Conclusions and recommendations
Objectives of Local Housing Allowance
1. We
welcome the underlying objectives for LHA as set out by the Government.
We have heard that some are better met in practice than others.
The objective of increasing personal responsibility and financial
inclusion through direct payments to the tenant has proved to
be very controversial. We make a number of recommendations in
this report about how this aspect of the scheme can be improved.
(Paragraph 44)
2. We also welcome
the Government's intention to improve access to work. However,
whilst LHA has improved the transparency of the scheme, there
is clearly still some way to go to improve claimants' understanding,
as misconceptions can still act as a barrier to work. We look
forward to the outcome of the Government's consultation on this
and other points and we encourage our successor Committee to return
to this subject. (Paragraph 45)
3. We agree with the
Government that improved personal responsibility will have a positive
impact on work readiness. We make a number of recommendations
in this report as to how the Government could better support claimants
to achieve this. We also make recommendations on how the Department
can directly strengthen the objective of removing barriers to
work, which we believe is fundamental to the success of the scheme,
for example by placing this objective at the heart of defining
the boundaries for Broad Rental Market Areas. (Paragraph 46)
Direct payments—principles
4. We
fully support the objectives behind direct payments to tenants
to promote personal responsibility and financial inclusion and,
through this, removing barriers to work. We believe direct payments
to the tenant should remain the default supported by the necessary
financial advice and vulnerability safeguards as discussed in
this report. Managing one's own finances is an important element
of work-readiness which the Government should aim to support.
There is evidence that giving tenants the choice of having rent
either paid to them or the landlord may not be a real choice as
landlords then tend to demand direct payments to them as a condition
of agreeing to the tenancy. Such an arrangement would defeat this
important objective of the scheme and help perpetuate benefit
dependency. (Paragraph 55)
5. We seriously question the Government's
suggestion to re-introduce tenant choice as to whether the payment
is made to them or to the landlord under the condition that energy
efficiency standards are met. We believe that this proposal would
undermine a number of important objectives for LHA. It would bring
back administrative burdens and benefit complexity just removed
by the scheme and, most importantly, would undermine the objective
of removing barriers to work as set out above. We agree with the
witnesses to this inquiry who argued that standards should be
improved and energy efficiency targets met, but looking at the
objectives behind LHA we think that trying to achieve this through
LHA would do more harm than good. (Paragraph 60)
Direct payments—practicalities
6. We
agree with the Government that LHA payments into a bank account
are the most secure way of payment, less prone to fraud and financially
efficient. Ideally, claimants are able to manage their finances
by setting up a standing order or direct debit to pay the rent
to their landlord. This represents an important step to improved
personal responsibility and job readiness and the majority of
claimants seem to have made that important transition. (Paragraph
68)
7. However, we have
heard that some people are experiencing problems with setting
up a bank account or managing their account, particularly if they
have already run into debt. We strongly believe that the policy
of direct payments to the tenant is only working well when these
practical problems are addressed on an individual basis. Local
authorities should use their discretion as to the form in which
they pay LHA. (Paragraph 69)
8. Paying LHA into
the Post Office Card Account would make the system easier to manage
for claimants and we recommend accordingly that provision should
be made for the Post Office Card Account to accept LHA payments.
(Paragraph 70)
9. The fact that the
first LHA payment is paid in arrears makes it difficult for some
to manage their finances and has been the subject of concern to
some landlords. We recommend that it should be standard practice
for local authorities to give the first cheque to the tenants,
payable to the landlord. We believe this will give the tenant
time to get used to the new scheme and provide the landlord with
some confidence in receiving the payment. (Paragraph 73)
10. We recognise that
the cycle of LHA payments (fortnightly, weekly or every four weeks)
instead of monthly (when rent is usually due) is making it difficult
for claimants to manage their budgets. We recommend that the Department
reviews payment cycles of LHA to avoid an unnecessary burden on
claimants and to reinforce the financial capability agenda. (Paragraph
78)
11. We believe the Government should monitor
the need for additional advice services to help claimants and
provide the necessary funding. There is evidence that at this
initial stage of the scheme there is increased need for financial
guidance and advice on setting up bank accounts and managing finances.
We recommend that new LHA claimants should be a high priority
for signposting to financial advice services. (Paragraph 86)
Vulnerable Claimants and rent arrears
12. We
have received mixed evidence on the effect of direct payments
to tenants on levels of rent arrears. The availability of data
on rent arrears is scarce and the surveys of stakeholder groups
are not representative. However, there is welcome evidence that
numbers for evictions and homelessness are actually falling nationally.
We recommend that the Department commissions a more representative
in-depth study on rent arrears, and the reasons for them, to gain
a clearer picture of the scale of the problem. (Paragraph 95)
13. The evidence on
the eight week safeguard rule suggests that it is not fully understood
and that implementation varies across local authorities. We strongly
believe that it is the Department's responsibility to ensure that
local authorities understand the rules and implement them correctly.
The rules need not change if eight weeks arrears remains the upper
limit for when payments must go to the landlord and include the
first payment, which is usually paid in arrears. However, local
authorities should liaise with landlords and financial advice
services to identify those clients at an early stage who are likely
to run into arrears and put safeguards in place. (Paragraph
104)
14. It is a difficult balance to strike for
the Department to enhance personal responsibility and to identify
vulnerable claimants early in the process to avoid the build-up
of rent arrears and possibly even eviction. We believe that in
order to achieve the objective of greater personal financial
responsibility it is important that local authorities apply a
personalised approach to advising and dealing with claimants.
Local authorities should also seek the insight of financial advice
services and the voluntary sector to pro-actively identify vulnerable
claimants. The onus should not be on the claimant to inform the
local authority that they are vulnerable. We welcome the Minister's
assurance that the Department will issue further guidance and
some best practice examples to local authorities to ensure that
good practice is applied more consistently between and within
local authorities. (Paragraph 114)
Broad Rental Market Areas
15. In
summary, the evidence on the existing boundaries for Broad Rental
Market Areas suggests that most are working well in terms of the
level at which the LHA is set. However, the examples of the Cambridge
and Blackpool BRMAs demonstrate that there are some BRMAs within
which rent levels vary considerably, with potentially negative
consequences for claimants. In Blackpool, the inclusion of the
pricier suburbs artificially raised the level of LHA in the inner
city. The evidence suggests that this has had adverse implications
for business and incentives to work. In Cambridge the inclusion
of the low rent rural area around the city prices out people on
LHA from living in the higher rent city, with adverse implications
for their access to low paid work. (Paragraph 131)
16. We recommend that
the Department asks the Valuation Office Agency to urgently identify
and review those BRMAs where rents vary greatly and, as a consequence,
potentially distorting the local rental market and increasing
barriers to work. (Paragraph 132)
17. We also strongly
recommend that the Department includes access to low paid work
as an underlying criterion for setting BRMAs. This would help
the scheme to meet the Government's overall objective of helping
people out of benefit dependency and into work. (Paragraph 133)
18. We are not convinced by the Government's
arguments in favour of scrapping the £15 excess entitlement
and welcome its decision to review this proposal in the context
of its wider consultation on Housing Benefits. We believe that
the £15 excess entitlement is a key feature of the scheme
and supports the objective of increasing choice for tenants. Also,
the £15 excess incentivises tenants to shop around and, through
this, mitigates against rent levels coalescing around the LHA
rate. (Paragraph 145)
Impact of LHA rules on large families, disabled
people and under 25s
19. We
agree with the Government's principle that Housing Benefit levels
should be appropriate to what is affordable for people on low
pay and should represent value for money for the tax payer. This
relationship was clearly distorted when LHA was rolled out and
a small number of benefit claimants living in large accommodation
claimed an amount for rent well out of the reach of most working
families. However, it is equally important that the solution to
this problem does not undermine other Government objectives on
availability and quality of housing, child poverty and race equality.
We recommend that the Government monitors the impact of the cap
as part of its two-year review of LHA with an open mind to other
potential solutions for larger properties. (Paragraph 155)
20. There is clear evidence that the current
LHA rules constitute a real barrier to independent living for
disabled people who require an extra bedroom and we believe this
requires urgent action from the Department. As a result of the
continuing failure to conduct an equality impact assessment and
demonstrate compliance with the Disability Equality Duty, the
Committee remains very concerned about this aspect of Local Housing
Allowance. We strongly disagree with the way in which the consultation
on Housing Benefits has put the initial question about this policy
and recommend that the Department changes LHA rules as a matter
of urgency to allow for reasonable adjustments for disabled people.
(Paragraph 167)
21. The Minister's
statement that the Government is not currently looking into changes
to the shared-room rate for the under 25s does not sit well with
the Department's acknowledgement that there are not enough places
available for young people at this rate. We have heard that as
a consequence many face shortfalls between benefit and rent, which
leaves local authorities and third sector organisations to make
up the rest. We recommend that the Government considers the proposal
to allow for the calculation of the shared-room rate for LHA to
include the rent for bedsits in order to improve access to accommodation
for young people. (Paragraph 173)
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