Welfare Reform and Work Bill — House of Lords, 2016-01-12
Topic: Housing
Natalie Evans (Conservative, Centre-right): My Lords, I shall start by addressing Amendment 110, which was tabled by the noble Baroness, Lady Sherlock, the noble Lord, Lord McKenzie, and the noble Earl, Lord Listowel. It would in effect reverse the summer Budget measure of applying a four-year freeze to housing benefit local housing allowance rates from 2016-17 Between 2000 and 2010, expenditure on housing benefit doubled in cash terms, reaching £21 billion per year. If left unreformed, by 2014-15 housing benefit would have cost taxpayers £26 billion per year. This measure to freeze local housing allowance rates for four years will build on the reforms introduced in the last Parliament, which saved £4 billion and continue to deliver savings of around £2 billion a year. Savings from freezing local housing allowance rates are estimated to be around £655 million for Great Britain over the four-year period of the measure I will set out the process for setting the local housing allowance rates and what we already do to monitor the levels in comparison with market rates. Within DWP, local housing allowance rates are monitored each year to assess any divergences between the rates and local rents. Each autumn, the rent officer services provide DWP with rental data for all broad rental market areas for the 12 months up to the end of September. This is used to review the rates, and in the past two years has been the basis for identifying which rates should be increased by the targeted affordability funding If any changes are needed to secondary legislation, such as setting out a schedule of which areas and rates might be increased by the targeted affordability funding, they need to be carried out during the autumn and laid before Parliament, observing the requisite timescales before the amendments come into force before the LHA determination date at the end of January each year I should add that the Secretary of State has the power to review the local housing allowance rates or to provide in regulations for the maximum housing benefit to be an amount other than these rates. These powers have been in place since the LHA scheme was introduced and were reinforced in the Welfare Reform Act. Noble Lords will be aware that this measure has already passed through secondary legislation and been agreed by the Delegated Legislation Committee in the other place. The order was not prayed against by Members of this House and was therefore not subject to a debate. I reassure noble Lords that, alongside the LHA rate, we will continue to publish at the end of January, as we have done previously, the 30th percentile of market rates in each area. The noble Lord, Lord McKenzie, asked about his figures. They are broadly right in terms of the figures that he asked about The first step is for a provider to determine what would have been the rate of formula rent for that social housing—I apologise to noble Lords; I do not think this is quite right. I have not responded to the question from the noble Lord, Lord Kerslake. Typically for me, I appear to be missing a page. I will now turn to Amendments 110A and 110B, tabled by the noble Lord, Lord Kerslake. I am grateful to him for bringing forward these amendments and giving me the opportunity to explain to the Committee the approach that the Government are taking regarding rent-setting for new tenancies Schedule 2 to the Bill sets out how maximum rent should be determined during the four years of rent reductions for tenancies that were not in place at the beginning of 8 July 2015. Different rules apply to existing and new social housing and affordable-rent housing, and they are set out in paragraphs 1 to 3 of Schedule 2 respectively. Rents for new social housing, excluding affordable-rent housing, may be set up to the social-rent rate. It may be helpful for me to explain in slightly more detail how the social-rent rate is calculated, which is set out in the Bill in paragraph 1(4) of Schedule 2. The first step is for a provider to determine what would have been the rate of formula rent for that social housing at the beginning of 8 July 2015. The Government’s intention is to set that out in regulations that will mirror the formula for 2015-16, as set out in the rent standard guidance and the Government’s guidance for rent. In this way we have sought to make the 1% rent-reduction policy work in a similar way to existing policy in so far as we can Noble Lords will be aware that formula rent takes into account relative property values and local earnings, the size of the property and an overall rent cap. Local circumstances are therefore taken into account in determining what the rate of formula rent is. Once determined, the social-rent rate is found by then applying the appropriate annual reductions. But we do not think it appropriate to continue to allow providers of new general-needs housing the flexibility to set rents at up to 5% above formula. That flexibility was only ever intended to be taken up by general-needs housing providers on an exceptional basis and is now out of step with the Government’s policy for rent reductions, which necessitates a more tightly-controlled approach. As I have explained, the social-rent rate will be closely aligned to the previous formula-rent policy, which took into account local conditions. Local property values and local earnings are in fact built into the formula For new tenancies of affordable-rent housing, paragraph 3 of Schedule 2 provides that the rent payable by that tenant should be set at no more than 80% of the amount that would be the market rent for that property, and that in the following years a 1% per annum reduction to that maximum rent applies. But this is a maximum rent, and guidance regarding other factors of rent setting, including local factors, remains in place. Housing which may be let on the affordable-rent basis will be identified as such by regulations under paragraph 4 of Schedule 2 to the Bill, and I can be clear that our intention is that this will reflect existing policy regarding properties that may be let at an affordable rent.