Housing and Planning Bill — House of Lords, 2016-03-14
Topic: Housing
Richard Best (Crossbench, Unknown): My Lords, Amendment 75A would enable the Secretary of State to exempt a local authority from the requirement to raise rents for those earning over £30,000 outside London, or £40,000 in London, if the administrative costs of collecting the extra money would absorb a disproportionate amount of the extra cash. What would be disproportionate in terms of the cost of assessing incomes and collecting the extra rent? I accept that this is subjective but surely if more than one-third or more than 40% of what is obtained in additional rent goes on securing that additional rent, a line must have been crossed. If charities spend 40% of the donations they raise on raising the money in the first place, they come in for huge criticism. High earners could rightly protest if so much of the extra rent serves no useful purpose at all Is it likely that admin costs really could absorb up to 40%—or more—of the extra income raised? We have heard just how much work is likely to be involved in obtaining these higher rents. If the same cost as for housing benefit claims was possible, using the housing benefit team to do the job, it seems from the evidence we have had from a number of local authorities that the cost would be between £30 and £40 for each household investigated. Around one-third of tenants, on average, would have to be assessed as these are the tenants not receiving housing benefit. That is a smaller number than the numbers for housing benefit, so there would be fewer economies of scale and higher costs than for administering HB. With universal credit comes the change to the councils’ role, with councils having a smaller role in its administration, and piggybacking on the housing benefit process will no longer be possible, quite apart from the complications of the interaction between universal credit and housing benefit, as set out by the noble Baroness, Lady Hollis. So the admin costs for the higher rent regime will rise Let us take the figure as being somewhere between £30 and £40 a throw, not forgetting that there are set-up costs, such as the new computer program, and the costs of the appeals system, as well as the costs of returning overpayments of rent and compensation when mistakes have been made. The £30 to £40 per tenant not on housing benefit looks tight. Now let us consider the circumstances of an individual local authority. In an area of relatively high incomes for council tenants and a big gap between council rents and market rents—that sounds like central London—there may be some serious money to be raised. Conversely, in an area of low incomes for almost all council tenants and only a narrow gap between council rents and market—private rented sector—rents, there will be very little extra money to collect from higher earners I will try an example. In an unnamed local authority in the northern half of England, market rents are only £20 per week above council rents, and never more. The most that could be gained here from a higher earner is £1,000 per annum, which would be payable by any tenant earning more than £40,000, on the basis of the 10p in the pound taper. No tenant would be paying more than this, however high their income goes. We know that an average one-third of tenants will need to be assessed because they are not claiming housing benefit but we also know that nationally only 7% will actually be earning above the £30,000 threshold—£40,000 in London In my example, a smaller proportion than nationally will be in the higher earners category, perhaps 3% instead of the national figure of 7%. So for every 100 tenants, assessments will be necessary for 33— one-third—and extra rent will be collectable from seven, perhaps in this case only three because the area has fewer high earners. The 33 being assessed will cost, say, £1,200 per annum. The three will contribute, not the maximum of £1,000 per annum—£20 per week—but, perhaps, £300 per annum, yielding £900 per annum for the three of them, which is less a return in extra rent than the administration costs in my—possibly fairly extreme—northern local authority example.