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Housing Benefit (Amendment) Regulations 2009

My Lords, despite suggestions from the noble Lord, Lord Skelmersdale, to the contrary, I thank the noble Baroness, Lady Thomas, for bringing forward the Motion, which has given noble Lords a chance to talk about these issues. I have listened with great interest to the points that have been made. I do not want to dwell on the background to this issue, except to say that the Government have introduced these regulations which cap the local housing allowance at the five-bedroom rate from this April to move towards housing benefit paying housing costs that are on a par with those that the majority of working families can afford. There was some agreement that, clearly, we do not want to burden the taxpayer by meeting excessively high rents through housing benefit; rents that most working families would not even contemplate committing to. I also believe that most people would agree that benefit expenditure at those levels should not go on unchecked, even if the number of households involved is very small. Our estimates suggest that fewer than 1 per cent of cases assessed under the local housing allowance arrangements would be entitled to properties with more than five bedrooms. I turn now to the issues raised by the Social Security Advisory Committee in response to the Government’s consultation on the changes and which were reflected in the report of the Merits of Statutory Instruments Committee. The noble Baroness, Lady Thomas, and the noble Lord, Lord Kirkwood, raised the criticism that the regulations were over-hasty and disproportionate. The regulations were not over-hasty; it became apparent fairly early after the local housing allowance was rolled out from April 2008 that rent officers were encountering problems in finding sufficient rental evidence to determine an appropriate rent for larger properties. This lack of evidence made it very difficult for them to arrive at a median rate for the local housing allowance. In addition, local housing allowance rates for larger properties had reached unacceptably high levels in some areas. For example, local housing allowance rates for larger properties in some inner London areas exceeded £3,000 per calendar month, and rates in excess of £2,000 per calendar month were not uncommon, particularly in greater London and the south. The need for change was apparent, and we spent some time during the course of last year considering how best to address this concern. The noble Lords, Lord Skelmersdale and Lord Kirkwood, asked why these issues were not apparent earlier in the pathfinders pilot. The national scheme was slightly different to the pathfinders scheme. We did not measure entitlement on bedroom size in the pathfinders scheme, but on room size. The number of cases affected is very small indeed. Our considerations included looking at a number of options, including the cap at the five-bedroom rate, and I will go through these, as the Social Security Committee has identified some of them as being a better way of dealing with excessively high rents for larger properties. The noble Baronesses, Lady Thomas and Lady Meacher, have referred to the options this evening. One option was for the local authority to make a referral to the rent officer requesting a property-specific determination of a reasonable market rent if an individual claimed housing benefit for a property with more than five bedrooms. This would replace the arrangement whereby the rent officer calculates generic local housing allowance rates for properties with six or more bedrooms if and when requested to do so by a local authority in any month. We decided against the property-specific determination in these cases for a number of reasons. First, a key principle of the local housing allowance was to move away from burdensome property-specific determinations by rent officers to local rates for the area, so that people would know in advance of taking a tenancy the maximum support they could get through housing benefit. More than that, the property-specific determination route would not have dealt with the more fundamental issue of people on benefit potentially accessing properties that they could not afford, even if employed, without recourse to benefit. This creates a powerful disincentive to work. It is also expensive to administer. Another option was to use the five-bedroom rate as a starting point and to add an additional amount for each bedroom entitlement above five bedrooms. We looked at various ways of deriving additional amounts of benefit for each extra bedroom by analysing the local housing allowance rates for smaller properties. Again, we rejected this option. It is complex and lacks transparency for customers. The derived rates, including the single shared room local housing allowance rate suggested by the Social Security Advisory Committee, would not reflect real market rents, so that larger families still might not be able to access suitably large accommodation. Conversely, in some cases the derived rate could be higher than the existing local housing allowance rate for properties with six bedrooms or more. The nature of the property market for larger properties is such that rents often do not increase proportionately in line with the number of bedrooms—floor area and location may be more important factors to consider. Again, an overriding concern would be that, by routinely giving people who are dependant on benefit access to larger properties with rental values that they could not possibly meet, even when working, removes any incentive for them to return to work. We considered the alternatives suggested by the Social Security Advisory Committee as part of our decision-making process before announcing that we would cap the local housing allowance at the rate for properties with five bedrooms. We believe that the cap is more transparent; it retains the simplicity of the local housing allowance system as there are no separate arrangements for larger properties; and it more accurately reflects the circumstances of low income workers who could not routinely afford rents for properties with six or more bedrooms. Another comment by the Social Security Advisory Committee was that, ""the potential impacts of the proposed change did not seem to have been properly thought through"." We have fulfilled our obligation to carry out an equality impact assessment for these regulations. In response to the noble Baroness, Lady Meacher, the Government acknowledge that there may be a disproportionate impact on some groups—for example, multi-generational households—but we believe that there are sufficient mitigating factors to justify our course of action. First, these changes do not mean that customers with larger families will be unable to rent properties with more than five bedrooms if they rely on housing benefit. The evidence shows that a proportion of properties with six or more bedrooms will still be available at the five-bedroom rate. The customer will know in advance the local housing allowance rate and can shop around for cheaper larger properties or renegotiate the rent. Next, there is a scarcity of larger properties and our analysis of the present property size of all households, regardless of benefit entitlement, suggests that, of those who would be entitled to six or more bedroom properties under the existing local housing allowance rules, around 70 per cent may actually be living in properties with fewer than six bedrooms. Again, larger properties tend to have more than one living room so there is scope for these to be used as bedrooms. The Government recognise that, as a result of this change, a small number of families will have to seek alternative accommodation because housing benefit will no longer meet their rent. So that these families have plenty of time to find their next property, the regulations give them six months’ transitional protection—increased from 13 weeks, as the noble Baroness said. We believe that this is wholly reasonable and that it takes into account that a lot of private tenancy agreements are of at least six months’ duration. The noble Lord, Lord Kirkwood, asked about the review. The local housing allowance is subject to a review over the first two years of its operation and we intend to include the impact of this change within the scope of that review. The noble Lord asked whether we could give assurances about a special chapter on this issue. We will be collecting a wide range of data as part of the two-year review and this issue will form part of the evaluation.