Written evidence submitted by London Borough
of Newham
1. SUMMARY OF
KEY POINTS
1.1 The London Borough of Newham is concerned
that the Local Housing Allowance (LHA) cap will effectively make
it impossible for low income households to rent in the private
sector in inner London. The coalition government promised fairness
to the most vulnerable and despite the current economic/financial
circumstances, these proposed policies are contradicting this
pledge. In east London, low income households will be priced out
of areas such as Hackney and Tower Hamlets, forcing these households
to look increasingly to outer London for accommodation where rents
are cheaper.
1.2 Those who are displaced by the caps will
find east London attractive because we have some of the lowest
rents compared to the London average. However we are already home
to very high proportions and high concentrations of low income
households; our private rented sector, although already large
and fast expanding, is still struggling to keep up with our levels
of housing need and demand for affordable housing.
1.3 The impact of the cap in East London and
in particular, Newham, is likely to be that rents which are currently
below the cap level, will rise to meet it as landlords recognise
the changes being made. This will increase the cost of living
for our existing poorer residents in the private sector.
1.4 Newham in particular already has high levels
of poorer residents with huge pressure on housing and other public
services. Our aspiration as a borough is to create mixed communities
and shared services and to improve social outcomes for our population.
Importing additional poverty in to the borough will not support
this aspiration; quite the opposite. It will make it increasingly
harder to provide adequate public services, including housing—particularly
in the current public spending climate. It will intensify poverty
in our part of London.
MAIN SUBMISSION
2. LEVELS OF
RENT INCLUDING
REGIONAL VARIATIONS
2.1 The borough has a competitive rental market
due to lower than average rents for London and its relative affordability
for those in employment which is linked to the fact that Newham
has a disproportionately high number of dwellings in the lowest
three Council Tax bands.
2.2 We are concerned that the capping of LHA
rates, though it has no direct impact on our own existing tenants,
will have such a significant impact on the availability of property
to housing benefit recipients in Inner London that it will in
effect squeeze them out to cheaper areas such as Newham. This
will in fact accelerate a housing market trend in Newham which
has seen a net exodus of some 10,000 owner occupied households
in the last 10 years replaced by privately rented properties.
2.3 Newham's increasing reliance on the private
rented sector puts a large area of housing provision and any disinvestment
from the sector will have a significant impact. Lower income households
both in and out of work will be hit the hardest, as they will
be competing for housing in a tighter market, with a likely reduction
in the supply of both private and social housing, and less resources
at their disposal than in the past.
3. SHORTFALLS
IN RENT
3.1 Even with LHA set currently at the median
level it is obvious that competition for affordable properties
makes it difficult for those needing support from housing benefit
to find properties at or below the set level. At present 50% of
claimant households receiving housing benefit based on LHA rates
have a contractual rent greater than the level appropriate to
their household need.
3.2 The proposal to set LHA at a level to make
only 30% of properties affordable to those requiring housing benefit
from October 2011 will only serve to increase competition.
Based on current contractual rents and assuming tenants are unable
to re-negotiate rents the financial impact on households is likely
to be significant. This is also likely to fuel demand for poor
and overcrowded accommodation often provided by unscrupulous landlords
who would otherwise be forced out of the market. We would like
to see local authorities have more controls over private landlords,
particularly in the LHA/HB market. We would wish to see them required
to demonstrate compliance with model standards and regulated by
a least an appropriate professional organisation and subject to
a local authority audit.
Table 1
| | | Number of households affected and potential level of weekly shortfall in rent
|
| Bedroom need |
LHA Rate Jan 2010 |
LHA @ 30%* | £0.01-£10.00
| £10.01-£20.00
| £20.01-£30.00
| £30.01-£50.00
| £50.01 or more
|
| Shared Room | 73.85
| 69.04 | 131
| 246 | 196
| 240 | 363
|
| 1 | 165.00
| 160.00 | 806
| 305 | 116
| 117 | 92
|
| 2 | 201.92
| 195.00 | 897
| 573 | 202
| 227 | 168
|
| 3 | 253.85
| 230.14 | 165
| 199 | 521
| 345 | 137
|
| 4+ | 296.54
| 277.00 | 3
| 45 | 90
| 26 | 62
|
| Total households affected
| 2,002 | 1,368
| 1,125 | 955
| 822 |
* Valuation Office Agency published figures
4. LEVELS OF
EVICTIONS AND
THE IMPACT
ON HOMELESSNESS
SERVICES
4.1 The borough is already making effective use of Discretionary
Housing Payments (DHPs) to prevent potential homelessness through
rent arrears resulting from a shortfall between the contractual
rent and the level of LHA appropriate for the household. In addition,
where we refer potentially homeless households to new landlords
through our Bond Scheme, we find that the standard of property
to meet what we would see as acceptable is often above the level
of the LHA and requires DHPs to be made to maintain the new tenancy.
So these changes are likely to lead to further downward pressure
on private sector housing standards and management in order to
maintain supply.
4.2 In high demand housing areas of London and Newham in particular,
the imbalance between supply and demand means that the low income
part of the sector means that even landlords offering a poor standard
of accommodation can still find tenants.
4.3 Further increase in the PRS stock locally will amplify
problems caused by insecure tenancies such as lower social capital
caused by more transient PRS populations and tenants worried about
complaining about disrepair.
4.4 Whilst we welcome the increased level of DHP funding that
may be available we feel that with the significant changes to
the Housing Benefit scheme proposed from April 2011 this may not
be sufficient to address the problems that may arise.
5. LANDLORD CONFIDENCE
5.1 The introduction of the LHA with, on the whole, payments
to claimants has been a difficult transition for landlords. The
Department's reform proposals from February 2010 promised some
restoration of payments direct to landlords with a link to the
condition of the property, which the authority would have welcomed.
5.2 Whilst we accept that this issue may be addressed when
the Department's review of housing benefit is completed in the
autumn we believe that at the present time landlord confidence
in housing benefit as an effective means of supporting the tenancies
of those without sufficient means is somewhat dented.
6. INCENTIVES TO
WORK AND
ACCESS TO
LOW PAID
WORK
6.1 Newham has worked hard to address the issues of worklessness
that affect our residents. Our employment programme Workplace
has moved over 3,600 people into work since it was set up in 2007.
Within Workplace, we are running the Mayor's Employment Programme
that delivers intensive support to those who are long-term unemployed
and ensuring that no-one within the programme is worse off on
moving into work. We need a benefits system that supports this
local work and recognises the role local authorities can play
in shaping their local area.
6.2 Loss of housing benefit on taking employment has long
been seen as a barrier to employment. However, we have effectively
demonstrated to claimants through Workplace that they will not
be worse off in work and it is obvious from our own caseload that
housing benefit actually plays a key role in supporting employment
and in particular low paid employment; 39.8% of households receiving
housing benefit based on Local Housing Allowance levels are in
some form of employment or self-employment.
Table 2
| Employed claimants receiving Local Housing Allowance
|
| Average weekly net earnings* | Average weekly HB award
| No. of households |
| Less than £100.00 | £187.79
| 1,033 |
| £100.01-£200.00 | £164.29
| 1,222 |
| £200.01-£300.00 | £124.29
| 575 |
| £300.01-£400.00 | £96.85
| 200 |
| £400.01-£500.00 | £66.42
| 35 |
| More than £500.00 | £48.02
| 8 |
| Grand Total | £158.90
| 3,073 |
*Net of tax and national insurance and 50% of any pension contributions
6.4 We believe the proposals to reduce the level of Local
Housing Allowance to 30% level of rents will make it increasingly
difficult for those in low paid work and continuing to require
support with housing costs through benefit to find affordable
accommodation. Failing to find accommodation at an appropriate
rent will disincentivise work as earnings are used to make up
increased shortfalls between the contractual rent and LHA levels.
6.5 Working closely with workless residents through the Mayor's
Employment Pilot has shown that the level of support and time
needed to enable some residents to become work ready is significant
and we are therefore concerned at proposals to reduce the level
of Housing Benefit to 90% after 12 months in receipt of Jobseekers
Allowance from October 2011. We fully believe that work is the
singularly most effective route out of poverty but also believe
that if a resident is participating fully in work seeking activity
then they should not face hardship despite their efforts.
6.6 This proposal has a broad impact on all tenure types;
of our claimant residents currently in receipt of Jobseekers Allowance
there is a 50:50 split between private sector and social housing.
Any reduction in Housing Benefit will quickly translate into rent
arrears with the potential to jeopardise secure, affordable tenancies.
6.7
Table 3
| Tenure Type | Number of claimants in receipt of Jobseekers Allowance
|
| Council Tenant | 1,201 |
| Private tenant | 2,173 |
| Housing Association / RSL tenants | 1,042
|
| Owner Occupier | 312 |
| Tenure not known | 126 |
| Council Tenant - Homeless | 260
|
| | 5,114 |
6.8 With the borough having the 5th highest level in London
of residents claiming for more than 12 months (Source: NOMIS)
this proposal is likely to have an impact. It is unclear if local
authorities will be able to support tenancies through the payment
of DHPs in such circumstances even if it is evident the claimant
has endeavoured to find employment.
7. COMMUNITY COHESION
7.1 There are now up to 35,000 households (ELHP Strategic
Housing Market Assessment 2010) or one in every three households
living in the private rented sector in Newham. The projected economic
migration of households from inner London to Newham will provide
a further catalyst for growth in the sector which is likely to
negative consequences within our local housing market and contribute
to the fragmentation of our neighbourhood communities and undermine
community cohesion and sustainability. This will put an unacceptable
strain on the borough in terms of housing and the public services
it provides. Newham is already experiencing high levels of anti-social
behaviour as a direct result of the saturation of the private
rented sector in many neighbourhood areas and Newham is the only
London Borough to have implemented selective licensing powers
within the Housing Act in an attempt to regulate these negative
consequences.
8. OLDER PEOPLE,
LARGE FAMILIES
AND OVERCROWDING
8.1 Overcrowding—we already have significant overcrowding
occurring in our housing stock which is dominated by homes with
three bedrooms or less. Over occupation as a result of affordability
is a growing problem in the private sector with sub letting increasingly
commonplace and has ramifications in our communities and neighbourhoods
going well beyond the effects on the existing households.
6 September 2010
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