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Council Housing

February 25, 2009

Council Housing

Mr. Mark Field (Cities of London and Westminster) (Con): I congratulate the hon. Member for Portsmouth, South (Mr. Hancock) on securing this debate. I hope that he will forgive me if I focus most of my comments specifically on my area, in the way that he did in respect of Hampshire, although he strayed across to the Surrey border in some of his early comments.

The hon. Member for Sheffield, Attercliffe (Mr. Betts) summed up one of the core problems: there is a sense of injustice about how the system works. One of the difficulties with trying to draw a line under the past and bring in an entirely new system is that, almost inevitably, there will be significant losers as well as gainers. For those losers, if there are to be transition and damping arrangements, much of the good that comes into place is undermined. There are some big concerns about how precisely we should go forward.

The hon. Gentleman was a leader of a local council. I suspect that he was being modest when he suggested that many of us do not have too much of an understanding of the system. As he will know, however, there is all too often a system to be played not only in relation to housing, but across the range of council services. There are individuals at the highest levels of local authorities who understand exactly how those mechanisms work and can ensure that they operate in the best interests of their local authority, and that is nowhere more apparent than in the housing sphere.

The issues that I hope to raise in the few minutes during which I will address hon. Members are slightly different from some of those that have been raised, and they obviously focus very much on my own local authority in the city of Westminster. For some months, news coverage of the housing market has been dominated by talk of falling—falling house prices, falling mortgage rates, falling levels of interest for prospective buyers—but that has not been the case with social housing. While the Government appear to be throwing everything but the kitchen sink at helping the often hapless home owner, they have quietly pushed through some quite significant rent increases. Come 1 April, those increases will hit many tens of thousands of council tenants in London, at the very time when they are being squeezed hardest by the recession.

Ms Buck:Will the hon. Gentleman, as a prelude to the remainder of his remarks, recognise that Westminster council has the second-highest rent in the country? Does that not reflect the considerable leeway that local authorities have been given over the years to set their own rent levels? Did not Westminster choose to increase rent levels consistently and dramatically during the 1980s and 1990s, which is precisely why we now have the problem that I am confident he is about to describe?

Mr. Field: The issue of council rents goes back to the point about how we ensure that we have a fair system. The hon. Member for Sheffield, Attercliffe talked about the Treasury giving subsidies, and some phenomenal subsidies are given to the council rented sector. That has been the case since time immemorial, and it is very difficult to row back from that position.

I accept—this relates to some of the issues in my constituency that I want to discuss—that central London is in an exceptional situation in many ways. However, the difference between the rent for those who live in social housing and council housing, or arm’s length management organisation housing in the case of CityWest Homes, and any market rent is colossal. Understandably, that causes dismay and irritation among those who are not particularly well paid, but who are none the less well paid enough and in stable enough employment that they cannot get into social housing, even though they cannot begin to think about getting on the housing ladder or paying anything like a market rent to live in the centre of London.

In many ways, as we can see from the interest in the Chamber today, some of the Government’s proposals for rents have the makings of a repeat of the 10p tax band fiasco. For those with short memories, the Government hoped to grab the headlines through populist handouts in the 2007 Budget and conveniently to disguise the fact that the abolition of a 10p tax band would mean that the poorest were worst off.

As has been said, the formula for calculating social housing rents is set by central Government. As a result of linking that formula to the retail prices index figure from September 2008, when inflation was at a peak of 5 per cent., the Government are intent on imposing rent increases of 6 to 9 per cent.—by any measure, well over double the current rate of inflation. That works out at a rise of at least £300 a year in the rental bill of the average tenant—at least in Westminster. What is more, tenants in such properties tend to be on fixed incomes because they are pensioners, disabled—either in full-time or part-time work—or just above the benefit threshold. They will be the people who have to find the money by taking their already stretched household budgets back to the drawing board.

It has often been complained—I have some sympathy with the Minister’s situation in this regard—that councils have no flexibility to set their own rents under the current system. I can see that it would be difficult to have a free-for-all. To be absolutely candid, the fact that there are now considerably more Conservative and Liberal Democrat councils than there were perhaps 10 years ago means that we hear this klaxon voice in a way that we did not then. However, as the Minister is aware, London’s local authorities will be forced to impose rises on their tenants or suffer the financial consequences if the formula is not adhered to.

Eight local authorities in the capital—Westminster, Kingston, Southwark, Harrow, Hillingdon, Camden, Brent and Hounslow—oppose the proposed rise and have lobbied the Minister for Housing by sending her a cross-party letter to try to change her mind. My own local authority in the city of Westminster has spearheaded the campaign and would like the Government to take a more reasoned approach, keeping any rent rises to an absolute minimum. It believes that the Government should look again at the formula that they use to calculate rent or consider further Government assistance for tenants to mitigate the impact on local authority budgets if Ministers insist on pressing ahead with these inflation-busting increases.

At this point, it is worth mentioning the fact that, should the housing revenue account subsidy system remain unreformed, a 6.2 per cent. minimum increase has already been allocated for the financial year 2010-11.

It is clear that inflexible, centralised control of the rental system is not working, particularly here in the capital. Aside from imposing rent increases on vulnerable tenants in the most difficult of times, it fails to cater for a significant number of people who are, as I said, too poor to buy, but too rich to rent socially.

Earlier this year, I secured a debate in this Chamber on the problems facing London’s housing associations during the economic downturn, as the Minister will know because he responded to it. One of their complaints, which came through loud and clear, was about the inflexibility of the social rent structure, and I want to highlight that concern again.

I accept that wealth disparity has afflicted London since time immemorial. Other London Members in the Chamber—whether from Brent or Kensington—will know that there has been much more polarisation in the relatively short time that we have been Members of Parliament than there was before, and I have certainly seen that in my eight years in the House. There continues to be huge demographic change, and those on middle and low incomes—in the capital, that can mean those who earn well over double the national average wage—get pushed out of area. That includes many families who have lived in our vicinities for generations.

My local housing associations are eager to use their resources to cater for that low-to-middle income group, but the rigidity of the rental system means that they cannot get the most out of their housing stock. In exchanges in the House, I mentioned the example of the housing arrangements of an elderly constituent who passed away last year. She had lived as a secure tenant in her home on the Peabody estate on Wild street in Convent Garden since 1986 for a rent of £75.50 a week, which included services. The estate is moments away from the glitz and glamour of the Covent Garden piazza, and the market rent for the flat would be about £320 a week, which is roughly four times the amount that she was paying. The flat is now being re-let at £116 per week, including services, to a tenant with support needs.

So, the typical difference between the social and market rents in my constituency is often £200 a week, or £10,000 a year. Although that is an extreme example, there will be similar examples of that huge disparity throughout London. What happens to those who fall between the two extremes—those who do not qualify for social housing, but who cannot realistically afford the cost of market rents in central London? At two thirds of that cost, the gap is huge and getting bigger, and we need to find some middle ground.

Housing associations are frustrated that the income that they receive from renting a property in London often barely covers the maintenance costs and that the rental income from a four-bedroomed house is only slightly more than that from a two-bedroomed flat. The same applies when we look at the differences in rent for a zero-carbon home and an old, inefficient property. None of that makes sense.

I appreciate that other hon. Members wish to speak, so I will bring my comments to a conclusion. The current centrally imposed national rental system simply does not and cannot work for London tenants. I suspect that that is an issue not just for the capital, and we have seen it in Portsmouth and other parts of the country. If the proposed rent rises go ahead, they will serve only adversely to affect tens of thousands of council tenants at a time when the Government purport to be doing all they can to mitigate the impact of recession.

Ms Buck:Would the hon. Gentleman mind agreeing with me on the issue of rents and subsidy? Is he aware that Westminster council delivered a letter about rent increases to every tenant? That letter included a form of words that suggested that Westminster tenants were contributing to a national pot that was being redistributed across other parts of the country. Will he take the opportunity to agree with me that that is untrue and misleading? Westminster council has enjoyed a cumulativetotal of £115 million in positive subsidy in the past year, including just under £7 million in positive subsidy in the current year. An attempt to claim that that rent increase is because tenants’ rents are being exported to other parts of the country is simply a lie.

Mr. Field: I cannot agree entirely with the hon. Lady. I do not deny that Westminster council has been a net beneficiary of significant subsidy over many years, but we now have a hybrid arrangement, for reasons that have already been pointed out, and are looking for a final arrangement with the social housing fund. A certain amount of cost subsidy is going from Westminster to other parts of the country from the current rents on the basis that has been mentioned, so I do not think that it has been misleading to other tenants.

I know that the hon. Member for Stroud (Mr. Drew) wishes to speak, so I will bring my comments to a close. Many Members across the House would like the Government to look again at the impact of what is and has been a pretty inflexible and centrally controlled system, particularly for those in the capital who remain locked out of the hugely expensive private market. If the Government do not do so, they run the risk of repeating the 10p tax fiasco and penalising the most vulnerable in our communities at a time when those folk are the most in need of a helping hand.