McDonnell’s distorted and dangerous version of Right to Buy9:01 AM, 5th September 2019
About 3 weeks ago 35
Polly Neate and Greg Beales took over the management of Shelter in August/September 2017. In August this year Shelter started to harass letting agents over alleged bans on housing benefit (HB) claimants. Click here
On 11 September Shelter obligingly published a guide for letting agents and landlords on avoiding discrimination, click here, which says:
“Although being a benefit recipient is not a protected characteristic,our research suggests this practice puts women and those with a disability at a disadvantage (as they are more likely to require housing benefit than others).
So, unless this practice can be justified as ‘a proportionate means of achieving a legitimate aim’, that would be unlawful indirect discrimination. As pointed out by James Welch, former Director of Liberty, when it comes to refusing to even consider someone’s application to rent a property because they receive housing benefit, ‘it’s hard to see what such a legitimate aim might be.”
A link is provided to Mr Welch’s article in the Guardian – from October 2010! It is disingenuous of Shelter to try to support its claim by quoting what someone wrote eight years ago when conditions were very different. In those days most HB was paid to the landlord, not to the tenant, and it was well before Universal Credit (UC) was introduced.
Payment of HB to the tenant started in April 2008 but only for new claimants or changes of address. The problem of tenants spending the money on other things is very likely to be more widespread now than it was in 2010, because there will be more HB claimants receiving the money themselves now than there were then. Shelter knows the problem. “Survey evidence gathered by Shelter indicates that claimants would also prefer to have their HB paid direct to their landlords in order to help them manage their finances and reduce the temptation to spend LHA on other bills.” This is a quote from a Briefing Paper from the House of Commons Library dated 29 March 2018. Click Here
This briefing paper describes several other developments since Mr Welch found it hard to see what a legitimate aim might be.
1 The gap between rent and Housing Benefit levels
In April 2011 the calculation of the Local Housing Allowance (LHA) was changed. Prior to this it had been calculated by reference to the median rent (where half the rents are lower and half higher). Since April 2011, LHA rates have been based on the 30th percentile of local market rents (where only 30% are lower). In addition, LHAs for different sizes of properties are subject to national caps.
2 Capping increases in LHA rates
“In 2012 it was announced that increases to LHA rates would be capped at 1% in 2014 and 2015 (with an exemption for areas with the highest rent increases). Housing bodies highlighted the impact of LHA rates failing to keep pace with actual rent levels over time. The relative reduction in HB/LHA has reinforced the concern that claimants may struggle to pay rents in the future. The prospect of tenants accruing arrears, or the pressure to lower rents for benefit claimants, acts as a disincentive to private landlords. This is particularly the case in areas with a buoyant market and high demand for rented properties.
“Richard Lambert, chief executive of the National Landlords Association (NLA), warned that the 1% cap could render private accommodation unaffordable for many tenants in receipt of housing benefit and will deter landlords from investing in much needed housing for those receiving support.”
3 Freezing LHA rates for four years
As part of the Summer Budget 2015 the Chancellor announced that LHA rates would be frozen for four years from April 2016.
“In March 2017, Shelter published an analysis of Local Housing Allowance rates and concluded that: Private rents have been rising consistently for several years, between 2011/12 and 2015 they rose in 79% of the country. […] Since 2010 housing benefit levels have not risen in line with rising private rents, and current freeze means that they will remain frozen at their 2016 levels until 2020, regardless of how much private rents have gone up by in each local area. This means that most private renters who need their income topped up by housing benefit will face a monthly shortfall between the actual cost of their rent, and the support available.”
4 Other benefit restrictions
“In addition to the freezing of LHA rates, the Government reduced the benefit cap threshold with effect from 7 November 2016 to £23,000 in London and £20,000 outside of London. This cap limits total benefit entitlement for a household and can result in a claimant facing a reduced level of Housing Benefit where their total weekly benefits exceed the cap. The lowering of the threshold was expected to ‘bite’ in areas with higher housing costs.”
5 Third child unsupported
“The Government is also restricting support provided to families with more than two children through tax credits with equivalent changes to Housing Benefit so that any subsequent children born after April 2017 will not be eligible for further support.”
6 Universal Credit
The briefing has a large section about this, including landlords’ experiences with it.
7 Impact of tax and other regulatory changes
“The Summer Budget 2015 announced changes to the tax regime for residential landlords [Section 24]. The relief on finance costs that these landlords can get is to be restricted to the basic rate of income tax. The restriction is being phased in over 4 years, starting from April 2017. Landlords are also facing changes to Stamp Duty Land Tax – see Library briefing paper 07050: Stamp duty land tax on residential property.
The National Landlords Association said that these changes would prompt more landlords to minimise risks by letting to tenants “less prone to missing rental payments”. Tenants in receipt of Housing Benefit are identified as falling into the “riskier” category”.
Changes 1 to 5 have meant that the amount of benefit received has been reduced and/or frozen, so claimants who are working have to put more of their pay towards the rent now. Direct payment of HB to claimants allows them to spend the money on other essentials instead of the rent, increasing the risk of rent arrears. Section 24 will reduce the profit of affected landlords (in some cases to zero or even turn it into a loss), assuming the rent is received; they need to avoid the risk of arrears, as by definition they have mortgage interest to pay and must prevent having their properties repossessed. Every HB claimant is going to be transferred onto Universal Credit which is designed to cause rent arrears because of the planned delay in the initial payment, even if the transfer goes smoothly.
To see how UC is making people homeless, even from social housing: Click here
It seems to me that choosing to rent to tenants who do not need housing benefit – in order to reduce the risk of repossession or of losing money – is a proportionate means of achieving a legitimate aim, and therefore not indirect discrimination.
The changes described in the briefing paper were made by the three governments we had since 2008, which were formed from the three main parties. Why is Shelter’s new management trying to put the blame for the results onto letting agents? Who is it doing this for?
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