Tag: Local Housing Allowance

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When averages don’t have to be so mean

With the Tories on the proverbial housing policy ropes, Labour must continue to focus on progressive policies that result in more support for households at lower parts of the income distribution. To roll with the punches Labour must call for an increase in the Local Housing Allowance (LHA) to the median 50th percentile, scrap the discriminatory age restrictions to the Shared Accommodation Rate (SAR), and put those most in need at the heart of any emergency coronavirus plan and comprehensive vision for the future.

Shelter have announced we have a public health crisis on top of an already existing housing emergency. This is because millions of tenants, whether they be private, social, or intermediate, are presently not working due to the fact society has lost confidence in our ability to move around without catching a killer infection. This has happened in the middle of an existential housing emergency that has been significantly exacerbated by the Tories over the past decade.

Vicky Foxcroft, Lewisham Deptford MP, brutally exposed this in the Commons in Julylast year:

“Local housing allowance is supposed to cover the lowest 30% of market rents, but research by Shelter found that that is not possible in 97% of England. For example, in south-east London, local housing allowance will cover only the bottom 10% of rents. We have a housing crisis across the country and local housing allowance is not fit for purpose. Does the Minister agree that it must be raised to reflect the true cost of renting?”

House of Commons | Hansard | 01 July 2019 | Local Housing Allowance

Virendra Sharma, Ealing Southall MP, also explained how a staggering number of members in his constituency had a very real risk of homelessness as they struggle, month after month, to make up the shortfall between their rent and the level of LHA.  

For example, a single young person under the age of 35 in Ealing Southall would have found just 1% of shared properties affordable with the SAR available in 2018. A family with children looking for a two-bedroom property would find the LHA rate covered just 6% of the private market. This would mean they would have to find an extra £150 per month to afford a property within the cheapest third.

In 2019, 88,330 households in England found themselves living in temporary accommodation, a figure tragically up from 48,010 in 2010. That is equivalent to the size of a town like Grimsby, Guildford, or St Albans often having to live in bed and breakfast accommodation in the first instance, until something more suitable can be found.

Figure 1: Total Number of Households in Temporary Accommodation 31st December 2019
Source: https://www.gov.uk/government/statistical-data-sets/live-tables-on-homelessness

The Tories have at least attempted to unwind the horrendous consequences of their own bad policy through reforming “no fault” evictions, removing Section 21 of the Housing Act 1988, and making changes to the grounds for possession. Yet much of this will be a mere sticking a plaster over what are much deeper structural issues, with pressure on the housing benefit system having been exacerbated from years of weak wage growth and domestic price rises

The severity of the impact on households’ living standards has been to an extent normally associated with a severe recession, which has left the huge shortfalls between LHA and the true cost of renting one borne by the poorest.  The result has left the country ill-prepared to face such a crisis, particularly as it braces itself for the biggest economic slump in over 300 years. This was not what Labour had it mind when it introduced LHA back in 2008 following evidence based research.

After an initial three-year pathfinder Labour set the LHA rate at the median 50th percentile of the local private market. Shared Accommodation Rates were applicable for those under 25, which meant that single claimants under 25 were forced to share with others rather than live on their own. It had an aim to give a flat fair allowance for the local area and enabled people to have choice. LHA was argued to increase incentivisation to work, namely through greater clarity of in-work benefits, and most importantly it was simple.

LHA was slashed in 2011 to the 30th percentile by the Coalition government, with the Liberal Democrats crooning it in, like mice singing in the cats choir. A year later LHA rates were delinked from market rents and increases there forth capped by CPI. An uncaring cap on benefits was further introduced in 2012 following George Osborne’s famous Conservative Party conference speech where he asked “where is the fairness?”.

Three years later George Osborne thought it was still not fair enough and pushed the benefit cap even lower in his Summer Budget of 2015.  He brought this alongside an extension of SAR up to the under 35s, with a 5-year freeze to LHA announced in 2016.

Turns out George’s idea of “fairness” leaves poor families with mounting debt and pushes children into deeper poverty, with many families financial circumstances having worsened following the introduction of the policy. In large part having been left with an average gap between rent and housing benefit of £3,750 per year.

That said, evidence from Crisis identified that investing in LHA rates to cover 30% would prevent 6,000 households from becoming homeless over a three year period. It would also lift 32,000 households out of poverty, which would include 35,000 children. Off the back of this research, and vociferous campaigning by Labour Party politicians the Tories buckled, and ended their very own LHA freeze one year early.

Hurrah!

Announced in January 2020 under The Social Security (Coronavirus) (Further Measures) Regulations 2020 the Government stated it would relink the LHA to the 30th percentile, which was set at the same level seen in the 2019 Labour Party manifesto.

But was this rate high enough?

The Liberal Democrats thought not. Their manifesto included a call to increase LHA in line with average rents in an area. Though fell short on whether this was the mean average, or the more robust to statistical outliers mean average. In any case nobody was going to believe that commitment with the Liberal Democrats having been the hand maiden for such cuts in the first place.

Yet their policymakers did have a point, as a move back to the average rent level for LHA is one backed by credible research. In August 2019 Crisis demonstrated a higher cost benefit could be achieved if LHA was restored to the 50th percentile rate in areas where the rates fall behind rents the most, and to 30th percentile everywhere else. The research also gave a nod to restoring all the rates to the cheapest half, which would bring the highest overall benefit. In effect restoring LHA to the progressive median average, not seen since the last Labour government, would be more equitable and more cost effective.

This begs the question why previously Labour only sought an increase to the 30th percentile when, under the previous Labour Government, the median average left fewer people choosing between eating or paying rent. Shelter have recently joining the ranks call for an increase in housing benefit to cover the cost of average rents and to lift of the benefit cap.

Labour’s recent announcements chime well. Thangam Debbonaire’s emergency five-point plan echoed such calls through laying out increases to LHA rates and an improved provision of Universal Credit. Shadow Secretary of State for Work and Pensions, Jonathan Reynolds, also called for urgent action on social security. Through a suspension of the benefit cap and removing the savings and two-child limit to Universal Credit.

At least now renters can take comfort both Labour and the experts are on their side.

Sadly, the Tories will be difficult to move on from the below average LHA rate and age discriminatory SAR policy, which will remain unfair and incredibly impudent towards those on the breadline. Yet Labour must continue to be bolder than its Tory counterparts on housing. For it to work effectively for a just society, it must call for an increase in LHA to the median 50th percentile rate, not the mean, and in the interest of fairness push for the abolishment of age discriminatory housing benefit criteria.

<strong><span class="has-inline-color has-accent-color">Chris Worrall</span></strong>
Chris Worrall

Co-Editor of Red Brick. Non-Executive Director of Housing for Women. Labour Housing Group, Executive Committee. Exploring innovative new models in housing with care in the for Guild Living. Previously Investment and Finance Manager at Quintain and Thor Equities.

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Cuts in wages cause surge in demand for HB

It’s amazing how many people think that only those who are economically inactive can claim housing benefit.  But then again all the rhetoric about cuts to HB and to Local Housing Allowance (HB for private tenants) has been about tenants living in something called ‘benefit dependency’, being feather bedded and given so much money that they can afford to live in places that ‘hard working families’ couldn’t afford to live.

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Cameron makes it up

If Ed Miliband had said anything as ludicrous as David Cameron’s claim that private rented sector rents are going down he would have been all over the news facing demands that he apologise with detailed analysis by pundits of the figures that show he is wrong.
In response to a question by Joan Ruddock MP, Cameron had the nerve to claim that the housing benefit reforms were bringing rent levels down: “what we’ve seen so far, as housing benefit has been reformed and reduced, is that actually we have seen rent levels come down. So we’ve stopped ripping off the taxpayer.”
Cameron’s statement was contradicted by everyone who has ever done any work on private sector rents.  Chartered Institute of Housing quoted National Valuation Office Agency data showing that LHA baseline rates, which are based on market rents, have increased or stayed the same in 853 out of 960 local authority areas since March 2011.
However the apparent misleading of Parliament never made it big in the mainstream news.  The fact is that Cameron gets away with saying things that aren’t true and gets an easy ride from the media.  No 10 set out the case for the defence.  They told Inside Housing “We are hearing of cases where in return for direct payments to landlords our reforms are beginning to work” but, as IH notes, the spokesperson “was not able to provide numbers to back up the claim, saying that the Government will publish data on the impact of LHA reforms later in the year”.
If Miliband had tried such a pathetic explanation as that deployed by No 10  – “we’ll let you know in a few months” – he would have been ripped to shreds.  “Hearing of cases”?  What cases, where, how many, publish the data!
It is interesting, though, that commentary on private sector rents now often includes reference to Ken Livingstone’s idea of the London Living Rent, even if it is often misunderstood.  Ken is seeking to open up the debate about rents by setting a benchmark – after due research – for the proportion of income that should reasonably be taken by rent if households are to retain sufficient income to meet their other needs.  As the idea develops it should put pressure on social landlords who are beginning to charge excessive rents under this Government’s policies, but also kick off a debate about how to exert an element of control over the private sector as well.
The countries with the most successful private rented sectors have a stronger measure of rent control than we do, and better security of tenure as well – but it is difficult to work out how we get from where we are to where they are.
Apart from saving cash, which they look increasingly unlikely to do, the argument deployed most frequently by Iain Duncan Smith and Lord Freud, and repeated by Grant Shapps, was that the HB changes would bring down rents.  It’s how markets work, they explained.  We argued at the time that this was nonsense economics: the policies would do nothing to bring rents generally down as there was excess demand in the system, but would put upward pressure on rents in the lower end of the market as more people chased fewer affordable homes.
Labour Housing spokesperson Jack Dromey MP has been chasing Cameron over his mis-claim, but it would be good to see it feature in a future PMQs so that Labour nationally can show, as Ken Livingstone is doing in London, that someone will stand up for private tenants on low incomes.

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'Rents will fall and no-one will be made homeless'. So what happened, IDS?

Government Ministers have consistently argued that the changes in local housing allowance would lead to reduced rents in the private rented sector and would not lead to more homelessness.
Labour MP Karen Buck spoke at the launch of the NHF’s Home Truths report this morning, and writes exclusively for Red Brick below.
Guest post by Karen Buck MP, Labour MP for Westminster North
A year ago, Iain Duncan Smith said in the House of Commons debate on Housing Benefit:
“The purpose of these (HB) changes is to give a real impetus to getting the rents down to make affordable housing more available in some areas…… Through the emergency Budget and spending review, we proposed a set of housing benefit reforms designed to bring back under control a system that has been out of control. I accept that the responsibility of Government is always to get the balance right as we protect, incentivise, and ensure fairness in the system. Critically, for housing, that means getting the rents down….. There should be no need, with the discretionary allowance, for people to be made homeless. That is just the nonsense with which Labour Members want to scare everybody.”
One year on, we now know that the mean rent increase in London was around 12%.
We are facing an unprecedented crisis of supply and affordability. This has not all occurred since May 2010 – and some of the present problems have roots in the decision to
switch subsidy from ‘bricks and mortar’ to personal subsidy three decades ago. Still, recent developments have intensified the problem acutely.
Over the last year, homelessness has risen sharply, reversing a fairly steady medium term decline. The recent pattern by which homelessness/temporary accommodation has been diverted via the prevention and relief of homelessness strategy is faltering, because families are reluctant to abandon future security as the PRS becomes increasingly unaffordable. (Meanwhile, there are over 100,000 households to whom local council accepted homelessness duties but then diverted them into the private sector who will be
at risk of re-presenting as rents rise and benefits fall).
The central issue remains one of the supply of affordable homes, especially for rent, but whilst we are seeing the final wave of new supply coming through as a result of the Labour government’s investment, the future looks less hopeful because of the Orwellian ‘affordable rent’ model and housing benefit cuts.
‘Affordable rents’ as the means of filling the grant gap mean not just places like Westminster become unaffordable – an ‘affordable rent’ set at 65% of market rents would require a household income of £65k to cover the cost without benefit – but so do poorer
places like Haringey and Newham. In Haringey, a rent set at 80% of local market rents would require a household income of £31k for a 1 bed flat, and in Newham a 2 bed flat would require a household income of £27k. This at a time when the median income for social housing tenants is £12k.
The Household Benefit Cap and Housing Benefit cuts, meanwhile, are estimated in a recent report by London Councils to leave 133,000 households unable to pay their current rents.
Even if this proves to be an over-estimate, staggering numbers of households face a dramatic shortfall in their income and are at risk of upheaval and homelessness as private rents continue to soar. Boroughs with lower housing costs can anticipate a sharp increase in numbers of incomers, many with high service and support needs.
It is worth noting that unemployment, the freeze in real wages and rising housing costs have already contributed to a rise in the number of private sector Housing Benefit
claimants, especially in the suburbs- the London Borough of Redbridge, which includes part of the constituency of the Secretary of State for Work and Pensions, saw a 65% increase in Local Housing Allowance claims in a little over a year, the largest increase in the country. Some of the areas facing the biggest cost pressures are not the Knightsbridge’s and Mayfair’s of popular myth, but places like Hillingdon and Croydon, whilst Newham will be amongst the places worst hit by the overall Benefit Cap.
Supply may be the solution over the medium and longer term, but in the very short term we need DCLG and DWP to sort out their differences and develop an integrated approach
to housing need and homelessness before they escalate.

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What goes up won’t come down

The changes to Local Housing Allowance and the rest of the Housing Benefit system have been covered frequently on Red Brick.  We don’t think much of them.
But one argument that the government deployed seemed logical to a lot of people.  That was the common Ministerial assertion that, because LHA claimants make up as much as 40% of the private rented market, the level of LHA  payments must be a big factor in the rise in private rents over recent years.  And the corollary was that cuts to benefit, and hence to tenants’ ability to pay, would inevitably lead to a fall in rents, which would be a good outcome.
In my old economics textbook I find some support for this in theory: if supply is constant and effective demand falls, then the price should fall as well.  Cue much Tory-speak about the good old market mechanism.
However in the real housing market demand is in such excess over supply that the neat little supply and demand chart really doesn’t work.  If you reduce benefits so that tenants in high demand relatively expensive areas have to move out, there are many people willing to replace them at the same price.  The price will not fall.  Yet in the cheaper areas where the tenants are expected to move to, there will be more people chasing the small proportion of homes that become available at or below the 30% percentile (the new cap) at
any one time: the price is likely to rise.
A new report ‘Leading the Market’ from the Chartered Institute of Housing and the British Property Federation pours more cold water on the ‘LHA causes high rents’ argument.
They conclude that

“The increase in average rent levels during this period (2008-2010) is entirely due to a shift in the relative distribution of the caseload from the North and the Midlands towards London and Southern England. After adjusting for this ‘caseload effect’ average housing benefit rent levels fell by 1% (instead of the reported 3% rise).”
“We found no evidence for a relationship between the LHA inflation rates and the proportion of the market that is let to housing benefit tenants.”
“There is no evidence to support the contention that the LHA is inflationary or produces a feedback loop.”
“Our findings call into question the Government’s strategy that it can use its power as a bulk purchaser to force landlords to reduce their rents.  If LHA rates do not contribute towards rent inflation then conversely they cannot be used as a tool to force rents down.”

In short the policy is not just wrong in principle: it is wrong in theory and it is wrong in practice.

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When the facts change, I change my mind. What do you do, sir?

George Osborne would do well to read more of John Maynard Keynes, and in particular his General Theory of Employment Interest and Money published in 1935.  Unlike Osborne and Cameron, Keynes (a capitalist economist and a Liberal) learned lessons from the Great Depression and was determined never to see it repeated.
One of JMK’s well-known sayings – ‘When the facts change, I change my mind. What do you do, sir?’ – was uttered after he was criticised for changing his position on monetary policy during the Great Depression.  It applies well now to Osborne’s repetition of the Great Depression mistake (and indeed Japan’s more recently) of cutting demand in a recession.
But it might equally be applied to private rented sector rents and the policy of slashing the Local Housing Allowance for private tenants.  Minister after minister, from Cameron down, trotted out the line that cutting benefits would reduce rents, that the HB sector was holding rents up high, and that the free market would respond to HB cuts, effectively lowering demand, by lowering price.  Iain Duncan Smith frequently said that the fact that his department was responsible for 40 per cent of the private rental market was ‘staggering’ and that the aim of the reforms was ‘to drive down market rents’.
Logical thinkers came to different conclusions.  With current levels of excessive demand, tenants forced to move by cuts in their HB payments would be easily replaced by new tenants able to pay market rents.  There would be no price reduction in more costly areas.  However, the displaced tenants would be looking for homes in lower rent areas, boosting demand and competition for the cheaper homes that come on the market.  Rents in those areas would be likely to rise.  The problem would be compounded by a proportion of landlords taking family homes off the market to make them available instead to the growing number of single people who would only receive the shared accommodation HB rate in future.  Letting to 4 or 5 singles was likely to be more lucrative than letting to a single family.
The anecdotal evidence is that sharing and overcrowding are increasing as people, and especially larger families, try to find cheaper – which often means smaller – accommodation.  Harder evidence, from agents and landlords, shows that rents continue to rise above inflation.
Nor are there any signs of rents turning down in the future.  The head of research at Savills recently concluded  “High rent rises are not confined to the prime market and, as more aspiring buyers are frozen out of home ownership, demand for private rented stock in the country as a whole can only grow. Our prognosis for the private rented sector as a whole remains extremely bullish.”
Even if the government believed its little bit of idiot economics when it started the policy, surely the evidence is accumulating that they are just wrong, rents will not fall and people will be put through endless misery because of it.
The facts have changed.  But does Iain Duncan Smith have the bottle to change his mind as JMK suggests he should?

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The tide of destruction

TUC General Secretary Brendan Barber has been busy recently, what with the huge march and rally for the alternative on Saturday.
So it was good to see him taking time today to comment on the government’s decision to bring forward to January 2012 the new rule that single adults up to the age of 34 will be eligible only for the single room rate of local housing allowance. 
Brendan focused on the risk of homelessness.  He said: ‘This reform runs the risk of increasing homelessness among young people as many will have their benefit entitlement significantly reduced.  There is almost no chance that all of these people will be able to find alternative accommodation at affordable rents.  With unemployment still rising and the housing crisis deepening, the government seems intent on piling on the financial pain for young adults.’
The government has been happy to keep the debate about housing benefit/local housing allowance changes focused on the largest families receiving the highest amounts of benefit in the highest value areas, especially in central London.  But the changes will hit hard at all kinds of tenants all over the country, as the tables produced by the Valuation Office Agency (VOA) show clearly, and they will hit single young people between the ages of 25 and 34 severely.  You can see figures for your local area here. 
The tables show for each area (Broad Rental Market Area in the jargon) what the difference is between the current 1 bed rate and the single room rate and also how the rates will be affected by the switch from being assessed on the 50th percentile – ie the median rent in an area – and the new rule that they will be based on the 30th percentile.
So a single person aged between 25 and 34 would currently be eligible for the 1 bed rate at up to the 50th percentile rent; in future (ie over the next year) they would be entitled to the single room rent at the 30th percentile.  The figures will change as market rents change, but on current calculations a single person age 25-34 living on Tyneside would be entitled to a 1 bed rate of £97 a week and after the changes would only be entitled to a single room rate of £58 a week.  In southern Greater Manchester the drop will be from £103 to £56.  In Leicester from £91 to £56.  In north west London from £178 to £80.
In theory the 30th percentile rule means that 30% of properties in an area will be ‘affordable’ for claimants.  In practice the cheapest 30% are already occupied and people having to leave their existing accommodation will have to compete for vacancies as they arise.  Not only is this likely to force rents at the lower end up (not down as the government ridiculously claims) but there will be a flood of 25-34 year olds seeking to move and it is extremely unlikely, as Brendan comments, that there will be enough accommodation to go round.  The risk of homelessness is great, and even if there is a scramble amongst landlords to convert larger houses into shared accommodation there will then be knock-on effect on families. 
As Brendan said at the rally at the weekend, ‘We’ve come together not just to oppose the cuts, but to call for a new approach to rebuilding our economy rooted in social justice, in place of this tide of economic destruction.’  Quite.

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Housing benefit: the truth will out

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone. Steve sits on the Editorial Panel of Red Brick.

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In a recent post I made the observation that government impact assessments, and especially equality impact assessments, tended to reveal more about a policy than all the other official documents put together, and that looking at any policy from the point of view of those most likely to be worst affected tends to expose the downside or weak links in the argument. 

The point is well supported by the DWP impact assessments on the housing benefit changes, or more correctly the Local Housing Allowance changes, published last week. 

At constant prices, and taking account of the recent minor concessions in the proposals, the LHA savings will start in 2012/13 and build up to £1040m in 2014/15, slightly offset by piddling amounts for increased discretionary payments and an (extremely welcome) allowance for an extra room for a carer.  In 2014/15:

– removing the £15 bonus for people achieving a rent below the LHA rate (the shopping around incentive) will save £550m

– setting Local Housing Allowance at the 30th percentile of local rents will save £425m, and

– capping LHA rates will save £65m.  

The first point to note is the relatively small saving from the ‘cap’, given that virtually all government comment on the LHA issue has focused on excessive benefit payments to people in high rent areas, especially in central London.   17,400 households are affected – often very severely – by the caps.   The much higher saving from the ‘30th percentile’ change will have far more impact.  It will affect more than three-quarters of a million households in all parts of the country.

Nearly everyone will lose: over 900,000 households, a stunning figure.  The national average loss is £12 per week, from an average benefit of £126, but the hardest-hit group, households needing a 5 bedroom property, will lose an average of £57 per week as the 5 bed rate is withdrawn entirely.  All the regions/nations are hit, with London top with an average loss of £22 per week.  The biggest groups numerically are those in the 1 and 2 bedroom categories, who will face average losses of £11 and £15 respectively.   The lack of grip on the reality of what it is like to live on a very low income is illustrated by the argument that “only four per cent of cases will have a shortfall of over £20 a week” – well, that’s all right then.

DWP refuse to make an assessment of the number of households that will have to move.  They say they can’t predict behaviour, and customers have options – for example, “some may start work or increase working hours”, others “may be able to renegotiate their rent with their landlord and others may have resources such as savings they can fall back on”.  To be fair, they do note that the Greater London Authority’s estimate that over 9,000 households may need to move in London as a consequence of the caps, and that 6,800 of those will be families; and Shelter’s estimate that between 68,000 and 134,000 households may have to move nationally.

“David Cameron insisted today

no one will be made homeless

by limiting ‘extravagant’ housing benefits”

Daily Mail

Contrary to the assertions of leading members of the coalition, including David Cameron, the impact assessment notes “a risk of households falling into rent arrears leading to eviction and an increase in the numbers of households that present themselves as homeless”…. and that “any resulting population movement could have wider impacts. People who move may need to rearrange their children’s schooling, healthcare arrangements or, where relevant, social services support; they may also need assistance with finding accommodation.”

Other specific groups affected by the changes include:

Disabled people, especially those who may have to move across a council boundary, because care and support packages do not move with the person and settled arrangements will be disrupted as the new authority carries out a new assessment. This “could lead to gaps and delays in new arrangements being put in place and consequential distress for the individual.”

Large families, who often have poor employment prospects and a much increased risk of poverty: for them, the “cap could affect their risk of overcrowding and the associated health and educational effects.”

Ethnic minority groups, who tend to have a higher proportion of large families, will be likely to be affected disproportionately.  Further research may be commissioned in this field as there are “limitations in current data.”

Quotable quote from the impact assessment

“the impact assessment recognises that there are a number or risks as follows:

– increases in the number of households with rent arrears, eviction and households presenting themselves as homeless;

– disruption to children’s education and reduced attainment;

– disruption to support services for people with disabilities and other households with care and support needs;

– increase in the number of households living in overcrowded conditions; and

– a decrease in the number of and quality of private rented sector properties available to Housing Benefit tenants.”

The truth will out.

Quotations from DWP impact assessment: http://www.dwp.gov.uk/docs/lha-impact-nov10.pdf

apart from *David Cameron http://www.dailymail.co.uk/news/article-1324941/David-Cameron-claims-homeless-cuts-social-housing-budget.html#ixzz17LsNDNnz

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LHA on a Shoestring (Eddie, that is)

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone. Steve sits on the Editorial Panel of Red Brick.

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The excellent blogger Jules Birch, of Inside Housing magazine, demonstrates the value of a good journalistic nose and a bit of statistical persistence. 

Last week, Ministers made much of the comparison between private sector rents, which they claimed the Office for National Statistics showed were down by 5% in a year, and rents where local housing allowance was being paid, up 3%.  This proved, they declared in the House and on the airwaves, that LHA was distorting the market, driving high rents and fuelling profiteering by landlords. 

Birch, aka Inspector Clouseau, smelled a rat.  And in particular that the ONS produces no such statistics.  A few calls later, and Inspector Morse forced the admission from the department that the statistics in fact came from a private property website.  And Inspector Frost then discovered that using the website’s stats as an index was dodgy in the extreme, not to be relied on as an indicator of rents in the sector as a whole let alone the LHA market, and that their analyst was in fact predicting rent rises.  And finally Inspector Taggart demonstrated that all the available evidence shows that LHA does not distort the market after all.  No case to answer.

So, was Ian Duncan Smith misleading the House – sorry, in Parliamentary language, was he ‘inadvertently’ misleading the House?  If this had been Labour Ministers it would have been all over the front pages and Paxman and Humphreys would  demanding an apology, but so far our forensic investigator, Britain’s answer to the Girl with the Dragon Tattoo, has only managed the pages of Inside Housing and not the Daily Mail.

I’m sure that erstwhile Jane Tennisons and Juliet Bravos on Labour’s front bench will pursue further enquiries in Parliament. 

http://www.insidehousing.co.uk/community/blog/mind-the-gap/6512515.blog

(illustration: an inspector’s insignia)

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HB: more heat than light

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone. Steve sits on the Editorial Panel of Red Brick.

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Yesterday’s marathon Commons debate on the proposed housing benefit changes produced more heat than light.  There were a lot of apparently conflicting statistics, especially about the number of people affected and the number of people likely to have to move home as a result.


The main government theme – sorry, but I can no longer distinguish between Tory and Liberal members of the government, I had thought the Minister, Steve Webb, was a Liberal Democrat until I heard his speech – was to attack Labour’s ‘scaremongering’.  But as the government has yet to publish any meaningful analysis of the proposals, or to demonstrate how the savings are calculated, the opposition has to rely on its own analysis and that of the housing organisations like the National Housing Federation and Shelter, and all have predicted dire outcomes.


There was an interesting debate about the impact the Local Housing Allowance has had on rent levels in the private rented sector.  In short, Labour argued that rent levels, especially in higher rent areas, have been dragged up by buoyant and growing demand from non-HB tenants, especially the growing group of people who would have become owner occupiers in previous times who now can’t or won’t take a risk on buying.  Therefore LHA, being linked to the median rent, follows the market rather than leads it.  Labour in office had decided to remove the highest rents from the calculation of the median to reduce the impact the top of the market was having on the measure that determined the going LHA rate.
The government benches took two slightly different views; on the backbenches several claimed that the LHA level was determining the rent levels, driving the market up, but the Minister relied on the more limited construction that, as the LHA supported 40% of rent payers in the sector, it must therefore have some effect on the price. 

This seems to me to be a proper debate about a fundamental issue.  How does state intervention impact on a market, especially one with inelastic supply, which caters for the very rich and the very poor and lots in between and has little consumer protection?   We will be more and more dependant on private renting in the future, and this is a question worthy of proper study and analysis.  One factor may be the differences between the market in high rent areas and those in areas where the gap between social and market rents is really quite small and where there are fewer richer people entering the market.


Another noteworthy feature of the debate was the number of speakers from places well away from London.  The government has been keen to keep the debate focused on the more extreme cases where the national cap will now apply, but there were speeches about Glasgow and Sheffield and Sunderland and elsewhere identifying the likely losers and the impact the losses might have on families.


The only real sign of dissent on the government side concerned the proposal to cut HB by 10% for anyone on job seekers allowance for more than a year, irrespective of how hard they had looked for a job, and LibDem Simon Hughes said he would oppose this – although the remainer of his interventions gave me the impression that he might end up supporting the rest of the package, making it much more likely that it will go through.