Written evidence submitted by the Local
Government Association (LGA)
KEY POINTS
IN THIS
SUBMISSION
- The Local
Government Association is concerned at the effects of the budget
measures on the private rented sector and at the potential effect
on homelessness, with potential consequences for community safety,
physical and mental health, social care, child protection and
other services.
- The increase
in the non-dependent deduction, which could increase by up to
160% in some cases over the next four years, is likely to have
an effect on household stability and could affect community cohesion.
- The LGA
welcomes the provision for an additional bedroom within the LHA
calculation for non-resident carers. This was something which
the LGA and specialist organisations had called for.
- The LGA
is concerned at the increasing burden represented by supported
"exempt" accommodation; one council reports this could
amount to 2% of its revenue budget and 3-4% on its council tax.
INTRODUCTION
1. The Local Government Association is pleased
to submit written evidence to the Select Committee on the effects
of the changes announced in the Emergency Budget 2010 on housing
benefit, specifically on local housing allowance.
2. The Local Government Association (LGA) is
a voluntary lobbying organisation, acting as the voice of the
local government sector. We work with and on behalf of our membership
to deliver our shared vision of an independent and confident local
government sector, where local priorities drive public service
improvement in every city, town and village and every councillor
acts as a champion for their ward and for the people they represent.
3. The 423 authorities who make up the LGA cover
every part of England and Wales. Together they represent over
50 million people and spend around £113 billion a year on
local services. They include county councils, metropolitan district
councils, English unitary authorities, London boroughs, shire
district councils and Welsh unitary authorities, along with fire
authorities, police authorities, national park authorities and
passenger transport authorities. Of these, local housing allowance
most immediately affects housing and council tax billing authorities,
who have responsibility for assessment and payment of housing
benefit.
4. Our submission is based on the areas of inquiry
set out by the Committee.
INTRODUCTORY SECTION
5. The Local Government Association gave evidence
to the Select Committee in its last enquiry into Local Housing
Allowance. We also responded to the previous Government in its
Housing Benefit consultation issued in December 2009.
6. We said that although we did not want the
LHA to have an effect of distorting the rental market locally,
we equally warned against measures that would increase homelessness
through making renting to housing benefit customers less attractive
to the private rented market. We said that the private rented
sector has played a crucial role in tackling homelessness and
we would not like to see this reversed, particularly as extra
homeless acceptances will lead to more expenditure for councils.
7. We also opposed the plans to remove the £15
excess when they were proposed by the previous government as a
measure which would impact on the poorest in society.
8. We do welcome a greater government contribution
towards discretionary housing payments and for more flexibility
on size limits for disabled customers. We had called for both
of these.
9. LGA member authorities believe that the measures
in the Budget are bound to have an effect on homelessness. This
will have the effect of increasing local authority costs, which
have come down in recent years, thanks to the private rented sector.
10. Member authorities point out the wider impact
of homelessness on public services including Local Government
- community safety, physical and mental health, social care, child
protection and other services. The wider impact of these changes
should not be underestimated and will result in increased cost
for Local Government and other public services, at a time of squeezed
budgets.
11. Homelessness prevention and housing options
work in member authorities has been very effective and has, since
the highpoint of 2005, steadily reduced homelessness. The changes
will undermine this valuable work and will make it much more difficult
to prevent homelessness. The PRS plays a critical role in the
housing options approach, but the housing benefit changes will
severely limit its role as a higher proportion will become unaffordable
or inaccessible to people on housing benefit.
12. There is particular concern over the non-dependent
deduction which could increase by as much as 160% over three or
four years. One suggestion would be for there to be a cap on non
dependant deductions so that a non dependant is not expected to
pay for more than 50% of the householder's housing costs.
INCENTIVES AND
ACCESS TO
WORK
13. The budget measures are primarily about savings
and do not directly address incentives or access to work. Those
who argue that benefits are a disincentive to work would argue
that reduction in benefits, in particular the JSA cap, increases
the incentive. As opposed to that, it could be argued that the
measures act as a disincentive to those looking for work on the
following grounds:
- The JSA
cap, and the punitive approach to worklessness that implies, will
only have an effect if work is readily available. If it isn't
it will only have the effect of reducing benefits for the poorest
in society without affecting overall employment and of increasing
poverty. In addition it could lead to serious shortfalls in rent,
thus pushing customers into debt and disengagement from landlords
and local authorities, and making their employability less.
- With the
general reduction of LHA rates and the caps, more areas will become
unaffordable. We previously voiced our concern that broad rental
market areas are set by access to facilities rather than by access
to transport or work. The budget measures will particularly affect
low paid claimants in London; there could be an effect in other
areas. If within a particular BRMA the area with better employment
opportunities has higher rents overall; the reduction will affect
affordability within this area and restrict claimants to an area
within the same BRMA with lower employment opportunities. An example
of this is Oxfordshire; there are more jobs in Oxford city but
rents in the surrounding rural area are lower. Travel costs in
this instance are likely to act as a major disincentive to work.
- The reduction
will hit all LHA rates, for those in as well as those out of work.
So those on low incomes will have less of a top up; this could
act as a disincentive when a benefit customer decides whether
or not to take a low paid job and considers their total income.
For example in Brighton and Hove 35% (4,211 claims) of LHA claimants
are from working households, who will lose on average £755
per year.
- The
higher deduction for non-dependants, which affects all housing
benefit irrespective of sector, as well as council tax benefit,
could also act as a disincentive when households consider overall
affordability. It might also act as a disincentive to non dependents
such as young adult children taking a low paid job, given the
effect on overall household income.
LEVELS OF
RENT, INCLUDING
REGIONAL VARIATIONS
14. Figures published by the DWP and the Valuation
Office Agency shows the effect that the measures will have. It
will clearly have an effect on LHA rates and thus on housing benefit.
Those who support the measures would argue that it is bound to
have a downwards effect on rents generally, correcting the tendency
for high LHA rates to contribute towards their upwards movement.
As opposed to that it can be argued that rents generally are set
by market factors and that LHA will not have an effect.
15. There could be a differential effect on the
market. In an area where rents are low, where landlords rely on
benefit customers to fill their properties and find it difficult
to substitute other tenants, there could be reductions. Where
other potential tenants are available, a fall in rents is unlikely.
The very high LHA rates which were the subject of media attention
were in Central London and the Central London rental market is
affected by wider factors such as overall confidence and the state
of the economy rather than by LHA.
16. In the long term, uprating in line with CPI
rather than market evidence could accentuate the divorce between
LHA rates and actual rents. There needs to be more clarity about
the role of the Valuation Office Agency in future once updating
by CPI comes in. Some have expressed concern that it will no longer
gather detail on private sector rents and that broad rental market
areas will no longer be reviewed and updated regularly.
17. The size and basis of broad rental market
areas means that the policy will continue to have a different
effect in different areas. The 30th percentile approach
takes no account of the total proportion of claimants in the total.
If 10% of private tenants in an area are claimants; the 30th
percentile may be affordable but if 40% are on benefits (for example
the LHA caseload in Brighton and Hove of 12,000 is approximately
43% of the total private rented sector, 28,000), the 30th percentile
is likely to be low and many benefit customers will be unable
to find affordable accommodation.
SHORTFALLS IN
RENT
18. According to DWP evidence as cited by Crisis,
48% of people already face shortfalls in their benefits. The measures
seem likely to accentuate this.
19. For example, Camden Council have carried
out an analysis which shows that following the introduction of
capping over 2,000 claimants currently living in privately rented
accommodation will be affected. This represents around two thirds
of those who currently receive LHA. Some will need to renegotiate
their rents while others will have to find alternative accommodation
within the limits set down by government. While the number of
claimants affected fluctuates daily, the borough's analysis shows
that, currently, over 1,200 claimants are set to lose £30
or more per week. Over 500 claimants will lose £50 or more
per week. In Brighton and Hove the average loss has been calculated
by the council to be £13.70 per week.
20. The reduction in the bedroom limit and the
caps for the various size of property will not take effect until
the anniversary of a claim. However Camden Council estimates that
on a rolling basis from April 2011, 250 existing claimants each
month will face a reduction in their current housing benefits
and will require advice and assistance to find alternative accommodation.
21. Some authorities will experience significant
peaks in impact which will apply particularly acute pressure on
local benefit services, housing services and the rental market.
For example in Brighton and Hove in April 2012 it is expected
2,623 cases will experience a change in their entitlement which
will take their LHA rates lower (or lower still) than the level
of rent they pay.
22. In response to this the Government has announced
it is increasing the amount made available in Discretionary Housing
Payments (DHPs). The LGA had previously called for the amount
made available in DHPs to be increased. However the increase by
£10 million a year in 2011-12 and by £40 million
a year (which will be a total government contribution of £60
million) comes against a likelihood of increased demand.
23. Areas such as Central London, where benefit
customers face a potentially unmanageable reduction of up to £1600
a week in some of the largest properties are likely to be particularly
affected by the capped rates but measures such the 30th
percentile and non dependent deductions will mean that all areas
face increased pressure.
24. Local authorities are currently permitted
to top-up DHP grant payments in a ratio of 3:2; assuming that
this remains the case the total theoretical DHP payments will
become £150 million per annum; (£90 million in council
contributions; £60 million grant from the Government). However
whether local authorities can afford to top up at a time when
their overall grant from the government could shrink has got to
be debateable.
LEVELS OF
EVICTION AND
IMPACT ON
HOMELESSNESS
25. The budget measures; in their totality seem
bound to increase the number of evictions for non-payment of rent.
As the LHA reductions become effective from April 2011 onwards;
customers will face a position where LHA covers less of their
rent. Some will doubtless attempt to negotiate their rent downwards,
but if that it not successful it could lead to increased numbers
of evictions as benefit customers fall further into arrears. Managing
this is likely to be a major challenge for local authority benefits
and homelessness sections. Although the private rented sector
is likely to be the worst affected initially, the social housing
sector will also be affected, particularly from 2013, by uprating
in line with CPI and the limits in line with household size.
26. Social housing is extremely scarce and reductions
in central government capital spending are likely to reverse the
upward trend in new social housing completions achieved in recent
years. This means that there will not be an adequate or growing
social housing stock which can pick up the strain of people priced
out of private rented housing.
27. There is a risk that there will be even more
pressure on social housing, with councils forced to make even
more difficult choices than they do already about who gets access
to what stock there is. That will reinforce still further the
concentration of people with the lowest incomes, who are in other
ways the most vulnerable, in social housing stock.
28. One option for councils seeking to free up
larger social stock which is being under-occupied is to encourage
and facilitate moves into the PRS. However the benefit changes
are likely to make that option more unattractive and risky to
tenants with a secure social tenancy.
29. Councils will continue to have a duty to
house those who are homeless and this will be a challenge to council
homelessness budgets. Although the precise extra cost is still
hard to estimate, temporary accommodation costs seem certain to
be higher.
LANDLORD CONFIDENCE
30. The PRS plays a crucial role in the housing
system by meeting the needs of households who are unable to access
owner occupation or social housing. The LGA is aware that many
landlords consider that the introduction of LHA and of payments
direct to customers has shaken landlord confidence and thus willingness
to let to housing benefit customers.
31. As opposed to that some local authorities
consider that it has had a positive effect on landlord tenant
relations as landlords have got to make an effort to collect rents
thus facilitating more contact with tenants.
32. The budget measures seem bound to affect
landlord confidence in renting to housing benefit claimants. If
landlords consider that they cannot realistically ask for substantially
more than the LHA rate it is bound to have an effect on landlord
willingness to let to benefit customers, when they could potentially
get a higher rent from tenants not on benefits.
33. The LHA changes seem likely to increase arrears
as households find it difficult to access affordable accommodation
with the result that landlords, who are already concerned about
direct payment of LHA to tenants, may cease renting to tenants
on benefit. Other landlords may well decide to move away from
owning property with the result that the pool of rented accommodation
will start to decline. If significant numbers of properties are
put up for sale over a short period of time this could also have
a negative impact on the wider housing market.
34. The LHA changes are also likely to increase
the demand for the cheapest rented accommodation which may result
in landlords investing in property of the poorest standards e.g.
HMO's. This will not only impact on health and safety it will
also increase the pressures on the Local Authority enforcement
teams.
COMMUNITY COHESION
35. There are concerns that the changes will
have a negative effect on community cohesion. This will come about
because benefit customers are likely to be concentrated in smaller
areas. In addition, restricting housing benefit within the social
sector could have an effect on community cohesion. Local authorities
are keen to release family size accommodation but many of those
affected are likely to people well rooted in the local community,
often with caring or being cared for responsibilities and with
community involvement in "Big Society" activities. In
addition the LGA has heard concern that many local authorities
may not have a ready supply of two bedroom accommodation within
which to accommodate customers who no longer qualify for larger
accommodation.
36. The increase in the non-dependant deduction
could have a negative effect on family and community stability
to the extent that young adults feel that they have to move out
of the family home; there could be more concealment of their presence
and income, which will add to the level of fraud and error.
37. The capping of LHA rates for larger accommodation
may impact disproportionately on some black and minority ethnic
households who tend to live in larger households.
38. Concern has also been expressed at the effect
in rural areas. The LHA changes will limit the number properties
in an area that are affordable to households on HB. This will
have a particularly severe impact in some rural areas where it
is already very difficult to find affordable housing to rent.
Tenants in rural areas will find it extremely difficult to access
alternative affordable accommodation and may be forced to move
considerable distances. This will disrupt community support networks,
schooling and access to employment.
DISABLED PEOPLE,
CARERS AND
SPECIALIST HOUSING
39. The LGA welcomes the provision for an additional
bedroom within the LHA calculation for non-resident carers. This
was something which the LGA and specialist organisations had called
for.
40. One issue which has been raised by member
councils is the position on supported exempt accommodation. In
this case, typically where houses purchased on the open market
have been adapted by non-profit organisations or charities to
house individuals with specialist care needs, all costs above
the determination by the rent officer is not funded by DWP. Depending
whether the claimant is considered vulnerable, local authorities
have to meet 40% or 100% of the additional costs.
41. Districts in Lancashire report that they
have seen the total cost associated with exempt accommodation
rise from £1.9 million in 2007-08 to £3.5 million in
2009-10. This is a cost which the authority has to meet from its
own resources and which potentially falls on council tax papers.
One Lancashire district reports that the sum represents 2% of
their entire revenue budget and 3-4% on their council tax.
OLDER PEOPLE,
LARGE FAMILIES
AND OVERCROWDING
42. Young people under 25 currently receive reduced
LHA, based on rent for shared accommodation and this has resulted
in 70% of young people subsidising their rent from other income.
A further reduction in LHA rates will exacerbate this situation.
Young people will also be hardest hit by the 10% reduction for
those on jobseekers allowance for more than a year as youth unemployment
is disproportionately high and is increasing rapidly (Welsh colleagues
point out that figures for youth unemployment in Wales increased
by 20% in the last year). The rapid increase in non dependent
deductions will further compound this problem as it can be expected
to increase the number of young people who leave home.
43. The capping of LHA rates for larger accommodation
will affect large families and will lead to significant reductions
in benefit for larger households. This is likely expected to increase
levels of homelessness, increase levels of overcrowding and reduce
the ability of extended families to live together which in turn
will increase housing need and pressures on social housing.
FURTHER ASSISTANCE
44. The Local Government Association will be
happy to be of any further assistance to the Committee
September 2010
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