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Housing Benefit

Volume 448: debated on Tuesday 4 July 2006

This debate is prompted by three things. The first is the publication today of the Welfare Reform Bill, which I welcome. The second is the concern that the Government response to the Green Paper, which was published before the Bill, made no mention of the single room rent and did not comment about responses on that subject. The third is the fact that many young people face continuing acute difficulties, which are highlighted by the research into the new local housing allowance pathfinders.

I shall give some background. Single room rents were introduced by the Conservative Government in October 1996. They were opposed by the Labour party, and the shadow Minister said somewhat presciently that single room rents could have a devastating effect on whether young people could live in safe, sound and affordable accommodation. Indeed, he went on to say that landlords were likely to withdraw from lettings based on single room rents. Sadly, that has proved to be the case. The number claiming single room rent fell from 32,000 in 1997 to about 12,000 last year. Financial hardship has undoubtedly resulted.

The single room rent is, on average, only 60 per cent. of the local reference rent; a gap exists between that and the rents that have to be paid. Indeed, research shows that 87 per cent. of those on the single room rent face some form of shortfall in the amount that they receive. That and the fact that young people receive smaller sums for living costs—£44.50 rather than £56.24 for those over the age of 25—has resulted in many young people living in poverty and being threatened with homelessness. Add to that the fact that many cannot access appropriate forms of accommodation, and we find that very large numbers of what we now term “the hidden homeless” exist in informal lettings or sleep on friends’ or relatives’ floors. According to the research, many of them stress that such circumstances make it more difficult for them to enter or sustain employment, one of the Government’s overall objectives.

Estimates of the savings made from the single room rent restriction vary, as do the estimates of the costs of phasing it out. In answer to a parliamentary question in April, the Government said that the costs would be about £20 million, not taking into account any behavioural impact. Previously, in December, they had indicated that they would be £60 million-plus. The Government’s calculations are obviously based on there being a significant behavioural impact, although under the new deal there has been a significant reduction in youth unemployment. My first question for the Minister is about what lies behind those behavioural impacts that the Government believe will lead to costs as large as £60 million, and what importance that has for decisions taken on the single room rent—or shared room rate, as it is now called.

In 1997, the Government decided to stick to the Tory spending plans of that year, and I supported that. The Minister at the time promised to commission a survey and to monitor the impacts of the single room rent restriction. Those impacts have been almost entirely negative. Under the previous Act, there were 100,000 determinations, but in the past five years the number has reduced to just under 15,000.

Few of the young people involved have been successful in negotiating the lower rents that we hoped would ensue from the introduction of the single room rent. A YMCA survey showed that 35 per cent. of its residents found it almost impossible to find suitable shared accommodation to move on to. As a result of the findings, the Government introduced a modest change to the definition of the single room rent; the definition now includes access to a shared living room, and that is to be welcomed. Ministers suggested that it would more adequately reflect the housing costs faced by young people. It certainly went a small way towards improving the circumstances. For example, it led to an increase in benefit of about £1.30 over the first nine months to a year of its introduction. That reduced the shortfall between the payment and rent that people were having to meet to about £35, but that was still significantly higher than the £16 shortfall for those above 25 who were paid the local reference rent.

However, the change did not have much impact on young people’s ability to access accommodation or sustain a tenancy. Indeed, lots of evidence from all the research carried out over the years shows that it undermines the efforts to access employment or training opportunities. The fact that such people have no stable housing base makes it very difficult for them to undertake training, or to gain employment.

Particular problems are faced by vulnerable young people such as those coming out of care, those who are disabled, those with mental health difficulties and those with alternative lifestyles, for whom shared accommodation may not be suitable. Some of the more recent research has been carried out for the Department by Dundee university. It concluded that a wide body of opinion among those involved was in favour of extending in two ways the exemptions under the single room rent restrictions. First, it was thought that the existing exemption for under-22s who have left a caring situation should be extended to include the under-25s. No one could understand why it was considered that 22 was a natural boundary. If someone is vulnerable because they have been living in care, surely they will be vulnerable at 22, 23 or 24.

Secondly, it was thought that the exemption for the severely disabled should be widened. Many are disabled, but not defined as being severely so, and they have real needs and difficulties in working and finding suitable accommodation. My second question for the Minister is about whether either extension of exemption has been considered by the Department in respect of the new shared room rate.

I move on to the contents of the Welfare Reform Bill, which I hope will be debated in the House later this month. The process started in November 2003, when the Government introduced pilot areas for the new flat-rate local housing allowance. Nine local authorities were originally chosen in 2004; another nine were later added to the list. At the same time, the Government not only made a very welcome change to the title, which changed from “single room rent” to “shared room rate”, but provided a more generous definition of what the shared room rate would be: all or some of the facilities lived in had to be shared.

That produced a small but welcome increase in the benefit provided to young people. However, although research on the pathfinders concludes that, overall, the gap between the rent that has to be paid and the benefit received has gone down—in some cases, significantly—there are, unfortunately, no specific figures for the new shared room rate.

A number of organisations, Shelter in particular, have carried out their own research. Shelter concluded that although rent was affordable for 46 per cent. of those living in one-bedroom accommodation and receiving the local housing allowance, it was affordable for only 26 per cent. of those living in shared accommodation under the new shared room rate.

There is also evidence that there was a reduction in the availability of suitable accommodation for young people. For example, Shelter undertook a study of adverts for accommodation in the pilot areas: 33 per cent. excluded those in receipt of housing benefit, and the figure rose to 50 per cent. for those in receipt of the single room rate. Follow-up research, involving telephoning and going round to the accommodation available, revealed that 15 per cent. of landlords were prepared to accept benefit recipients on the local housing allowance but only 7 per cent. were prepared to accept people on the shared room rate.

On top of that, it is clear from wider evidence and evidence from the pilot schemes that the supply of non-self-contained accommodation has been falling in recent years. The ability of young people on the new rate to engage with such accommodation is being more and more restricted. Although the shared room rate has improved the situation, because of the change in definition, there is no doubt that, as is shown by all the research, poverty, hardship and homelessness persist among those who are on the new shared room rate.

We cannot escape the reality that, given that the restriction on non-self-contained accommodation is forcing young people to move into self-contained accommodation, the living costs that they have to face are exactly the same as those faced by people of any age. Therefore, the boundary that exists between the over-25s and under-25s is causing severe hardship. The first question that arises from that work is whether in drawing up the Welfare Reform Bill the Government considered widening the definition of the shared room rate to reduce the gap in affordability. It is possible to use a wider definition to ensure that the gap that undoubtedly exists with the local housing allowance is reduced and that affordability becomes less of a problem for an adversely affected group of young people.

The second question is about the age range, which at present does not go to 25. Many of those vulnerable people face real difficulties in gaining employment. If we are to provide care in the community or make a reality of welfare to work, is there a case for narrowing the age range in which people are covered by the new shared room rate?

Finally, the evidence produced by the Department for Work and Pensions and by Shelter, the citizens advice bureaux and indeed everyone involved in this area confirms several things. The shared room rate undermines attempts to support young people, especially in getting from welfare to work, and that undermines the Government’s objectives. The shared room rate is ineffective in ensuring that young people live in shared accommodation because the amount of such accommodation is decreasing at this time, as I mentioned earlier. There is a continuing high risk of poverty, large debts—we talk continually in the Chamber about the debt taken on by young people—and homelessness, and that exists whether people are in low-paid work or on benefits.

The shared room rate is not achieving the Government’s objectives. Therefore, my final question is whether the Minister would outline the rationale for including the new shared room rate restriction in the local housing allowance regime in the Welfare Reform Bill. Surely the Bill is an ideal opportunity to equalise the situation for young people, to give them the options that we proclaimed in all our manifestos and to create opportunities for work, independence and improved living standards. That can all be achieved if we do something about the shared room rate.

I congratulate my hon. Friend the Member for Edmonton (Mr. Love) on staging this debate. It has been useful to listen to his points, and it is particularly appropriate that the issue should be debated today because, as he rightly said, the Government launched the Welfare Reform Bill today. As he knows, the Bill contains proposals to introduce the local housing allowance across the country. Indeed, I was in Coventry this morning for today’s launch. It was one of the pathfinder authorities for the local housing allowance. I discussed its impact in the area not only with the staff in the local authority and the benefits offices who administer the system but with local landlords and tenants, all of whom confirmed that the local housing allowance is a distinct improvement on the old housing benefit and welcomed many aspects of the reform.

I can tell my hon. Friend that we have listened and are listening carefully to the experiences of the 18 pathfinder authorities in respect of all the issues to do with housing benefit. I have been particularly interested to talk to them about support for younger people in private sector rented accommodation and the impact of single room rate measures. We are very much in listening mode and want to hear what the experience has been, but it is good to know that everyone who reports to us confirms that local housing allowance is an improvement on the old housing benefit, as I believe my hon. Friend acknowledged.

I am sure that my hon. Friend would agree that we have all been awaiting the introduction of the Welfare Reform Bill and that it is therefore only right that we should use this opportunity to reflect on our priorities for reforming the welfare state, on the central role that support for meeting housing costs plays in that and on how young people fit into the picture. I believe that he and I would also agree that welfare reform is a huge challenge, but that we have come a long way in addressing it in recent years. After all, we have increased the number of people in work by nearly 2.5 million, decreased the number of people in long-term unemployment by three quarters and virtually eliminated youth unemployment since 1997.

However, there are still tough challenges ahead, and we are now setting the barrier even higher. We believe that work is the best way out of poverty, and we want to deliver an opportunity to work to everyone in our society for whom it is relevant. Despite our success so far, there remain groups and communities that have not yet been able to share in the improvements in living standards that work brings. That is why we are now setting ourselves the considerable challenge of an 80 per cent. employment rate.

Key to achieving that 80 per cent. rate will be engaging and interacting with young people who are trying to enter the labour market. Work is important as the ladder out of poverty for everyone, but, as my hon. Friend said, it is especially important for young people. If we can give them a vital step up in their early years, we will make good progress towards achieving our ambitious goal.

The homes that we live in and our ability to pay for them can have a huge effect on our ability to gain and retain a job. The simple fact of having a roof over one’s head that is affordable from month to month can make all the difference when looking for work. For 4 million families across Britain—nearly 16 per cent. of all households nationally—that is exactly the kind of support that local housing allowance in the private sector will provide now and in the future.

However, we always want to make things better where we can, which is why we are undertaking a radical reform of housing benefit, as outlined through the Government’s recent response to the welfare reform consultation. My hon. Friend spoke about the views that we received during that consultation, and I confirm that we have seen Shelter’s submissions. My right hon. Friend the Secretary of State and I met Shelter representatives just a few days ago and again discussed their wide-ranging views about the housing aspects of the welfare reform Green Paper. We had and still have a willingness to meet them to discuss their views, and that will continue to be the case as we take the Welfare Reform Bill through Parliament.

Shelter agrees that rolling out local housing allowance across the private sector will make housing benefit clearer, simpler and more transparent for everyone, including young people. In our meeting a few days ago, it confirmed that in principle it fully supports our reforms, and it too has been reassured by the experiences of pathfinder authorities. It had doubts about the reforms at the outset, but it now broadly supports them, and I am pleased that that is the case.

My hon. Friend asked a few specific questions which I shall try to address, in particular the one about the cut-off at 22. The evidence is that most people leave care between 16 and 18. By putting the cut-off at 22, we have built in a margin that in many cases allows people up to an additional four years without restrictions. That is a concession, given the age at which most people would normally leave care. Wherever we draw a line, there will always be the question whether someone is still in that position after that age. My hon. Friend suggested considering the age of 25, but I suspect that there will still be those who are aged 26 or 27 and in the same circumstances. There is a rationale for choosing 22.

My hon. Friend asked whether we had considered any further exemptions to the single room rate. We will continue to assess the impact that the local housing allowance has on young people as we evaluate the local housing allowance in the pathfinder areas. We will continue to assess the details of that while we develop the regulations that will be introduced following the passage of the Welfare Reform Bill, assuming that it succeeds in passing through Parliament.

I thank my hon. Friend for his welcome for the discussion of the research that lies behind some of the issues that I have raised, but can I press him about the disabled? The definition of “severely disabled” is restrictive and does not cover many people who are very adversely affected in attempting to live independently. Bringing them within the concession would help enormously with their living circumstances.

I understand my hon. Friend’s point, but he will be aware that other aspects of the benefits system can be utilised to support people in exactly that position. We are looking to make further improvements to those and other parts of the system in the Welfare Reform Bill. However, I take on board his point, which we shall consider as we go through the stages of implementing the Bill.

My hon. Friend wanted me to address the rationale behind retaining the principle of the single room rate in its slightly altered form, as we move into the local housing allowance. I recognise that the abolition of the single room rate is still a priority for many of our stakeholders and for many Members of the House. However, we feel that we must uphold the fundamental principle of fairness and equity across the benefit system, and that includes housing benefit. Let me expand on how that relates to the allowance.

As I am sure my hon. Friend would accept, young single people under 25 have earning prospects that are well below those of older people. In fact, 60 per cent. of those renting in the private sector who are not on housing benefit rent shared accommodation. It is therefore reasonable to expect young housing benefit claimants to share too. Doing otherwise would allow them to access better housing than that which was available to their working peers, which would not represent a fair deal for those in and out of work.

My hon. Friend is concerned about potential shortfalls in the benefit and about whether that would contribute to poverty among young people, with which he is rightly concerned. In his local authority area, where about 100 young people are affected by the single room rate, there is quite a sizeable nominal shortfall of £80 a week, which would of course be a concern. It is relevant and interesting that, where the young people concerned have gone into shared accommodation, the shortfall between their allowance and the rent is £22 a week, which is less than the average shortfall in his constituency for tenants in the private rented sector who receive housing benefit. That shows that if people respond to the pressure in the system to move into shared accommodation, they are not at any greater financial disadvantage than anybody else in receipt of housing benefit, and are possibly even at a smaller disadvantage. However, my hon. Friend makes a valid point about the supply of appropriate accommodation, which I shall address briefly if I have time.

In some areas young people might have difficulty accessing shared housing, and for them the choice is limited. However, extra help is available in the form of discretionary housing payments and flexible support from local authorities, which can be added in on a case-by-case basis. Under the local housing allowance, single under-25s will be able to see in advance what their maximum level of benefit is in the area. That will help reduce the risk of signing a tenancy agreement in good faith, only to discover subsequently—as currently happens—that the housing benefit is not sufficient to meet their rent.

Local housing allowance brings additional benefits, as has been demonstrated in the pathfinder authorities. Simplifying the scheme has produced quicker processing times for local authorities. Local housing allowance is paid directly to claimants, rather than to landlords, in an average of 85 per cent. of cases, thereby extending the benefits of personal responsibility and financial inclusion, which in turn helps people to prepare for and move into work.

I assure my hon. Friend that as we move forward with housing benefit reform we will continue to review the single room rate, to ensure that young people can access appropriate accommodation. However, as I hope I have explained, the rationale for doing so remains—namely, that of encouraging work. We could not endorse a situation in which benefit dependency was fostered, which would result in young people being trapped on benefits and in poverty more than otherwise. Therefore, to be blunt, the incentive issue must be considered in what we do. We want to pursue the programme of welfare reform, always mindful of our ambition to raise the level of employment and help people who want to enter work to do so. The right mix of incentives and encouragement must be in the system to achieve that.

I am pretty sure that if we were just to abolish the single room rate, we would produce outcomes that would quite probably leave more young people on benefits, and therefore poorer, than under the present arrangements, in which there is a work search incentive. I would not want to do anything in the name of welfare reform that left people dependent on welfare for longer than would otherwise be the case. The drive throughout the programme must be to help people to access work in every way that we can.

Although I understand the point behind my hon. Friend’s question about whether the right sort of accommodation is available, where that is an issue—and I fully accept that in some parts of the country it is—the answer does not lie so much in reforming the welfare system as in what my right hon. and hon. Friends in other Departments are doing to address housing supply and housing need. They will have more to say about that in the near future.

I thank my hon. Friend for that detailed reply. I believe that we will return to the question whether the restrictions, in whatever form, help or hinder in moving people from welfare into work. There is a lively debate to be had on that, which I hope will be joined when we discuss the Welfare Reform Bill, but let me press my hon. Friend on supply. There is growing evidence to suggest that shared accommodation is becoming harder to enter. In those circumstances, young people who cannot remain in whatever situation they were in previously will have to access more expensive accommodation, making the threat of homelessness, poverty and debt ever more prevalent.

I hear what my hon. Friend says, but he will understand that I cannot speak on behalf of colleagues in the Department for Communities and Local Government who are responsible for such matters. They are actively engaged on that very issue and have already made various statements about the eventual policy development, which I am sure he will hear more about.

My hon. Friend is right that the debate that he has correctly initiated will be joined by many others as we proceed with the passage of the Welfare Reform Bill and its subsequent regulations. I look forward to making further contributions on the subject over that period.

Question put and agreed to.

Adjourned accordingly at one minute to Two o’clock.