed communities. The Government believes that local authorities have a crucial role, through their planning and housing policy functions, and makes particular reference to the role of the ALMO pilots in developing the concept.[30]But all social housing providers have a role in shaping the mix within communities, and so do private landlords.

23. Currently, the main mechanisms for creating mixed communities are planning obligations, the right to buy, and infilling within existing estates.[31] The use of s.106planning obligations has achieved some success in mixing communities.[32] Lord Best told us that planning obligations have allowed housing associations access to land that "they could not get their hands on" and has put social housing into better areas.[33]However, many of the homes now being agreed through planning obligations are more likely to be for low cost home ownership than social rent. Efforts need to be made to convince developers and existing residents that creating mixed communities is desirable and that not all occupants of social housing are "problem tenants".[34] The Government has made it clear that the introduction of the Community Infrastructure Levy, which is designed to replace section 106 agreements in raising funding for infrastructure needs associated with new developments, will not remove the requirement to ensure that a mixture of tenancies is created in accordance with local housing market assessments.[35]

24. We found a widespread degree of consensus among our witnesses that more effort must be put into creating mixed communities where the most vulnerable households and those on the lowest incomes are not concentrated into ghettos of deprivation, but live side by side with more affluent households. The need for more mixed communities has significant implications for the future delivery of the supply of rented housing. The creation of mixed communities to reduce social polarisation should pervade all spatial and housing policy; local authorities must be allowed the necessary freedoms to pursue this aim. We look for confirmation by the Government, and action on the part of local authorities to demonstrate, that mixed communities are being pursued as a long-term objective, and are not merely a desirable by-product of other means of dealing with the housing shortage such as infilling and the use of s106 planning obligations.

Quality in the private rented sector

25. One reason why renting has such negative connotations is the poor quality of too much of the private rented sector. Most tenants of private landlords are satisfied with their landlord;[36] 81 per cent are on good terms with their landlord and 68 per cent are satisfied with how repairs are carried out.[37]These figures nevertheless show a substantial minority who are not satisfied with the service they are receiving, particularly where repairs are concerned. When tenants are dissatisfied with repairs, the most frequent reason is that the landlord does not bother about maintenance.[38]At the lower end of the market, some landlords deliver poor services in order to maximise the return on their investment.[39]

26. Complaining about poor standards of maintenance may be counterproductive. Sometimes tenants who persist in complaints can find themselves thrown out on the street. The Crosby, Formby & District Citizens Advice Bureau highlighted to us the underhanded practice by some private landlords of "retaliatory eviction":

27. The poor conditions of the private rented sector characterised by the Rackman era of the late 1960s have become more evident with the growth in the number of migrants, particularly from eastern Europe. The Cheshire Housing Alliance, noting that the settlement patterns of the Polish community is linked to work opportunities, told us that:

We have seen similar concerns raised during our more recent inquiry into community cohesion and migration.

28. Representatives from the private rented sector were keen to highlight the recent improvement in quality as measured by the Government's decent homes standard.[42] During our inquiry, the Association of Residential Letting Agencies (ARLA), for example, published a report on buy-to-let. We took oral evidence from representatives of ARLA, including the author of the report, Michael Ball, Professor of Urban and Property Economics at the University of Reading. Professor Ball, whilst recognising that there were sub-sections within the private rented sector which were of poorer quality, argued that "since the growth of buy-to-let the quality has increased very substantially".[43] The number of homes in the private rented sector meeting the decent homes standard increased from just 750,000 in 1996 to 1.6 million in 2006.

Figure 2—Number of decent and non-decent private and social rented homes 1996-2006.

Source: CLG (2008) English House Condition Survey 2006. Table A1

29. As the graph above demonstrates, however, the growth in numbers of decent private rented homes does not tell the full story. Any improvement in overall quality is welcome, but a significant contribution to that improvement has been made by brand new homes. The recent growth in the buy-to-let sector has included significant investment in newly built and refurbished stock.[44] This has therefore increased the number and proportion of stock that meets the decent homes standard. While the number of decent homes is increasing, there has not been a significant drop in the number of homes not meeting the decent homes standard, and between 2003 and 2005 (when the sector grew by over 200,000 homes) the number of non-decent homes remained static. The improvement in physical quality is thus by no means universal, and many pre-existing private rented homes remain cramped, poorly heated, draughty or otherwise in a poor state of repair. Nor does an overall improvement in physical quality assure a corresponding improvement in the quality of management, which remains poor in too many cases.

30. Industry bodies are beginning to recognise that a new approach is needed to encourage better standards of management.[45] Recent increases in the numbers of repossessions[46]and the chronic shortage of social rented homes suggest that many more people and their families will end up in the private rented sector. It is critical that improvements to the effectiveness of regulation, including minimum standards of management for landlords and letting agents[47] set by the industry itself, are made as soon as possible so that existing and new tenants within the private sector are protected from bad practices.

31. In oral evidence to us in April 2007, the then Minister for Housing and Planning said:

However, in December 2007 the Minister announced "a wide-ranging review of the private rented sector".[49] We welcome the fact that the Government is to review the private rented sector, reversing a previous statement to us. The Government and the private rented sector itself need to face up to the poor quality and management of too much of the private rented stock. Tenants in the private sector can too easily be mistreated by their landlords, and a minority of private landlords are not fulfilling their obligations to their tenants to provide a decent home. The Government must address the bad practices of some landlords and letting agents by strengthening the regulatory approach to the private rented sector. Achievement of the aim of a decent home at an affordable price for private tenants depends on significant improvements in standards of management in the sector. We consider further below how regulation can be strengthened.[50]

DENIAL OF HOUSING TO BENEFIT CLAIMANTS

32. One particularly bad practice is the denial of housing to benefit claimants. Many private landlords do not want to take in tenants who are claiming housing benefit and even advertise "No DSS" when listing their properties with agents and in newspapers.[51]Unwillingness to accommodate tenants on housing benefit is not confined to landlords: mortgage providers are increasingly refusing to lend for properties used by tenants on housing benefit.[52] This practice limits the available pool of homes to people who can rent without support from housing benefit and makes it virtually impossible for some housing benefit claimants to access private rented accommodation in some areas.[53] Pushing people into cheaper and poorer-quality housing increases the concentration of deprivation, counter to the aims of creating mixed and sustainable communities.

33. Landlords would argue that the practice of refusing to let to benefit claimants is followed to avoid damage to their property and anti-social behaviour; they also point out the significant disincentive to landlords represented by the payment of housing benefit in arrears and, often, delays in the receipt of payment at all.[54]The introduction of the Local Housing Allowance (LHA) in April 2008 is intended to speed up the administration of housing benefit and should result in a system which is simpler and provides more choice.[55]Landlords are concerned that under LHA, which is paid to the tenant rather than direct to the landlord, more tenants will fail to pay rent, which would make renting to housing benefit claimants more unattractive, particularly to mortgage providers.[56] We noted that the Department did not find a significant increase in tenants defaulting during the trials of the LHA, and hope that the same occurs when the programme is introduced nationwide.[57]

34. It is understandable that landlords, particularly those who have had bad experiences, seek to protect their investment; but denying housing benefit claimants the right to access certain housing solely on the grounds of their receipt of that benefit is unjustifiable discrimination. Even if the right to expect a decent home at an affordable cost[58]is ignored and a view is taken that tenants are simply consumers of a service, such practices represent an unjustified denial of service.

35. Refusing to accommodate people just because they use housing benefit to support their needs is wrong. We recognise the problems landlords have faced when rent, through housing benefit, is not paid. CLG and DWP must monitor the implementation of the Local Housing Allowance very closely and address problems with delays in administration and payment rapidly to promote confidence within the private sector. If councils pay housing benefit promptly, it will remove all justification for discrimination by landlords against benefit claimants in the provision of housing.

Housing benefit

36. Housing benefit supports around 860,000 households in private rented accommodation.[59] It cost over £13 billion in 2006.[60] Housing benefit is paid to tenants within both the social and the private rented sectors. Most claimants (80 per cent) have a social tenancy; but around 25 per cent of the cost of the system is accounted for by private rented tenants (£3.4 billion in 2004-05).[61]

37. No system that distributes so much to so many with such high degrees of differentiation between individuals as housing benefit could be perfect. However, the degree to which the support is cut back when members of a household take on more work, or get a better-paid job, is a major drawback of the system. In areas with high rents, especially London, the tapering off of housing benefit with income, and the lack of awareness of the availability of housing benefit as an in-work benefit, can become a disincentive to work.[62] Around 25 per cent of tenants within the private rented sector claim housing benefit.[63] Because the rents are at market rates, the effect of the tapering off of the benefit, or at least the perception of the withdrawal of the benefit, may well be more pronounced than for tenants paying lower social housing rents. During the Committee's visit to tenants in central London, the problem of someone feeling trapped by the benefit system was demonstrated starkly. We learnt from one tenant in expensive temporary accommodation that moving from part-time to full-time employment was impossible because of the housing benefit tapers, even though the tenant clearly wanted and was able to take on more work.

38. The amount of housing benefit that a household receives tapers off sharply with rises in income. The Cumbria Sub Regional Housing Group, for example, told us that in a typical case in their area 91 pence of every £1 earned could be clawed back in reduced housing benefit.[64] Several witnesses referred to the tapering off of housing benefit with income as a disincentive to work.[65] When the tapering of housing benefit operates alongside other forms of income-based support such as council tax benefit (CTB), free prescriptions and free school meals, the effect of the cumulative loss of benefits as income rises compounds the disincentive to work,[66] a point which even CLG has recognised.[67] We have raised this issue previously, in our recent Report on Council Tax Benefit. We recommended that the Government urgently address the problem of the interaction of tapers acting as a work disincentive. We reiterate the need for our recommendation to be implemented.[68] But as the British Urban Regeneration Association told us, disengaging the tapering of housing benefit from other benefits does not necessarily improve the situation, either:

39. The design of the system is not, however, the only, or perhaps even the main, problem. Reviewing the function of housing benefit on behalf of DWP, David Freud cites Professor Hills's analysis and states:

The design of housing benefit is also unlikely to be the reason for worklessness. Housing benefit does not create an unemployment trap—in other words people are (almost always) financially better off in work. And in practice social tenants are more likely to move into lower paid jobs working fewer hours, and therefore less likely to float off housing benefit on entering work.

40. Freud's conclusion that "housing benefit does not create an unemployment trap" appears to be at variance with others, particularly Hills's conclusion that housing benefit is a major contributor to the "poverty trap."[71] Freud is, however, here referring solely to the design of the housing benefit system. More important are his later remarks on awareness and understanding of housing benefit as an "in work" benefit. Notwithstanding the detailed analysis which Hills and Freud have undertaken, it is the calculations which individual tenants make themselves that make the difference.

41. During questioning, Professor Hills agreed with Freud's view that there is a lack of understanding about housing benefit as a work-related benefit. He also suggested that the system could adjust less rapidly when a tenant's circumstances change, assisting the transition into work or from part-time into full-time employment.[72]

42. The complexity of the benefit system, especially as it operates during the transition into work, contributes to the creation of a poverty trap, and exacerbates the fears that people have of being unable to climb out of it. In areas where rents are high, this problem becomes particularly acute. There is an urgent need, as identified by the Freud report, to provide clearer guidance to benefit recipients about the network of benefits and credits that alter with income, and to ensure that they receive the necessary advice about the effects of increasing their income from work. But the operation of the various systems must also be better coordinated and made more flexible to take account of changes to individual circumstances, as well as to changes in the local housing market. We recommend that the Government take immediate steps to address these problems.

SINGLE ROOM RATE

43. We also have significant concerns about the effect of the single room rate of housing benefit. This policy deems that because someone below 25 without dependants is better able to share space (a kitchen and bathroom), they need less financial support. Since its introduction in 1996, the number of young people in private rented accommodation has declined.[73] In rural areas, where shared housing and bed-sits are rare, young people are "effectively excluded from the private rented sector."[74]The National Landlords Association, along with Shelter and the Citizens Advice Bureau, has called for an end to the single room rate.[75]

44. The single room rate effectively bars young people, many of whom have no hope of accessing social rented accommodation, from any real choice within the private sector either. We recognise that there would be a cost to removing the cap on housing benefit represented by the single room rate, but current policy is having a pernicious effect on many vulnerable young people. The Government must undertake further reform to the single room rate so that if the local housing market is such that a young person's needs cannot be met through shared accommodation, there is flexibility for increasing their housing allowance.

Overcrowding and family homes

45. Few experiences short of homelessness itself can have as adverse an impact on a tenant as severe overcrowding. A greater proportion of households in social rented accommodation are overcrowded (5.5 per cent) than in the private rented sector (4.6 per cent).[76] But overcrowding has worsened within the private rented sector, and is particularly acute in London, where the number of over-crowded households in that sector doubled from 25,000 to over 50,000 between 1998-99 and 2005-06.[77] On our visit to families in Westminster, we witnessed families having to cope with a small lounge which is also needed for homework or study, eating, and as a bedroom.[78] Drawing on experience in her own constituency, Regent's Park and Kensington North, Karen Buck MP demonstrated the point vividly:

46. Overcrowding will only be lessened if the right size and types of homes are available. Lord Best drew our attention to the shortage of family accommodation even though new homes were being built. Part of the problem lies in the type of homes that are being built, which are mainly in flatted developments. Lord Best told us:

The Housing Minister confirmed to us that there is a general lack of homes suitable for families, and that this is a particular concern to families in London.[81]

47. The extent of overcrowding and the lack of larger homes in London has been recognised by the Housing Corporation, which has allocated 34 per cent of its funds in the capital to homes that have three or more bedrooms.[82] This is expected to increase to 42 per cent during the 2008-11 programme.[83] We share Shelter's view that the introduction of a target for expenditure on larger houses to tackle overcrowding shows leadership on behalf of the Housing Corporation.[84] We expect the Homes and Communities Agency, when it takes over from the Housing Corporation, to continue the Corporation's policy of placing a particular financial emphasis on building and acquiring family homes. As many new social rented homes will be built through planning agreements, the HCA must support local authorities at all stages of the planning process to ensure that adequate family-sized homes are built.

48. The Government announced a £15 million action plan for overcrowded households in December 2007.[85] We welcome the fact that the Government acknowledges that problems of overcrowding are most acute within London;[86] that there is a relationship between overcrowding and family breakdown and domestic violence;[87]and that overcrowding must not be seen in isolation from other issues such as temporary accommodation and homelessness.[88] But measures simply to address overcrowding must also be seen within the context of the overall shortage of social rented homes in general, and of larger properties in particular. The Government recognises that overcrowding is a significant problem, but has not acted soon enough on the root cause of supply. Welcome as measures to address overcrowding are, they will not be successful unless the Government addresses the issues of supply considered elsewhere in this Report.

DEFINITION OF OVERCROWDING

49. Overcrowding is defined by room and space standards which date back to the late 1950s. The Government says it intends to review these standards even though the Housing Act 2004 already contemplates changes to the definition of overcrowding.[89] Amendments were proposed during the committee stage of the Housing and Regeneration Bill, but were withdrawn on the understanding that the Government intends to review the standards in 2009.[90]

50. The overcrowding definition only relates to homes when they are being occupied. English Partnerships, however, has recently introduced minimum space standards for new property. These standards relate to the number and floor area of rooms[91] and require housing to be built to the principles of Lifetime Homes, which aims to encourage more flexible, adaptable and robust designs that can adapt to social and demographic changes.[92]

51. While we welcome the Government's commitment to reviewing the definition of overcrowding in 2009, amendments are long overdue. We recommend that when drawing up revisions to the overcrowding definition, CLG and the Homes and Communities Agency adopt an approach similar to that taken by English Partnerships, by establishing minimum space standards and measures such as Lifetime Homes for all new homes, especially if built for, or used by, the social rented sector.

Tenant involvement

52. The recommendations we make above would, if implemented, make significant improvements to some of the worst aspects of the experience of being a tenant. If renting is to become established as a tenure of choice, however, it will not be enough simply to eradicate the bad practice. Steps must be taken to involve tenants more closely in the management of their homes.

53. The problem in the private sector lies chiefly with a relatively small number of bad landlords, whom we consider need to be dealt with through more effective regulation—a point we consider elsewhere in this report.[93] A recent survey has shown that, overall, 79 per cent of private sector tenants are satisfied with their landlord.[94] There is a willingness within the private rented sector to develop longer-term relationships with tenants and a recognition that they need to be regarded as consumers.[95] We commend those private landlords who are prepared to do that and urge others to follow their lead.

54. A more customer-focused approach is also needed within the social rented sector. We were told that some housing associations have adopted a "get-what-you-are-given" culture which disempowers tenants.[96]We discussed the involvement of tenants in the social rented sector in decisions about the management and control of their homes with three tenant-based organisations.[97]Three main points emerged about the involvement of social rented tenants in the management of their homes (all of which could also apply to the private rented sector, albeit to a lesser degree). The first is that, regardless of the provider and despite ample best practice guidance, there are many landlords who do not involve their tenants in making decisions about their home.[98] Second, landlords have to be genuinely willing for greater empowerment to work;[99] and, third, ownership by the tenants gives a greater degree of certainty to the efforts made by tenants in management.[100]

55. The introduction of Arms Length Management Organisations (ALMOs) has already improved tenant involvement in the management of their homes. ALMOs are required to involve tenants at board level. At least a third of the members of the board must be tenants; some ALMOs have greater numbers.[101] The ALMO model can also include representatives from other tenures. The board of Derby Homes, for example, is chaired by Mr Dennis Rees, himself a leaseholder;[102] this ALMO also has a successful track record of incorporating the private sector into its overall housing strategy, according to the Audit Commission.[103] The Riverside Group, a parent body for eight housing associations, acknowledges that ALMOs have "proved successful in raising the game of social housing providers by demonstrating capacity for improved performance and customer satisfaction."[104]

56. Co-operative models of renting offer a further means of enabling greater tenant involvement, through ownership. In co-operative models tenants are joint owners, giving them a fundamental right to be heard about matters concerning not only their own homes, but also the rest of the land and buildings owned by the co-operative. The Confederation of Co-operative Housing drew our attention to research demonstrating that community controlled housing is amongst the most effective form of social housing.[105] Mr Nic Bliss, Chair of the Confederation, told us in oral evidence that the creation of an asset-owning community group "gives them the power to do things in terms of decision-making in their local neighbourhoods."[106]

57. Cooperative models are far more prevalent in other countries: in England, co-operative systems of housing are currently seen as being no more than a "niche solution."[107] We recognise that some of the benefits of co-operative models are "not easy to measure",[108] but the evidence we have received suggests that tenant involvement through ownership can nonetheless significantly improve tenants' experience of the ownership and management of their homes. Blasé Lambert of the Confederation of Co-operative Housing explained why:

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Trevor Bell, Coordinator of the National Federation of Tenant Management Organisations, told us that "a number of Tenant Management Organisations are actively looking at moving from management to community ownership."[110]

58. Greater involvement of tenants in the management of their homes has significant potential to improve the experience of tenants and to contribute towards the wider aim of community empowerment.[111]We recognise the progress which CLG, the Housing Corporation and social housing providers have made in this area. We recommend that the Government continue to extend the aim of tenant empowerment, which is one of the goals of its policy of stock transfer,[112] across the whole of the social rented sector. In particular, we recommend that CLG undertake further investigation of the potential further to develop models where tenants jointly own the land and buildings around their home. Meanwhile, we encourage private landlords to continue their efforts to improve their relationship with tenants and to root out bad practice.