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Welfare Minister fiddles figures to accuse private sector landlords of inflating benefit bill
03 November 2010Landlords have accused the Coalition’s Welfare Reform Minister Lord Freud of fiddling government figures in order to lay the blame for rising housing benefit bills on the doorstep of private sector investors.
Lord Freud, who gave evidence to a parliamentary inquiry into housing benefit reforms on Wednesday, has been asked to retract claims that private landlords have been most to blame for the rising cost of housing benefit – a claim made despite his own department’s figures showing that the opposite is true.
Data from the Department for Work and Pensions shows that a greater proportion of the rise in the housing benefit bill since November 2008 was caused by increasing unemployment and by government policies on social housing, rather than by landlords pushing up the rents that they charge to housing benefit tenants.
Analysis using DWP’s figures shows almost 70% of growth in the benefit bill can be attributed to additional claimants – the unemployed of this recession. A further 17.7% is attributed to an increase in payments in the social rented sector – due to the transfer of council house stock to housing associations, which have higher rents – and only 13.2% to an increase in average payments in the private rented sector.
Source: Building and Social Housing Foundation, Support with Housing Costs: Developing a simplified and sustainable system. Based on Department for Work and Pensions (2010) Housing Benefit and Council Tax Benefit Caseload Statistics, July 2010, Tables 4 and5, http://research.dwp.gov.uk/asd/asd1/hb_ctb/hbctb_release_jul10.xls
Landlord bodies claimed that the misuse of statistics was part of a campaign by the DWP to justify its programme of housing benefit cuts.
This has seen the department misrepresenting independent research it commissioned from the Centre for Urban and Regional Studies and the University of Birmingham comparing low income working households not receiving housing benefit with benefit recipients.
It wrongly claimed in one newspaper article (Daily Telegraph, 17 October) that “on average, private landlords charge higher rents to housing benefit claimants than working adults in equivalent accommodation, but provide worse conditions”. The report however found the difference was “not statistically significant”.
The research was also misquoted, with claims it “offered compelling evidence that benefit is distorting incentives to work”, but the DWP PR had removed reference to a crucial sentence which made it clear that the report was only talking about a small group of households in the sample with children aged under 16. (See notes to editors 2.)
Commenting, Ian Fletcher, Director of Policy at the British Property Federation, said: “Landlords and their representatives support benefit reform, but are not prepared to take the rap for the Government’s unpopular policies. Constant spinning and fiddling with the statistics just embarrasses the Department of Work and Pensions and has no place in the Coalition’s politics.
“The private rented sector has housed an additional 1.1 million households in the UK over the past decade and should be welcomed as almost the only source of housing growth in this country over the period. HM Treasury statistics show that rents are no more costly to working people now3, in real terms they were a decade ago.
“Rather than distorting the findings of the report and misusing statistics the Department should be focusing its energies on how it can work with the sector to keep people in their homes.”
Richard Jones, the Policy Director for the Residential Landlords Association added: “Unfortunately DWP seems to have embarked on a campaign to slur the vast majority of landlords who rent their properties to benefit recipients.
"The public has been hearing about exceptional cases involving large benefit claims and are getting a distorted picture. In the last few days this has become a major political issue and the general public are beginning to learn more about serious consequences which will result from what the Government are proposing. At the RLA we have written to Lord Freud to point out the errors in the Daily Telegraph report and to ask him to retract the misleading DWP claims”.
One way of mitigating the impact of benefit cuts would be to restore the choice of direct payment of local housing allowance landlords – a pre-election promise made by the Conservative Party and Liberal Democrats.
Ian Fletcher, said: “We hope the Minister will in his evidence this week confirm the unconditional pledge to restore direct payment to landlords, which after all, his party described as a system that “failed both tenants and landlords.”4
Notes to editors:
1. A new system of calculating rents for private rented sector claimants was introduced in 2008 – Local Housing Allowance (LHA). The accusation of the DWP is that significant and widespread artificial rental inflation has taken place, which landlords are to blame for. LHA was always intended to be transparent with the rates known in advance so tenants know their entitlement before they commit themselves to a tenancy. These rates are set based on market rents but, importantly, excluding rents of properties where housing benefit is paid. Therefore landlords were to increase housing benefit rents this will not feed through into LHA rates.
2. The Department’s misprepresentation of independent research is quoted in an article in the Telegraph quoting Lord Freud on 17th October, see: http://www.telegraph.co.uk/finance/economics/8069810/Lord-Freud-Housing-benefit-landlords-are-ripping-off-the-system.html
The study is called Low Income Working Households in the Private Rented Sector, see: http://research.dwp.gov.uk/asd/asd5/rports2009-2010/rrep698.pdf
The claim in the Telegraph is that “on average, private landlords charge higher rents to housing benefit claimants than working adults in equivalent accommodation, but provide worse conditions”.
The Department are referring to a statement on page 56 of the report: “that Low Income Working Households (LIWH) tend to pay rents which are less than the LHA rate.”
The reference is to the rate at which LHA is payable for different property types not what is actually paid. This is the key difference.
Clearly all this reflects is a statistical truism that Low Income Working Households by definition are likely to be on rents that are less than the median rent at which LHA is set. This does not prove, that landlords are charging higher rents on the same property to housing benefit claimants than low income working adults which is what the DWP are incorrectly claiming.
Indeed perhaps anticipating the scope for misrepresentation the researchers are at pains to discount such a notion, stressing on page 78 of their report:
“Since LIWH are, by definition, among the lowest income groups in such properties, it might be expected that they would occupy a property where the rent is less than the median rent.”
It continued
“Indeed, findings from modelling rent levels with data from the Family Resources Survey suggests that whether or not a household is receiving HB is not statistically significant in explaining any differences in the rents paid by the two groups of recipients and non-recipients.”
The article also stresses that “the research also offered compelling evidence that benefit is distorting incentives to work, underlying the need to reform”. It goes on to quote a sentence from the research, which states that “LIWHs with children aged under 16 do appear to be worse off in terms of property size that they occupy and the rates they would be entitled to if they were eligible for housing benefit.”
This quote is taken from page 2 of the summary. The full paragraph, however, reads: “While the HB arrangements do not seem to unduly favour LHA compared to most LIWH, the exception is the small group of households with children aged under 16 who appear to be worse off than other household groups in terms of property size that they occupy and the rates they would be entitled to if they were eligible for housing benefit.”
Clearly the absence of the first part of the sentence makes a world of difference to the claim DWP is making.
3. The following chart is taken from an HM Treasury publication in February. It shows that private rent inflation has been no more than average earnings over the past decade. In contract to house price inflation, which has been rampant.
Comparison of rents, mortgage payments, house prices and earnings. Source: Investment in the Private Rented Sector, HM Treasury, Feb. 2010
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