Welfare and Work Bill Committee

Written evidence submitted by the Residential Landlords Association (WRW 33)

About the Residential Landlords Association (RLA)

The Residential Landlords Association (RLA) is the premier national landlords association operating in England and Wales. We have over 20,000 subscribing members. Our members own or control over 250,000 units of accommodation. Primarily our members are landlords in their own right but a number are managing and letting agents, some of whom are also landlords. Our members operate in all sub-sectors of the Private Rented Sector (PRS). Properties are rented out to families, working people, young professionals, the elderly, students and benefit claimants.

Introduction

In this submission, we concentrate on the impact of the measures contained in the Bill on the PRS in relation to housing benefit and the housing costs element of Universal Credit (UC). For ease we refer to these as HB. We also wish to draw the Committee’s attention to related issues affecting the PRS as well as two important aspects relating to UC which could be addressed through the Bill namely the release of data with tenant’s consent and permitting deductions to recoup arrears of rent from UC payments, even after a tenant has vacated. Importantly, we request that consideration is given to the impact of the measures set out in the Bill on tenants and the PRS generally. Regrettably, the tendency is to look at matters in isolation, and while we acknowledge the importance of getting the deficit under control nevertheless there are long term consequences of what is now proposed.

The measures

Along with other working age benefits, the Bill will "freeze" various allowances used to calculate HB. Likewise, as this applies to other means tested benefits, this will in turn feed through to claims for HB where claimants are passported through to local housing allowance (LHA). This freeze will apply for four years. Whilst inflation may be well within the Government’s target at the present time this is not necessarily going to be the case over the four year period. Importantly, we are living through an era of unprecedented low interest rates, which cannot be sustained in the long term, and it is more than likely that during this four year period interest rates will rise, perhaps up to 3% above current levels. This will mean that PRS landlords in turn face higher mortgage costs which will inevitably feed through into higher rents. As a result tenants will be faced with having to top up their rent from other benefits or wages or will have to move to cheaper accommodation. Equally landlords will have less money to spend on the upkeep of their property which may well mean poorer quality accommodation being provided in order to moderate rent increases. This is part of the wider picture to which we will refer to later. At the same time rents are rising in many areas. This is not something which the PRS can be blamed for; it is part of the wider housing crisis we face.

Of particular concern must be those who are in work and on low wages, who need the support of HB to meet their living costs. This is the very section which the Government seeks to help and support, rightly, to encourage people into work. You cannot realistically expect landlords to freeze rents for four years if inflation increases and interest rates rise alongside upward market pressures. The freezing of allowances means a real terms reduction. The long term nature of the proposal is therefore worrying, particularly as there is no automatic review mechanism written in.

At the same time, we are concerned at the reduction in the benefit cap. We very much welcome the differentiation between London and the rest of the country which is what we called for when the benefit cap was first introduced. What we are however opposed to is the reduction in the amounts of the cap which go along side this and we also feel consideration needs to be given to a higher benefit cap in certain high cost areas in addition to London to reflect higher than average rental costs which apply in these "hot spots". Whilst we recognise that the benefit cap has been widely welcomed, we fear that it does lead to tenants moving into lower rental cost areas which is a disincentive to them working because of increased travel costs. We were always of the view that this would be a more gradual process than was predicted by some who were prophesising a version of "ethnic cleansing". It has proved to be more insidious but nevertheless real. The problem is that where something happens gradually in this way the consequences are realised too late.

LHA and UC Housing Cost Rates

Although not part of this Bill, as it is addressed via the Rent Officer (Functions) Regulations, there has been no announcement yet by the Government of whether or not there would be any increases in LHA/UC housing cost rates or whether these will also be frozen in line with allowances. We would urge the Government not to impose a similar freeze and most certainly not over such a long period of time. The Government has already rightly recognised that in some areas there is considerable upward pressure on rents and did permit extra increases. Currently, generally, these increases have been limited to a maximum of 1% but with exceptions. We would ask the Government to adopt a flexible approach and not to impose an across the board freeze. The amounts by which rates can increase is, in our view, more significant than allowances, although allowances are clearly very important, particularly to those who are in work. The two are closely linked.

Likewise, there has been speculation that rates would be limited to the 20th percentile in broad market rental areas, as opposed to the current 30th percentile. We would urge the Government not to further reduce the percentile because this would restrict even further the amount of the available accommodation in the PRS for working age benefit claimants. Particularly for those who are in work, effectively restricting the market to 20% of an area would lead to additional numbers who would be unable to rent in the PRS, especially when social housing is simply not available.

The overall picture

Measures like this are being introduced in isolation in pursuit of a target to cut welfare benefits, without any proper consideration of the wider consequences. Repeatedly, we have told the Government that very many landlords are no longer willing to rent to benefit claimants, particularly those who are out of work. In the past we have provided evidence of the many advertisements for PRS properties to let which confirm that benefit claimants are not welcome. It is clear from what our members tell us that a considerable number are changing their lettings policies. we must stress that in many areas there are non claimant tenants queuing up to rent. What we are seeing as a result is a situation that in those areas where there is high employment there is no need for landlords to rent to claimants. Housing and employment must be looked at together. It is essential that the Government promotes labour mobility to assist people back into work or to improve their job opportunities or to increase their available hours of work. We cannot do this, if in order to achieve it, tenants have to move to areas where they simply cannot afford to rent. The level of supply in the HB subsector of the PRS is reducing due to unwillingness to rent to HB claimants, as we have repeatedly told Government would happen. These measures will simply exacerbate this problem.

Alongside this, Government needs to be concerned about the quality and standard of property available. Experience from rent controls amply demonstrates that if you restrict rents the quality of accommodation falls. The restraints on HB are a form of rent control by the back door. Landlords have less money to spend on repairs and improvements. The old principle of "you get what you pay for" applies. HB rates have now been constrained below market rents for a number of years so inevitably quality and standards are deteriorating. Short term savings are being translated into long term costs. The Government is already concerned about the quality of properties in the PRS where proportionately there is a higher level of non decent homes. However, if the Government restricts rents for the lower end of the PRS this is a key contributor to this problem.

At the present time the PRS is facing an unprecedented battering. The Government is restricting the availability of relief for mortgage interest which would reduce much needed supply. Landlords are facing ever increasing regulatory burdens such as the roll out of immigration checks, extensive property licensing schemes with high fees, restrictions on regaining possession, compulsory improvements and from 2018 the imposition of minimum energy efficiency regulations. We are not necessarily opposed to all of these regulatory measures but it has to be appreciated that inevitably they come at a cost. If your rents are constrained then you either have to find different tenants, excluding benefit claimants or reduce standards. Above all of this hangs the spectre of increased interest rates. The measures contained in the Bill therefore represent yet another threat to the PRS, one of many. For this important sub-sector of the market clearly they represent a major threat. This is why we say that it is vital that the impact of the measures in the Bill are looked at in this much wider context.

Disincentives for private landlords

The Government’s on going insistence on direct payment of housing costs tenants as part of a single monthly payment, as opposed to direct payment to landlords, continues to generate major concerns on our part. The Government will no doubt point out that this has been the "norm" since the introduction of the LHA so far as private sector landlords are concerned. What the Government is now however forgetting is that at least with LHA there are some checks and balances built into the system which go someway towards mitigating the risks from the private landlord’s perspective. In their recent update report on UC the Social Security Advisory Committee have rightly identified the commercial risks to landlords involved in payment of UC to claimants. We see this bill as an opportunity to bring forward measures to mitigate these risks so that the current safe guards which exist under LHA can be built into UC. Problems which need to be addressed include:-

· LHA is administered locally by local authorities whose staff are in touch with local landlords and are aware of local conditions. This is not the case with UC which is administered at a distance in large centres

· Local authorities know how the private rental sector works. They have dedicated teams to administer. DWP staff lack this specialist knowledge/training, having to deal with all aspects of benefit administration. Although dedicated Centres have been set up we are far from confident that they are "on top of the job" even with the limited number of housing costs claims that are currently being processed. This will worsen as the roll out of UC continues.

· Currently there is sharing of information with landlords where this is necessary, with tenant’s consent. DWP maintain that they lack the legal power to even share information with private landlords, even though local authorities have operated the same system for many years without concerns or complaints.

· UC is based on guidelines and discretion, where as LHA operates under a proper system of rules.

· Landlords have rights of appeal in relation to LHA. There are no such rights under UC and the lack of independent oversight through an appeal system will lead to DWP staff operating without proper controls, with consequent abuses resulting.

· Without confirmation that claims have been made for UC together with notification as to when claims are in payment landlords will be far less inclined to allow tenants/claimants leeway.

· Although UC should be suspended once a request is made for an alternative payment to the landlord this has not been happening in practice with payments being made direct to tenants even though rent arrears are mounting.

· There is evidence of significant delays on the part of DWP in administering UC, even with the limited number of claims that are currently in the system.

In our view it is essential that these issues be addressed at this early stage whilst UC is rolled out. We welcome assurances from DWP that they are learning as they go along but in terms of the roll out of housing costs, it is essential to improve the system even further, if landlords are to retain any confidence at all when it comes to letting to UC claimants.

Suggested additional provisions

There are two additional matters which we consider should be addressed in this Bill namely –

· The grant of an express power to disclose information regarding Universal Credit claims and their delivery, with the claimant’s consent.

· A requirement that in the event of a tenant vacating a property owing rent arrears to the landlord then a deduction must be made from ongoing benefits and paid to the former landlord with a view to recouping these arrears.

Power to disclose information

DWP maintain to us, wrongly in our view, that there is no power to disclose information to third parties such as landlords regarding claims for UC, their administration and delivery, even if the tenant consents. Granted that there is no explicit power in the legislation, we nevertheless have a firm view that there is an implicit power. Such a power does not need to be express and it can be implied. This is a well established principle. The relevant provision is set out in Section 123 of the Social Security Administration Act 1992. In effect this provides that a disclosure by an official of the DWP is to be regarded as made with lawful authority if it is made (inter alia) with the consent of the appropriate person. The appropriate person is defined as the person to whom the information relates or in appropriate cases someone acting on their behalf, i.e. an attorney etc. This is an exception to the general principle that a person who is engaged in social security administration or adjudication is guilty of an offence if he discloses information about a particular person, without lawful authority. Thus, if consent is given by or on behalf of the person concerned no offence is committed. We regard this as implicitly conferring power on officials to make disclosures which would otherwise be prohibited where such consent is given.

We only seek such disclosure where the tenant gives written consent normally. However, the fact that a claim for payment of housing costs has been made and also the fact that payment has started should be disclosed to the landlord, in any event without the necessity for any consent, unless the tenant objects for good reason.

DWP has taken power in of Section 131 the Welfare Reform Act 2012 to disclose information in the case of social landlords on the somewhat questionable basis that this information is to be provided to social landlords in connection with their wider social/welfare responsibilities. The argument by DWP is that in the absence of any power they cannot disclose information to a private landlord, even if the tenant consents. We find this whole approach most disturbing because, without any difficulties, local authorities have been content to disclose certain information to landlords where a tenant has given his/her authority relating to housing benefit claims. Likewise, DWP itself as part of its work programme has been content to provide information to third party contractors and this supposed lack of a power to disclose information has not stood in the way of this. In any case, the current provision in the 1992 Act is modelled on a similar provision in the Taxes Management Act under which HM Revenue and Customs are perfectly content to disclose information about a tax payer’s affairs to third parties, so long as the tax payer consents. We therefore find these claims by DWP that they lack the requisite statutory power to disclose information baffling. We would stress that this is not an issue around data protection but rather a claim by the DWP of a fundamental inability due to a lack of a legal power to do so to disclose information at all.

In our view, therefore, this Bill represents the opportunity to put the situation right, even assuming that the DWP are in fact legally correct in the first instance, which we do not agree is the case. We would therefore invite the Government to put forward an amendment to the Social Security Administration Legislation permitting the disclosure of information regarding a tenant’s claim with the written consent of the claimant or if the claimant is incapable of giving such consent consent by an attorney, guardian or appointee etc., acting on behalf of the claimant.

Further, legislation should permit the making of regulations to stipulate the circumstances in which information can be disclosed to all landlords, not just social landlords where it is considered to be appropriate without the necessity for such prior consent. We would envisage that this would then allow DWP to notify landlords that a claim has been made. After all, it is the current practice of DWP to contact the landlord of the tenancy if a tenant/claimant is unable to produce evidence of the existence of this tenancy. Again, in this instance, the supposed absence of any legal power does not seem to stand in the way of DWP although inherently they are then of course notifying the landlord of the existence of a claim for the payment of housing costs. Likewise, regulation should permit the disclosure of the fact that the first payment of housing costs has been made to the tenant or that payment has recommenced following a suspension.

We would make the point that it is vital that the landlord is aware of the existence of a claim and also is notified that payment is made officially. Experience has shown that landlords are willing to bide their time if they know that a claim is to be processed. After all, the first payment is only going to be made six weeks after the claim for payment of housing costs, during which time inevitably arrears will have mounted. A landlord is not going to evict in these circumstances if they know that the claim is being processed, especially if they know that they will be told that payment will be made to the tenant, assuming that it is not to be made direct to the landlord. Without the safeguards being in place landlords will be concerned that arrears are building up and are therefore much more likely to take action to enforce payment or refuse to house a claimant in the first place but will wait if they know that payment is going to be forthcoming from DWP once the claim has been processed. It is no good, however, simply making the first payment to the tenant/claimant without telling the landlord. Otherwise, the landlord will not know when to expect the payment from the tenant or when to contact the tenant to ensure that arrangements are made for the landlord to pay once the tenant has received payment from DWP. These are issues that have not raised problems, we would stress, in the administration of the housing benefit system and therefore we are at a loss to understand why DWP are raising such concerns at this stage in relation to UC.

We recognise that some tenants may have perfectly legitimate reasons why they do not want their landlord to know of the fact that a claim has been made and assuming that DWP can then be satisfied that the requisite payment of rent will be made to the landlord when the tenant is paid we would envisage that regulations could allow DWP to override the request of notification to the landlord. In other words it would be a kind of "opt out" system where for good reason the landlord would not be told so long as payment is assured. After all, these payments are made for a designated purpose and the loss of accommodation due to non payment of rent helps no one, not least the tenant and his/her family or dependents. It is most certainly not in the public interest that money given for a specific purpose, i.e. the payment of rent, should be diverted elsewhere and that the tenant should be left at the risk of homelessness, as well as the landlord not receiving the rent which is properly due to him/her.

Arrears following the tenant

We have already made the observation earlier in this evidence, that many landlords are not willing to take on tenants who are benefit claimants, especially if they are out of work. It is vital, in our view, that means are put in place to give landlords more confidence that they will not be left facing rent arrears. At the initial design stage for UC landlords were told that as UC would operate as a national system one advantage would be that landlords would be able to recoup arrears of rent even after tenants has left the property concerned. This would be by way of third party deductions. In the event, this has not materialised. Regulations now do provide for a scheme of third party deductions in the favour of landlords (up to a maximum currently of 20% of the standard allowance) in order to recoup rent arrears but only where the tenant is still in occupation of a property to which the arrears relate. This does not apply once a tenant has left.

We consider that this situation encourages irresponsible tenants to vacate the premises leaving arrears of rent in the knowledge that they cannot then be pursued. The reality is, of course, that it is not worth the landlord’s while in most cases to claim the arrears and then go through the County Court procedures to try to enforce any judgment. It is simply not worthwhile, especially if the tenant is out of work.

The intention is that UC should replicate, where practical, the same conditions as those in work. Obviously, if someone is in work then there is a greater likelihood of recovery being possible by an attachment of earnings order made against someone who is in employment (but not the self employed). Clearly, the reduction rate would not be the same as for someone who is currently in occupation of the property. Vitally, the knowledge that if a tenant did abandon a property owing arrears then recoupment would be possible with a strong disincentive to the tenant simply walking away in the knowledge that he/she could do so with impunity which is currently the case. If tenants knew that on an ongoing basis, even if they had left the property, arrears could be recouped this could be a strong disincentive to such irresponsible behaviour. Importantly, also, it would give landlords the re-assurance that there was no available method to recoup arrears over time from a tenant who had vacated which would give landlords at least some re-assurance when considering letting to benefit claimants especially those who were not in work or who are in work but on a very low income.

In this way social responsibility on the part of tenants/claimants would be encouraged and, likewise, there would be also encouragement to landlords to let to this category of tenants. Many tenants are currently excluded from the private rented sector by landlords as a result. It is important in our view to put in place realistic measures that will achieve the gradual re-engagement of landlords with the housing benefit system. Tenants themselves generally would be rewarded because, again, they would enjoy the same advantages of their working compatriots. The refusal of many landlords to countenance benefit claimants as tenants is socially divisive. If the Government is intent on promoting financial responsibility through UC equally it should regard rewarding tenants as an important objective. We need to look at the tenants who are excluded from "the system" at the moment and seek ways to promote re-engagement by landlords will this sub-sector of the market. This would increase the choice of accommodation available. As we have already pointed out in this submission it is vital to look at the longer term consequences of what is being done and this is one of the issues that should readily be addressed by including provision in the Bill that the Secretary of State must make regulations to allow for the recoupment of the benefit of rent arrears, even after a tenant/claimant has vacated the property in respect of which the rent arrears are accrued.

Conclusion

In this response we have stressed the importance of looking at these changes more broadly and also giving greater consideration to the longer term consequences of what is happening. There is no point in trying to improve tenants’ financial responsibilities and budgeting abilities, worthwhile objectives though they may be, unless, at the same time, tenants are helped particularly through the ability to access private rented accommodation which provides the requisite standards of accommodation. Otherwise, whatever the short term savings, in the longer term we are building up a much greater cost both from the perspective of rectifying what has gone wrong but also the wider social consequences, which will otherwise come back to haunt us in years to come.

September 2015

Prepared 16th September 2015