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RLA Press Release
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THE government’s welfare policy is apparently being planned on dangerously incorrect estimates and ignoring a dramatic reduction of capacity in the private rented sector. Analysis of the government’s latest housing benefit payments (DSS, Analytical Services Division, ‘Housing Benefit and Council Tax Benefit, Quarterly Summary Statistics, August 1998, Government Statistical Service, May 1999) show a major shift from the private rented sector to social housing. For the sector which provides homes for mobile, flexible and often vulnerable parts of the community this reflects a serious decline according to the Residential Landlords Association which commissioned the research. The main points are:
Martin Moylan, RLA chairman, comments: "The housing benefit market is in freefall. Landlords cannot afford to take housing benefit tenants. Landlords income from housing benefit has slumped risking the long term maintenance of property standards. And landlords have rent 'clawed back' because tenants do a 'flit' - leaving without proper notice and not telling the housing benefit office they have moved. "No landlords are now taking HB tenants where they have the option, because housing benefit rent levels to the PRS have dropped by as much as 40 percent since these figures were produced in May 1998, meanwhile council and housing association rents are rising. The reference rent system also makes mockery of market values with apparently similar properties given vastly varying values by the rent officer. "The loss of an estimated 300,000 housing benefit tenancies in the private rented sector over three years is a serious depletion of the stock. "Housing benefit administration is chaotic and inefficient - the 'clawback' process always assumes the landlord is responsible for receiving overpayments, when nine out ten tenants leave without proper notice and also fail to tell housing benefit they have moved. It has caused a lot of resentment." ENDS RESEARCH REPORTS ATTACHED
Issued by Newspoint PR for RLA
Background:
BRIEFING 5 - JUNE 1999 PRIVATE RENTED SECTOR HOUSING BENEFIT STATISTICS STEVE GRIFFITHS INTRODUCTION This is the fifth of a series of briefings for the Residential Landlords Association on the effects of Government housing benefit policies on the ‘lower end’ of the private rented sector, as measured by trends in the number of housing benefit claims, and the level of benefit awards, using regular statistical updates published by the DSS. It follows hot on the heels of the April 1999 briefing, as the DSS are catching up after a long break due to installation of a new computer system. This briefing is shorter than the last for two reasons. First, the last one contained analysis of the Government’s budget estimates for housing benefit expenditure, which only appear once a year. Second, the latest update further confirms many of the trends identified in the April briefing, and lengthy repetition is avoided here. 1. OVERALL TRENDS SINCE FEBRUARY 1996 1 TRENDS IN NUMBERS OF HOUSING BENEFIT RECIPIENTS IN DIFFERENT HOUSING TENURES - FEBRUARY 1996 - AUGUST 1998
The disproportionate fall in the numbers of private tenants continues - by almost a fifth compared to a fall of only 3.7% in the local authority and housing association sectors combined. Clearly, there must be reasons other than the general performance of the economy for this great difference. There are now 229,000 fewer tenants than in 1996 who are living in the private rented sector and receiving housing benefit. If the sector had been behaving in the same way as other tenures, the fall would have been 43,000. Why is this happening? The Government needs to apply its commitment to joined-up thinking to understand this. Falls in a major sector providing housing for the most mobile, flexible and often vulnerable parts of the community demand answers: if they are not to find cheap housing in this sector, where will they find it? These DSS figures do not occur in a vacuum detached from housing policy. 2. TRENDS IN THE LAST QUARTER AND THE LAST YEAR, TO AUGUST 1998 On a quarter by quarter basis from May 1998 to August 1998, the number of housing benefit recipients overall fell by 49,000. There was a fall of 21,000 in the numbers of private tenants receiving housing benefit between May and August 1998. This continues the long-term downward trend since January 1996. It is a fall of 2.2%, compared to a fall in local authority recipients of 1.1%. Though in both tenures the rate of fall has slowed down, the rate of decline in the private rented sector is still double that in the local authority sector. Over the year to August 1998, there was a fall of 93,000 private tenants receiving housing benefit, or 9%. This is nearly double the rate of decline in local authority tenants, again demonstrating a continuing disproportionate rate of withdrawal of private landlords from this part of the market, in accordance with the conclusions of the ‘Private Landlords’ Housing Benefit Survey 1997’, the results of which were made available to the Government. 2 The great majority of the decline in the private rented sector was in income support recipients, again a continuing trend. The fall was 11.2% between August 1997 and August 1998 (81,000), compared to only 4.2% among non-income support recipients (11,000). In the local authority sector, the fall was 5.4% over the same period among income support recipients - less than half the rate of decline in the private rented sector.
3. BENEFIT AWARDS The analysis distinguishes between trends under the different rules of assessment applied under changes in January 1996 (local reference rent), October 1996 (single room rent), and October 1997 (local reference rent plus end of the 50% top-up). This is very illuminating. The single room rent policy, implemented in October 1996, is left out of this analysis as it is applied only to one group of private tenants, those under 25. The old scheme - pre-January 1996 Cases assessed under these rules show an increase of less than 1% between August 1997 and August 1998 - below inflation. The average housing benefit award in August 1998 was £68.90. (Note - the average for May 1998 in this update has been adjusted downwards from £69.70 to £68.80. The DSS Analytical Services Division explains that this and the adjustment below are the result of a new method of data collection, which local authorities are finding difficult and which results in a high degree of 'data cleaning') The Local Reference Rent scheme, January 1996 Cases assessed under these rules show an increase of 3.3% between August 1997 and August 1998. The previous update showed an increase of 11.4% from May 1997 to May 1998. However, this has now been adjusted down to 4.6%. - SEE NOTE ABOVE MORE SIGNIFICANT IN THIS CASE AS THE RATE ON INCREASE HAS DECLINED. The average housing benefit award under this scheme in August 1998 was £62.20, 9.7% below cases assessed under the old scheme. The Local Reference Rent plus the end of the 50% top-up - October 1997 Housing benefit awards under this new scheme show a substantial cashdecline compared to awards under the old scheme, of 13.6%. The average payment is £59.50 in August 1998 - now only £2.40 more than the housing association sector. Thus the housing benefit ‘excess’ in the private rented sector over a major part of the public sector has virtually disappeared - but private landlords don’t get investment subsidies. It means, as the graph below shows, a substantial saving for the Government, to go with the steep decline in the size of this part of the market. Out of 544,000 private tenants assessed under the 1996 and 1997 schemes, 177,000 have been assessed under the post-October 1997 arrangements. As turnover of tenants proceeds, this proportion is climbing steeply. This means more private tenants awarded housing benefit at a lower rate. As the withdrawal of landlords from renting to tenants with low incomes continues, massive and unforecast Budget savings are accompanied by a shrinking pool of low-cost private sector housing for rent.
 1 DSS, Analytical Services Division, ‘Housing Benefit and Council Tax Benefit, Quarterly Summary Statistics, August 1998’, Government Statistical Service, May 1999; plus analysis of previous updates. 2 Steve Griffiths, 'Private Landlords' Housing Benefit Survey 1997', National Federation of Residential Landlords, 1997.
PRIVATE RENTED SECTOR BRIEFING 4 - APRIL 1999 STEVE GRIFFITHS INTRODUCTION This is the fourth of a series of briefings for private landlords on the effects of Government housing benefit policies on the ‘lower end’ of the private rented sector, as measured by trends in the number of housing benefit claims, and the level of benefit awards, using regular statistical updates published by the DSS. Are landlords growing fat on the proceeds of an over-generous benefit system? Do Ministers actually know what is going on? When the latest figures from the DSS are matched with statements coming out of the Government, there is cause for concern that someone is using an out-of-date road map. This briefing aims to keep landlords up to date and quite possibly ahead of the game. Members of the residential Landlords’ Association may wish to put their local M.P.s straight with the aid of some of these figures, because there is widespread ignorance of an issue vital to the supply of affordable housing in the next century. The last briefing for landlords was produced in July 1998. Since then, there has been a hiatus in the regular DSS quarterly statistical updates, due to a new computer system. They are therefore behind schedule, and now that the technical difficulties have been resolved, we would expect the next couple of updates to come out in quick succession. There are some improvements, giving new and useful figures for which there is no previous comparison. Therre has, however, been a hiccup: I identified a significant mistake inthe DSS statistics for February 1998 which the Analytical Services Division immediately acknowledged, and which may have led readers in the DSS to a wrongly optimistic view of trends. Such a mistake can help to steer Government policy in a wrong direction. This briefing consists of four parts. We have been tracking changes in the numbers of housing benefit claimants in each sector, Council, housing association, and private, since February 1996, when the last Government’s ‘local reference rent’ scheme first began to have its effect. Different trends in different housing tenures can tell us something about how the private renting ‘housing benefit’ market is being affected by the changes. We can then look closely at what is happening now - at least the last twelve months for which figures are available. Thirdly, we look at the size of housing benefit awards under the three (main) different housing benefit schemes which are now running concurrently: the one for tenants who have claimed since before 1996, and are therefore not affected by the local reference rent scheme; those affected by the January 1996 scheme; and newer tenants affected by the October 1997 scheme, when the ‘50% top-up’ was abolished. Finally, we look at the ‘big picture’: how much the Government thinks it is spending on housing benefit, what its predictions are - and these dictate their policy towards the future - and what is actually happening, which is not quite the same, according to these quiet little figures put out by the DSS. 1. OVERALL TRENDS SINCE FEBRUARY 1996 1
TRENDS IN NUMBERS OF HOUSING BENEFIT RECIPIENTS IN DIFFERENT HOUSING TENURES -
 The trends are clearly not consistent, and thus are not simply a consequence of economic improvement. Much of the change in local authority and housing association totals is explained by mass transfers of from one sector to the other. This leaves a fall in the private rented sector of 200,000.The fall in the local authority and housing ssociation sectors jointly totalled 3.05% compared to a massive decline of 17.1% in the private rented sector. If the fall had been at the the same rate as in the public sector, it would have been 40,000 in the private rented sector. This suggests that 160,000 private sector tenancies have fallen out of the housing benefit market for other reasons than changes in the economy. These housing benefit policies are resulting in a steepening of the challenge of housing supply to people on low incomes, quite separate from the fall in benefit expenditure resulting from the decline in unemployment. Landlords would be justified in asking the Government where they expect to find the additional housing for people in the lower end of the market in the next century; and whether they are planning to reassess the impact of these little considered cuts in benefits and consequently in a crucial area of housing supply. 2. MORE RECENT TRENDS, IN THE YEAR TO MAY 1998 On a quarter by quarter basis from February 1998 to May 1998, the number of housing benefit recipients overall fell by 60,000. Due to a mistake in transcription in the February 1998 update, the DSS summaries suggest an increase of 10,000 private tenants receiving housing benefit between February and May. Scrutiny of the detail reveals that there was in fact a fall of 30,000. This continues the long-term downward trend since January 1996. It is a fall of 3%, compared to a fall in local authority recipients of 1.85%. Over the year to May 1998, there was a fall of 100,000 private tenants receiving housing benefit, or 9.2%. This is double the rate of decline in local authority tenants, demonstrating a continuing disproportionate rate of withdrawal of private landlords from this part of the market, in accordance with the conclusions of the ‘Private Landlords’ Housing Benefit Survey 1997’, the results of which were made available to the Government. 2 A new element in the statistical updates is division of the figures by tenure into income support and non-income support recipients. This shows that the great majority of the decline in the private rented sector was in income support recipients, where the fall was 12% between May 1997 and May 1998 (87,000), compared to only 3.5% among non-income support recipients (11,000). In the local authority sector, the fall was 5.5% over the same period among income support recipients - again half the rate of decline in the private rented sector. 3. BENEFIT AWARDS Overall, there was a continuing small cash increase in housing benefit awards to private tenants between May 1997 and May 1998, of 1.55% in Great Britain. This is clearly behind the rate of inflation. Regional analysis can be done on request.
The analysis distinguishes between trends under the different rules of assessment applied under changes in January 1996 (local reference rent), October 1996 (single room rent), and October 1997 (local reference rent plus end of the 50% top-up). This is extremely illuminating. The single room rent policy, implemented in October 1996, is left out of this analysis as it is applied only to one group of private tenants, those under 25. Cases assessed under these rules show an increase of 1.75% between May 1997 and May 1998 - below inflation. The average housing benefit award in May 1998 was £69.70. The Local Reference Rent scheme, January 1996
Cases assessed under these rules show an increase of 11.4% between May 1997 and May 1998 - well above inflation. However, the average housing benefit award in May 1998 was £65.70, 5.7% below cases assessed under the old scheme.
The Local Reference Rent plus the end of the 50% top-up - October 1997 Only one quarter’s figures are available for this. The figure, for May 1998, shows a substantial cash decline in housing benefit awards compared to those under the January 1996 scheme - from £65.70 to £59, a fall of 10.2%. Out of 543,000 private tenants assessed under the two schemes, 131,000 had been assessed under the ost-October 1997 arrangements. As turnover of tenants proceeds, this proportion will climb steeply. It is not unreasonable to suggest, as the report of the Private Landlords’ Housing Benefit Survey 1997 maintained, that this will lead to a further acceleration of the withdrawal of private landlords from letting tenancies to people in receipt of benefit:
‘With a further cut in housing benefit, another big withdrawal by landlords may be just around the corner: more than two-thirds of those still renting to tenants on housing benefit said they would not continue to accept housing benefit tenants if the '50% top-up' is removed in October 1997, as the Government is about to do. This represents 43% of all who participated in the survey’. 3
IMPACT OF CONSERVATIVE AND LABOUR GOVERNMENT CUTS IN HOUSING BENEFIT AWARDS IN THE
 4. WHAT THE GOVERNMENT’S BUDGET ESTIMATES TELL US My second briefing in April 1998 pointed to substantial inconsistencies between DSS estimates of current and future Housing Benefit, and actual spending. It suggested that a political strategy based on ‘a relentless upward trend’ in the housing benefit budget - to quote Keith Bradley, the Social Security Minister responsible for Housing Benefit (June 1998) - was based on substantial over-estimates of current and furure spending. The 1999 Budget estimates of current and future spending are now available. The previous year’s estimates forecast an increase of £200 million between 1996/97 and 1998/99. Widespread press coverage of the Green Paper for Welfare Reform quoted a forecast increase of £1½ billion over the same period. The new publication shows a fall of £159 million in the ‘estimated out-turn’ over the same period to 1998/99. Such estimates drive the formulation of policy. At a crucial time in the life of the new Government, as new policies have been developed, estimates of spending have pointed in the wrong direction: the trend has been down, not up, as the Government appear to believe. However, this understates the problem of the Government budget estimates for Housing Benefit quite substantially. For 1997/98 spending, successive Government budget publications from 1997 to 1999 revised the total from a planned £11,650 million in the 1997 publication to an actual out-turn of £11,212 million reported in the 1999 publication. This inflated estimate, undershot by £438 million, will have helped to drive Tory benefit cuts in the last years of that administration. The discrepancy grows vast for 1998/99: the undershoot between spending planned in 1997 for 1998/99, £12,250 million, and the estimated out-turn for the same year given in the 1999 report, £11,221 million, is over £1 billion. On the evidence of the previous year, the undershoot of the final out-turn for 1998/99 is likely to be even greater, because the actual out-turn for 1997/98 was £351 million less than the estimated out-turn declared in 1999. What this means is that the baseline figures used in the 1999 publication to justify steep rises in future estimates of spending, of nearly £3 billion between 1998/99 and 2001/2002, are simply wrong. This is precisely the mechanism used by Peter Lilley earlier this decade to justify the introduction of local reference rents and other cuts. The Government needs to be pressed to revise them, and to spell out the policy implications of such a revision, as the lower end of the private rented sector braces itself for yet more contraction as result of policies that are based on statistical fallacy, and on the narrowest consideration of their consequences. 1 DSS, Analytical Services Division, 'Housing Benefit and Council Tax Benefit, Quarterly Summary Statistics, May 1998', Government Statistical Service, February 1999; plus analysis of previous updates. 2 Steve Griffiths, 'Private Landlords' Housing Benefit Survey 1997', National Federation of Residential Landlords, 1997. 3 Ibid. |