Communities and Local Government CommitteeWritten evidence submitted by Save the Children UK

Save the Children is the world’s largest independent children’s charity working across the UK as well as in over 120 countries around the world. In the UK we work directly with children and families experiencing poverty and provide expertise, research and policy support to key partners, including local authorities and other strategic bodies to ensure services are preventative and that they deliver for the most disadvantaged in society.

Almost two million children in the UK are growing up in temporary, overcrowded or poor quality housing1 The evidence shows that bad housing can have a serious impact on children’s health, well-being and education—damaging their childhoods and restricting their future life chances. Nationally, the private rented sector (PRS) is home to a million families with children—twice the number of a decade ago.2 This trend is set to accelerate as local authorities begin to place homeless families into a private tenancy, rather than social housing and the Government policy seeks to stimulate the sector’s expansion through de-regulation and public subsidy.

While the majority of private tenants have a decent home with a responsible landlord, some are being exploited by unscrupulous landlords renting very poor quality and sometimes, downright dangerous homes. The last Government made a commitment that 70% of private housing containing vulnerable tenants would be brought up to the Decent Homes Standard by 2010. However, very little funding was made available to fund that work and, as a result, progress was limited.

The 2008 “Rugg Review” by the Centre for Housing Policy at the University of York set out a coherent set of proposals for light-touch regulation of the PRS, including a national register of landlords, mandatory licensing for letting agents and written Tenancy Agreements. Save the Children broadly supports these recommendations and was encouraged by the-then Government’s response. However, the Rugg review was condemned by private landlords’ bodies as likely to lead to the demise of private renting and the new Government decided not to pursue its proposals.

Similar claims were made before the introduction of the Tenancy Deposit Protection Scheme under the last Government. In fact, it was only after a forceful recommendation from the ODPM select committee persuaded over 200 back bench MPs to support an Early Day Motion in support of it, that a Tenancy Deposit Protection Scheme was included within the Housing Act 2004. Objections were also raised against the legislation for HMO licensing. Neither measure has resulted in the collapse of private renting that their opponents predicted.

Save the Children hopes that this positive experience will encourage the committee to make the case for the far-reaching reforms the sector needs to provide young children with the decent, stable and affordable home they deserve.

The Quality of Private Rented Housing and Steps that can be taken to Ensure that all Housing in the Sector is of an Acceptable Standard

The regulation of landlords and steps that can be taken to deal with rogue landlords

In 2010, 37.4% of PRS stock failed to meet the basic decent homes standard.3 The Housing Health & Safety Rating System (HHSRS) brought in by the Housing Act 2004 to replace the outdated Housing Fitness Standards introduced a new method of assessing the physical conditions within residential accommodation. In theory, this sophisticated measure should result in improvements to the physical condition of poor quality private housing. However, given that it is estimated that, nationally, as many as 30% of private rented homes could contain category 1 hazards,4 it is a massive challenge to ensure effective enforcement of the new legal standards.

This comes down to a question of resources at local authority level. Against a backdrop of an average 28% budget cuts to local government in the current Spending Review period, few authorities are able to find the funding needed to expand services to tackle rogue landlords. As a result, very few currently have sufficient Environmental Health capacity to identify and inspect problematic private rented accommodation in their areas, let alone pursue enforcement action against landlords whose properties are persistently found to be in breach of these laws.

One notable exception is the London Borough of Newham, which in response to the growing number of “beds in sheds”, and persistent reports of anti-social behaviour associated with privately-rented housing, has introduced a boroughwide licensing scheme and increased the number of Environmental Health Officers. Save the Children believes that other authorities should follow Newham’s example, at least in licensing in those parts of their areas experiencing similar problems. We are very encouraged that Liverpool has just announced its intention to do so.

More broadly, we think the time has now come to require more of private landlords, particularly those in receipt of public subsidy. Given the growing use of the PRS to prevent homelessness and accommodate those on low incomes, local, regional and central government must do more to raise both physical and management standards. One idea that bears serious consideration, for example, is that accommodation on which Housing Benefit (HB)/Local Housing Allowance (LHA) is paid could be required to be brought up to the Decent Homes Standard within a given period.

Similarly, all landlords/agents should be required to meet the “fit and proper” rules introduced by the Housing Act 2004 and utilised in the latest Homelessness (Suitability of Accommodation) regulations. The current situation of requiring landlords who house families to whom a legal duty has been formally accepted to meet that “fit and proper” test, while landlords who house families whose homelessness has been “prevented” do not, makes no sense. A national register of landlords would iron out those inconsistencies and help drive the minority of rogue landlords out of the market, which would be to the benefit of tenants and decent landlords alike. Legislation along these lines is being brought forward in Wales.

Levels of Rent within the Private Rented Sector

Including the possibility of rent control and the interaction between Housing Benefit and rents

The cost of renting privately is prohibitive for low income families with children in many parts of the country, which is why so many are dependent upon HB/LHA to help pay for their home. The most recent English Housing Survey 2010–11 found that tenants in the PRS paid an average rent of £160 per week—double that of tenants in social housing. The latest analysis shows that private rents have risen by 3.4% in the past 12 months.5 However, this masks higher increases in areas of high demand. In London for example, rents have risen by almost 6% in the past year and are set to rise by another 7.8% in the next 12 months.6

While the introduction of the LHA increased the overall fairness of financial support for housing costs, it did not have the downward impact on rents claimed at the time of its introduction. However, neither are today’s ministers correct to claim that LHA is the real cause of the increased Housing Benefit bill. Detailed research by the British Property Federation and the Chartered Institute of Housing has proved that:

“the increase in average rent levels during this period (2008–10 is entirely due to a shift in the relative distribution of the caseload from the North and the Midlands towards London and Southern England. After adjusting for this “caseload effect” average housing benefit rent levels fell by 1% (instead of the reported 3% rise)”.7

Since deregulation in 1989, only those with “fair rent” tenancies have benefitted from any restriction on rent increases. The Rent Act (Maximum Fair Rent) Order 1999 limited increases for protected tenants to RPI plus 7.5% at the first review, and RPI plus 5% thereafter, although these could be higher if the landlord was able to demonstrate that the property had benefitted from improvements. The number of tenants enjoying these rights has dwindled over time, and very few families with children are now among them.

Save the Children believes that private tenants, especially families with children, are simply not in a strong enough contractual position to negotiate a meaningful reduction in their rent with their current landlord. In areas of high demand, the chronic shortage of supply also makes it very difficult to “shop around” for another property with a lower rent. In our view, excessive and unaffordable increases in rent can only be prevented by government intervention.

For the past 25 years, governments of all political complexions have rejected such intervention. However, there is a growing interest and support for what are sometimes described as “second generation” rent controls. In its recent research into the PRS in other countries, Shelter found that greater security of tenure combined with inflation-linked rents was successful in making the private rented sector a more attractive and sustainable option.

We hope the committee will recommend that the Government legislate for inflation-linked rent increases.

The impact of above-inflation rent increases for those on low incomes is extremely worrying, especially in combination with the move away from linking LHA with median rent levels. However, it is the forthcoming £500 weekly household benefit cap (HBC) which is the most immediate concern. The HB/LHA caps introduced in 2011 have already left many families facing benefit shortfalls, but the HBC extends that misery to 56,000 households including 190,000 children. Around half those households are lone parents.8 The average loss per household is £93 per week—almost £5,000 per year. Delaying national roll-out until September does nothing meaningful to alleviate the difficulties this policy will cause these families.

Ministers have repeatedly sought to justify these caps as a necessary response to the problem of families living in expensive luxury homes at the tax payers’ expense. Recent Parliamentary Questions have, however, revealed that only 150 households are in receipt of £1,000 or more in HB/LHA per week—all of whom are in either Kensington & Chelsea or Westminster. Families who have been accepted as homeless and placed in temporary accommodation will be particularly badly affected as they have no control over the home they are in and will lose their priority if they move out.

Despite being challenged during the Parliamentary debates on the HBC regulations, ministers refused to bring forward any mitigation for these families.

Regulation of lettings agents including agents’ fees and charges

Save the Children recognises that administration fees are a growing problem for many private tenants, including families with children, and we support decisive action to improve their transparency and fairness.

The regulation of Houses in Multiple Occupation (HMOs) including the operation of discretionary licensing schemes imposed by a local authority for a category of HMO in its area

The Housing Act 2004 introduced both selective licensing of private landlords in areas suffering low demand and mandatory licensing for larger Houses in Multiple Occupation (HMOs) containing three or more floors and five or more occupants. The requirement for the landlord or his/her agent to be a “fit and proper” person to manage such accommodation was welcome, but as a result of the composite nature of the threshold, only around one-fifth of HMOs were covered by this mandatory scheme. Few councils have so far chosen to extend it to smaller properties.

The committee’s predecessor raised concerns about this high threshold for mandatory HMO licensing during its pre-legislative scrutiny of the draft Housing Bill in 2003. It examined evidence, which had been commissioned by the Government itself in 1999 and found that the risk of fire was much higher in all HMOs with three or more storeys irrespective of the number of occupants. As a result, the committee concluded that, “We are not convinced that mandatory licensing of HMOs should be limited to properties of three or more storeys with five or more residents”.9

Save the Children believes that the committee’s predecessor was right to highlight this concern in 2003. We note that during the Bill’s passage, several amendments were tabled lowering this threshold, including one at Third Reading in the House of Lords which was only defeated by 130 votes to 111. In response, the minister, Lord Bassam, promised that the threshold would be reviewed within three years of the implementation of the mandatory regime. The results of that review were published in January 2010 alongside proposals to make it easier for local authorities to extend their licensing schemes to smaller HMOs.

While some, most notably Oxford City Council have used these powers to extend the mandatory licensing regime, most have not, leaving thousands of HMOs in England unlicensed. Oxford’s decision was made after a House Condition Survey found that 70% of HMOs in the city were unsafe. In January 2011, it extended licensing to all HMOs of three or more storeys and those of two storeys with five or more occupants. In January 2012, it was further extended to all HMOs containing three or more occupants irrespective of the number of floors. Despite landlords’ protests this would be a disaster, the PRS in Oxford continues to prosper.

We would encourage the committee to restate its predecessor’s support for the mandatory threshold for HMO licensing to be lowered.

Tenancy Agreements and Length and Security of Tenure

Save the Children believes that the shift towards six-month Assured Shorthold Tenancies (ASTs) is one of the biggest problems facing low income families in the PRS. While the number of homes rented privately has grown and a majority of tenants are reportedly satisfied with their position, a significant minority are dissatisfied. More vulnerable tenants, particularly low income families with children, struggle to compete in such a market and often end up losing out to young professionals and students.

The Homelessness (Suitability of Accommodation) regulations, which require local authorities to ensure that a minimum 12 month AST is in place before discharging their duty with an offer of a private rented home, suggest that CLG is conscious of some of the problems vulnerable families face at the bottom end of the market and willing to take steps to address them. However, there appears to be very little appreciation that insecurity is something that adversely affects a more families than just those who are legally accepted as being homeless and in priority need.

Save the Children believes this new 12 month minimum in the homelessness regulations should be the starting point for all ASTs. In fact, if it is not, there may even be a perverse incentive for families with children to approach local authority homeless services for assistance instead of trying to find a home to rent on the open market for themselves. Given the practical difficulty of creating one form of AST for families and another for single people, we would encourage the committee to make a clear recommendation that ministers legislate to extend the minimum AST.

The committee’s support for a requirement that all tenants have a written tenancy agreement would also be helpful.

How local authorities are discharging their homelessness duty by being able to place homeless households in private sector housing

Save the Children recognises that the PRS is already used widely by local authorities to prevent homelessness and that some parents prefer to take up an AST rather than endure several weeks in Bed and Breakfast rooms, and risk being moved around different temporary accommodation which is some distance from their children’s schools and family support networks. It is also true that there has been some improvement in recent years in both the physical conditions and management standards among professional landlords.

However, we are not persuaded of the effectiveness of the “safeguard” against repeat homelessness the Government has included within section 149 of the Localism Act 2011. Neither are we convinced that the secondary legislation consolidating the existing definition of “suitable” accommodation is sufficient to protect families with children and individuals who have been found to be vulnerable and in priority need. Consequently, we do not support the discharge of local authorities’ duty to a vulnerable homeless household by brokering a PRS tenancy.

As Shelter noted in its representations to the Public Bill Committee, this severing of the link between homelessness and the need for settled accommodation is particularly worrying for families with children of school age. Those children will be uprooted from their classmates or forced to travel long distances to and from school each day. Such families will lose any prospect of being given “reasonable preference” for social housing and may well end up trapped in a cycle of poor quality insecure tenancies dependant on Housing Benefit to pay their rent.

In the parliamentary debates around these provisions, the Government argued they were necessary to reduce the costs of placing statutorily homeless households in temporary accommodation. Save the Children is not persuaded that the costs of placing these same families directly into the PRS instead of temporary accommodation will generate any significant savings. In fact, if they end up increasing the number of existing social tenants rehoused instead of homeless families, they could even end up increasing the cost to the Exchequer.

We recognise, however, that this issue has been settled for this Parliament and so we are keen to ensure that the regulations and guidance are strengthened so that they do at least guarantee some minimum standards for those who are forced into the private rented sector. In our response to the draft Homelessness (Suitability of Accommodation) Order, Save the Children specifically called for stronger wording around both the affordability of the tenancy offered and its location.

Affordability

With the cost of renting privately on the open market already so high, steep rent increases can make it increasingly difficult for those on low incomes to sustain their tenancy. The Government’s recent changes to the LHA regime, particularly setting rates at the 30th percentile and then up-rating them in-line with CPI or 1% rather than tracking actual market rent levels, make this situation even worse. It will inevitably result in increased benefit shortfalls and arrears for many households, and may lead to eviction and homelessness for some.

Given these concerns, we would welcome a clearer requirement in the regulations for the local housing authority to ensure that PRS accommodation is affordable to the applicant in the medium-term. Otherwise, families will simply be subject to the revolving door of homelessness, with claimants quickly falling into arrears from the 1st anniversary of their tenancy and being threatened with its termination. This will be especially necessary once the £500 total weekly household benefit cap for families is rolled out nationwide in the autumn.

Best practice in homelessness prevention recognises that the rent for PRS tenancies should be below the LHA rate within that Broad Rental Market Area (BRMA). The best local authorities also intervene if a landlord seeks to raise the rent after the first 12 months, either through negotiation or through the provision of a Discretionary Housing Payment (DHP). Unfortunately, too many others fail to offer such on-going support. Save the Children believes that the need for a PRS offer to be affordable in the medium-term should be reflected in the regulations or at least the accompanying guidance. We would welcome the committee’s support on this point.

Location

Revelations that some councils have been looking to place homeless families hundreds of miles from their home areas demonstrates just how essential it is to tackle potential abuses. Save the Children, therefore, welcomes the strengthened provisions on “location” within the homelessness legislation so that households are placed nearer to home. Statutory recognition of the potentially adverse impact of changes of school is especially welcome. However, we are concerned that the “wherever possible” proviso leaves too much scope for local authorities to evade their responsibilities to protect the interests of homeless families.

While there will always be some circumstances in which it will be more appropriate to accommodate a homeless family out of their area, for example to provide refuge for those fleeing domestic violence, the default obligation should be for them to be placed within their own local area. Ideally, this should apply to temporary accommodation as much as a PRS offer, but we recognise that this may not be realisable at the present time. However, given the Government’s view that such households are being “re-settled”, discharge into a PRS tenancy should only be done within the authority’s own boundaries, unless with the agreement of the household.

An unambiguous presumption in favour of a placement within the local authority area would have the advantage of making it much easier for homeless families to understand their rights, and much harder for local authorities to relocate vulnerable low income households in those parts of the country which will struggle to provide the wider services they need. Given their publicly stated concerns about Newham’s attempt to move homeless families to Stoke, we had hoped that ministers would be persuaded that this principle should be clearly stated in secondary legislation and are disappointed they chose not to do so.

It is noteworthy that, at the same time it was criticising Newham, CLG was itself paying that authority £72,000 to “host” an advisor who was actively encouraging local authorities across London to tell homeless applicants they would be placed outside their area in an effort to dissuade them from making a formal application. We hope the committee will challenge the Government on these mixed messages and recommend that it strengthen the safeguards in this part of the regulations.

January 2013