First Labour backbenchers, now landlords. Government plans for reform of local housing allowance (LHA) are facing a rocky ride.
The National Landlords Association (NLA) complains today that millions are being wasted because many tenants who get paid their LHA are not passing it on to their landlord to pay their rent.
So much, so obvious, you might think. Landlords always preferred the way that housing benefit was paid direct to them. And they have repeatedly threatened to boycott the new scheme without providing much evidence that this would ever happen - tenants on benefit are too lucrative a market for many of them.
Except that this latest attack follows complaints from Labour backbenchers and the Liberal Democrats about another government reform to the scheme - the scrapping of shopping incentives that allow families to keep up to £15 a week of their LHA if they can find cheaper accommodation.
The fact that Frank Field was prominently involved will have given ministers bad memories of the 10p tax debacle, where it ignored complaints put forward by the former minister and ended up paying the political price by looking hopelessly out of touch with the concerns of poorer families.
As Field complained last week: ‘At one stroke, they get rid of a reform aimed at getting flexibility into a fairly inflexible market by giving people incentives to shop around. The timing for this could have been decided in Conservative headquarters.’
But another thing the twin attacks confirm yet again is just how hard it is to reform housing subsidies. Field should know - he was the minister charged by Tony Blair with ‘thinking the unthinkable’ on housing benefit in 1997 who never quite managed it.
Another Labour backbencher, Karen Buck, has a thoughtful piece on the issue on her website. As she points out, housing allowances proved too complex even for the greatest of social reformers, William Beveridge.
LHA was a brave attempt to change that by introducing shopping incentives into the system. Quite apart from the effects on poorer families the government is junking the intellectual basis of those reforms to save money. Scrap paying it direct to tenants too and you end up with a system that sounds remarkably like the old housing benefit.
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Readers' comments (4)
Joe Halewood | 08/09/2009 6:45 pm
LHA was not principally about incentives at all. It has one key economic aim and one key theoretical one and both are problematic.
The economic aim is to rein in the most extreme or highest rents by producing monthly LHA (average) rates thereby controlling how much is spent by identifying those well above this 'benchmark, at least in theory that is the case. Its a nonsense to believe in reality or theory that people at the lower end we find a grottier flat so they can 'make' up to an extra £15 per week.
The real problem is the ludicrous choice argument. The govt prmote the charade that tenants need choice by having HB paid to them. This means they have the choice not to pay rent - a bloody obvious point that is not seemingly considered.
Because of this risk landlords should in theory and in the private sector do in practice, is increase their provision for bad debt. As a result rents are higher than before - that is the economic reality of paying only to tenants.
Ask PSLs now if they will take a 5% cut in rental if they are paid direct and many will agree to this. At a stroke average rents reduce and tenants cant pocket the public purse moniers for any other reason.
If councils guaranteed they would pay direct LHA minus 5% to PSLs for example- and they have the clout to do this - then rents will reduce, less arrears will accrue and PSLs will want to give longer security of tenure..
Shopping incentives is not what LHA is about at all, but the above scenario would be and has worked in the past.
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Melvin Bone | 09/09/2009 9:01 am
PSLs seem to want it both ways they like LHA as it justifies them rasing the rent to the latest LHA rate, but they also want that money paid direct. They have the right to be paid direct if the tenant is more than 8 weeks in arrears, but many cannot be bothered to chase this up!
All they have to do is keep their records up to date.
I think they just want the easy life of not having to chase rent and get the Local Authorities to do all the legwork.
I know of no other sector where benefit is paid automatically paid direct although many would love this to be the case.
Why give people JSA as money when we could pay the in Tesco vouchers?
Why give pensioners a winter fuel allowance when we could just give them some wood to burn?
Its about a balance of the rights of the tenant and the rights of the landlord. The tenant has the right to be paid direct. The landlord has the right to direct pay if the tenant fall behind with the rent. That seems to be a fair balance to me.
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VH | 09/09/2009 10:27 am
dont know where else benefit is paid direct? What about Local Authorities? They pay themselves council tax benefit direct.
Also to be considered is the efficiency agenda, it cant be worthwhile to send each claimant an individual cheque for them to then arrange a payment to the landlord who processes it. It must be more cost effective to pay direct - especially if the landlord has a number of tenants - we are always being told to look for efficiences - this is one
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Joe Halewood | 09/09/2009 11:20 am
I dont agree on the balance as this terms means tenants can choose not to pay for 8 (and probably 10) weeks before that balance comes into effect.
Due to habit, it seems that up to 8 weeks arrears is somehow acceptable but it is not. Whether that is intent on the tenants part or poor administration on HB depts part, it is unacceptable.
This cost of money and delay and risk have to be built into rental levels and also factored into the risk of taking a HB case for a private landlord - all of which increase rent levels. This means the public purse pays out more.
It also increases the risk of private landlords not accepting HB cases - so what in theory should be the lowest risk to landlords (HB) ends up becoming the highest risk, all for the sake of giving a tenant the choice not to pay for the roof over their head. That is not balance that is simply unacceptable
This so called choice and balance is in reality a perverse incentive not to pay rent. If a tenant is not working and struggling financially why incentivise the risk of them not paying rent? In that scenario as in many others there are always too many alternate temptations to spend the HB monies on.
That perverse incentive wrapped up in so-called choice increases the risk of eviction and the instability that causes. In the context we are in of the increasing need to use psl stock due to the undersupply of social housing this so called balance becomes even more stupid and perverse.
Finally - JSA is free to be spent on more than food and the winter fuel allowance does not have to be spent on fuel. HB has to be spent on rent - a critical difference.
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