Adrian Sanders writes… The cap that doesn’t fit

People outside of London who cannot afford to buy a home or meet their rent without help from the benefit system are missing out in the current debate on the capping of Housing Benefit.

The housing benefit bill doubled under Labour but it wasn’t because of an increase in claimants, it was because Labour failed to ensure enough regulated rent social housing was built for the increasing numbers of people who could not and cannot afford to buy.

The problem didn’t start under Labour; it began in the early 80’s. The ratio between wages and house prices rose at the same time as council housing stock was sold off at taxpayer funded discounts, but crucially not replaced with new stock. People who couldn’t afford to meet ever rising property prices turned to the rented sector. This increased demand was met by a growing private sector where rents are significantly higher than among housing associations that in turn have slightly higher rents than councils.

The issue that is dominating the news this last week was the government proposal to cap rents to reduce the housing benefit bill. The size of the bill is a national challenge, but capping is mostly a London issue where rents are highest. The numbers of my constituents likely to be affected can be counted on one hand.

It’s the other government proposals to cut Local Housing Allowance, cut Housing Benefit after 12 months unemployment, and restrict the level of benefit for 24 to 35 year olds that concern my constituents and could see one in every four households in Torbay lose up to £30 a week in support towards their housing costs. A massive hit to the local economy on top of the human misery it will cause.

The idea that cutting housing support for people will encourage them to look for cheaper rented accommodation is based on a number of false presumptions:

  1. There are cheaper rents available in the immediate area.
  2. People are rational beings with no emotional attachment to their current home.
  3. They have savings to meet the cost of removals.
  4. Their savings are substantial enough to afford a deposit on their new accommodation before their current deposit is or will be returned.
  5. They have no problem with meeting any increased transport costs of getting to work/child to school/other new journey consequential on their move.

As for cutting benefit on the basis of how long someone has been out of work there is an assumption of the existence of a vibrant local economy not dependent on low value insecure employment, while the age restrictions presuppose that the only reason young adults don’t share is the fact their benefit isn’t restricted. The reality in rural areas and many towns outside London and larger cities is the lack of similar aged adults to share with, or a medical or mental health problem forcing solitude upon the individual.

I don’t believe the consequences of reducing rent support have been properly thought through. As the debate continues more of the impact on low income working and non working households will come to light and more measures to lessen the damage will have to be considered. This last week alone has seen the Government promise an extra £70 million to mitigate against the impact of the changes since MPs started to speak out.

Reducing the housing benefit bill without hitting the poorest hardest requires a massive programme to secure more regulated rent social housing. Lib Dem Coalition Minister Andrew Stunell MP was able to announce that as a consequence of the recent Spending Review more social housing will be built over the next four years than over the entire 13 years of Labour. It sounds good, but in reality is nothing more than an example of just how bad the last Labour Government was when it came to meeting housing need and keeping public spending under control.

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38 Comments

  • .
    What Local Authority will channel money into social housing when tenants can buy the stock from councils at 50% discount a few years later? Surely the first step should be to get rid of the right-to-buy?

  • Over the 13 years Labour were in power 500,000 new homes were built. Are you saying that under the coalition more than that will be built?

  • The Local Housing Allowance in my area is £506pm (3 bedroomed).

    The vast majority of 3 bedroomed houses in my area are available at …… £495pm

    If the LHA was increased to (say) £555pm do you think landlords would hold their price at £495?

    If it was reduced to (say) £465pm do you think landlords would hold their price at £495?

    Discuss.

  • @crewegwyn
    LHA is currently set at the median rent for a given area. If the LHA is £506 then either the level has not been set correctly or you are wrong that the vast majority of houses in your area are available at £495pm.

    Good article.

  • Anthony Aloysius St 31st Oct '10 - 7:04pm

    And in fact if crewegwyn’s suggestion that rents will drop in line with LHA is correct, then the proposal to lower it from the median to the 30th percentile will obviously be unworkable!

  • Anthony Aloysius St 31st Oct '10 - 7:16pm

    “The caps however are only a small part of the benefit cuts and are quite frankly irrelevant. Only a few BMRAs are affected and even then, only very few claims are affected within that BMRA.
    Please – stop looking at the cap and look at the bigger issues.”

    One does wonder whether the hullaballoo surrounding the cap is part of a deliberate strategy to camouflage the other changes to housing benefit.

    A challenge to the Cleggie Cheerleaders: Are any of you willing to defend the cut of 10% in housing benefit for those on jobseeker’s allowance for more than a year?

  • matt
    ”These policies do not make sense.”

    I’m not altogether sure that some of your figures make sense.

    You’re saying that, for a 3 bedroom house in your area:
    1. The median rent is £138.08 per week, but that
    2. The average rent is £250.00 per week (= £200 x 100/80)

    Those two figures are clearly incompatible.

    Also, you are incorrect in your supposition that private landlords will “inevitability raise their rents” if councils and housing associations raise their rents to 80% of the Market Value.

    Of course this applies to new lettings only, but If this involves new properties being built and made available by councils and housing associations (as is intended), then it will result in lower rents.

  • It’s the other government proposals to cut Local Housing Allowance, cut Housing Benefit after 12 months unemployment, and restrict the level of benefit for 24 to 35 year olds that concern my constituents

    Exactly how many of your constituents have expressed a concern about a 10% cut in Housing Benefit after 12 months on the dole? I should have thought that most of them would expect that after 12 months the claimant should have found a job or moved someplace cheaper. The polls I have seen show majorities of at least 2:1 in favour of this measure.

    1.There are cheaper rents available in the immediate area.

    I should think that is a pretty safe bet, given that the benefit is currently set to the median rent. If people are doing their sums correctly, half the rents available should be cheaper.

    2.People are rational beings with no emotional attachment to their current home.

    I imagine that the people paying below-median rents have an emotional attachment to their earnings, and resent those earnings being taken away and being given to other people, simply so that they do not have to go through the horrifying trauma of moving house.

    Frankly, I doubt that any cut in the CSR will have had more popular support than this one.

    If this is the cut that Labour and Lib Dem MPs choose to oppose, they will not do anything to represent the public.

  • matt
    ”for some reason my last post has been removed.”
    I’m glad you said that – I thought I was going mad.

    My above post refers to your missing (now reposted) post:

    matt
    ”These policies do not make sense.”

    I’m not altogether sure that some of those figures make sense.

    You’re saying that, for a 3 bedroom house in your area:

    1. The median rent is £138.08 per week, but that
    2. The average rent is £250.00 per week (= £200 x 100/80)

    Those two figures are clearly incompatible.

    Also, you are incorrect in your supposition that private landlords will “inevitability raise their rents” if councils and housing associations raise their rents to 80% of the Market Value.

  • What The BigotBasher says about BRMA (Broad Rental Market Areas) being too large is supported by Citizens Advice:

    “The significant variation in rent levels across the country has always been a feature of the UK housing market and indeed this has been behind the recognition of the need to separate out housing costs from other benefits designed to support living costs. Even under the existing rules, a common problem reported by bureaux, following the reduction in the number of BRMAs which came into effect along with the move to the LHA, has been that it has led to much rougher justice for claimants, because of the wide variation in rent levels in different communities within a BRMA.

    Rother CAB has raised concerns about the way the boundaries of the Sussex East BRMA have been drawn, to include Hastings with its relatively low rents, along with Rother District where rents are significantly higher. The LHA rates which result from combining these two contrasting areas mean that claimants in Rother District face major difficulties in finding any accommodation to rent within LHA rates.

    This highlights a longstanding concern of Citizens Advice and others – that the regulations do not allow Rent Officers to have any regard to variations in rent levels when setting the boundaries of BRMAs. The previous Government was considering amending the regulations to address this issue, and we believe that it is important that such reform is progressed before the reduction to the 30th percentile is implemented. Without such a reform, the move to the 30th percentile increases the risk that some local authorities will find there is little if any accommodation in their area within LHA rates, making it very difficult for them to make use of the private rented sector in their homelessness prevention strategy.”

    http://www.citizensadvice.org.uk/hb_budget_changes_submission_to_ssac.pdf , pages 8-9, emphasis in original document

  • Mr Sanders, given what you have written in this article, can we expect you to vote to annul the two statutory instruments implementing these changes (The Housing Benefit (Amendment) Regulations 2010 and The Rent Officers (Housing Benefit Functions) Amendment Order 2010) when they are laid before the House of Commons sometime in November? (Statutory instruments cannot be amended, so you have to accept all of the changes or vote to annul the regulations.)

  • “It’s the other government proposals to cut Local Housing Allowance, cut Housing Benefit after 12 months unemployment, and restrict the level of benefit for 24 to 35 year olds that concern my constituents and could see one in every four households in Torbay lose up to £30 a week in support towards their housing costs. A massive hit to the local economy on top of the human misery it will cause.”

    All too true.
    This Thatcherite spite against the poor is wicked and what should be expected from the multi-millionaire bullingdon boys Osborne and Cameron. What some of us didn’t expect was Nick to be a cheeerleader for this repugant attack on the poorest in society.

  • And on the subject of opinion polls, if the public were given the choice to raise more from taxing the bankers rather than taking the money from the poorest who are out of work in a recession, I wonder who would fare the worst in that poll ?

  • matt
    ” Why am I incorrect, How do you know how the private landlords and letting agencies will react to increased rents in social housing?”

    Unfortunately I omitted the last paragraph the second time I posted.

    So my last two paragraphs (as I posted at 8.29pm, above) were:

    Also, you are incorrect in your supposition that private landlords will “inevitability raise their rents” if councils and housing associations raise their rents to 80% of the Market Value.

    Of course this applies to new lettings only, but If this involves new properties being built and made available by councils and housing associations (as is intended), then it will result in lower rents.

  • I understand Labour peer Baroness Uddin is a council/social housing tenant in Tower Hamlets – even though she bought a flat outside London and allegedly built a villa out in Bangladesh. Should she be spared paying 80% of market rent?.

  • Simon Shaw – just on a mathematical point. You asked why “median rent” and “average rent” can have different values. I am assuming “average” in this context means “mean”.

    Mean rent would be calculated by adding all the weekly rents in the desired group together and dividing by the total number of properties. Median rent is the value of the central value.
    eg 5 properties – A £500pw B £300pw C £290 pw D £310pw and E£320pw

    Mean rent = £1720/ 5 = £344pw Median rent = £310pw

    What we are saying if the mean (average) rent is well above the median is that most rents tend towards the bottom of the scale, whereas the few that are above that range make the mean higher. Mean can, of course be exactly the same as median, in a perfectly symmetrical Normal Distribution curve but is unlikely.

  • Anthony Aloysius St 1st Nov '10 - 8:55am

    I wrote:
    “Are any of you willing to defend the cut of 10% in housing benefit for those on jobseeker’s allowance for more than a year?”

    One attempt so far, from “ad” (whether he/she is a Lib Dem I don’t know):
    “I should have thought that most of them [Adrian Sanders’s] would expect that after 12 months the claimant should have found a job or moved someplace cheaper. The polls I have seen show majorities of at least 2:1 in favour of this measure.”

    Is that really it?

  • Dilke wrote –
    “I understand Labour peer Baroness Uddin is a council/social housing tenant in Tower Hamlets – even though she bought a flat outside London and allegedly built a villa out in Bangladesh. Should she be spared paying 80% of market rent?”

    That’s right, hold up the exception to condemn the whole, work for the Daily Mail do you?

    Anthony Aloysius St wrote –
    “Are any of you willing to defend the cut of 10% in housing benefit for those on jobseeker’s allowance for more than a year?”

    I don’t believe you’ll get many takers on that, your suggestion is probably correct that the caps are a smokescreen as the savings made from the 10% cut is far greater than would be gained from the cap, Osbourne is breathing one big sigh of relief that the main talking point are the HB caps and not this spiteful ‘punishment’ cut, which is in my opinion this worse part of these proposals by far.

    nige (ex LD)

  • Anthony Aloysius St 1st Nov '10 - 10:41am

    “Osbourne is breathing one big sigh of relief that the main talking point are the HB caps and not this spiteful ‘punishment’ cut, which is in my opinion this worse part of these proposals by far.”

    Indeed. And I see LDV is doing its best to keep the game going by posting yet another article on housing benefit caps – again about how Labour would have done the same thing (though it’s not obvious how it’s different from the last article on that subject).

    Just for a change, how about a LDV opinion piece on how the unemployed deserve what’s coming to them if they don’t get a job within a year? Who knows, if “ad” is right about public support for penalising the unemployed, it might even get the party a few more votes!

  • Tim13
    “Simon Shaw – just on a mathematical point. You asked why “median rent” and “average rent” can have different values. I am assuming “average” in this context means “mean”.”

    Tim, I wasn’t implying that “median rent” and “average rent” can’t have different values. And yes, I did mean “mean”.

    I would agree that with a distribution such as rents (the same would apply to salaries), with a few way off at the top end, the mean will normally exceed the median.

    What I meant was that for any distribution of rents that could reasonably be envisaged, I cannot imagine that the same population would have:
    Median = $138.08
    Mean = $250.00

    Theoretically possible, but highly unlikely.

  • nige
    Dilke wrote –
    “I understand Labour peer Baroness Uddin is a council/social housing tenant in Tower Hamlets – even though she bought a flat outside London and allegedly built a villa out in Bangladesh. Should she be spared paying 80% of market rent?”

    That’s right, hold up the exception to condemn the whole, work for the Daily Mail do you?

    How on earth can you say that Dilke “condemns the whole”.

    As for your comment: by referring to that as “the exception” you are implying that no other (or very few other) council/social housing tenants have average or above average incomes.

    On what evidence do you base that assertion?

  • @Simon
    Oh please, Dilke was obviously using Baroness Uddin as an example, that was the point of the post as that was all that’s written, no other point/argument was raised just that statement, surely your not arguing otherwise.

    “As for your comment: by referring to that as “the exception” you are implying that no other (or very few other) council/social housing tenants have average or above average incomes.
    On what evidence do you base that assertion?”

    http://www.thisismoney.co.uk/news/article.html?in_article_id=511489&in_page_id=2 this explains that 20% of social housing tenants have an income of above the ‘average wage’ so therefore 80% have less

  • and they are certainly not building villas in foreign countries nor have a ‘private’ house elsewhere

  • Dominic Curran 1st Nov '10 - 2:19pm

    good article, adrian – well said.

    @ jayu – “Over the 13 years Labour were in power 500,000 new homes were built. Are you saying that under the coalition more than that will be built?”

    the coaliton are saying that more social homes were sold under right to buy between 1997 and 2010 than were built, so there was a net loss of social housing. in contrast, the coalition will build 150,000 homes but only expect to see some 24,000 sold under RTB. so there will be a net gain of some 125,000.

    it’s an interesting definition of success. only 30,000-odd homes built each year compared to the 60,000 labour achieved right at the end of its term (after many, many dimsal years of very low numbers of social housing completions) but somehow still better than what went before.

  • @nige
    I’m still not clear whether you think it is fair or not that Baroness Uddin enjoys heavily subsidised council/social housing?

    Also, thanks for that link, especially as what is written there seems to completely undermine you point of view:

    “ Almost a fifth of council households earn more than the national average wage – with tens of thousands taking in more than £50,000 a year.

    Figures seen by the Daily Mail reveal scores of relatively well-off families living in homes intended for the most in need.

    A total of 720,000 subsidised households have incomes of more than the typical wage of £20,801 – as millions earning less languish on council and housing association waiting lists.”

  • I completely agree with nige and Anthony Aloysius St about the 10% cut for Housing Benefit claimants on Jobseekers Allowance who haven’t found a job after a year is indefensible. However, it should be pointed out that this measure will not come into effect until April 2013, so in essence I would say that there is more time to try and change the mind of fellow Liberal Democrats (and hopefully the Government) on that measure as compared to the caps and the changing of the setting of LHA rates from the median to the 30th percentile, both of which come into effect in 2011.

  • Dominic Curran 1st Nov '10 - 6:28pm

    @ Simon

    naturally, if someone like Baroness Uddin applied for council housing now, she’d be rejected. the dilemma is how to ensure a system that ensures that those in need get the housing and those that can afford to go onto the private rented sector do so. A means test every five years, which appears to be what the coalition is proposing, is not a way to achive this, as it will act as as powerful disincentive to work. Imagine if by bettering yourself you got thrown out of your home and, insetead of paying 40% of market rent, had to pay the full whack? that’s an enormous marginal tax rate.

    so how do you mange stock? I say, instead of rationing it ever more, slicing up a smaller and smaller pie, you actually build enough homes so that people aren’t fighting over the scraps of what’s left. rather than blaming those in current cocunil hosing fort he shortage, why not blame the successive governemnt who ahve, for thirty years, abandoned their moral commitment to ensure enough affordable housing for all? By having a pop at Baroness Uddin and anyone else is is super wealthy and in council accommodation (a tiny fraction of the total anyway), you miss the real villans here. It’s a bit like blaming someone having a hip operation on the NHS when they could afford to go private for causing waiting lists. Surely you should address the cause of the problem rather than castigate those who represent the symptoms?

  • @ Simon Shaw

    I am not opposed to a cap as such, maybe it’s implementation and some details yes, as for Baroness Uddin, yes it is very unfair so on that point we agree. but the 10% cut in HB after 12 months, that’s a big no no, I would like to hear your take on it especially any moral argument that you feel supports the 10% cut.

    The link I provided shows that 4 in every 5 tenants wages are below the national average so how can that undermine my point that somebody such as Baroness Uddin is an exception rather than the rule? I mean she’s a Baroness for gods sake! you don’t see many of them on a council housing estate do you?

  • @nige
    You ask for my take on the 10% cut in HB after 12 months: as I said on another thread, I have serious concerns about that.

    On the point about the fact that 4 out of 5 are below the national average, the fact that there are nearly 3/4 million households above the national average (according to the newspaper report) means an awful lot of “exceptions”.

  • @Simon

    And I’m sure you’ll agree that Baroness Uddin would be an exception even amongst those 3/4 million households or are you just arguing for arguing sake now?

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