Welfare Reform and Work Bill — House of Lords, 2016-02-29
Topic: Housing
David Freud (Conservative, Centre-right): My Lords, at Third Reading earlier this month, I informed the House that we had received representations from providers and the regulator for social housing about an unintended consequence of one of the government amendments we brought forward on Report. That amendment sought to enable continuation of existing policy on affordable rents and service charges which we had intended to be helpful. I said at the time that we would seek to address this issue by tabling an amendment in lieu when the Bill returned to the other place, and this Motion is the result of doing that In speaking to the Motion, I find myself reminded of Alexander Pope’s popular quotation, "To err is human", but that would give noble Lords the chance to be divine in their forgiveness, which is clearly unacceptable. Perhaps it is more appropriate to quote William Hickson, the proprietor of the Westminster Review, who is credited with popularising the proverb: "’Tis a lesson you should heed: Try, try, try again If at first you don’t succeed, Try, try, try again" I hope that I have now removed the opportunity for noble Lords to make jokes at my expense, but I doubt it I will outline briefly why the change is needed. The providers have told us that the drafting of the original amendment would inadvertently bring service charges within rent reduction measures for some standard social rent housing. This is because, although providers are entitled, under existing guidance, to charge service charges on top of formula rent, this has been implemented by providers in different ways. For example, some landlords of formula social rented housing reserve service charges as part of rent for purposes of enforcement in relation to non-payment of service charge. As a result, the service charge, even if it is separately itemised—and it is not always—forms part of gross rent and is captured by the provision. In such cases, service charge is part of rent and the entirety of the sum would be captured. This would result in a larger reduction in revenue for the providers than expected. We understand that these practices, while not general, are sufficiently widespread to be a problem for the sector. This was not our intention and we thank providers and the regulator for drawing it to our attention Given that this is a complex area, the amendment sets out a new regulation-making power instead, rather than setting the position out in the Bill itself. This will allow flexibility for further adjustments if they are ever needed. Regulations made under these powers would do two things. First, they would identify the cases where the social rent reduction limits being imposed by the Bill would limit both the amount of rent and the amount of service charge payable by tenants. This would apply to most affordable rented housing, where the rent is set using a percentage of market rent principle. Secondly, they would identify the cases where only rent is to be limited by the 1% per annum reduction policy. These are cases where rent is determined by a formula social rent approach. This is all standard social rented housing and that minority of affordable rented housing where rents are set by reference to the formula social rent model I regret the need for this late amendment. I am grateful to the housing sector for bringing this issue to light. I hope, with the explanation I have given and on the basis that the new provision will help providers, your Lordships will feel able to support the Motion. I beg to move.