Written evidence submitted by Notting
Hill Housing Group
Introduction
1. Many of the people living in our social homes
and temporary accommodation are dependent on HB for some or all
of their rent, so the proposed changes to the HB system have significant
implications for Notting Hill and its tenants.
2. We welcome the Government's focus on reducing
HB expenditure, and support its aims of ensuring that the HB system
does not enable people on benefit to live in accommodation which
is out of the reach of most people in work, and creating a fairer
system for low-income working families and for the taxpayer. The
near doubling of HB expenditure over the last 10 years, from £11
billion in 1999-2000 to £20 billion in 2009-10, is clearly
unaffordable, and the current HB system does not provide the right
incentives for people to live in accommodation that meets their
needs in a reasonable way, and for working age people to secure
jobs and build successful lives.
3. We are concerned, however, that some of the Government's
proposals take insufficient account of the particular challenges
of London's housing market, where rents are inevitably much higher
than in most other parts of the country. DWP's impact assessment
shows that all LHA recipients living in London will receive less
HB under the proposed changes. The average loss would be £22
per week, more than double that for the rest of England. 12% of
London's LHA recipients will lose £30 or more per week, with
6% losing over £40. No LHA recipients in other parts of England
face losses of this magnitude. The losses would be particularly
severe in central London. For example in the two boroughs where
most of Notting Hill's homes are the average losses range from
£67 per week for a one bedroom home to £641 per week
for a five bedroom home in Kensington and Chelsea, with equivalent
figures of £20 and £282 in Hammersmith and Fulham. They
would make it virtually impossible for families dependent on HB
to find homes in those boroughs unless they manage to secure social
housing.
4. The proposals would make it much more difficult
to build and sustain mixed communities in London and other major
cities; could be very disruptive to families with children settled
in schools in central London and to the support networks on which
these often quite needy families depend, and could lead to higher
levels of rent arrears, evictions and homelessness, We believe
that some of these problems could be avoided if the particular
circumstances of London were more clearly reflected in the package
of changes, and if the changes were brought in more slowly than
the Government proposes, to give families already living in relatively
expensive rented accommodation more time to adapt to the new system.
POTENTIAL IMPACTS
OF THE
PROPOSED CHANGES
1. From October 2011, Local Housing Allowance
rates will be set at the 30th percentile of local rents (instead
of the 50th percentile)
7. In the Budget the Government said that this would
save £365 million in 2012-13 (the first full year), rising
to £425 million in 2014-15. The effect of this change would
be effectively to limit those dependent on HB to renting homes
in the bottom third of the Broad Rental Market Area (BRMA) in
which they live. It would increase demand for homes in the bottom
third, which might result in rent increases for them which would
reduce the level of saving. It would lead to a greater concentration
of low income households in the cheaper parts of the BRMA. In
some areas more than 30% of private sector tenants are on HB,
and in those areas some of those tenants would have to move out
as they are unlikely to be able to use other income to make up
the short-fall between their rent and HB.
8. If this cap is reflected in the support arrangements
for temporary accommodation provided by housing associations like
Notting Hill it will mean that we have to give up leasing properties
outside the bottom 30%, and the relevant borough would have to
find replacement temporary homes for any tenants living in such
properties.
2. From April 2011, Local Housing Allowance Rates
will be capped at £250 per week for a one bedroom property,
£290 per week for a two bedroom property, £340 per week
for a three bedroom property and £400 per week for four bedrooms
or more
9. This change would only affect some 21,000 households,
living mainly in central London. As a result it only saves some
£55 million in 2011-12, rising to £70 million in 2013-14.
It is not clear whether the Government plans to index link the
caps, and if so whether that would be to the CPI or to rental
movements. If the caps are not increased as rents increase their
impact in London would increase greatly over time, and they would
also have an impact in an increasing number of other areas.
10. This change would have a dramatic impact on the
ability of poorer families to rent private homes in central London.
DWP's impact assessment shows that only 7% of private rented accommodation
in central London would be available under the capped rates proposed,
compared with 52% under the current system. In effect LHA recipients
would be priced out of virtually the whole of the central area,
and those currently living there would have a year to find new
homes elsewhere. Those unable to do so would rapidly build up
rent arrears and face eviction and homelessness which the boroughs
concerned would have to deal with.
11. Once the limits are applied to the temporary
accommodation subsidy system under which housing associations
like Notting Hill make leased homes available to councils to provide
temporary accommodation for homeless families we would have to
hand back many of the properties we currently lease, with vacant
possession, and the councils concerned would have to find new
homes for the tenants.
3. Deductions for non-dependants will be up-rated
in April 2011 on the basis of prices. This will reverse the freeze
in these rates since 2001-02
12. The Budget estimated that this would generate
savings of £125 million in 2011-12, rising to £340 million
in 2014-15. Reversing the freeze in these rates would lead to
a dramatic increase in the contribution that working adults are
expected to make towards the rent payable — in many cases
it would mean that tenants were no longer eligible for HB. If
the working adults refused to make the contributions for which
they were assessed this would almost certainly lead to a rapid
build up of rent arrears, leading to evictions, for both social
and private sector tenants. The proposal would provide a powerful
incentive for tenants to encourage their children to leave home
as soon as they reached adulthood, reducing the likelihood that
they would provide care for their parents when they needed it,
although in the case of private sector tenants they would then
probably have to move to smaller accommodation as their LHA entitlement
would fall. Working age social tenants could also find that they
had to down-size as a result of the proposed restriction of HB
payments to such tenants who are under-occupying their homes (see
item 5 below).
4. From 2013-14, Local Housing Allowance rates
will be up-rated in line with the Consumer Price Index (CPI)
13. In the budget the government said that this would
yield a saving of £300 million in 2013-14 rising to £390
million in 2014-15. Rents historically have moved broadly in line
with earnings rather than with prices. As a result over the past
ten years rents have risen on average by 2.57% per year above
CPI. If LHA rates are only up-rated in line with CPI the proportion
of homes affordable to those dependent on LHA will rapidly fall
from the 30% that will be affordable under the new rates to be
set in October 2011. This will not have a significant impact in
central London, as the proposed caps govern availability there,
although as noted above the Government has not said whether the
caps will be up-rated and if so on what basis. But elsewhere it
will make it much more difficult for HB recipients to find affordable
homes to rent. It would call into question the whole notion of
LHAs linked to rents in BRMAs.
5. From April 2013, housing entitlements for working
age people in the social sector will reflect family size
14. The Government estimated in the Budget that this
change would yield annual savings of £490 million from 2013-14
onwards, the highest figure for the various changes proposed.
15. Notting Hill has long been keen to encourage
its tenants to down-size from family size homes once their children
have grown up and left, to free up the homes for families who
need them. We have worked closely with a number of boroughs to
achieve this, with the boroughs providing incentive payments and
Notting Hill providing support to our tenants to help meet the
costs of moving and make the removal and other arrangements necessary.
This is a resource intensive exercise, and often tenants are very
reluctant to move from homes they have lived in for years. It
would therefore be useful to introduce some levers which associations
and councils could use to secure more moves, alongside incentives
so that tenants who move do not incur costs in doing so and secure
some benefits.
16. The Government's proposal would introduce a significant
element of compulsion into the process, although it is not yet
clear how the HB entitlement would be calculated, and whether
the restriction would bite even if a suitable smaller home was
not available. Social rents do not vary with property size anything
like as much as they do in the market, and many of the social
tenants who under-occupy their homes are above working age and
would not therefore be affected by the proposal. Where the change
resulted in under-occupied homes coming vacant in many cases councils
would choose to use them to re-house overcrowded families already
living in social housing, rather than families living in expensive
temporary accommodation. So the estimated level of savings looks
very high.
6. Housing Benefit awards will be reduced to 90%
of the initial award after 12 months for claimants receiving Jobseeker's
Allowance. This will be introduced in April 2013
17. Notting Hill is keen to help its working
age tenants secure worthwhile employment and build successful
lives. We run a number of employment and training programmes aimed
at achieving this. In our experience many of our tenants want
to work, but find it hard to secure jobs that will make them significantly
better off once they take account of the costs associated with
working, lack the confidence needed to do so, and are concerned
that if they take a job and it does not work out they will struggle
to get their benefits re-started quickly enough to avoid them
getting into debt.
18. We agree that the Government needs to adopt an
approach which embodies both carrots and sticks in order to tackle
the hard core of claimants who are determined not to work. But
we believe that it would be more appropriate and effective to
use the JSA system to achieve this. We are concerned that a blanket
cut in HB after 12 months on JSA, which does not take account
of the individual circumstances of tenants, may result in a number
of our tenants building up rent arrears which could lead to evictions
and would certainly distract them from seeking employment.
7. From April 2011, Housing Benefit claimants
with a disability and a non-resident carer will be entitled to
funding for an extra bedroom
19. We welcome this proposed change.
8. The Government contribution to Discretionary
Housing Payments will be increased by £10 million in 2011-12
and £40 million in each year from 2012-13
20. We welcome this proposed increase in Government
support for Discretionary Housing Payments, although the amount
is small compared with the savings predicted from the other proposed
changes.
IMPLICATIONS OF
THE PROPOSED
CHANGES FOR
THE ISSUES
ON WHICH
THE INQUIRY
IS FOCUSSING
1. Incentives to work and access to low paid work
21. The public and service sectors in central London
both need a steady supply of people willing to take on low paid
work. Limiting the ability of people receiving housing benefit
to live in central London will significantly reduce the supply
of such people. The supply of jobs in the less expensive areas
to which they had to move would be much lower, and the increased
travel costs that they would incur in commuting from outer London
or further afield would significantly reduce work incentives.
2. Levels of rent, including regional variations
22. Landlords who currently let to tenants on HB
could respond to the reductions in three ways — reduce the
rent they charge to the level supported by the new HB system;
seek to let to tenants not dependent on HB, or sell their properties.
LHA rates are set by reference to the rents that landlords are
able to secure in the relevant Broad Rental market Area. Since
only a minority of private rented sector tenants receive HB, whilst
it seems certain that some landlords exploit the LHA system to
secure rents that they would not be able to achieve in the open
market, it is unlikely that many landlords will reduce the rents
they charge to reflect the HB changes — rental returns on
residential property are already low compared with other forms
of investment, and capital growth remains highly uncertain following
the credit crunch.
3. Shortfalls in rent, levels of evictions and
the impact on homelessness services
23. Since rent reductions are unlikely tenants facing
a shortfall between the rent they have to pay and the HB they
receive will have to try to use other income to cover the gap
until they are able to secure cheaper accommodation. However the
scope for doing this is very limited. The increase in provision
for discretionary housing payments will enable local authorities
to provide help in some cases, although the £40 million planned
increase in provision for this will only cover a small proportion
of the planned reductions. So it seems certain that the changes
will lead to significant increases in rent arrears, and that this
will lead to higher numbers of evictions and of homelessness cases
that local authorities have to deal with.
24. These problems could be significantly reduced
if the government phased in the changes for existing tenants more
slowly than they currently propose, to allow more time for HB
recipients to move to less expensive accommodation. They could
also be reduced by making changes to homelessness legislation
and practice, to give boroughs greater freedom to place homeless
families in homes outside their area, and in the accommodation
they are able to secure rather than the high space standards that
are currently applied, and to reduce choice based lettings for
those living in temporary accommodation, requiring them to accept
one reasonable offer of local social housing. In the longer term
tenure reform, so that social landlords did not have to grant
life-long tenancies in response to the often relatively short-term
problems that enable people to reach the top of the priority list
for social housing, would help reduce the need to use expensive
private rented accommodation to house homeless families, generating
significant HB savings.
4. Landlord confidence
25. As noted above, the proposed changes are bound
to damage landlords' confidence in the ability of tenants on HB
to sustain their tenancies, and therefore make them more reluctant
to let their properties to such tenants. They seem likely to have
an adverse impact on the very welcome growth of the private rented
sector that we have seen over the past 10 years, which has brought
huge benefits in terms of mobility and housing choices, and enabled
local authorities to virtually eliminate the use of bed and breakfast
accommodation for homeless families and to substantially reduce
the number of families living in temporary accommodation.
5. Community cohesion
26. In the short term the proposed changes will lead
to a great deal of community churn , as relatively settled families
have to move from central London and other expensive parts of
London to cheaper homes in outer London or further afield. The
influxes of poorer families with no community links into these
areas is bound to create animosity in the existing communities
in those areas, and therefore damage community cohesion. In the
longer term the changes will lead to even greater polarisation
of communities in central London, as only relatively well off
households or those fortunate enough to secure social housing
will be able to afford to live there.
6. Disabled people, carers and specialist housing
27. A large proportion of those on HB are disabled,
and the proposed changes will impact heavily on them. For example
the DWP impact assessment shows that 88% of the 308,540 LHA recipients
on Income Support/income-related Employment and Support Allowance
will lose out under the proposal to set LHA rates at the 30th
percentile of private rented sector rents, with an average loss
from this change alone of £10 per week.
28. The planned change to allow funding for an extra
bedroom for HB claimants with a disability and a non-resident
carer is welcome, but the cost of this (£15 million pa) is
substantially outweighed by the planned increase in deductions
for non-dependents, which will save £125 million in 2011-12
rising to £340 million in 2014-15, and is bound to reduce
the ability of non-dependent adults to remain living in the family
home helping to care for their elderly parents.
7. Older people, large families and overcrowding
29. The challenge of having to move from the neighbourhoods
and communities in which they have established roots to less expensive
areas will impact particularly heavily on older people. Similarly
the proposal to restrict housing entitlements for working age
people in the social sector to reflect family size will mainly
impact people approaching retirement age whose children have left
home, forcing them to down-size. As noted above, the proposed
increase in deductions for non-dependents will reduce the ability
of non-dependents to remain living in the family home helping
to care for their parents.
30. The caps on LHA will bite most severely on large
families living in central London, and are bound to result in
more overcrowding as they try to find new homes that they can
afford in areas which make sense in terms of employment and community
links. The restriction of housing entitlements for working age
people in the social sector should free up some under-occupied
homes which can be used to re-house families living in over-crowded
social rented or private sector homes, but the impact of this
is likely to be reduced by the cuts in resources for provision
of new family homes widely expected to result from the spending
review.
26 August 2010
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