Welfare Reform Bill

Memorandum submitted by the National Landlords Association (WR 31)

Summary

1. The NLA is concerned by the lack of detail contained within the Bill. The reliance on secondary legislation to set out essential detail behind many of the Bill’s provisions makes it difficult to analysis the potential implications of important policies the Secretary of State is seeking to achieve.

2. The NLA’s biggest concern is the proposal to set housing support rates in line with the Consumer Price Index. The NLA believes that this measure will achieve an increase in homelessness which will raise costs to fund temporary accommodation. The Secretary of State should look for a more sustainable measure for housing benefit up-rating.

3. Given that 80 per cent of households affected by the benefit gap have 3 or more children, the overall effect of the policy will be to penalise families who need family-sized homes. The NLA believes that the Government should include a housing disregard into the benefit cap calculation to limit any increase in homelessness.

4. The NLA is also worried about the effect of these provisions on forcing tenants to migrate to much cheaper, but ultimately less professional ‘rogue’ end of the market. Placing a greater focus on housing benefit tenants renting accommodation from ‘accredited’ landlords should be included within the provisions of the Bill.

About the National Landlords Association

5. The National Landlords Association (NLA) is a leading landlord association in the UK with around 20,000 members across the UK. In addition to landlords, we work with over 100 local authorities across the UK as associate members of the Association. We provide industry representation for our members and a range of services intended to raise professional standards across the sector, including running NLA Accreditation for local authorities looking to engage and improve their local private-rented sector.

Introduction

6. The NLA welcomes the principles which underpin the Welfare Reform Bill. Reforming welfare to enable greater efficiencies, create more flexibility and reducing disincentives to work, are principles the NLA supports. However, there are serious concerns about the consequences of the housing benefit-related proposals contained within the Bill. Their impact on tenants who rely on private-rented sector housing and the implications for landlords in different parts of the UK threaten to damage the sustainability of the sector trying to meet this housing need.

7. The NLA is concerned by the lack of detail contained within the Bill. The reliance on secondary legislation to set out essential detail behind many of the Bill’s provisions makes it difficult to analysis the potential implications of important policies the Secretary of State is seeking to achieve. Many of these regulations confer powers to the Secretary of State allowing him to fundamentally change the benefit system without effective Parliamentary scrutiny. The Bill should be amended to ensure adequate scrutiny over the eventual use of the powers the Secretary of State will gain.

8. The background to some of the measures in the Welfare Reform Bill is the cost of still-growing group of diverse households who rely on housing benefit support. This group rely on the private rented sector to provide homes to help meet their housing need. Current DWP statistics show 1,510,800 recipients of Housing Benefit in the private-rented sector, 1,171,560 receive Local Housing Allowance (LHA). During 2010 an additional 234,910 recipients began to receive LHA, 24,490 in December 2010 alone. [1]

9. Given the importance of the private-rented sector in some areas of the UK in providing these homes, this upward trend will place significant pressures on local authorities. Previously local authorities had been able to utilise local landlords through Local Housing Allowance, reducing expenditure on more expensive temporary accommodation. The proposals contained within this Bill will make it harder for local authorities to discharge their homeless duty through the private rented sector as rental shortfalls will be insurmountable.

Up-rating of housing support by CPI

10. The NLA’s believes that the proposal to enable the Secretary of State, through secondary legislation, to set housing support rates in line with the Consumer Price Index will prove unsustainable. Currently LHA rates are set so that they reflect the ‘real world’ rents paid in a local area (defined by Broad Rental Market Areas).

11. If support for housing costs is to continue to successfully meet its purpose it needs to be linked to the actual cost of housing. As Policy Exchange has identified prices in the rental market have, over the long term, matched rises in house prices. [2] The cost of providing and maintaining rented accommodation make up a large proportion of the rent paid by tenants (additional factors like management costs are also important) and housing support should reflect these costs. Without this many landlords will be unable to sustainably provide homes for this group of tenants.

12. If housing support is decoupled from the cost of providing rental accommodation then there are three equally damaging possible, but ultimately likely, consequences: a) rent arrears will increase as people struggle to meet their rent, forcing more landlords to seek possession as tenancies become unsustainable; b) landlords will be forced to delay improvements and some maintenance of properties, prioritising work based on limited cash flows; and, c) in large parts of the country, where landlords can, they will seek non-housing benefit tenants reducing supply and increasing competition for homes for this group.

13. More generally other organisations have made reference to the inadequacy of CPI in as a measure of inflation in housing costs [3] . CPI masks changes in rental prices because a large proportion of the country do not rent and because CPI is not sufficiently sensitive to changes rental costs as other parts of the goods basket tend to wield larger influence.

14. Fundamentally the NLA believes that this measure will increase homelessness which will, in turn, increase spending on temporary accommodation. The Secretary of State should look for a more sustainable measure for housing benefit up-rating.

Housing Benefit Cap

15. Although the NLA understands purpose behind the Secretary of State’s proposal for an overall benefit cap, its effect on tenants’ ability in some parts of the country to meet their housing costs will be severe. From current information it appears that housing benefit will be the first benefit cut where the cap applies. The Secretary of State should state categorically in which order benefits will be cut as the cap affects recipient’s entitlement.

16. From the Bill’s Impact Assessment 22,500 households will lose more than £50 per week, with 7,500 households losing more than £150 per week. Given that 80 per cent of households affected by the benefit gap have 3 or more children, the overall effect of the policy will be to penalise families who need family-sized homes. The NLA does not believe that, at this point, increasingly the challenges larges families face in terms of housing and costs will be effective.

17. It is a deficiency of the Bill’s Impact Assessment not to be able to map out where in the country these affected families currently live. The NLA believes that the Government should include a housing disregard into the benefit cap calculation to limit any increase in homelessness.

Direct Payment of Housing Support

18. Given the significant pressures tenants will face on their welfare support, it is becoming increasingly important to let tenants choose to have their housing support component paid directly to their landlord, whether social or private. Increasing confidence of housing providers would have a number of positive effects. It would ensure that administration and management costs for landlords do not rise as tenants struggle to balance their budgets and inevitable rent arrears.

19. It would also provide some protection against cash shortfalls which would affect professional landlords’ ability to fund maintenance and repair work. The sector has made headway in improving standards this move would ensure that the Government continues to get value for money from housing support. Finally, like social landlords, it would encourage lenders to have greater confidence in a landlord’s business plan when based on housing benefit/Universal Credit tenants.

20. It is currently unclear how penalties for official error and overpayments will affect tenants struggling to pay their rent. The NLA is concerned about the level of fines suggested and the uncertainty of how the system will work in practice given the real-time nature of Universal Credit.

Conclusion

21. Finally, the NLA is also worried about the effect of these provisions on forcing tenants to migrate to much cheaper, but ultimately less professional ‘rogue’ end of the market. Placing a greater focus on housing benefit tenants renting accommodation from ‘accredited’ landlords should be included within the provisions of the Bill.

March 2011


[1] Housing Benefit and Council Tax Benefit, DWP Statistics, March 2011

[2] Making Housing Affordable, Policy Exchange, 2010, p42

[3] British Property Federation, Evidence to the Work and Pensions Select Committee, HC469