Written evidence submitted by East London
Housing Partnership
1. EXECUTIVE SUMMARY
- (a) ELHP support the proposed additional
bedroom rule for disabled households with a non-resident carer.
However, on the proposals in general we have strong concerns that
the impact of the changes on the behaviour of landlords, Local
Authorities and claimants has not been assessed. Without this
analysis it is impossible to state with any certainty what the
social, economic and financial impact of the changes will be.
In East London, anecdotal evidence suggests the following:
- (i) The main impact of the changes will be
a large movement of Local Housing Allowance (LHA) claimants to
low-rent areas from inner London
- (ii) This will be accompanied by an increase
in rent arrears and evictions, homelessness and temporary accommodation
placements, and levels of overcrowding: all challenges which already
affect East London to a great extent.
- (iii) The changes will lead to a loss of
income for virtually all claimants, and the introduction or strengthening
of barriers to work for many low-income households.
- (iv) Ultimately, the changes will increase
and reinforce concentrations of deprivation in the most deprived
parts of East London and undermine the efforts of Boroughs to
spread the benefits of regeneration and economic growth to all
communities.
2. OVERALL IMPACT
- (a) In many ways the impact on East London
will be similar to elsewhere in the Capital. The LHA cap will
effectively make inner London (including much of Hackney and Tower
Hamlets) a no-go area for low income households looking to rent
in the private sector. It will also constrain availability of
accommodation in Newham.1 In some areas rents may fall
as is the Government's objective; however in section 4 we dispute
this assumption for most of the sub-region.
- (b) The effect of this will be that inner
London boroughs increasingly look to outer London, with its cheaper
rents, to supply the private rented accommodation needed by its
residents. This will in turn put strain on services — housing
or otherwise — in outer East London and will cause rents
to rise towards the cap levels. In East London this trend will
be more pronounced for the following reasons:
- (i) The prevalence of low-income households.2
- (ii) The large parts of the sub-region with
rents that are very low compared with the rest of London.3
- (iii) The size and demand for East London's
private rented stock.
3. INCENTIVES TO
WORK AND
ACCESS TO
LOW PAID
WORK
- (a) The Partnership supports the view that
any reform of Housing Benefit should incentivise work and help
to lift low-income households out of poverty. We strongly support
any move towards creating a benefit system which does not contain
perverse disincentives to work for those who are fit and able
to do so.
- (b) However, we believe that the net impact
of the proposed changes will be to reduce access to work for LHA
claimant households in East London and reduce the scope for low
income households to benefit from economic growth in the sub-region:
- (i) Low income households will be forced
to move away from central London to areas where there are lower
rents and higher levels of unemployment and economic inactivity.
- (ii) Where economic growth and regeneration
occurs, rents will inevitably rise. This will drive out LHA claimants.
Stratford will be a test case for this scenario.
- (c) The DWP Explanatory Memorandum for the
changes accepts that people moving further away from work could
experience increased travel costs, but argues this is countered
as more affordable accommodation "could encourage households
to take up employment". This is inaccurate: assuming that
LHA covers the entire accommodation cost both before and after
the move, the net impact on the income of the household will be
zero. In reality it is likely to be negative, since the £15
excess allowance has been removed.
- (d). Indeed, the DWP equality impact assessment
has found that the average impact of the changes on a household
will be a reduction of £12 per week. For East London the
impact on households will be significantly higher, as the table
below shows:4
Borough |
Shared
room | 1-bed
| 2-bed | 3-bed |
4-bed | 5-bed |
| Barking & Dag | 8 | 8
| 12 | 20 | 17 |
52 |
| City of London | 7 | 64
| | | |
|
| Hackney | 13 | 21
| 27 | 26 | 23 |
125 |
| Havering | 8 | 8
| 13 | 20 | 18 |
59 |
| Newham | 7 | 8
| 9 | 20 | 16 |
42 |
| Redbridge | 8 | 7
| 12 | 22 | 19 |
73 |
| Tower Hamlets | 19 | 29
| 27 | 19 | 55 |
|
| Waltham Forest | 8 | 8
| 10 | 20 | 17 |
49 |
- (e) These figures do not take account of behavioural changes,
for example households choosing to spend more of their non-LHA
income on rent in order to remain in an area for economic or social
reasons.5 48% of LHA claimants already face an average
£23 p/w shortfall.6 A further loss of income for
households who are already experiencing severe income deprivation
is obviously extremely concerning.
4. LEVELS OF
RENT
- (a) Private rent levels are very difficult to predict.
However, ELHP is concerned that DWP has not taken into account
the behavioural effects on landlords that will arise as a result
of these changes.7 We see no reason why, particularly
in London, DWP cannot market test the changes in order to gather
more accurate data on landlord behaviour. To illustrate what could
happen in East London we have included below a possible situation.
- (b) There are three scenarios in East London for the impact
of the changes on rents levels:
- (i) Rents gravitate towards the cap levels.
This assumes that the LHA regime encourages landlords to maximise
their profits by charging ever higher rents. Since LHA is currently
linked to the median local rent there is an incentive to do so
in high demand areas. The implication is that landlords in Tower
Hamlets, Hackney and parts of Newham will lower their rents in
line with the LHA caps, in order to sustain the high levels of
demand from low income households who are recipients of LHA. This
scenario also suggests that landlords in relatively high demand
areas in outer East London will actually increase their rents,
eventually to the cap level, whilst some will leave the private
rented market altogether.
- (ii) The impact on rents will depend on
the level of demand. This assumes that rents are set
in the most part according to demand and supply. In outer East
London rents would rise as low income households from inner London
are pushed out due to the LHA caps. Rents would rise faster in
areas where transport links and quality of accommodation are better.
However, rents in inner London would continue to
rise as they have done for many years. This is due to the sheer
scale of latent and future demand. In inner East London this is
likely to consist of young professionals who want to live in inner
London as well as migrant workers.8
- (iii) Private rented sector will shrink.
The impact of the caps could be a reduction in the size of
the private-rented sector, since landlords will see a large drop
in income and an increase in the financial insecurity of their
tenants. This may hold true in parts of the City fringe, however
there is no evidence (given the size and importance of the private
rented sector) that this will be exhibited on a large scale in
East London.
- (c) In reality, ELHP believe that the East
London experience is likely to consist of a combination of all
three as demonstrated by the four categories in the maps below:9
- (i) Those areas where rents could be relatively
unaffected (apart from some small rises in some areas) —
shown in white. Eg Dagenham.
- (ii) Those where rents are more than 10%
higher than the new LHA cap. In these areas rents may continue
to rise and LHA claimants will be barred or private rented accommodation
will become owner-occupied — shown in red. Eg Shoreditch.
- (iii) Those where rents are less than 10%
higher than the LHA cap. In these areas — where the PRS
may depend heavily on LHA claimants — rents could fall in
order to meet the cap — shown in orange. Eg Poplar.
- (iv) Those where rents are less than 10%
lower than the LHA cap. These are affordable for LHA claimants
but are still in areas of relatively high demand. Displaced LHA
claimants are likely to gravitate here, pushing the rents up to
the LHA cap level — shown in green. Eg Stratford.
5. SHORTFALLS IN
RENT
- (a) Many thousands of households will inevitably
experience a rent shortfall, at least in the short term, as a
result of these changes. Some will be able to renegotiate their
rent with their landlords but others will need to make up the
shortfall if they choose to remain in their home. Some households
will choose to use more of their own income to pay for their accommodation
costs, reducing the security of their rent payments. This is especially
the case for families who will resist moving, eg for school reasons.
- (b) Moreover, the proposed link between Jobseekers
Allowance (JSA) and Housing Benefit, whereby JSA claimants who
have been claiming the benefit for more than a year will have
their Housing Benefit cut by 10%, will inevitably lead to rent
arrears. This is even more likely when we consider the large-scale
transfer of Incapacity Benefit (IB) claimants to JSA, many of
whom will be farther from job-ready than existing JSA claimants.
- (c) A particular concern is the staggered
nature of the changes, with no financial transitional arrangements.
Households could be forced to move twice: once in April 2011 when
the caps take effect, and again in October 2011 when LHA is linked
to the 30th percentile. This double disruption could compound
the negative impacts of uncertainty for families.
- (d) The combination of a shortfall in rent
and an insecure tenancy will of course lead to eviction and homelessness,
discussed below.
6. LEVELS OF
EVICTIONS AND
IMPACT ON
HOMELESSNESS SERVICES
- (a) East London has achieved a great deal
in this area in the last five years. The total number of households
accepted as homeless between 2002-03 and 2009-10 has dropped by
65% in East London, due in no small part to a marked increase
in prevention activities and partnership working with Councils
and the 3rd sector. In reducing the number of families
in temporary accommodation East London has also performed well,
with a 30% decrease between 2003 and 2010.
- (b) However, ELHP are concerned that the
changes to Housing Benefit will lead to a significant increase
in demand for homelessness services. Levels of evictions will
rise as security of income reduces, and experience in London shows
that outer East London boroughs will be particularly affected
by an influx of high cost households placed in the private-rented
sector. The successful rent deposit schemes will become less attractive
to tenants due to the uncertainty of their tenancies. The proposed
increase in Discretionary Housing Payments (DHPs) is likely to
be allocated to those boroughs which are most affected by caps,10
not to those Boroughs which will need to meet the social costs
(education, social services, housing advice) of incoming low-income
households.
- (c) Many households who have previously been
helped into the private rented sector will now present themselves
as homeless once again, and in some cases Local Authorities will
have no choice but to place them in temporary accommodation. This
will impact on the Mayor's targets to reduce temporary accommodation
in the capital,11 and will create insecurity for many
families. In 2009 half of those helped to find alternative accommodation
were offered a PRS home, so any reduction in the number of properties
available in this sector will put pressure on homelessness services.12
All of this will occur in the context of wider spending cuts which
impact on local authority services.
- (d) Particularly worrying is the impact on
children. In London, 59% of children living in the private sector
are living in poverty.13 Many will be forced to move
to new areas or into temporary accommodation, with knock on effects
on social deprivation, educational attainment and life chances.
7. COMMUNITY COHESION
- (a) East London is an extremely diverse place,
with wide variation between communities in terms of incomes, wealth,
ethnicity, age and religion. Creating sustainable and successful
communities is a priority for all ELHP partners, and we support
any housing reforms which further this aim. For this reason we
welcome moves to recognise the role of a non-resident carer when
assessing Housing Benefit. This will allow some households to
remain in their homes and communities and to exercise choice and
control over their lives.
- (b) However, ELHP believe that the bulk of
the proposed changes will accentuate extremes of wealth and poverty
in East London, perpetuate and reinforce concentrations of social
and economic deprivation, and therefore limit our ability to promote
cohesive and sustainable communities. This is because low-income
households will be forced to concentrate in areas where there
are already high concentrations of worklessness. This will particularly
impact large families who will be the most affected by these changes.
8. DISABLED PEOPLE,
CARERS AND
SPECIALIST HOUSING
- (a) We strongly welcome the change to how
disabled people are assessed for LHA, taking into account a non-resident
carer in the room allocation. This removes one of the barriers
to enabling disabled households to remain in their homes and to
live independent lives. However, clarity is required in some areas:
- (i) The additional room rule will be irrelevant
in areas where rents are so high that even an extra room will
not allow a household to remain in the area.
- (ii) The DWP proposes to allow affected households
to backdate claims for the additional room allowance where those
households had not realised they were eligible. There is to be
no time limit on this. The financial impact of this on Local Authorities
and the Housing Benefit system need to be better understood.
- (iii) The proposed changes do not take account
of couples who are unable to sleep in the same room for health
reasons.
- (b) With respect to the first point, the
increase in DHP to support the changes is welcomed. However, the
increase may in the long run only allow Local Authorities to stand
still: DWP data shows that in 2008-09 42% of Local Authorities
had to overspend their DHP allocation, compared with 15% in 2004-05.14
The extent to which the increase will allow Local Authorities
to support more households in the long run is therefore unclear.
9. OLDER PEOPLE,
LARGE FAMILIES
AND OVERCROWDING
- (a) 36,500 households are living in overcrowded
conditions in East London, 6% of the total, and in some areas
the rate is as high as 10%.15 Many of our homes are
relatively small, there is a severe shortage of family-sized homes,
and households in some areas (and often in certain ethnic groups)
are particularly large. In response the sub-region is investing
in a range of projects to reduce overcrowding. This includes promoting
cross borough and inter-RSL chain lettings and providing an Under-Occupation
Officer to support under-occupying households to move to a new
property.
- (b) The changes to Housing Benefit are likely
to lead to an increase in overcrowding levels in East London,
for a number of reasons:
- (i) The removal of the five-bed LHA rate
will mean that very large households will be forced to move to
four-bed homes.
- (ii) In order to remain in a certain area
some households could seek cheaper and smaller accommodation which
will inevitably lead to overcrowding.
- (iii) Our efforts to reduce overcrowding
will be undermined by a shortage of private-rented stock which
meets the rent requirements under the new regime.
- (c) Because of the second point, DWP's assertion
that overcrowding will affect only five-bed LHA claimants is inaccurate.
In London, because of the caps, the changes are likely to increase
overcrowding at all household sizes. Because there is no protection
for existing Housing Benefit or LHA claimants our efforts to reduce
under-occupation will be undermined since households will not
wish to lose income as well as downgrade to a smaller property.
10. FURTHER AREAS
FOR CLARITY
- (a) In general the proposals are detailed
and Local Authorities can be clear with claimants about how their
claims will be affected. However, a number of areas need further
clarification including:
- (i) The allocation and purpose of Discretionary
Housing Payments (DHPs). Will Boroughs which bare the social costs
of incoming low-income households be compensated as well as those
Boroughs which have the highest rents?
- (ii) The 10% reduction in Housing Benefit
for jobseekers who have been receiving JSA for longer than 12
months. Will account be taken of the local availability of jobs
in applying this rule? What discretions will be given to local
Housing Benefit officers in applying this rule?
- (iii) The reconciliation of the Government's
welfare objectives. How will the changes impact on the objective
to increase incentives to work, and particularly on facilitation
of mobility for low-income households?
- (b) More detail and analysis is required
to determine the impact of other changes, such as to non-dependent
deductions and limiting the working age Housing Benefit entitlement
to reflect family size. These could have further negative effects
on homelessness services.
11. MITIGATING THE
IMPACT AND
ALTERNATIVE APPROACHES
- (a) ELHP are keen to ensure that the changes
do not unfairly impact on low-income households and in certain
areas. The following options are available for mitigating the
impact of the Housing Benefit changes:16
- (i) Better target the DHP to areas where
the impact on local services is greatest.
- (ii) Replace a fixed cap with one that reflects
local rent levels in different regions: excluding the highest
and lowest rents and then capping at the 30th percentile.
- (iii) Improve the transitional arrangements
by better phasing the changes for existing claimants and applying
the rules to all new claims (thereby avoiding new claimants signing
up to tenancies that will become unaffordable and forcing additional
moves which negatively impact children's' education).
- (iv) Prioritise support for certain groups
which will be most affected by the changes.
- (b) If the LHA bill is to be reduced in the
longer term, the excessive rent levels in London and the large
gulf in incomes between different communities must be addressed.
This can be addressed by increasing the supply of affordable housing
in London.
REFERENCES
1 Based on analysis
of London Rent Map by postcode area, June 2010.
2 Five out of seven
East London Boroughs (excluding the City of London) fall below
the London average weekly income level (£598.60): Newham
(£491.80), Barking and Dagenham (£526.10), Waltham Forest
(£542.30), Hackney (£573) and Havering (£80.40).
Source: Annual Survey of Hours and Earnings.
3 See London Rent
Map, June 2010. The lowest rents in London are in Waltham Forest
and Barking and Dagenham.
4 DWP, Equality
Impact Assessment: Housing Benefit, July 2010. Table 4: Estimated
average loss per loser or notional loser, £ per week.
5 Shelter, For
whose benefit? A study monitoring the implementation of local
housing allowance, December 2009.
6 Hansard (05 March
2010) cc1422W-1423W; Crisis, Policy Briefing: Housing Benefit
Cuts, July 2010.
7 Ibid. "Savings
do not take account of behavioural effects such as landlords increasing
rent up to the maximum".
8 See http://www.thisislondon.co.uk/standard/article-23857889-record-demand-for-rented-homes.do
for example. Future demand figures are available in the forthcoming
East London Strategic Housing Market Assessment (SHMA).
9 Data extracted from
London Rent Map, July 2010.
10 DWP, Annex A:
Explanatory Memorandum for the Social Security Advisory Committee,
2010.
11 See GLA, London
Housing Strategy, 2010.
12 DCLG, Homelessness
Prevention and Relief: England 2008/09, 2009.
13 London Child Poverty
Commission, Capital Gains, February 2008.
14 DWP, Equality
Impact Assessment: Housing Benefit, July 2010.
15 DCLG, Local
Authority P1E returns; Local Authority overcrowding monitoring
forms, 2009-10 Q4.
16 Some of these are
adapted from London Councils, Briefing Note.
3 September 2010
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