We look at government discussions on Flood Re – and affordable insurance scheme for people in areas at high risk of flooding, the approval of plans to increase LHA by the rate of inflation and the ageing PRS population.
MPs quiz government on Flood Re
The Secretary of State for the Environment, Food and Rural Affairs, Theresa Villiers MP, yesterday delivered an oral statement to the House of Commons in the wake of flooding as a result of Storm Ciara.
In his response to the statement, the Shadow Secretary of State, Luke Pollard MP, asked what action is being taken “to ensure that homes and businesses that have been denied insurance and are still outside the current Flood Re scheme get the affordable protection that they so deserve.”
The Secretary of State responded: “Flood Re has significantly improved access to insurance, and it has kept the costs much lower than they would otherwise be.
“Virtually 100% of people now have the option of quotes from at least two companies when choosing insurance, but we recognise that there was concern in South Yorkshire after the November flooding incident, so we are reviewing the scheme independently to ensure that it is working as effectively as possible to help people insure in these circumstances.”
Dame Diana Johnson MP (Labour, Kingston upon Hull North) asked what the Secretary of State’s advice was for those who are not covered under the present Flood Re scheme “who live in properties built after 2009 and businesses, particularly microbusinesses or businesses run from home—and are finding it very difficult to get any insurance.”
The Secretary of State said that these were issues that will be covered as part of the independent review.
The full transcript of the debate can be read here.
The statement was repeated in the House of Lords.
During these exchanges, the former Chair of the House of Commons Environment, Food and Rural Affairs Committee, Baroness McIntosh of Pickering (Conservative) raised her concerns at the properties not covered by the Flood Re scheme, including those built after 1st January 2009, along with businesses, farms and flats in whole blocks. Her concerns were shared by Lord Campbell-Savours (Labour).
The Minister in the Lords, Lord Gardiner and Kimble, simply referred to the review being undertaken.
The transcript of proceedings in the Lords can be read here.
Government pressed on LHA rates
MPs yesterday approved the draft Social Security Benefits Up-rating Order 2020 which increases benefits by 1.7%.
During the debate Anneliese Dodds MP (Labour, Oxford East) quoted research by Alma Economics showing that “if the government decided to restore the local housing allowance rates for the cheapest 30% of rents, that would save local authorities, the health system and many others billions of pounds in the long run.”
The Shadow Work and Pensions Minister, Mike Amesbury MP (Labour, Weaver Vale), said in relation to the Local Housing Allowance: “Evidence suggests that it has been a particular source of hardship because of the increasing number of people forced into private rented accommodation by the shortage of social housing.
“The charity Shelter has calculated that as a result of the benefit freeze, 94% of areas in the UK are unaffordable for people claiming LHA.
“Recent research by the charity Crisis and the Chartered Institute of Housing found that almost 93% of areas were still unaffordable.
“There are huge discrepancies throughout the country. For example, an average of £87 a month would be needed to make the bottom 30% of the rental market available in the UK. However, in London a claimant would need an extra £1,398, so the uprate of £10 per month is totally unrealistic.”
Kate Green MP (Labour, Stretford and Urmston) spoke of the implications of only increasing the LHA in line with inflation in Greater Manchester. She told the House: “I frequently see people who are driven into rent arrears because of the lack of generosity in local housing allowance.
“That means that they have to seek advice to avoid penalties or eviction, but that advice is not available. Eventually, the cost piles up and they arrive at the door of the local authority saying that they are now in housing need because they have been evicted from their private rented accommodation. How can that be sensible?”
The Chair of the Work and Pensions Select Committee, Stephen Timms MP (Labour, East Ham), argued that increasing the LHA only in line with inflation “makes no sense at all.” He went on to say: “I can remember—I imagine that many of us can—when nobody slept in Westminster tube station overnight.
“We have all seen the large numbers who seem at times to be camping out there at the moment. That is the consequence, to quite a large extent, of the extraordinary unwillingness to allow the local housing allowance to reflect what is actually going on in housing costs in London.”
He went on to encourage the Government to accept the recommendation of the Work and Pensions Committee in its report published in July last year, which called on the DWP to “unfreeze Local Housing Allowance as planned in 2020/21, and restore rates to at least the 30th percentile of local market rates. Thereafter, the Department should commit to uprating Local Housing Allowance in line with rental prices.”
The RLA is also calling for the LHA to once again be based on this 30th percentile level, to reflect local rents. You can read more here.
The debate transcript can be accessed here.
Proportion of older people in the PRS set to rise
The Office for National Statistics has published an article examining changes in housing tenure between 1993 and 2017 and what those changes might mean for older people in the future. Of note, it reports that:
- People in their mid-30s to mid-40s are three times more likely to rent than 20 years ago. A third of this age group were renting from a private landlord in 2017, compared with fewer than 1 in 10 in 1997.
- While only 6% of people aged 65 years and over rent privately today, this is likely to increase in the future if people who are currently in their 30s, 40s and 50s in the private rental sector remain so into older ages.
Looking at the advantages and disadvantages of renting later on in life, the ONS goes on to say: “The private rental sector has some advantages over owning a property, including maintenance responsibilities and costs falling on the landlord rather than the resident.
“This is something that may be particularly beneficial in later life as reduced income, deteriorating health and decreased cognitive function may impair the ability of people to maintain their homes.
“Renting privately may also mean that older people are more likely to be able to move to a different, better-suited property if their needs change, as they would not need to rely on the sale of their house.
“However, these potential benefits come at a price. The private rental sector is the most expensive tenure in terms of housing costs (rent and/or mortgage repayments).
“While those with mortgages also often have high housing costs, repayments stop when the mortgage is paid off, usually prior to retirement.
“A market rent that is affordable to someone of working age may cease to be affordable after retirement, when income decreases.
“Research suggests that someone who owns outright could expect to maintain their living standards on a pension pot of £260,000, while someone who rents privately would need almost double this (£445,000).
“Additionally, while responsibilities for repairs do not fall on tenants, private landlords may not always meet obligations to maintain the property satisfactorily.”
The ONS has said that the implications of living in the private rental sector in later life will be investigated in more detail in a future article, which will be published in spring 2020.
To read the article in full click here.
The RLA recently explored the issue of the ageing population in the PRS in members’ magazine Residential Property Investor. To read the article click here.