Appendix: Government response
Introduction
1. The Government welcomes the Second Report of the
Work and Pensions Select Committee on Changes to Housing Benefit
announced in the June 2010 Budget which was published during
the 2010-11 parliamentary session. In particular, the Government
welcomes the support of the Committee for its key objective for
Housing Benefit reform, to manage the cost and ensure that the
cost represents value for money. The wide-ranging reforms the
Government will take forward will represent significant challenges
in the next few years but also provide opportunities to ensure
that the level of support provided is both fair and sustainable.
2. The Government acknowledges the concerns expressed
by the Committee regarding the level of funding provided for transition
stages of the reform measures over the period of the Spending
Review. The Government is providing an additional £190 million
over the next four years to support customers during the transitional
period, which includes a trebling of the Discretionary Housing
Payments fund.
3. The Government welcomes the recognition by the
Committee that Housing Benefit has a significant role to play
in reducing barriers to work and welfare dependency. These reforms
will represent a significant first step to reduce the social and
economic costs of benefit dependency for individuals, their families
and wider society. In addition, these incentives to employment
pave the way for the next step of welfare reform in the introduction
of Universal Credit.
Conclusions and Recommendations
Government's objectives for reform
[Paragraph 24] We agree with the Government's
objective of managing the costs of Housing Benefit. We also agree
that support for low-income families towards housing costs should
represent value for money for the taxpayer. We hope that the Government
will be able to influence the rent levels of properties in the
private rental sector available to Housing Benefit tenants. Further
detailed research should be undertaken on this issue as the policy
is implemented.
The Government welcomes the Committee's agreement
to one of our key objectives of welfare reform, to manage Housing
Benefit expenditure. In real terms the total Housing Benefit bill
for working age customers has gone from over £10 billion
in 2005-6 to over £15 billion in 2010-11 an increase of 50%.
Over the last 10 years average earnings have grown by 11% while
the average Housing Benefit award has grown by 40%.
The reforms that the Government is introducing will
still enable people in receipt of Housing Benefit to rent a reasonable
standard of accommodation, but it is essential that the level
of support we provide is at a level that is fair and sustainable
to the taxpayer.
Housing Benefit reform must deliver a more robust
scheme that is fair to families that pay their own rent and ensures
that the housing choices people on benefit make are not out of
reach to most people in work.
The Government fully accepts the importance of undertaking
ongoing evaluation of the changes. To ensure that Housing Benefit
reform is achieving the objectives that have been set, the Government
is committed to undertaking a comprehensive review of the changes
to Housing Benefit that will come into effect from April 2011.
This will include independent, comprehensive primary research
to look at the effects on different types of households in a range
of areas across Great Britain, including London, the rest of England,
Scotland and Wales.
Rises in Housing Benefit costs
[Paragraph 30] According to the Valuation Office
Agency, claimant rents moved in line with changes in the LHA rates
in the first three quarters of the period from November 2008.
It is only in the last two quarters that average rents for claimants
rose ahead of LHA rates. In a period of rapid market change, and
a sharp rise in the numbers of claimants in the sector, it is
important to ensure that the Department obtains value for money
in the Housing Benefit budget. We recommend that the Department
undertake further research into the reasons for the increased
rent levels and the methodologies used to measure them.
The Government acknowledges the importance of research
into the reasons for increases in rent levels. The Department
is continuing to work with the Department for Communities and
Local Government and relevant organisations to monitor trends
in the housing market which have a potential influence on support
for housing costs. The Department will be continuing to explore
ways of improving the quality and timeliness of the data available
to it, with the aim of widening its understanding of market conditions.
[Paragraph 35] There
is some evidence that the introduction of the Local Housing Allowance
has led to a convergence of rents around the level of the LHA.
This has involved both upward and downward revisions and has varied
between areas, but it is clearly a factor in the rising costs
of Housing Benefit.
The evidence we presented to the Committee in November
2010 showed a modest tendency for rents to move closer to Local
Housing Allowance rates over the period April 2009 to August 2010.
Since November last year further analysis of related data has
been undertaken as part of the Two Year Review of the Local Housing
Allowance. The final report[1]
published in February 2011 notes the need for caution because
of data limitations, but concludes that there is a slight increase
in the proportion of Local Housing Allowance cases with rents
clustered within £15 of their Local Housing Allowance rate,
from about 52% in November 2008 to about 55% in February 2010.
[Paragraph 50]
We recommend that the Government fully
evaluate the impact of the changes to Housing Benefit introduced
in 2011, including on rent levels, before introducing the change
to using the Consumer Price Index (CPI) for uprating LHA. If uprating
using CPI is introduced in 2013, it should be accompanied by an
undertaking that the Secretary of State will review the Local
Housing Allowance rates in relation to prices in the wider private
rental market prior to 2015.
The Government agrees to the recommendation of the
Committee to evaluate the impact of the Housing Benefit changes
and is committed to commissioning independent, external research
to help us evaluate the impact of the Local Housing Allowance
changes coming into effect in 2011. This review will be comprehensive
and thorough and be presented to both Houses of Parliament. Initial
findings will be made available in spring 2012, with an interim
report in the summer and a complete report in early 2013.
The measure to uprate Local Housing Allowance rates
according to the Consumer Price Index will be outside the scope
of this review and will be taken forward as part of the Welfare
Reform Bill introduced in Parliament on 16 February 2011. The
Secretary of State will through secondary legislation be able
to review rates and, if he considers it necessary, will be able
to set rates at a different level than the increases in the Consumer
Price Index.
Potential for shortfalls
[Paragraph 59] It is difficult to predict the
precise impacts of the LHA changes in London given the number
of factors involved. Nonetheless it is clear that the changes
in London will result, as they are intended to, in substantial
levels of household movement. The Government has acknowledged
this and has increased funding for Discretionary Housing Payments,
in order to provide local authorities with the means to assist
with the transition. We examine later in this report whether this
support is likely to be sufficient.
The Government acknowledges that the caps will result
in some tenants moving from the more expensive areas. However
there is already a substantial annual turnover rate of about 40%
in the private rented sector, and some of those who will need
to move would have done so in any case. In all but three of the
most central areas of London at least 30% of properties will still
be affordable within Local Housing Allowance rates.
The maximum weekly rates of Local Housing Allowance
provide a generous level of support. The maximum rate payable
will be £400 a week which equates to annual support for housing
costs at over £20,000 a year. A family paying an average
proportion of their income in rent would require an income of
at least £80,000 a year to be able to afford to pay this
level of housing costs.
Impact on different household types
[Paragraph 64] Concerns have been expressed to
us that a few, highly publicised cases of large families in high
rent properties in central London are distorting the public perception
of the scale of the problem and driving policy changes which affect
a much wider range of people. Evidence shows that large families
make up a very small proportion of claimants but will be hardest
hit by the changes to LHA. Many amongst this group come from ethnic
minorities. We have heard that shortfalls between Housing Benefit
and rents will be so large for some that evictions are likely
and in some cases temporary homelessness. Use of Discretionary
Housing Payments will be important in managing the transition
of such families. We would like to see an analysis of the effects
of the policy on large families during implementation to enable
policymakers to respond to any impact on child poverty.
[Paragraph 72] The Government should monitor the
cumulative impact of all of the measures on disabled people. It
should also carry out an analysis of the availability of affordable
and accessible homes for disabled people and work with other government
departments and local authorities to address the need for an adequate
supply of such housing.
[Paragraph 91] Significant concern was expressed
to us that the number of households living in overcrowded properties
will increase as a consequence of the reforms. This will not only
affect large families, but households of all sizes who try to
find new accommodation within their budget. We heard from a witness
that, for large families, this might result in the breaking up
of the family unit, especially where the families have chosen
to live in a multi-generation household as is often the case in
ethnic minority families. This would increase the number of claims
for Housing Benefit. The issue of overcrowding highlights the
need for the Government to thoroughly assess the availability
of properties of all sizes in the bottom third of the rental market.
[Paragraph 101] There is inevitable uncertainty
over the impact of expected shortfalls on possible levels of evictions
and homelessness. Much depends on whether the savings the Government
expects to make are achieved through landlords' willingness to
renegotiate rents and claimants' ability to find accommodation
at the lower end of the private rental market. We welcome the
Department's commitment to a full review of the impact of these
changes.
The Government acknowledges the importance of undertaking
an analysis of the effects of the policy change on particular
groups. The Department is still developing the detailed scope
of the research that it will undertake in relation to the 2011
Local Housing Allowance measures but the evaluation, through qualitative
survey and longitudinal research with claimants, landlords and
external organisations, will pay particular attention to the impact
in a number of key areas including:
- Homelessness and numbers moving
- The single room rent and Homes in Multiple Occupation
- Greater London
- Rural communities
- Black and Minority Ethnic households
- Families with children, particularly large families
or those with multiple risk factors
- Older people
- People with disabilities
- Working claimants
- Landlords
- Housing and labour markets
The research will also consider the impact on vulnerable
individuals,
· Financial
status
· Health and
wellbeing
· Family life
(particularly where the move includes a change of school for children).
[Paragraph 70] We welcome the allowance for an
extra bedroom for live-in carers. This is something our predecessor
Committee recommended and we fully endorse. However, we would
have liked to have seen this provision extended to cover all disabled
children and disabled people who need more space for wheelchair
access, a guide dog, essential equipment, or a live-in carer,
or where a child is unable to share with a sibling due to disability.
The Government welcomes the Committee's endorsement
of the policy to introduce an extra bedroom for non-resident carers.
The Government's decision to acknowledge the need for an extra
room for these carers within the size criteria for Housing Benefit
has to be taken in the context of the tight fiscal climate and
the priority this relatively small group has been afforded. It
recognises that funding for this particular need has in the past
been met through several different sources such as social services
and Discretionary Housing Payments. The presence of an overnight
carer allows these individuals to live independently and the change
simplifies and clarifies the funding arrangements.
Representations made to the Department have mainly
concerned people who need help to live on their own. The move
away from residential accommodation to independent living has
seen an increase in people with more intense care needs requiring
this sort of assistance. Where care is required for a child this
is more often provided from within the household. Housing Benefit
is not designed to meet every individual circumstance and it would
be complex to introduce different rules for the situations such
as those described by the Committee and to establish a need in
each case.
Where the local authority is satisfied that an additional
room is necessary as it would be beneficial, that authority can
make a Discretionary Housing Payment where they consider there
is sufficient justification for additional payments to meet any
potential shortfall between Housing Benefit and actual rent payable.
Providing certainty that Housing Benefit will, in future, meet
the costs of an additional room for a non-resident carer should
help free up funds within Discretionary Housing Payment budgets
and allow local authorities to use their discretion to meet the
costs in the types of circumstances the Committee describes. Housing
Benefit already takes account of resident live-in carers where
that carer is not part of the claimant's assessment unit. The
Government has no plans to extend this measure further.
[Paragraph 71] Evidence from the Government's
own impact assessment suggested that disabled people might still
face shortfalls and might have to move house and have new homes
adapted. We would wish to see Discretionary Housing Payments used
to avoid disabled people suffering housing disruption.
[Paragraph 77] We accept that at retirement many
households will review their housing location once they are in
receipt of a pension. However, we strongly believe that older
people on low incomes who have little opportunity to improve their
financial circumstances should not face being made homeless or
find themselves in accommodation that risks being detrimental
to their health and well-being. We would wish to see Discretionary
Housing Payments used to minimise housing disruption for the elderly.
[Paragraph 78] The Government should also look
at ways of protecting vulnerable older people and ensure that
they receive the help they need to find decent alternative accommodation,
taking into account proximity to friends, relatives and support
networks, should they need this.
The Government acknowledges the Committee's comment
regarding Discretionary Housing Payments. The Government is investing
a further £190 million in funding over the Spending Review
period to support people during the transition period. This support
will include, in England, £10 million from the homelessness
grant which has been made available to London local authorities
where the shortfalls are greatest to help them to prepare for
immediate challenges of the Housing Benefit measures. Trebling
of the Discretionary Housing Payments budget is intended to give
local authorities the flexibility to sustain some tenancies where
more support is needed.
In response to concerns raised over the possible
impacts, the Government announced that there would be up to nine
months of transitional protection at the existing Local Housing
Allowance rate for existing customers. This will help all existing
customers affected, including older people, those that are vulnerable
and people with disabilities, to have a longer period of time
to adjust to their new circumstances. In the longer term, tenants
will have the choice of whether to meet the shortfall from other
sources of income, or to move into more affordable accommodation.
[Paragraph 85] Young people will be particularly
hard hit by the LHA changes as single people under the age of
35 will only be entitled to the shared room rate which, even when
calculated at the median, has been found to be too low to find
a decent quality tenancy in many areas. The problem of lack of
available accommodation for young people has been acknowledged
by DWP, and our predecessor Committee recommended that the level
of benefit for young people should be increased. However, the
Government's reforms take this in the opposite direction: benefits
for young people will be lowered as a result of setting the shared
room rate at the 30th percentile and extending the shared room
rate policy to young people under the age of 35. We understand
the need for savings at a difficult time economically, but it
should be considered as an interim measure and the Government
should review this policy prior to 2015. At this point, we would
like to see a reconsideration of our predecessors' recommendation.
The move to increase the scope of the shared room
rate (now known as the shared accommodation rate to more accurately
reflect what it covers) from those aged under 25 to those aged
under 35 is being introduced to help contain Housing Benefit expenditure,
an area on which the Committee shares the Government's concerns.
The shared accommodation rate currently applies to single people
aged under 25 and reflects the lower earning capacity of young
adults and the fact that most single young individuals live in
shared accommodation. The Government does not think it unreasonable
to limit Housing Benefit in the same way to those slightly older
working age individuals who have recourse to public funds, particularly
as many of their contemporaries in work are living in shared accommodation.
The shared accommodation rate is also paid to individuals or couples
over 25 with no children who live in shared accommodation. Currently
just under half of those in receipt of the shared accommodation
rate are over 25, reflecting the fact that they are living in
shared accommodation rather than self-contained accommodation.
Work should be people's first choice and exemptions will remain
for the most vulnerable.
The exemptions from the shared accommodation rate
ensure that people who are severely disabled and young people
leaving care (under age 22) are protected from the restriction.
Those who are in supported accommodation or social housing are
also not subject to this restriction. Those getting the middle
or higher rate care component of Disability Living Allowance,
and where no one gets a Carer's Allowance for them, would be exempt
from the restriction.
The impact of this policy change on people under
the age of 35 will vary considerably depending on their specific
circumstances but it has never been the intention that Housing
Benefit should fully meet every individual's circumstances. People
facing a rent shortfall who are not covered by the exemptions
can be considered for extra help from the Discretionary Housing
Payment scheme. This allows local authorities to give extra help
on a case by case basis to those facing difficulties meeting their
housing costs.
As the changes are not due to be introduced until
2012, it is too soon to know how landlords might react. The Department
will be working with the Department for Communities and Local
Government on the potential impacts of these changes on the supply
of such accommodation. This policy will be kept under review as
part of normal monitoring and evaluation processes.
Potential risk of evictions and homelessness
[Paragraph 100] We recommend that the Government
obtain information from local authorities about the extent and
nature of their reliance on, and procurement of, additional temporary
accommodation, if any, inside and outside their local areas.
The Government appreciates the concerns expressed
by the Committee regarding reliance by local authorities on any
additional use of temporary accommodation.
The Government already receives information from
local authorities about the use of out-of-area procurement activity
through various channels including formal data collection in England
and through more informal means, such as regular engagement at
official level with local authority staff, particularly in London.
The Department for Communities and Local Government
collects quarterly statistics from English local authorities on
homelessness, which include the extent and type of temporary accommodation
they use, and whether the accommodation is within or outside the
authority which has accepted a homelessness duty.
The Welsh Assembly Government is aware that there
is a fair amount of placement across local authority boundaries
in Wales, particularly in the more urban areas. Officials at the
Welsh Assembly will consider with the local authority sector the
case for introducing the monitoring of cross-boundary placements,
taking account of the potential usefulness of the data.
The Scottish Government is aware that local authorities
in Scotland sometimes use out-of-area accommodation, often for
good reason, but there are no plans at present to capture this
data.
[Paragraph 107] While the Department acknowledges
that some households may have to move, evidence suggests that
these numbers may be much greater than the Government expects.
We have also heard of the difficulty of identifying households
who may have to move and that people on Housing Benefit tend to
move home less often than low-income working households and often
over-stretch themselves financially in order to stay within their
community network where possible. The Government should monitor
the extent of enforced moves and resulting hardship and increase
Discretionary Housing Payments if necessary.
[Paragraph 112] The Minister for Welfare Reform
emphasised that he is not expecting a substantial increase in
homelessness as a result of the reforms. However some witnesses
believed that a substantial increase in homelessness was inevitable.
The Mayor of London estimates a 50% increase in homelessness at
a cost of around £78 million for the additional 5,000 households
in London which could potentially be placed in temporary accommodation.
If this proved to be an accurate forecast, we would be concerned
about the resulting impact on the families affected.
[Paragraph 113] We welcome the Minister of State
for Housing and Local Government's recent announcement of the
Government's commitment to maintaining a robust homeless safety
net. Very careful consideration would need to be given to any
proposal to amend the statutory obligation on local authorities
to house vulnerable people.
The Government acknowledges the concerns raised by
the Committee regarding the estimates produced by some of the
witnesses of a substantial increase in homelessness as a result
of the measures being introduced in 2011. However, the Government
considers that these estimates have been exaggerated.
The transitional measures the Department is putting
in place to support both customers affected by the changes as
well as local authorities will ensure that eviction will be an
absolutely last resort. Over £190 million of extra funding
is being provided over the next four years to support the implementation
of the Housing Benefit measures. Discretionary Housing Payments
can be used to provide additional support such as allowing extra
time to those affected to find suitable accommodation or provide
longer term support for vulnerable customers. This includes families
with multiple risk factors and families with children at critical
points in their education. In addition, the introduction of nine
months transitional protection will give existing customers more
time to adjust to any reduction in entitlement and more time if
necessary to find suitable alternative accommodation.
If landlords reduced rents by £10 a week there
would be a significant reduction in the number of customers in
receipt of Housing Benefit under the Local Housing Allowance scheme
that would face a shortfall. In many areas, the proportion of
tenants in the private rental sector in receipt of Housing Benefit
is such that the downward pressure on rents is likely to be unavoidable.
As a further tool to support downward pressure on rents local
authorities will now have an additional discretion to pay Housing
Benefit direct to the landlord if they agree to reduce their rents
to an affordable level.
The Government is committed to maintaining a robust
homelessness safety net. The Localism Bill introduced in Parliament
on 13 December 2010 set out new freedoms and flexibilities for
local government in England, including proposals to allow local
authorities to end the main homelessness duty with an offer of
privately rented accommodation, without requiring the applicant's
agreement. This will allow local authorities greater freedom
to make better use of good quality private sector accommodation
which can provide suitable accommodation for households accepted
as homeless, while at the same time freeing up social homes for
people in need on the waiting list. Local authorities will still
be required to secure suitable accommodation for households owed
the main duty, and can continue to end the homelessness duty with
an offer of social housing if they decide that this is appropriate
or there is no accommodation available in the private rented sector
that is suitable for the applicant.
[Paragraph 121] We welcome the Department's assurance
that it will engage with the Department for Communities and Local
Government, local authorities, and the devolved administrations
to assess the impact of the changes and provide appropriate support.
However, it is essential that the Government considers the wider
impact of the Housing Benefit changes on public services. It has
been suggested that local authorities will experience increased
pressures on their services as a result of these measures. The
Government should monitor the costs to local government of the
policy changes and be prepared to consider additional funding
if necessary to ensure that appropriate support and services can
be provided in the areas where people might find new accommodation.
We recommend that the Department takes these broader considerations
into account when estimating the likely savings to be achieved
and overall taxpayer value for money.
The Government acknowledges the recommendation made
by the Committee regarding monitoring of the cost to local government.
The introduction of the changes to Housing Benefit
will present significant challenges and opportunities for local
authorities and may have an impact on local authority administration
costs. The Government is providing local authorities with an additional
£2 million to support the implementation activity required
for the 2011 Local Housing Allowance measures. The Department
will monitor carefully the potential financial and non-financial
impact of any new policy changes on local authorities and consider
any funding impacts of each proposed change separately. The Government
published its Vision for Adult Social Care: Capable Communities
and Active Citizens in November 2010. This set out how people
will be given greater choice and control over the care and support
that they need. The Government will work to ensure that the impacts
of the Housing Benefit changes do not adversely affect older and
disabled people's access to care and support and the future proposals
for adult social care, and do not disadvantage the groups affected.
[Paragraph 128] 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 taxpayer. However, we would not like to
see Britain reduced to exclusively affluent and deprived neighbourhoods.
A number of government departments have an interest in the issue
of community cohesion. We recommend that the Government monitors
the effect of the Housing Benefit changes on community cohesion
and continues to help people on low incomes, both in and out of
work, to live in communities which are socially mixed.
The Government welcomes the Committee's agreement
that Housing Benefit levels should be affordable and represent
value for money for the taxpayer.
Housing Benefit reforms are not about excluding benefit
recipients from affluent areas; the Government is simply ensuring
a fairer deal for the taxpayer. Only a small number of people
in the most expensive places may have to move and they are only
expected to need to move a short distance. The Department will
be working with local authorities to ensure these customers are
given the support they need.
Widespread areas of low income and deprivation are
generally associated with large estates of social housing. In
the private rented sector there is usually more of a mixture of
households. The Department's Local Authority Omnibus Survey will
be used to monitor the impact on community cohesion.
The Department's administrative data and secondary
sources will form a key part of the review and be used for examination
of key issues such as shortfalls. Research with landlords will
explore their rent setting and reactions to the changes; this
will be through primary fieldwork with landlords and letting agents
in a range of local authority areas. The external research will
include working claimants and those on low incomes also through
primary fieldwork in a range of local authority areas.
Transitional arrangements and Discretionary Housing
Payments
[Paragraph 140] We welcome the Government's £50
million addition to the funding originally announced for Discretionary
Housing Payments (DHP) in the June Budget, which brings the total
amount of additional funding for DHP over the Spending Review
period to £180 million. We note however, that the sum allocated
is intended to provide a solution to a very wide range of identified
areas of concern. We would therefore like to see further analysis
of the anticipated demand for this funding, compared to the resources
available, in order to understand the extent to which this fund
can support benefit claimants through the transition period and
help avoid evictions. We recommend that DWP carries out robust
monitoring of DHP to ensure that any shortfalls and unmet needs
are identified and acted upon swiftly.
The Government agrees with the Committee's recommendation
regarding the importance of monitoring use of Discretionary Housing
Payments. The Department is revising the guidance on Discretionary
Housing Payments to ensure that local authorities can target funding
where it will be needed most.
The Department will distribute the additional funding
for 2011-12 based on the total losses expected by local authorities
due to the Housing Benefit reforms that will come into force in
2011. The data source is the same as that used to produce
the July 2010 Impact Assessment. Discretionary Housing Payment
allocations to individual local authorities in subsequent years
have not yet been agreed. The Department will be monitoring the
impacts of reform via the same data source, and this is expected
to inform the distribution of funds.
Given that Discretionary Housing Payments are discretionary,
the local authority will provide financial assistance based on
its assessment of need in each case. The Department does not hold
information on reasons for a payment made, but provides Good Practice
Guidance.
[Paragraph 147] Serious concern was expressed
when the measures were first announced in the June 2010 Budget
both about the inadequacy of transitional arrangements and the
timetable for change. This would have meant that some households
would potentially have been affected twice in 2011 by the changes
to be introduced in April and then in October. We welcome the
Government's recognition of the depth of these concerns and its
subsequent decision to allow existing claimants a transitional
period of at least nine months.
The Government welcomes the Committee's agreement
to the new transitional arrangements. Following advice from the
Social Security Advisory Committee and other stakeholders, and
to ensure a smooth transition, the Government brought forward
the timing of the measure to reduce rates to the 30th
percentile and gave existing customers up to nine months transitional
protection.
[Paragraph 148] The welcome amendment to the timetable
for change does not however lessen the obligation on the Government
to support local authorities in communicating the changes to benefit
recipients. We believe that it is essential that all households
in receipt of Housing Benefit are giving clear information about
how and when the changes will affect them. This may best be communicated
in a letter giving specific details on what the new benefit rate
for that household will be; from when it will apply; and, where
relevant, the likely shortfall between the rent and the new benefit
level.
The Government agrees with the Committee that it
is essential that the Department has an effective communication
strategy to ensure that those customers affected by the changes
are given as much notice as possible and as much information as
possible for them to make informed choices.
The Department is working closely with
the 380 local authorities that administer Housing Benefit to ensure
that the full range of options for customers facing a shortfall
in their rent as a consequence of the changes is publicised, and
that people are encouraged to consider the options in good time.
In order to give this work the priority it deserves, the Department
has set up a dedicated team devoted to implementation of the 2011
reforms. Benefit managers in every local authority have been invited
to one of a series of four conferences to be held in Scotland,
Wales, North England and London. These conferences aim to help
smooth the implementation of the measures to be introduced from
April 2011. The Department is also working closely with other
government departments, and primary stakeholders such as Citizens
Advice, Crisis, Shelter and landlord organisations.
The Department acknowledges that local authorities should give
specific consideration to the additional support needs of older
and disabled people, particularly in ensuring that information
is available in accessible formats.
Private rented sector and responses to the proposed
reforms
[Paragraph 160] The Government has suggested that
lower benefits rates will not lead to increased levels of evictions
and homelessness if tenants are able to make up the shortfall
through other income or move to cheaper accommodation. The latter
assumes that enough such affordable accommodation is available.
However, evidence indicates that, in the context of a shortage
of social housing and high demand for rental accommodation, this
may not be the case. Tenants may be left with no other option
but to accept overcrowded accommodation, or a dwelling that is
otherwise unfit, or in a different location. We recommend that
the Government carry out a review of how the changes are likely
to impact on tenants' ability to access the bottom third of the
market. This review needs to be clearly aligned with an assessment
of housing supply and demand below the 30th percentile of the
market.
The Government acknowledges the concerns expressed
by the Committee and agrees on the importance of research into
the ability of tenants to access the bottom third of the market.
The Department is still developing the detailed scope
of the research it will undertake. However, it will certainly
involve a close examination of the private rental market, to monitor
the impacts on supply, rent levels and landlord behaviour, particularly
in the bottom third of the market. It is also intended to involve
landlords and letting agents directly.
Meanwhile, the Department is working closely with
the Department for Communities and Local Government and the central
departments to identify specific actions that can be taken to
increase the proportion of the private rented sector that is available
to Housing Benefit customers. The increased discretion for local
authorities to make payments direct to the landlord is an example
of this. We will work with local authorities to ensure as much
consistency as possible in the operation of these new arrangements.
[Paragraph 167] We accept that there will be a
response by landlords to the lower LHA rates in terms of lowering
rents, but the extent of that response cannot be accurately predicted.
Moreover, the landlord response will vary from area to area depending
on local market conditions, and the degree to which landlords
have choice in securing tenants who do not rely on Housing Benefit,
bearing in mind that the proportion of claimants within local
private rented markets ranges from less than 10% to over 80%.
The Department should monitor the extent to which tenants make
up the difference and landlords accept lower rents in particular
Broad Rental Market Areas and work closely with other government
departments and with local government to ensure that adequate
support is in place in areas where more tenants have to move home.
The Government agrees with the Committee's recommendation
regarding the monitoring of the effects of the Housing Benefit
changes. The independent review will be comprehensive; particular
areas that the research and analysis will explore will be an econometric
analysis of the impacts of the measures on markets and landlords
In addition to this, the review will also examine
the availability of shared accommodation and options for younger
renters and vulnerable groups such as disabled people, care leavers
and those leaving homelessness services. The review will also
examine landlords and the private rental market, to monitor the
impacts on supply, rent levels and landlord behaviour.
A further important part of this review will be work
with tenants and the staff of local authorities as well as voluntary
organisations to monitor tenants' behavioural responses, operation
of the safeguards/Discretionary Housing Payments as well as local
authority service provision. We are aiming to involve some
tenant tracking elements to provide information on those who choose
to move property.
[Paragraph 179] Some landlords may be willing
to reduce rents in return for better security of payment, and
landlords also stressed that direct payment would improve their
confidence in the Housing Benefit market. It is likely that this
would also increase the supply of private rented housing for Housing
Benefit tenants. Direct payment to landlords could therefore be
a useful bargaining tool for local authorities in trying to secure
cheaper accommodation for clients. In that context, we welcome
the Government's recent announcement that it would temporarily
widen the discretion of local authorities to make direct payments
to landlords who are willing to reduce rents to a level that is
affordable for claimants.
The Government welcomes the support from the Committee
for its measure to temporarily widen local authority's discretion
to make direct payment of Housing Benefit to landlords. The Government
accepted the suggestions made by the Committee during the oral
evidence hearing on 3 November 2010.
For the private rented sector, safeguards are already
in place to identify those customers who are unlikely or unable
to pay their rent. As a temporary measure, a new safeguard has
been introduced that will encourage landlords to reduce their
rents by providing direct payments of Housing Benefit if it would
help the customer secure a new tenancy or remain in their current
home at a reduced rent. The Department will issue guidance on
the operation of the further discretion to ensure that it is operated
fairly.
[Paragraph 180] We note the important principles
behind payments to claimants as supported by our predecessors.
The Government's plans to introduce a Universal Credit, bringing
together in and out of work benefits, will rely on Housing Benefits
being paid direct to the claimant. We believe that, both to retain
this important principle and to help build landlord confidence
in the sector, the Government should promote good practice schemes
such as LetFirst in Edinburgh which brings together direct payments
to the claimants and rental guarantee for the landlord.
The Government agrees that good practice schemes
such as the Letfirst scheme, operated by the property group Orchard
and Simpson in partnership with the City of Edinburgh, demonstrate
that local authorities and landlords can work effectively together.
Early identification of vulnerable customers can ensure that arrears
do not build up and put a tenancy at risk. In the private rented
sector, paying Housing Benefit under the Local Housing Allowance
scheme directly to the customer has many advantages, including
the promotion of financial inclusion. As announced in the June
2010 Budget, we will set the amount we pay to support people in
the private rented sector at a level that will generally make
the lowest third of market rents affordable. Rates will be set
and uprated to ensure that the support received is fair but not
excessive. As the White Paper states, our aim is to simplify provision
for rent support in Universal Credit as much as possible, while
protecting potentially vulnerable people from unintended consequences,
such as getting into arrears or being made homeless, and also
minimising the impact on landlords. These vitally important
principles are the subject of ongoing policy development.
Addressing barriers to work in the Housing Benefit
system
[Paragraph 187] One of the Government's stated
objectives of the Housing Benefit reforms is to create a level-playing
field between households in receipt of Housing Benefits and low-income
working households (LIWH). We note that about 10% of LHA recipients
are LIWH and that 50% of working people entitled to claim Housing
Benefit are not claiming it. We believe that the Government should
also recognise that households in receipt of Housing Benefit are
also more likely to be older and lone parent households. Evidence
also suggests that overall the "typical" levels of rent
are quite similar for those receiving and not receiving Housing
Benefit.
The Government notes the Committee's comment regarding
the "typical" levels of rent paid by those in receipt
of Housing Benefit and low income working households. The reasons
why people who are eligible to claim Housing Benefit but choose
not to are complex. The low income working household research
found that only a few, mostly families, had any experience of
claiming Housing Benefit, but previous bad experiences with the
system may be deterring them from claiming.
Households in receipt of Housing Benefit in the private
rented sector are more likely to be older, have fewer qualifications
and be lone parent households than low income working households
who are a very diverse group in terms of the type of household
and ethnicity. They are best considered as a range, from
those who are very similar to households on Housing Benefit, in
low paid work and with little prospect of leaving rented housing
to those who are passing through at a particular stage of their
lives/housing history.
The low income working households research did find
that before the introduction of the Local Housing Allowance, the
typical levels of rent are quite similar between those receiving
and not receiving Housing Benefit. However, the survey undertaken
after the introduction of the Local Housing Allowance found that
most low income working households pay a rent which is slightly
less than the Local Housing Allowance rate set for the property
they occupy; the amount paid is usually 90% or more of the Local
Housing Allowance rate, except for large properties where it is
lower.
[Paragraph 197] We agree with the Government's
objective of trying to address barriers to work in the benefit
system. The evidence is very strong that the greatest barrier
to employment is the complexity, confusion and limited net gains
for claimants arising from a combination of taper rates and earnings
disregards for benefits. We therefore welcome the principles behind
the Universal Credit as set out in the recent White Paper. We
intend to pursue issues arising from the proposals and look forward
to seeing more details, including on how housing costs will be
dealt with under the new scheme. However, we are concerned that
the proposed reforms to Housing Benefit may contradict some of
the objectives of Universal Credit. We recommend that the Government
allow Housing Benefit to "run on", as people move off
benefit and into work, a measure which previously commended support
from both sides of the House.
The Government welcomes the Committee's support of
the principles behind Universal Credit. The current benefit system
must be reformed to make it fairer, more affordable and better
able to tackle poverty, worklessness and welfare dependency. The
Government agrees that the complexity of the current system creates
barriers to work as it is difficult for customers to know what
further help will be available if they start work. Taper rates
and earnings disregards currently provide a disincentive for the
long term unemployed to get back to work, and for those in low
paid work to do extra hours or take on extra responsibility. Universal
Credit will tackle those barriers.
Housing Benefit currently helps people over the difficult
transition from out-of-work to in-work benefits by paying benefit,
at the out of work rate, for four weeks after starting work. The
design of Universal Credit will mean there is no benefit transition
when people move in to work and there is therefore no need for
a benefit run on.
[Paragraph 223] We are concerned about the potential
impact of the 10% Housing Benefit cut on providers of hostels
and supported accommodation. This measure is likely to have a
negative impact on the financial viability of these providers,
forcing them to close facilities or to evict clients on Jobseeker's
Allowance. We urge the Department to work closely with other government
departments, with local government and with these organisations
to ensure that they remain able to provide a place for homeless
people to live and support them into work.
[Paragraph 227] We note that the Government plans
to cut Housing Benefit by 10% for those who have been claiming
Jobseeker's Allowance (JSA) for 12 months. We recognise that Housing
Benefit has an important role to play in the decision to take
a job and that the reduction by 10% after a year of job search
will increase the net gain to a job seeker, from this lower base,
when they eventually find work. Taken together with our proposal
to "run on" Housing Benefit, this may provide an improved
incentive to work.
[Paragraph 228] A number of concerns have
been expressed to us about other possible implications of the
proposal to reduce Housing Benefit after 12 months on JSA:
· It
risks adding further complexity to the benefits system and thereby
detracting from the Government's plans to simplify working-age
benefits, by moving to a Universal Credit.
· It is not
clear how it fits with the Government's new welfare to work programme.
Support from the Work Programme will only be available to many
people once they have been claiming JSA for a year. They may therefore
lose 10% of their Housing Benefit for being out of work before
they have received the additional support they need to find a
job which the Work Programme is intended to provide.
· The number
of people potentially affected by the 10% Housing Benefit reduction
will be larger and more varied than the current Jobseeker's Allowance
client group, and will include more vulnerable people. This arises
from two changes: the migration of a number of current Incapacity
Benefit and Employment and Support Allowance claimants to JSA;
and moving lone parents from Income Support to JSA when their
youngest child reaches the age of 5, with the accompanying requirement
to seek work.
· It does
not take account of the variations in availability of employment
across different regions of the country, nor of a claimant's particular
suitability for the work available or of the greater barriers
to work faced by some people, including disabled people, older
people and lone parents.
[Paragraph 229] We request that the Government
provides us with information on how it plans to address these
concerns, in its response to this Report. We would also be interested
to hear about alternative measures it would be prepared to consider,
which might offer a more nuanced approach, using targeted sanctions
for those who refuse to engage in the process of finding employment,
rather than a blanket approach for all JSA claimants.
The Government welcomes the Committee's acknowledgement
that the availability of Housing Benefit can play an important
part in a person's decision to take a job. Housing Benefit ensures
people can continue to receive help with housing costs when they
move into low paid work, on the same basis as when they are out
of work.
Although everyone should be financially better off
in work, there is a significant body of research pointing to the
fact that changes in benefit levels can affect incentives to find
and take-up work. While results between studies vary, there is
a general consensus that high levels of benefit payable to those
out of work can mean that the financial incentive to work is reduced.
This can be detrimental to employment levels.
Announced as part of the June 2010 Budget, the proposal
to reduce Housing Benefit entitlement by 10% for jobseekers after
12 months was intended to provide an additional incentive to take
up employment.
The Government received many representations on this
proposal, including those made by the Committee in their report,
focusing on the potential implications for people actively seeking
work. Concerns related, for example, to people who are now claiming
Jobseeker's Allowance after many years claiming incapacity benefits
and to lone parents transferring from Income Support as their
youngest child reaches age seven, reducing to five from early
2012, subject to the passage of the Welfare Reform Bill.
Subsequent to the Budget decision, the Government
has agreed to introduce the Universal Credit which will mean that
people will always be better off in work, which is a compelling
reason to move into work or to increase hours worked. Taken with
the new Work Programme, there will be both the incentive and enough
support to help people back into sustainable employment. The
Government has therefore decided not to introduce this particular
change to Housing Benefit.
1 Two Year Review of the Local Housing Allowance - A review of the introduction of the LHA arrangements at a national level against the original policy objectives.
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