Posted by: Jules Birch13/09/2011
As peers prepare for the second reading debate on the Welfare Reform Bill, there’s some startling new evidence that completely undermines the government’s rationale for cutting the local housing allowance (LHA).
Ministers from Iain Duncan Smith to Lord Freud have consistently argued that the introduction of the LHA fuelled a feedback loop that increased costs because landlords simply introduced their rents to the new LHA levels. And they demonstrated that by pointing out that between November 2008 and February 2010 LHA rates increased by 3 per cent whereas rents in the private sector as a whole fell by 5 per cent.
That apparent disparity has been central to the whole debate on the LHA since it implied that cuts would force landlords to reduce their rents and that the impact on tenants would not be as great as critics feared. And the government argued it could use its bulk purchasing power to drive down rents.
As I’ve blogged once or twice before, the whole comparison was deeply flawed because it used figures from findaproperty.com that bear little relation to the LHA market. IDS had to apologise in parliament for wrongly claiming they were official statistics but ministers have stuck to their guns on the comparison despite subsequent evidence that findaproperty.com rents have soared to record levels at a time when the LHA rate has barely increased.
But now joint research by the Chartered Institute of Housing (CIH) and British Property Federation (BPF) kills off the government’s case once and for all. It looked at whether other factors could have caused the increase in average LHA rates, such as a change in the composition of the caseload to include more claimants in expensive areas or a shift away from single person households to a higher proportion of families.
For the full report go here, but here is a flavour of the findings:
Between November 2008 and February 2010, LHA rates fell in twice as many areas in England as they rose.That pattern was repeated across the country and was even more marked in London and the South East.The increase in average rent levels in the period was entirely due to a shift in the distribution of the caseload from the North and Midlands to London and Southern England.After adjusting for this caseload effect, average housing benefit rent levels actually fell by 1%.There was no evidence of a relationship between LHA inflation rates and the proportion of the market let to tenants on housing benefit.LHA rates broadly reflect what is happening in the non-LHA market, which is unsurprising because LHA rates are set from data that excludes housing benefit lettings.
As the CIH and BPF argue: ‘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 the meantime, as Joe Halewood notes on his blog, the cost of housing benefit continues to escalate.
And the public accounts committee has called into question government claims about the savings it will make from the universal credit.
All of which is food for thought for peers as they prepare for this afternoon’s second reading debate but will it make any real difference?
It should if peers live up to their reputation of being more open to rational debate than MPs. In particular, it calls into question the provision in the Bill to allow ministers to uprates housing benefit according to the CPI inflation rate rather than RPI.
This can no longer be dressed up as a cost control measure that will force landlords to reduce their rents or as the government benignly using its buying power more efficiently. The savings will come directly out of the pockets of tenants and the long-term effect (and maybe the intention) will be to break the link between housing costs and benefit levels and leave even more tenants with permanent shortfalls.
As the briefings that have gone out to peers from all the major housing organisations and charities show, the outstanding concerns include general ones such as the direct payment of housing benefit to tenants and its future administration under the universal credit and specific ones about the household benefit cap and the housing benefit cut for under-occupying social tenants.
Few expect any substantial concessions or significant votes in the second reading debate itself, but all eyes will be on the concerns raised by individual peers and any hints from ministers that changes can still be made at the committee stage. Hopefully this research makes both just a bit more likely.
From Inside edge
Housing commentator Jules Birch puts the latest news in context