Westminster Hall Debate, Cost of living and the private rented sector, 18 July 2023

• The rising cost of essentials is exacerbating existing disadvantage and pushing more people into poverty. Councils and local partners have delivered remarkable services and support and will continue to do what they can to protect people against the rising cost of living, targeting help at those facing the most complex challenges.
• Private rents have reached record highs, with private rents rising an average of five per cent in the 12 months up to May 2023 and more than 25 percent since the start of the pandemic. Rising housing costs are a significant factor in driving financial hardship and homelessness. Research by StepChange found that private renters are twice as likely to be in problem debt than the general population, with the number of renters in problem debt rising by 300,000 from January to May this year.
• The Renters’ Reform Bill is vital important opportunity to drive up standards in the PRS and make it fairer, safer and more secure for tenants. With two months having passed since the Bill’s First Reading, it is vital that the Government brings forward the Bill’s Second Reading without delay.
• The LGA supports proposals in the Bill which would limit rent increases to once a year and giving tenants the right to challenge ‘above market’ rent increases through an independent tribunal. However, we are concerned that if the tribunal can impose higher rent increases than initially proposed by the landlord, it will inherently discourage tenants using this mechanism and undermine the tribunal’s purpose of providing stronger protections against excessive rent hikes. Government must ensure that the tribunal can only confirm or reduce a proposed rent increase – but not propose further increases.
• The Bill will do nothing to support private renters who are already struggling. As result of rising rents and the freeze on Local Housing Allowance (LHA), LHA no longer covers the cost of renting a modest two or three-bedroom homes in 91 per cent of England. The lack of affordable housing means that households are increasingly turning to councils for support with housing, with over 1.2 million people now on social housing waiting lists and over 100,000 people in temporary accommodation. We continue to call on Government to urgently lift the freeze on LHA and restore rates to at least the 30^th percentile of market rents, so that it covers the true cost of rent.
• Increasing the supply of genuinely affordable housing, by building 100,000 social homes a year, will be essential to tackling the crisis of affordability and end the housing emergency. The LGA is calling on Government to implement a six-point plan to enable councils to resume their historic role as a major builder of homes and deliver an ambitious build programme of 100,000 high-quality, climate-friendly social homes a year. Research by the LGA found that building 100,000 social homes a year would save the public finances by £24.5 billion over 30 years, including by reducing the LHA and temporary accommodation bill.

We want to work with Government to ensure the Renters’ Reform Bill is progressed through parliament as soon as possible and delivers meaningful change for renters.

Effectively resourcing local authorities

The Bill places significant new regulatory and enforcement responsibilities on councils. We welcome the provisions in the Bill that enable local authorities to keep the proceeds of financial penalties to reinvest in enforcement activity. While this funding will be helpful, it will not be sufficient to cover the full costs of new duties in the Bill or the cost of undertaking proactive work to drive up standards for tenants.

Many councils are already struggling to resource their enforcement teams to undertake the scale of proactive work that is needed in the PRS due to reductions in local government funding and wider financial pressures. For the reforms in the Bill to be effective, it is vital that Department of Levelling Up Communities and Housing (DLUCH) conducts a realistic assessment of the resources councils need to regulate the PRS effectively, and provides them with adequate new funding.

Effective enforcement also relies on having the right number of trained and qualified staff, which councils are already facing significant challenges in recruiting. DLUHC should urgently work with sector experts to develop a skills and capacity building strategy to tackle current workforce challenges ensure that local authorities can support effective implementation of the reforms.

Improving security of the PRS

We welcome important measures in the Bill, which promise to make the private rented sector more secure for tenants. This includes abolishing unfair Section 21 “no fault” evictions and ending the system of assured shorthold tenancies. Instead, all tenancies will move onto a single system of open-ended, ‘rolling’ tenancies.

These measures seek to end the current instability of private renting. Currently, households issued with a no-fault eviction face the difficulty of finding a suitable home at short notice. This is particularly challenging in areas with low housing availability and high rents, and can put households at risk of homelessness. Having to move frequently due to fixed term tenancies also unfairly imposes high costs on renters, with Generation Rent estimating that in 2021 a move cost the median private renter household £1709. These upfront costs (such as paying a deposit and a months’ rent upfront) take a significant financial toll on renters and are a key barrier to accessing housing.

It’s therefore important that the reforms in the Bill are introduced as soon as possible. We are also keen to ensure that their intention to increase security for renters is not undermined by loopholes in the proposed eviction grounds.

Grounds for eviction

In lieu of Section 21, the Bill will create new possession grounds which will allow landlords to recover their property if they wish to move in or sell. To prevent these grounds being used to evict tenants unfairly, it’s vital that Government places a requirement on landlords to provide robust evidence they are selling the property, moving in or moving in a family member. The Bill would introduce a three-month ban on landlords reletting/remarketing their property after using these grounds. This ban should be extended to six months to act as a sufficient deterrent from misuse.

Enforcing of several aspects of the Bill, including the new grounds for eviction and penalties for misuse, rely heavily on tenants understanding the legislation and being able to identify and report non-compliance. We have particular concerns about local authorities’ ability to effectively enforce compliance with the temporary ban on landlords reletting or remarketing their property, as this is wholly reliant on former tenants noticing that the property is back on the market after they have been evicted. In addition to the ability to levy fines, local housing authorities and tenants should be able to seek rent repayment orders (RROs) from landlords that misuse grounds for eviction. By incentivising tenants to check compliance, RROs will be a crucial tool in supporting councils’ enforcement work, reducing the burden on local authorities, and ensure these measures deliver improvements in the PRS.

We have further concerns regarding the ambiguity of the Bill’s definition of anti-social behaviour, and want to work with Government to revise the definition on the face of the Bill to reduce the risk of this ground being used to unfairly evict tenants.

The Bill also includes a new mandatory ground for eviction, in the case where a tenant has been in at least two months’ rent arrears three times within the previous three years. The notice period for the rent arrears ground will be increased to four weeks from two weeks. To improve support for vulnerable households in rent arrears, Government should urgently review the funding and use of Discretionary Housing Payment to ensure that councils can use it to restore financial stability and sustain tenancies as well as working with councils and housing providers to strengthen fair and effective debt management.

It is the LGA’s view that the national benefit system should provide the primary safety net for all low-income households and people who are not able to work. The basic rate of benefits is currently failing to meet people’s essential living costs. In February this year, research released by the Joseph Rowntree Foundation and the Trussell Trust found that Universal Credit on average falls £140 short a month of the cost of food, energy and other essentials.

Levels of Local Housing Allowance (LHA), which determine the amount of housing benefit low-income private renters receive, was last re-aligned with the 30^th percentile of market rents in March 2020 and has been frozen at those levels since. Private rents have risen by 10 per cent on average in this time, resulting in private rented accommodation becoming increasingly inaccessible for those on low incomes.  LHA no longer covers the cost of renting a modest two or three-bedroom homes in 91 per cent of England, with an average shortfall for a two-bedroom home of £547 a year. As a result, many low-income households have a permanent income deficit and are unable to afford essentials and are being pushed into homelessness.

Restricting support through the national system, also has a direct impact on the support that people need from councils and local partners, and on local costs and demand pressures, particularly in housing, health and social care. To ensure that councils can give people the support they need it is vital that:

• Government restores restore the private sector LHA rate to at least the 30th percentile of market rents.
• Government reviews key welfare reforms including the household benefit cap, the removal of the spare room subsidy (‘bedroom tax’) and the shared accommodation rate to ensure that they are not having a detrimental impact and contributing to financial insecurity and homelessness.
• The Household Support Fund is made permanent with a greater emphasis over time on strengthening financial resilience, so that councils can develop efficient, sustainable referral pathways and partnerships to support their most vulnerable residents.

Increasing the supply of genuinely affordable housing, by building 100,000 social homes a year, will be vital to tackling the housing emergency and the crisis in affordability.  

Over recent decades, construction of new homes has failed to keep pace with population growth, particularly due to the decline public house building. At the same time, the stock of social homes has significantly reduced through Right to Buy. Compared to the private rental sector and homes at affordable rent, social homes provide a genuinely affordable alternative and greater security of tenancy. For many people, social housing remains the only feasible option due to the widening gap between Local Housing Allowance (LHA) and market rents.

The LGA is calling on Government to implement a six-point plan to enable councils to resume their historic role as a major builder of homes and deliver an ambitious build programme of 100,000 high-quality, climate-friendly social homes a year:

1. Roll-out five-year local housing deals to all areas of the country that want them by 2025 – combining funding from multiple national housing programmes into a single pot. This will provide the funding, flexibility, certainty and confidence to stimulate housing supply, and will remove national restrictions which stymie innovation and delivery.
2. Government support to set up a new national council housebuilding delivery taskforce, bringing together a team of experts to provide additional capacity and improvement support for housing delivery teams within councils and their partners.
3. Continued access to preferential borrowing rates through the Public Works Loans Board (PWLB), introduced in the Spring Budget, to support the delivery of social housing and local authorities borrowing for Housing Revenue Accounts.
4. Further reform to Right to Buy which includes allowing councils to retain 100 per cent of receipts on a permanent basis; flexibility to combine Right to Buy receipts with other government grants; the ability to set the size of discounts locally; and the ability to recycle a greater proportion of receipts into building replacement homes paying off housing debt.
5. Review and increase where needed the grant levels per home through the Affordable Homes Programme, as inflationary pressures have caused the cost of building new homes to rise, leaving councils needing grant funding to fund a larger proportion of a new build homes than before.
6. Certainty on future social rents, to enable councils to invest. Government must commit to a minimum 10-year rent deal for council landlords to allow a longer period of annual rent increases and long-term certainty.

Building 100,000 social homes a year would save the public finances by £24.5 billion over 30 years, which includes a reduction in the housing benefit bill and temporary accommodation costs. Research for the LGA and partners found that every £1 invested in a new social home generates £2.84 in the wider economy with every new social home generating a saving of £780 a year in housing benefit.

Megan Edwards, Public Affairs and Campaigns Adviser

Email: [email protected]