My Lords, Amendment 110 stands in my name and that of my noble friend Lady Sherlock. We welcome the support of the noble Earl, Lord Listowel, who has added his name to it. The amendment moves us into somewhat different territory. It is about the adequacy of the local housing allowance system and the quarterly review of the extent to which at least 30% of private rented properties in each locality are made affordable by the LHA. It is an opportunity, in particular, to review the effect of the four-year freeze on the LHA.
Whereas the Government have sought in the Bill to ameliorate the costs of housing benefit for social housing by reducing rent levels, their efforts and those of the coalition Government have taken a different approach in the case of the private rented sector. For the PRS, the Government have progressively reduced the level of support provided by the LHA. This started by moving the LHA rate down from the median rent in any given area to the 30th percentile and was followed by national caps on categories of property, limited uprating, initially to 1% a year, and now a four-year freeze. As well as changes to the LHA which effectively substitute for the rent level in any calculation, there have been changes which affect the calculation of housing support itself: the abolition of the family element, the two-child policy and cuts to work allowances, not to mention, where appropriate, the benefit cap. That is happening at the same time as more people are looking to the PRS for housing and rents are increasing.
The private rented sector is growing out of all proportion to the UK’s housing stock, and is expected to comprise more than one-third of the total stock by 2032. This growth has been stimulated in particular by the deregulation efforts in the Housing Act 1988 and the continuing shortfall under successive Governments of new housing provision. Research by Shelter highlighted that a third of renters are now families with children—those most affected by the volatility and uncertainty of the rental market. Nearly three-quarters of families
who rent are in work and would overwhelmingly like to own their own home but believe that they will never be able to afford it.
In a release just last week, Shelter set out recent findings of an online survey which showed that 32% of private renters have had to cut back on either heating or winter clothing to meet housing payments and 56% are struggling or falling behind with their rent. An earlier study by Shelter highlighted that more than half of local authorities in England have a median private rent for a two-bedroom home which costs more than 45% of median take-home pay in the area. Eight per cent of authorities have median rents that are 50% or more of median full-time take-home pay. This is before the 1% freeze begins to operate.
The test the amendment sets down is whether 30% of private rented properties in each locality are affordable to people whose housing support is based on the LHA. It implies that the 30% would be the lowest cost, the 30th percentile, because that was the central test considered appropriate before uprating was decoupled from actual rental levels, a change which has been deepened by the LHA freeze which, as we touched on, is to be visited on social rented housing in 2018.
As I said, the extent to which private sector rents are affordable depends on how the broad rental market area operates in practice, as well as the details of the current social security system, but the starting point is the actual level of the allowance, the rent equivalent. There is no doubt that at times of growing demand, inadequate supply and rising rents, a freezing of the LHA is likely to widen the gap between actual costs and the level of housing support.
Indeed, this is already happening, particularly in London, where London Councils recently published an analysis of the likely effect of the freeze which demonstrates that already, less than 30% of private rented properties are affordable at the LHA rate. It suggested that only 5% to 10% of properties in some high-value parts of inner London might be affordable and that this could spread more widely around the capital. For 2015-16, a gap is already opening up between LHA rates and the 30th percentile. Based on government figures, in two-thirds of the broad rental market areas the 30th percentile rents for two-bedroom properties, for example, are already above the April 2015 LHA levels.
Does the Minister accept those figures? Unless rents are to come down, this shortfall will only grow. A clear consequence of this is that more and more people will uproot and move to cheaper areas, with all the consequences of that upheaval for families and their communities, both old and new. For some, the benefit cap will further make properties unaffordable, leading inexorably to homelessness and poverty. We cannot allow this to go on. This is a deepening crisis, which the Government need to address. The noble Lord, Lord Kerslake, has two amendments in this group. I may respond to them when I wind up. I beg to move.