The housing and labour Local Housing Allowance...3 Local Housing Allowance Final Evaluation: The housing and labour market impacts of the Local Housing Allowance Glossary of terms

Local Housing Allowance Evaluation

Local HousingAllowance FinalEvaluation:

The housing and labour market impacts of the Local Housing Allowance

16

ISBN 978 1 84712 321 3

Published by CDSCorporate Document Services 7 EastgateLeeds LS2 7LY United KingdomTel: 0113 399 4040 Fax: 0113 399 4205E-mail: [email protected]: www.cds.co.uk

16

Loca

l Ho

usin

g A

llow

an

ce Fin

al E

valu

atio

n: Th

e h

ou

sing

an

d la

bo

ur m

ark

et im

pacts o

f the Lo

cal H

ou

sing

Allo

wan

ce

501965_DWP_LHA16_cover.qxp 20/12/2007 14:13 Page 1

Local Housing Allowance Final Evaluation 16

The housing and labour market impacts of the

Local Housing Allowance

Local Housing Allowance Final Evaluation: The housing and labour market impacts of the Local Housing Allowance

Contents

Acknowledgements ........................................................................................................................ 1

Glossary of terms ............................................................................................................................ 3

Executive summary ......................................................................................................................... 5

Chapter 1: Introduction ................................................................................................................. 5

Chapter 2: National Housing and Labour Market Trends ................................................................. 5

Chapter 3: Local Housing and Labour Market Trends ...................................................................... 6

Chapter 4: Housing Market Impacts of the Local Housing Allowance .............................................. 7

Chapter 5: Labour Market Impacts of the Local Housing Allowance ................................................ 8

Chapter 1: Introduction ................................................................................................................. 11

Chapter 2: National housing and labour market trends ............................................................. 15

Housing market trends ................................................................................................................ 16

Labour market trends .................................................................................................................. 23

Summary..................................................................................................................................... 27

Chapter 3: Local market characteristics and trends in Pathfinder and Control areas ................ 29

House prices ................................................................................................................................ 29

Housing market characteristics..................................................................................................... 31

The Private Rented Sector ............................................................................................................ 35

Housing Benefit sub-sectors ......................................................................................................... 38

Categorising the Local Housing Allowance and Control Areas ....................................................... 41

Housing Benefit Dominant markets ............................................................................................. 44

Labour market characteristics and trends ...................................................................................... 45

Employment and unemployment ................................................................................................. 45

Economic activity in the Private Rented Sector .............................................................................. 49

Earnings ..................................................................................................................................... 50

Summary..................................................................................................................................... 51


Chapter 4: The housing market impacts Of The Local Housing Allowance ................................ 53

The supply of private lettings to claimants .................................................................................... 53

The rents of private lettings supplied to Local Housing Allowance claimants ................................. 60

Summary..................................................................................................................................... 74

Chapter 5: The labour market impact of the Local Housing Allowance ..................................... 77

Private rents and Housing Benefit ................................................................................................. 77

The potential impact of the Local Housing Allowance on labour market participation ................... 82

The evidence from the claimant surveys ........................................................................................ 83

Summary..................................................................................................................................... 92

Appendix A: Local house prices and earnings data ..................................................................... 95

Appendix B: Local Housing Allowance market stream vignettes ............................................. 107

References ................................................................................................................................... 117

1


Acknowledgements

This report was written by Steve Wilcox with the assistance of David Rhodes and Julie Rugg at the Centre for Housing Policy. However, the market analysis in the report draws on all the streams of research undertaken for the Local Housing Allowance Evaluation together with analyses of administrative data collected by the Department for Work and Pensions (DWP). The authors must therefore thank all the members of the evaluation team at Birmingham and Loughborough Universities and the National Centre for Social Research as well as all the research team at the DWP.

Particular thanks are due to Jacqueline Beckhelling and Kim Perren at Loughborough University for the additional analyses undertaken for this report of the survey of claimants and to Libby Cox and Saranna Fordyce at the DWP for the analyses of the Housing Benefit case data collected by the Department as part of the evaluation. Further thanks are due to Lynne Lonsdale at the University of York for her help in producing the final report, and to our liaison officers at DWP, Andy Brittan and Sonia Jemmotte, for their constructive support throughout the evaluation.

Centre for Housing Policy, University of York

Julie Rugg David Rhodes Steve Wilcox

2

3


Glossary of terms

In this report the following terminology is used:

ACT (Automated Credit Transfer) – A method of paying money directly from the Local Authority (LA) to the recipient’s bank or building society account.

Appropriately-occupy – Claimants whose accommodation matches the Department for Work and Pensions (DWP) size criteria (see size criteria on page 4).

Contractual rent – The rent charged to the tenant by the landlord for a property.

Deficit – Claimants have a ‘deficit’ if their Housing Benefit (HB) amount (i.e. the amount they receive after adjustments for income or non-dependants) is less than their contractual rent.

Direct payments/paid direct – Refers to payments made to the claimant (not the landlord).

Discretionary Housing Payments (DHP) – These are free-standing payments to be made at the discretion of the LA, subject to an annual cash limit, in cases where the LA considers that additional help with housing costs is needed.

Eligible rent – The maximum amount of Housing Benefit (see below) a claimant could receive based on the circumstances of the tenant, the locality in which they live and a range of restrictions applied by a Rent Officer (i.e. before adjustments for income or non-dependants). In the Pathfinders, the LHA is equal to maximum eligible rent.

Excess – When LHA (i.e. the maximum eligible rent before income and non-dependent based adjustments) is more than contractual rent, a claimant is said to have an excess.

Housing Benefit – Sometimes called rent rebate or rent allowance. It is a benefit that is paid by LAs to assist people to pay their rent. The amount that claimants receive depends on their financial and personal circumstances. Housing Benefit may not cover all their rent. In Pathfinder areas, claimants are paid the reformed benefit i.e. LHA.

Housing Benefit amount – Refers to the amount of LHA or HB that claimants receive after adjustments for income or non-dependants.

Housing Benefit Concentrated Markets – Where tenants in receipt of HB were one of a number of demand groups for properties in the Private Rented Sector (PRS), but where HB lets tended to be concentrated in particular areas, e.g Conwy, Edinburgh and Leeds.

Housing Benefit Dispersed Markets – Where demand was uniformly high from Housing Benefit tenants and a range of other competing demand groups, e.g. Brighton, Coventry, Lewisham and Teignbridge.

Housing Benefit Dominant Markets – where tenants in receipt of HB make up a substantial proportion of renters within the PRS, e.g Blackpool and North East Lincolnshire.


4

Local Housing Allowance rate (LHA) – This is a flat-rate allowance towards rent costs that is calculated on the basis of the circumstances of the tenant and the broad area in which they live. It is the maximum amount of HB a claimant could receive, before any income or non-dependent based adjustments are made. In the Pathfinders, the allowance is set at the maximum eligible rent.

Local Reference Rent (LRR) – This one of the rent limits applied to define eligible rents for private tenancies under the mainstream HB scheme. The LRR is based on average rents in the locality, as assessed by The Rent Service.

Over-occupy – Claimants who live in property that is deemed to be smaller than their entitlement under the DWP size criteria (see size criteria, below).

Shortfall – When LHA (i.e. the maximum eligible rent before income and non-dependent based adjustments) is less than contractual rent, a claimant is said to have a ‘shortfall’.

Single Room Rate – This is the LHA rate set for single people aged under 25. The Single Room Rate is based on average rents in the locality for accommodation with at least one exclusive room, and where one or more of the facilities – living room, kitchen, bathroom and toilet – are shared. This is slightly more generous definition of rooms compared to the Single Room Rent set under the mainstream HB scheme (see below).

Single Room Rent (SRR) – This is one of the rents limits applied to define eligible rents for single people aged under 25 with private tenancies under the mainstream Housing Benefit scheme. The SRR is based on average rents in the locality for one room accommodation, with a shared living room, kitchen and toilet, as assessed by The Rent Service.

Size criteria – The ‘size criteria’ are applied by the Rent Officers to calculate the number of bedrooms and living rooms to which a claimant is entitled. LHA rates are based on this entitlement. The conditions are as follows. One room is allowed as a bedroom, for:

• every adult couple;

• any other adult aged 16 or over;

• two children of the same sex under the age of 16;

• two children (of the same or opposite sex) under the age of 10; and

• any other child.

In addition, living rooms are allocated as follows:

• one, if there are one to three occupiers;

• two, if there are four to six occupiers; and

• three, if there are seven or more occupiers.

Surplus – Claimants have a ‘surplus’ if their HB amount is more than their rent.

Top up – A rent ‘top up’ is paid by a claimant whose HB amount is less than their rent.

Under-occupy – Claimants who live in property that is deemed to be larger than their entitlement under the DWP size criteria (see size criteria, above).

5


Executive summary

Chapter 1: Introduction

The Department for Work and Pensions (DWP) has commissioned an evaluation of Local Housing Allowance (LHA) in nine local authorities, or Pathfinder areas. The evaluation design included extensive interviews with claimants and landlords, as well as the collection of administrative data by DWP. This report draws on all those sources to provide an overall assessment of the labour and housing market impacts of the LHA.

LHA is designed to pay the same amount to private tenants with similar circumstances residing in the same area (the Broad Rental Market Area). In most cases, LHA will be paid to the tenant, instead of to the landlord. The overall aim of LHA is to empower tenants by enabling them to exercise more choice and take more responsibility over their housing decisions. The key objectives of LHA set out by DWP are:

• fairness;

• choice;

• transparency;

• personal responsibility;

• financial inclusion; and

• improved administration and reduced barriers to work.

The LHA evaluation was conducted by a consortium of independent research organisations and involves quantitative and qualitative research with claimants, landlords and stakeholders directly concerned with the operational aspects of LHA.

Chapter 2: National housing and labour market trends

There were marked changes in the housing and labour markets in Britain over the years from 2003 to 2006; the LHA Pathfinders did not operate in an unchanging context.

Both house prices and average mortgage costs rose rapidly over the period. While falling interest rates had reduced mortgage costs in the early years of the 1990s, by 2006 average first time buyer mortgage costs were almost as high – as a proportion of average earnings – as the peak of the housing market boom in 1990.

While house prices rose sharply in all regions between 2003 and 2006 the increases were greater in the northern regions of England, Scotland and Wales, and there was a reduction in the extent of ‘north south’ differentials in house price to income ratios. Affordability pressures grew in all areas.


6

Facilitated by the growth in the availability of ‘buy to let’ mortgages from mainstream lenders the overall Private Rented Sector (PRS) grew rapidly between 2003 and 2006 in England, Scotland and Wales. At the same time there was a matching increase in the numbers of HB claimants securing accommodation in the PRS over those years, reversing the decline experienced since 1995.

In the years preceding the LHA evaluation period, HB claimant numbers nationally fell as a proportion of all the households in the PRS. By 2002, they represented just 28 per cent of all households in the sector compared to 47 per cent in 1996, but there was no further fall between 2002 and 2005.

The private sector grew rapidly between 2003 and 2006, but there was only limited increase in average rent levels. This increase was less than in the case of house prices. Nonetheless, the regional variations in private rents were just as pronounced as the house price variations, and far greater than the regional variations in earned incomes.

Unemployment continued its decade-long downward trend until 2005 but rose in 2006 to levels a little higher than in 2003 prior to the commencement of the LHA Pathfinders. This increase was a result of a dip in levels of economic growth in 2005, which was also reflected in a reduction in the growth of earnings in that year. In 2005, gross earnings at the lower end of the labour market only rose in line with inflation, while more typically they have tended to increase at slightly more than one per cent above inflation each year.

Chapter 3: Local housing and labour market trends

The housing and labour markets in the Pathfinder and Control areas were subject to major changes over the LHA evaluation period.

House prices rose substantially in all areas, but most rapidly in areas with relatively low values, and less rapidly in the areas with high values. By the end of the LHA evaluation period there were housing market pressures in all areas, and it was more difficult to distinguish between areas in terms of concepts such as high and low demand, although there were still some marked differences.

There were distinct differences in the characteristics of the local housing markets in each Pathfinder and Control area, both in overall terms, and in terms of the PRS in particular. The PRS comprised from between ten per cent (Edinburgh) to 22 per cent (Brighton & Hove) of the local LHA housing markets, but less than ten per cent in two of the Control areas.

In comparison with other tenures, the PRS in each area tended to include a higher proportion of smaller dwellings, and to accommodate smaller and younger households. Difference was also evident between areas with regard to the characteristics of the PRS both in terms of the type and size of dwellings, and the households residing in the sector.

Dwellings with three or fewer rooms comprised a half of all the PRS dwellings in Brighton & Hove, but less than a fifth of the sector in Coventry, North East Lincolnshire and Wakefield. Households with a household representative person aged below 35 occupied more than half of all the PRS dwellings in Brighton & Hove, Coventry, Edinburgh, Leeds, Lewisham and Cardiff.

7


There were also marked differences in the size of the HB sub-sector within the PRS in each area. The HB sub-sector in Blackpool and North East Lincolnshire comprised over 70 per cent of the total PRS, excluding dwellings provided rent free and based on 2001 Census stock figures. These were characterised as HB Dominant Markets.

In all other Pathfinder and Control areas the HB sub-sector represented less than a half of the total local PRS, but geographically that sub-sector tended to be concentrated in specific localities within the wider local authority areas. This pattern applied in the cases of Conwy, Edinburgh and Leeds and these were characterised as HB Concentrated Markets.

In the other Pathfinder areas demand from HB was more dispersed across the local authority, and those areas (Brighton & Hove, Coventry, Lewisham and Teignbridge) were characterised as HB Dispersed Markets.

Economic activity rates varied quite widely between individual Pathfinder areas, with the lowest economic activity rates in Blackpool and the highest in Teignbridge. Economic activity rates also tended to be rather lower in the Control areas, compared to the LHA areas.

Between 1999/00 and 2005/06, unemployment rates fell more or less substantially across all the LHA and Control areas. However, there was no overall reduction in unemployment rates across all the Pathfinder areas during the evaluation period – 2003/04 and 2005/06 – and only a marginal average fall during that time in the Control areas. Brighton & Hove and Leeds were exceptional in seeing some increase in unemployment rates.

Against the wider local labour market position, households in the PRS were less likely to be economically active. Economic activity rates were particularly lower in Blackpool, Coventry, North East Lincolnshire and Cardiff.

Earnings levels varied substantially between the Pathfinder and Control areas, and were significantly higher in Brighton & Hove, Edinburgh and Lewisham. Variations in earnings were, however, far less marked than the variations in house prices. Earnings were lowest in Blackpool and North East Lincolnshire – the two areas with HB dominant markets.

Chapter 4: Housing market impacts of the Local Housing Allowance

The number of claimants in the PRS in the LHA Pathfinder areas grew over the evaluation period, in line with a similar level of growth in PRS claimant numbers across the rest of the country under the mainstream HB regime.

Thus, while the landlord surveys showed a small proportion of landlords suggesting that they would be less likely to let to LHA claimants, largely because of the arrangements for the LHA to be paid to the claimant, this did not have any overall impact on the ability of claimants to access accommodation in the PRS in the LHA areas.


8

The landlord survey did suggest that a very small proportion of the landlords did reduce their lettings to LHA claimants, but the available evidence suggests that any such impact was primarily offset by the availability of lettings from landlords entering the sector following the introduction of the LHA.

There were also signs of an emerging trend for cases to flow off of the LHA at a slower rate, which might be expected given the greater generosity of the LHA regime, but is not sufficient to suggest that this could have had a discernable impact on caseload numbers by the end of the two-year evaluation period.

Over the two-year evaluation period there was a modest tendency for contractual rents to converge towards the LHA levels, and this tendency was strongest in the HB dominant markets. However that tendency was not sufficient to outweigh the impact of broader market changes in three of the Pathfinder areas.

However, while there was only a modest degree of rental convergence towards LHA levels in the Pathfinder areas, there is evidence from the comparator areas of wider market changes over the evaluation period that were at the same time leading to a small increase in the distribution of contractual rents relative to LRR/SRR levels. This trend would suggest that the underlying tendency for the LHA regime to result in rental convergence around LHA levels is slightly greater than that seen over the evaluation period.

Reflecting wider market changes, LHA/Local Reference Rent (LRR) levels rose relative to contractual rents in both LHA and comparator areas.

The contrast between the growth in the proportion of cases with small shortfalls, as opposed to small excesses, can also be more plausibly explained by modest changes in claimant, rather than landlord, behaviour.

Finally, it should be noted that the evaluation only covered a two-year period, and over a longer period the LHA regime could potentially have a rather greater impact on both claimant and landlord housing market behaviour.

Chapter 5: Labour market impacts of the Local Housing Allowance

The factors influencing a claimant’s decision about labour market participation are complex, and the HB scheme has a very limited role in those decisions. There is a low take-up rate of HB by working households, and even when households are aware of its availability as an in-work benefit, there is a limited understanding of the impact of earnings on entitlement. These factors limit the extent to which individuals can take in-work HB into account when making decisions about whether or not they would be better off in work.

One aspect of the LHA regime is the encouragement given to claimants to open bank accounts. The introduction of the LHA, in this case linked to similar encouragement being given in respect of payments of Jobseeker’s Allowance (JSA), was largely successful in this respect, and very few claimants receiving LHA payments at the end of the evaluation period did so without having a bank account. A claimant having an operating bank account is taken as one of the dimensions of their taking responsibility for their financial affairs, and in that sense is an indication of ‘work readiness’.

9


While there was a broad consensus among the professionals that the LHA was more transparent and made it easier to make claimants aware of the benefit levels they would receive in and out of work, the claimant surveys clearly showed that there were limitations to the extent of that transparency, even in respect of the narrow issue of the maximum level of the LHA and how that related to their contractual rent.

The claimant interviews for the LHA study also found that most claimants either thought that they would get no HB if they took up a job, or knew they might get a lower level of benefit but had no idea how much. There was no change in this finding from the claimant surveys over the course of the LHA evaluation.

In broad terms, the claimant surveys found no indication of trend towards higher levels of labour market participation in the Pathfinder areas relative to the Control areas. The higher levels of employment at Wave 3 of the interviews in both the LHA and Control areas was seen primarily as a reflection of the changing composition of the interview samples over time, as they increasing comprised more ‘stable’ longer term claimants.

There was, however, a significantly higher proportion of working claimants in the high-rent LHA areas (Brighton & Hove and Lewisham), compared both to the low- rent LHA areas and the Control areas, which all had relatively low rents. In large part this trend simply reflected the greater likelihood that a low-income household in a high-rent area would still need to rely on HB to help them with their rent, and the Wave 2 claimant survey showed that a higher proportion of claimants moving into work also moved off of HB.

While the data were limited, and there are too many unknown factors to reach any definitive conclusions, the higher level of new working claimants in the high-rent areas found by the claimant survey undertaken towards the end of the LHA evaluation would be consistent with the LHA having had a positive impact in those areas.

However, wider labour market trends over the evaluation period do not appear to have had a differential impact across high and low-rent areas, nor do the claimant surveys provide any indication that claimants understanding of the availability of HB as an in-work benefit improved over the course of the evaluation, or that there was any change in their attitudes to labour market participation.

10

11


Chapter 1: Introduction

As part of its reform of Housing Benefit (HB), the Government introduced, in nine local authority or ‘Pathfinder’ areas, a Local Housing Allowance (LHA) which is payable to low-income tenants in the Private Rented Sector (PRS). An evaluation of the LHA was commission by the Department for Work and Pensions (DWP).

The evaluation included extensive interviews with claimants and landlords over the course of the two year long evaluation, as well as the collection of administrative data by DWP. This report draws on all these sources to provide an overall assessment of the labour and housing market impacts of the LHA.

HB is a payment that provides help to low-income families with their rent. Local Authorities administer the benefit. However, the HB scheme has been criticised for a number of reasons, including being too complex; having wide variations in administration of the benefit; limiting claimants’ choice of housing; and undermining work incentives.

The LHA is designed to pay the same amount to private tenants with similar circumstances residing in the same area (the Broad Rental Market Area). In most cases, LHA will be paid to the tenant, instead of to the landlord. Only when tenants are deemed to be ’vulnerable’ - in that they have difficulty managing their money, or have fallen into arrears of at least eight weeks - is their LHA paid directly to the landlord.

The Government outlined its intention to reform HB in the April 2000 Housing Green Paper, Quality and Choice: A Decent Home for All. This intention was followed up with detailed proposals in October 2002 with Building Choice and Responsibility: a Radical Agenda for HB in which the Government announced its intention to introduce the LHA in the de-regulated PRS in the nine local authority Pathfinders and also introduce a wide range of other measures aimed at improving the administration of HB and Council Tax Benefit (CTB). The rollout of these measures took place between 2002 and 2006 and included the following key changes to the administration of HB, which, in the Pathfinders, were implemented alongside the introduction of LHA.

• Benefit Periods were abolished for Pensioners from October 2003 and for working age people from April 2004. This change meant that these HB (and subsequently LHA) claimants no longer needed to reapply for HB yearly regardless of whether or not their circumstances had changed. Prior to this change, HB could generally be awarded for a maximum of 60 weeks only, and then a new claim had to be submitted. The change was expected to remove unnecessary form-filling for claimants and reduce the amount of HB administration necessary.

• From April 2004, entering work was treated as a ‘change of circumstances’. The change meant that a new benefit claim was not required for the many of the claimants moving into work so entailing a much shorter and less complex administrative process.

• The Council Tax Benefit (CTB) rule which restricted the benefit paid to people in property in bands F, G and H to the same amount of benefit paid to band E claimants was abolished in April 2004.

• Alongside the end of review periods for those claiming Pension Credit, people who had reached the qualifying age for Pension Credit (60 years old) could have their HB/CTB backdated for one year, or to the date at which they reached the age of 60 if that is less than one year, without having to demonstrate good cause for backdating.


12

• The HB ‘run-on’ for people starting work was widened in 2004 to include Incapacity Benefit (IB) and Severe Disability Allowance (SDA) claimants. Broadly, the run-on meant that people who qualified continued to get their ‘out of work’ HB/CTB for the first four weeks in a new job. Previously only those on Income Support or on both Jobseeker’s Allowance (JSA) and IB qualified for run-on after starting work.

• Any Tax Credit arrears were treated as capital for benefit purposes from April 2003. Tax Credit awards from April 2005 were taken into account much more simply for HB/CTB purposes, by being treated as current income rather than using complicated attribution/retrospection rules.

• From October 2002, rapid re-claim procedures were introduced for people returning to HB/CTB after twelve weeks or less, which means that a full new claim was no longer required.

In addition, over the same period, other changes were made to the operation of Jobcentre Plus and a number of DWP initiatives took place between 2002 and 2006 to improve local authorities’ performance in HB administration. These included offers of support to local authorities from the DWP Help Team and from the Benefit Fraud Inspectorate’s Improvement Team.

The overall aim of LHA is to empower tenants by enabling them to exercise more choice and take more responsibility over their housing decisions. The current key objectives of LHA set out by DWP (2006) are1:

• Fairness – The LHA bases the maximum amount paid to tenants on the size, composition and location of household. Therefore, two households in similar circumstances in the same area will be entitled to similar amounts of benefit.

• Choice – Under the LHA, tenants should be able to choose how to spend the allowance. For example, they could chose to rent a larger property and pay the excess, or spend less on housing and increase their available income.

• Transparency – A clear and transparent set of allowances helps tenants and landlords know how much financial help is available from the State. Tenants are able to compare how much support is available towards their housing costs in different areas and for different property sizes.

• Personal responsibility – The Government believes that, wherever possible, LHA should be paid to tenants, so empowering people to budget for and to pay their rent themselves rather than have it paid for them. Taking this responsibility helps to develop the skills unemployed tenants will need as they move into work.

• Financial inclusion – The Government wants people to have their housing payments paid into a bank account and to set up a standing order to pay their rent to their landlord. This arrangement has the advantage of being a safe and secure method of payment and provides certainty for landlords that rent will be paid.

• Improved administration and reduced barriers to work – For working-age tenants, LHA aims to provide greater certainty about what help is available in and out of work. A simpler system also helps speed up administration of housing payments, giving tenants more confidence when starting a job that any in-work benefit will be paid quickly. A more transparent system may also improve the ability of individuals to move between areas and to take advantage of employment opportunities.

1 The LHA Pathfinders were meant to help inform the design of the National LHA scheme and objectives have changed since the beginning of the evaluation. The original objectives can be found in the LHA Evaluation Report No 1 at http://www.dwp.gov.uk/housingbenefit/lha/evaluation/2004/pathfinder_intro_1.pdf

13


The LHA was implemented in the nine Pathfinder local authorities between 17th November 2003 and 9th February 2004, and could be introduced using either a ‘phased’ or a ‘big bang’ approach (Table 1.1). The phased approach involved putting all new claimants directly onto LHA after the ‘go live’ date and transferring existing claimants when there was a change in their circumstances or, prior to a change of regulations in April 2004, when their claim would have been routinely reviewed after 52 weeks. Under the big bang approach, all existing claimants were transferred onto LHA at the start date. Local authorities who decided to use the big bang approach had up to six months to transfer the existing claimants whose benefit was paid to their landlord to direct payments. The transfer happened about four months after LHA went live in Brighton & Hove and at six months in Edinburgh and North East Lincolnshire.

Table 1.1 Start Date and method of introduction of Local Housing Allowance

Start Date Pathfinder Method

17 November 2003 Blackpool Phased

1 December 2003 Lewisham Phased

12 January 2004 Coventry Phased

12 January 2004 Teignbridge Phased

2 February 2004 Brighton & Hove Big Bang

9 February 2004 Edinburgh Big Bang

9 February 2004 North East Lincolnshire Big Bang

9 February 2004 Conwy Phased

9 February 2004 Leeds Phased

A consortium consisting of the Centre for Research in Social Policy (Loughborough University), the Centre for Urban and Regional Studies (Birmingham University), the Centre for Housing Policy (University of York) and the National Centre for Social Research conducted the evaluation. A range of reports based on the landlord and claimant survey interviews and the evaluation of the operational aspects of the LHA have already been published by the Department for Work and Pensions. All publications are available on line at http://www.dwp.gov.uk/housingbenefit/lha/evaluation

The overall evaluation has three main aims:

• to test the extent to which LHA fulfils its objectives;

• to identify any unintended consequences of LHA; and

• to identify any major operational issues and so inform the design of any national scheme.

The market analysis sets out the evidence on the housing and labour market impacts of the LHA, drawing on the results of the successive waves of landlord and claimant interviews over the course of the two year


14

long evaluation, as well as the analyses of administrative data collected by DWP. Those results are set in the context of the changing housing and labour markets in the Pathfinder and Control areas over that period.

The central questions addressed by the market analysis are:

• What impact did the LHA have on the supply of lettings to claimants?

• What impact did the LHA have on claimants’ choices in securing lettings?

• What impact did the LHA have on local rents?

• What impact did the LHA have on claimants’ attitudes to work, and their participation in the labour market?

More wide ranging and comprehensive accounts of the multi-faceted issues arising from the introduction of the LHA can be found in the claimant, landlord and operational reports.

Chapter 2 sets out the national housing and labour market trends over the course of the LHA evaluation period. Chapter 3 sets out the local housing and labour market trends in the Pathfinder and Control areas over the course of the LHA evaluation period. Chapter 4 examines the evidence on the housing market impacts of the LHA. Chapter 5 examines the evidence on the housing market impacts of the LHA. Conclusions are set out at the end of each chapter.

15


Chapter 2: National housing and labour market trends

The first round of Local Housing Allowance (LHA) Pathfinders was introduced, on a staggered basis, from November 2003. The Pathfinder evaluation period of two years concluded in March 2006. This chapter outlines the national housing and market contexts in which the LHA Pathfinders operated, and the changes in those markets over the two-year evaluation period.

The housing and labour market trends over the period were set in the context of a prolonged period of low inflation and economic growth. The key housing trends were sharp house prices rises in all parts of the country, and rising levels of investment in private rented housing. The key labour market trend over the two- year period was a small rise in levels of unemployment, following a decade during which unemployment had fallen to the lowest levels for over thirty years.

Figure 2.1 shows that, while the sustained period of low inflation and economic growth continued throughout the Pathfinder evaluation, the rate of economic growth dipped in 2005, before recovering in 2006.

Figure 2.1 Fifteen years of low inflation and sustained economic growth


16

Housing market trends

The combination of economic growth and low inflation underpinned the substantial rise in house prices in the years from 1997, as shown in Figure 2.2. The low inflation rates over the last fifteen years also saw interest rates fall sharply from the levels experienced at the end of the 1980s, with a consequent fall in mortgage costs relative to house prices. Indeed, in part the house price rises over the period were a response to the reduced levels of interest rates and mortgage costs.

It is also notable that there was a particularly sharp rise in house prices in 2004, the first full year of the Pathfinder period, and a further rise in 2005. While house prices had been rising for six years by 2003, in part this represented a recovery from the housing market recession in the early years of the 1990s, and there was only a limited increase in average mortgage cost-to-income ratios for first-time buyers over that period.

However, there was a further surge in house prices in 2003 and 2004, and a corresponding rise in mortgage cost-to-income ratios, to levels close to those experienced at the peak of the last housing market ‘boom’ in 1990.

Figure 2.2 Housing market affordability in Great Britain

17


Figure 2.3 shows that mortgage cost-to-income ratios also rose sharply in all regions of the UK after 2003, and that the ‘north south’ gap in those ratios also fell during those years. Indeed the mortgage cost-to-income ratio in the lowest region of the UK in 2006 (Scotland) was above that for the highest region in 1996 (London).

In other words, while housing market pressures were being experienced in some parts of the country at the beginning of the Pathfinder period, by the end of the period those pressures had become more universal. As will be seen in the following chapter, this change led to a revised approach to conceptualising the differences between the nine pathfinder areas.

Figure 2.3 Regional trends in home owner affordability

Other factors have also contributed to the rise in house prices over the period from 1997. The Barker Reports, and subsequent related work, have focused attention on the shortfalls in housing supply relative to household growth, and the impact that this has on house prices. However, over the years from 1991 to 2001 there was no national shortfall in the level of house building relative to household formation.

There was a substantial shortfall in London and the south east, but this was offset by surpluses in other parts of Britain over the same period. Thus, while the London and south east shortfall in house building may have contributed to the widening ‘north south’ affordability gap between 1997 and 2001, this cannot be argued to have been a factor underlying the national rise in house prices over those years.


18

However, the latest estimates suggest that in more recent years household numbers have grown more rapidly, partly as a result of increased net inward migration and that, post-2001, national house building rates have not kept pace with household growth. Over the five years to 2006 household numbers in England grew on average by some 199,000 a year. In contrast the average level of new dwellings completed over the same period was just 151,000 per year. Similarly in Wales, household numbers over the same period grew on average by 13,000 a year, while only some 8,000 dwellings were completed each year.

In Scotland, new dwelling completions over the period from 2000 to 2005 continued to be higher than levels of household growth. For the period as a whole, net additions to the housing stock (after taking account of changes as a result of demolitions and conversions) also exceeded net household growth. However, while net additions to the stock were greater than levels of household growth in 2001 and 2002, from 2003 onwards household growth began increasingly to outstrip net additions to the stock.

The limited available data suggests that for England and Wales the gains to the housing stock through changes of use and conversions of existing dwellings were roughly offset by losses through demolitions.

Thus, in the years since 2001, and over the period of the LHA evaluation, there was some tightening of the overall housing markets in England and Wales, and regional data suggests that this tightening occurred, albeit to different degrees, in all the regions of England. In Scotland, the overall housing market also began to tighten over the years of the LHA evaluation.

This tightening of the market is also likely to have contributed to the rise in house prices in England and Wales over that period. However, this effect should not be exaggerated. The detailed modelling undertaken in response to the Barker Report suggested that an increase in house building levels in England of 50,000 additional dwellings per annum would only reduce prices by some seven to eight per cent after ten years of year-on-year additions (1).

Private Rented Sector

The other key housing market change over the years since 1997 has been the growth of the Private Rented Sector (PRS) following the deregulation of rents in 1989, and the entry of mainstream mortgage lenders into the market to provide mortgages for ‘buy to let’ landlords on an increasing scale in the years from 1998, as shown in Figure 2.4.

19


Figure 2.4 Growth in new buy to let mortgages

The growth of this market in such a short period of time is quite remarkable. While in 1998 buy to let mortgages represented only some two per cent of all housing market transactions, by 2006 they accounted for more than one in six of all transactions. Nonetheless, it should be recognised that in part these figures represent an increase in the market share by mainstream mortgage lenders in the overall investment market for private landlords.

The numbers of private lettings accessible to the public by non-resident landlords in England has grown substantially since 1989, and grew most strongly between 1990 and 1993/94, and then again after 2001 as the buy to let market expanded. This is shown in Figure 2.5. There was very little change in the numbers of lettings either not accessible to the public, such as lettings tied to employment, or by resident landlords over the period (the ‘other’ lettings in Figure 2.5). The growth in investment in private rented dwellings in the years since 2001 is thus clearly another factor underpinning the more rapid increase in house prices in those years.


20

Figure 2.5 Growth in private rented sector in England

More directly, it should be noted that the LHA evaluation covers a period of strong growth in the size of the PRS in England as a whole. New data for Wales shows the overall private sector growing from 110,000 in 2001/02 to 125,000 in 2003/04 and 137,000 in 2005/06. Survey data from the Scottish Household Survey also shows a substantial growth in the PRS in Scotland between 1999 and 2005, although this growth is not reflected in the Scottish Executive tenure statistics as these are not currently adjusted between Censuses to take account of any increases arising from private landlords purchasing previously owner occupied dwellings.

Figure 2.6 shows the overall growth in the PRS in Great Britain over the last fifteen years. It also shows that the numbers of Housing Benefit claimants in the PRS has also risen over the last three years, having previously declined in the years between 1996 and 2002.

In 1996 HB claimants represented 47 per cent of all households in the PRS but by 2005 the proportion had fallen to 28 per cent. However, over the subsequent years to 2005 - including the LHA evaluation period - there was no further decline in this proportion, as the rise in the numbers of HB claimants in the PRS between 2002 and 2005 rose in line with the overall the rate of growth of the sector as a whole.

21


Figure 2.6 Upturn in wider Private Rented Sector and lettings to Housing Benefit claimants

There is only limited data available on private sector rents at the national level. Data from the Survey of English Housing suggests that average rents for assured tenancies that were available to the public rose from £101 per week in 2000 to £126 per week in 2005, with the rate of rent increases slowing to just three per cent per annum between 2003 and 2005.

National and regional data on private sector rents is also available from The Rent Service in respect of lettings to claimants in the PRS. In principle the figures on Local Reference Rent (LRRs) provide an indication of Rent Officers’ views on market rents in the wider PRS, but the published LRR figures by size of dwelling for recent years include a substantial minority of cases subject to a ‘size related determination’, which limits their usefulness.

The Rent Service data do provide an accurate record of the contractual rents for HB claimants, but in this case it must be recognised that claimants comprise a distinctive sub-sector of the wider rented sector, and that sub-sector varies in its relative size and composition in different parts of the country.

Figure 2.7 shows the national trends in rents in both the wider PRS, and also those in the HB sub-sector. The figure shows that the average rents for HB claimants are some 10-15 per cent lower than the average for the sector as a whole. It also shows that there have only been very limited rent increases in the three years since 2002/03, both for the sector as a whole and for the HB sub sector.


22

Figure 2.7 Limited rent rises in private rented sector in England after 2002

Rents, like house prices, also vary widely across the country. Figure 2.8 shows the contractual rents for HB cases for the regions of England in 2004/05, for two and four bedroom dwellings respectively. As can be seen, the rents in London in 2004/05 were roughly double those found in the northern regions of England, and roughly 50 per cent higher than those in the south east of England. In broad terms, these regional variations are just as pronounced as those for house prices in the owner occupied sector, and are far greater than the regional variations in household incomes and individual earnings.

23


Figure 2.8 Private rents in the housing benefit sector in 2004/05

Labour market trends

Employment numbers in the UK grew continuously in the years from 1993 through to 2005, but dipped at the end of 2005. Similarly unemployment on the ILO measure fell continuously in the years from 1993 through to 2005, but has risen since the second quarter of 2005. Claimant unemployed numbers also declined over the same period, but have subsequently risen since the first quarter of 2005 on a seasonally adjusted basis.


24

Figure 2.9 Downward trend in unemployment halted

All these trends reflect the dip in levels of economic growth in 2005 (see Figure 2.1) that occurred during the second year of the LHA evaluation period, and as Figure 2.10 shows, the upturn in claimant unemployment numbers during the course of 2005 occurred in all regions of Britain, albeit with some minor variations in degree and timing.

25


Figure 2.10 Regional trends in claimant unemployment

However, if employment numbers were higher by the close of the LHA evaluation period than at the commencement, the reverse is the case for the employment rate for those of working age, which fell from 74.7 per cent in the last quarter of 2003 to 74.4 per cent by the second quarter of 2006, despite having risen to 75.2 per cent in the third quarter of 2005.

The context for the LHA evaluation period was thus a continuation of a long term decline in unemployment numbers during the first year of the evaluation period, followed by increases during 2005 and the first quarters of 2006. However, while in some regions claimant unemployment was still lower at the end of the LHA evaluation period than was the case at its beginning, in other regions the reverse was true.

Earnings

The annual rate of earnings growth in the UK grew a little in 2004, but then fell back quite sharply in 2005, as in shown in Figure 2.11. While over the whole period from 1997 to 2006 lowest decile full-time earnings grew marginally more rapidly than median full-time earnings, the reverse was the case in both 2003 and 2004.

Over the two main years of the LHA evaluation (2004 and 2005) lowest decile full-time earnings rose at the rate of just 0.6 per cent per annum in real terms, compared to an average rate of 1.4 per cent per annum over the year period from 1997 to 2006.


26

Similarly, lower quartile full-time earnings rose at the rate of just 0.7 per cent per annum in real terms over the two-year period, compared to an average rate of 1.2 per cent per annum over the longer period. Median full-time earnings rose by 0.85 per cent per annum in real terms over the two-year period, compared to an average rate of 1.3 per cent per annum over the longer period.

While over the period from 1997 to 2006 as a whole, part-time earnings grew a little more rapidly than full-time earnings, over the two main years of the LHA evaluation both lowest decile and lower quartile part-time earnings both fell in real terms with the rise in 2004 more than cancelled out by the sharp fall in 2005. Indeed, part-time earnings at the lower end of the earnings distribution fell in cash as well as real terms in 2005.

Figure 2.11 Growth of full-time earnings slows in 2005

These limited changes in earnings at the lower end of the labour market over the LHA evaluation period will not, in themselves, have improved the incentives for claimant households to move into employment, any more than the slight decline in the employment rate will have improved the opportunities for claimants to move into employment over the evaluation period.

27


Summary

There were marked changes in the housing and labour markets in Britain over the years from 2003 to 2006: the LHA Pathfinders did not operate in an unchanging context.

Both house prices and average mortgage costs rose rapidly over the period. While falling interest rates had reduced mortgage costs in the early years of the 1990s, by 2006 average first time buyer mortgage costs were almost as high, as a proportion of average earnings, as in 1990 which was the peak of the housing market boom.

While house prices rose sharply in all regions between 2003 and 2006, the increases were greater in the northern regions of England, Scotland and Wales and there was a reduction in the extent of ‘north south’ differentials in house price- to-income ratios. Affordability pressures grew in all areas.

Facilitated by the growth in the availability of ‘buy to let’ mortgages from mainstream lenders, the overall PRS grew rapidly between 2003 and 2006 in England, Scotland and Wales. At the same time there was a matching increase in the numbers of HB claimants securing accommodation in the PRS over those years, so reversing the decline experienced since 1995.

In the years preceding the LHA evaluation period HB claimant numbers nationally fell as a proportion of all the households in the PRS. By 2002, they represented just 28 per cent of all households in the sector, compared to 47 per cent in 1996. However, there was no further fall between 2002 and 2005.

While the private sector grew rapidly between 2003 and 2006 there was only a very limited rise in average rent levels; far less so than in the case of house prices. Nonetheless, the regional variations in private rents were just as pronounced as the house price variations, and far greater than the regional variations in earned incomes.

Unemployment continued its decade-long downward trend until 2005 but rose in 2006 to levels a little higher than in 2003, prior to the commencement of the LHA Pathfinders. This increase was a result of a dip in levels of economic growth in 2005, which was also reflected in a reduction in the growth of earnings in that year. In 2005, gross earnings at the lower end of the labour market only rose in line with inflation, while more typically they have tended to increase at slightly more than one per cent above inflation each year.

28

29


Chapter 3: Local market characteristics and trends in Pathfinder and Control areas

This chapter outlines the housing and labour market characteristics of the nine Local Housing Allowance (LHA) Pathfinder areas, and the three ‘control’ areas where a wide range of administrative and survey data was collected as part of the LHA evaluation. The chapter also examines the housing and labour market trends over time, as they affected the Pathfinder and Control areas. This chapter also sets out the rationale for distinguishing between the Housing Benefit (HB) ‘dominant’, ‘concentrated’ and ‘dispersed’ markets within the Pathfinder and Control areas.

House prices

The LHA Pathfinders were initially selected to cover a diverse range of local housing markets, including those with higher and lower levels of demand and prices. At one end of the scale, average house prices for two-bedroom dwellings in North East Lincolnshire were under £60,000 in 2003, while at the other end of the scale they were over £170,000 in Brighton & Hove.

Those local variations in prices were not just at the top end of the market – they impacted across the whole range of the market – the lowest decile prices for two- bedroom dwellings in North East Lincolnshire were just some £33,000 in 2003; while they were over £120,000 in Brighton & Hove.

The full range of house prices of two-bedroom dwellings in the LHA and Control areas in 2003 are set out in Table 3.1.

Table 3.1 House prices for two bedroom dwellings in 2003

Area House prices Lowest decile Lower quartile Mean average

Pathfinders

Blackpool £46,545 £54,687 £68,770

Brighton & Hove £122,812 £144,963 £172,858

Conwy £49,970 £62,750 £85,523

Coventry £54,000 £65,563 £79,083

Edinburgh £65,000 £85,000 £122,477

Leeds £47,500 £64,000 £93,417

Lewisham £100,000 £125,000 £150,857

N E Lincolnshire £33,400 £42,042 £59,425

Teignbridge £89,100 £99,750 £125,252

Controls

Cardiff £68,140 £81,988 £108,581

Wakefield £39,700 £53,000 £72,340

Wolverhampton £32,275 £47,875 £69,636

Source: Survey of Mortgage Lenders/Regulated Mortgage Survey


30

It can also be seen that there were differences in the local housing markets, not just in terms of the relative levels of house prices, but also in terms of the range of prices within those local housing markets. Thus, for example, average house prices for two-bedroom dwellings in 2003 were nearly double those at the lowest end of the local market (the lowest decile prices) in Edinburgh, Leeds, Wakefield and Wolverhampton, but less than 50 per cent higher in most of the other areas.

However, over the period of the LHA evaluation, the profiles of house prices in the LHA areas were subject to marked changes. In all areas prices increased rapidly, as in the rest of the country, but prices increased more rapidly in the LHA areas that had lower prices at the commencement of the LHA evaluation as shown in Figure 3.1.

Figure 3.1 Increases in average house prices for two bedroom dwellings between 2003 and 2006

While Brighton & Hove still had the highest house prices of the LHA areas in 2006, and lowest were in North East Lincolnshire, the gap between the prices in those areas had been substantially reduced. By the end of the period there were housing market pressures in all areas, and it was more difficult to distinguish between those areas in terms of concepts such as high and low demand.

While there were still marked house price differences between the areas in 2006, an element of those differences related to differences in levels of local earnings. When this factor is taken into account, the convergence between areas in terms of housing market pressure becomes evident over the years from 2003 to 2006. This is shown in Figure 3.2.

31


Using the average two-bedroom dwelling price, and the average full-time earnings, in 2003 house price-to-income ratios ranged from just 2.87 to 1 in North East Lincolnshire to 6.70 to 1 in Brighton & Hove. By 2006 those ratios had increased to 4.25 to 1 and 7.49 to 1 respectively. More generally, Figure 3.2 shows how the degrees of housing market pressures between the areas were far less differentiated in 2006; albeit that the ratios were still clearly highest in Brighton & Hove, Lewisham and Teignbridge.

Figure 3.2 House price to earnings ratios in 2003 and 2006

The full range of house prices in each of the Pathfinder and Control areas in the years 2003, 2004, 2005 and 2006, by size of dwelling are in Appendix A.

Housing market characteristics

There are other respects in which the Pathfinder areas exhibit a diverse range of housing market characteristics. In 2001, levels of home ownership ranged from just 50 per cent in Lewisham, to over 75 per cent in Edinburgh and Teignbridge, while levels of private renting ranged from just ten per cent in Edinburgh to 22 per cent in Brighton & Hove. The PRS was smaller still in the Control areas of Wakefield and Wolverhampton. The position for each Pathfinder and Control area is shown in Figure 3.3.


32

Figure 3.3 Tenure distribution in 2001

However, as discussed in the earlier chapter, there has been a significant growth in the size of the Private Rented Sector (PRS) in recent years, and for England as a whole the sector grew by almost 25 per cent in the four years to 2005/06. However local authority-level figures on the distribution of that growth in the sector are not available, so it is not possible to be sure how just how far the PRSs in each of the Pathfinder and Control areas followed the national trend.

There are also marked differences between the Pathfinder and Control areas in terms of the size of dwellings in the local housing market. It is notable that one and two-room dwellings only form a very small part of the market in all areas (from less than two per cent in North East Lincolnshire to eight per cent in Lewisham), and there are only three LHA areas where dwellings with three or fewer rooms make up even one fifth of the dwellings in the local market (Brighton & Hove, Edinburgh and Lewisham).

In contrast there are four Pathfinder areas, and one Control area, where dwellings with six or more rooms comprise more than two fifths of the local market (Blackpool, Conwy, North East Lincolnshire, Teignbridge and Cardiff). The size distribution of the housing stock in all areas is shown in Figure 3.4.

33


Figure 3.4 Size distribution of occupied dwellings in 2001

The differences in the size distribution of dwellings are only to some degree mirrored by differences in the social mix of the households resident in each area. Single people and childless couples below pensioner age comprise just over two-fifths of all households in Brighton & Hove and Edinburgh; but only just over 30 per cent in Conwy and Coventry.

Lewisham has the lowest proportion of pensioner households, and overall also has the lowest proportion of ‘small’ households – defined as all single and childless couple households of all ages – despite also having one of the highest proportions of small dwellings among the Pathfinder and Control areas.

Coventry, Leeds and North East Lincolnshire among the LHA areas also had relatively low proportions of small households, and more ‘larger’ households, defined as households with children or other multi-adult households. However of those three, only North East Lincolnshire also had a particularly high proportion of larger dwellings. The distribution of household types within all the Pathfinder and Control areas is shown in Figure 3.5.


34

Figure 3.5 Household types in 2001

Linked to the differences in household types, local markets also varied in the age distribution of those households. This distribution is only partly captured in the distinction between households above and below pensionable age in Figure 3.5. Figure 3.6 shows in more detail the age distribution of all household representative persons in each Pathfinder and Control area.

One first point to note is the very small number of households with a Household Representative Person (HRP) below the age of 25. This age threshold is particularly significant for single people in terms of the HB scheme. Only in four Pathfinder and one Control area did this group represent even five per cent of all HRPs (Brighton & Hove, Coventry, Edinburgh, Leeds and Cardiff), and in all cases these are University towns where around a fifth of those HRPs were full-time students and therefore outside the scope of the HB scheme.

In other areas, HRPs below the age of 25 were even less common – just 2.1 per cent of all HRPs in Teignbridge, and 2.5 per cent in Conwy. At the other end of the age range, households with an HRP aged 55 or over comprised about a half of all households in Blackpool, Conwy and Teignbridge, but only 30 per cent of all households in Lewisham.

35


Figure 3.6 Age of household representatives in 2001

The Private Rented Sector

If there is considerable diversity in the characteristics of the local housing markets in the Pathfinder and Control areas and the households resident in those areas, there is further diversity within the PRSs in each area. In broad terms the PRSs in each area tend to include a higher proportion of smaller dwellings, and also tend to accommodate smaller and younger households. The extent of those differences, however, varies substantially between one area and another.


36

Figure 3.7 Size distribution of private rented dwellings in 2001

Figure 3.7 shows that dwellings with three or fewer rooms account for a half of all PRS dwellings in Brighton & Hove, and more than two fifths in Lewisham. Only in Coventry, North East Lincolnshire and Wakefield do they make up less than a fifth of the local PRS.

Smaller dwellings comprise a greater proportion of the PRS than the owner-occupied sector in each area, as can be seen by comparing Figures 3.4 and 3.7. Nonetheless, in most areas dwellings with five or more rooms accounted for more than two-fifths of all dwellings in the sector. Indeed in North East Lincolnshire they comprise more than three fifths of all dwellings in the sector. Only in Brighton & Hove and Lewisham did they comprise less than 30 per cent of all the dwellings in the sector.

The differences between the size of dwelling in the PRS compared to other tenures in each area is, in part, related to differences in the characteristics of the households in the PRS compared to other tenures in each area.

Figure 3.8 shows the characteristics of the households in each of the Pathfinder and Control areas. In broad terms, as can be seen by making a comparison with Figure 3.5, there are fewer pensioner households, and fewer couples with children in each area. There also tends to be slightly fewer childless couples. In contrast there are far more non-pensioner single people, and their also tend to be more lone parent and ‘other’ households.

37


There, are, however, marked differences between the areas, particularly in terms of lone parent and ‘other’ households. Those differences are not quite as distinct as the broader differences in each area. Thus for example Lewisham has a higher proportion of lone parent households than any other area, but the lowest proportion of lone parents in the PRS.

Figure 3.8 Household types in the private rented sector

There are also particularly sharp differences in the proportions of ‘other’ households, and these represent over a fifth of all households in the PRS in Coventry, Edinburgh, Lewisham and Cardiff. In each case, a large proportion of those ‘other’ households comprise students sharing a dwelling.

The age profile of households in the PRS is also distinctive; with a far higher proportion of younger households than in the wider local housing markets. Indeed, there are only three Pathfinder areas and one Control area where households with a household representative person aged under 35 form fewer than a half of all households in the local PRS: Blackpool, Conwy, Teignbridge and Wakefield. While it is notable that none of those are University towns, in no area do students comprise more than 30 per cent of the total number of households aged under 25.

Whilst in all areas students are only a minority of the younger households in the PRS, it is nonetheless three University towns where the total numbers of households aged under 35 account for more than three-fifths of all households in the PRS: Edinburgh, Leeds and Cardiff.


38

The proportion of younger households with assured tenancies in each area will be higher still, as by definition the households with regulated tenancies (which will have commenced before January 1989) will inevitably tend to be within the older age bands.

Figure 3.9 Age of household representatives in the private rented sector in 2001

Housing Benefit sub-sectors

Just as the PRS plays a distinctive role within each of the Pathfinder and Control areas, so the Housing Benefit sub-sectors play a distinctive role within the wider PRS in each area. The characteristics and role of the Housing Benefit sub-sector also differs widely from one area to another, and those variations constitute the basis on which it is possible to distinguish between ‘dominant’, ‘concentrated’ or ‘dispersed’ HB markets (see next section of paper).

As already seen, while the PRS is one of the smaller sectors in each Pathfinder housing market, its size varied from ten per cent in Edinburgh to 22 per cent in Brighton & Hove. There is a similarly marked difference in the size of the HB sub-sectors within the PRS, varying from under a quarter of the PRS in Leeds, to almost four fifths of the sector in Blackpool. In this context, the measured the HB sub-sector was measured as a proportion of the wider PRS including dwellings that were let rent free either by employers, friends or relatives.

39


The proportion of the HB sub-sector of the PRS in each Pathfinder and Control area, and the proportion of dwellings let ‘rent free’ in each area, are both shown in Figure 3.10. The dwellings in the PRS let ‘rent free’ are not readily accessible to HB claimants, as they mainly comprise lettings by employers, friends or relatives.

However, due to some confusion by households in completing the census forms the ‘living rent free’ cases will also include a number of tenants whose rent is wholly covered by HB paid direct to the landlord, rather than tenancies for which no rent is levied. The numbers falling under this category in the PRS are relatively small, not least because so few HB claimants in that sector have their full rent eligible for assistance.

Figure 3.10 Housing Benefit cases as a percentage of the total local private rented sector


40

If the ‘living rent free’ cases are excluded, then the HB cases represent a slightly higher percentage of the element of the PRS that is readily accessible to the general public.

However, it should be borne in mind that this assessment is based on the HB caseload at February 2005, roughly the midpoint of the LHA evaluation period, while the local private rental data is from the 2001 Census. Nationally the PRS grew by some 14 per cent between 2001 and 2005, but no information is available on the extent of the growth in each of the individual Pathfinder and Control areas. In that context it is possible to use the analysis to suggest a maximum share of the local PRS occupied by HB claimants, while recognising that in practice that the share in each area is now likely to be rather lower than that shown based on the 2001 Census data.

Equally there is no evidence to suggest that there has been any significant change in the relative position of each Pathfinder and Control area in terms of the shares of the local rental sector occupied by LHA claimants. For example, it is probable that the HB sub-sectors in Blackpool and North East Lincolnshire still comprise over three-fifths of the local PRS while in all other areas the HB sub-sector comprises less than two-fifths of the overall local rental sector.

There is also a distinctive difference in the profile of dwellings by size in the PRS, and the size profile of dwellings in the PRS occupied by HB claimants. In broad terms HB claimants are more likely to occupy smaller dwellings in the PRS, and therefore represent a higher proportion of the total PRS market for smaller dwellings, than is the case generally.

It is, however, difficult to be precise about this, not just because of the changes in the PRS since the 2001 Census, but also because the Census and HB statistics define dwelling size in different ways. The key point is that the Census data includes the kitchen and the HB excludes the kitchen in the count of rooms. This difference cannot be simply countered by deducting one room from the Census counts to remove the kitchens, as in a proportion of the cases dwellings have combined kitchen and dining rooms, and these are counted as rooms for the purposes of the HB statistics.

Bearing that in mind, Figure 3.11 shows the distribution of the numbers of rooms occupied by LHA claimants in February 2006, compared to the Census count for the whole PRS in 2001, and the Census figures adjusted by deducting one room from the total (except in the case where only one room is recorded). In practice the figure for rooms excluding kitchens will lie somewhere between the unadjusted and adjusted Census figures, depending on the local incidence of dwellings with combined kitchen-dining rooms.

But even if the adjusted PRS figures are compared with the HB households in the PRS it is clearly apparent that in all areas there is a much higher proportion of HB claimants in the smaller dwellings available within the PRS. It also suggests that in the two areas where the HB sub-sector is the dominant part of the PRS overall (Blackpool and North East Lincolnshire), there will be limited opportunities for a greater proportion of claimants to move into smaller dwellings.

41


Figure 3.11 Proportion of dwellings with one or two rooms

Categorising the Local Housing Allowance and Control Areas

While, as outlined above, the LHA areas were initially selected to ensure that they covered housing markets with greater and lesser degrees of market pressure, the continued rise in house prices over the last few years increased the market pressures in all areas, and at the same time reduced the differences of degree between the areas.

Similarly, over the last few years the increase in levels of net inward migration have impacted on all parts of the country, so there are no longer any regions where house building rates are ahead of levels of household growth. Areas that had concerns about ‘low housing demand’ just three or four years ago have seen those problems evaporate under increasing market pressures, except in very few localities.

For the purpose of the LHA evaluation a focus has been placed more directly on the characteristics of the local PRS, and the extent of the HB sub- sector within the local PRS. On that basis, in the areas under consideration, three different types of HB submarket were discernible. These markets have been categorised as ‘Housing Benefit Dominant’, ‘Housing Benefit Concentrated’ and ‘Housing Benefit Dispersed.’

This categorisation was predominantly based on the available data on the relative size of the HB sub-sector within the local PRS, and the extent to which the PRS was concentrated or dispersed geographically across each area. However some account was also taken of local perceptions of the market, especially in the cases of Brighton & Hove and Conwy.


42

The key data used to arrive at the categorisation is set out in Table 3.2. This is based on claimant numbers at February 2004, as this categorisation was made early during the evaluation process (rather than the February 2005 numbers used in Figure 3.10).

The most straight forward element of the classification is based on the proportion of households within the PRS (excluding rent free lettings) that are Housing Benefit claimants. Only in two areas do Housing Benefit claimants comprise more than a half of the local PRS – Blackpool and North East Lincolnshire, where HB claimants respectively account for 81 per cent and 73 per cent of the total lettings in the PRS. The distinction between these areas, and all the other Pathfinder and Control areas is very clear cut.

However, as noted above, the PRS as a whole grew substantially in the years following the Census, by an average of ten per cent nationally between 2001 and 2004, although we do not have any data on the precise extent of the growth at the local level. The figures in Table 3.2 will all thus, to some degree, overstate the size of the HB claimant sub-sectors within the wider PRS.

The further categorisation of the areas where the HB sector was not dominant was made between those cases where demand from benefit claimants was more spatially concentrated within the local area, and those areas where demand was more dispersed. This categorisation also took account of the total size of the proportion of PRS households receiving HB, as well as the degree of dispersion of the overall PRS.

43


Table 3.2 Quantitative information used in defining the HB sub-markets

Market types Proportion of all Highest proportion Index of Proportion of of Pathfinder and households living of households concentration PRS households Control areas in the PRS living in the and dispersion receiving HB (per cent)* PRS in any ward of PRS in (per cent) (per cent) each area # ¶

HB dominant

Blackpool 17.7 45 2.04 81

NE Lincolnshire 10.1 21 1.85 73

HB concentrated

Conwy 12.6 31 1.69 45

Edinburgh 11.7 42 2.28 31

Leeds 10.1 58 2.88 25

HB dispersed

Brighton & Hove 21.8 49 1.83 40

Coventry 10.2 22 1.52 43

Lewisham 12.7 19 1.44 41

Teignbridge 11.9 25 1.39 41

Controls

Wakefield 5.8 11 1.29 35

Wolverhampton 7.2 21 1.49 43

Cardiff 11.1 50 1.62 32

Sources: *2001 census data – PRS figures here exclude dwellings where households are living rent free; #see text for definition

of index of concentration and dispersion ¶HB PRS caseload data for February 2004 from DWP.

Geographical concentration and dispersion of the PRS can be measured in a number of ways from ward level Census data. However, as individual wards vary in size, the data in Table 3.2 is focused on the wards with the greatest degree of concentration of the PRS that contain approximately 50 per cent of the total PRS in the local area.

Thus, for example in those wards with the highest proportion of PRS households dwellings that made up approximately 50 per cent of the local PRS, those households were 2.04 times more likely to be PRS households than was the case for the local authority area as a whole.


44

In other words while the PRS represented some 17.7 per cent of the total stock across Blackpool as a whole, those wards with the greatest concentrations of the PRS, and that comprised half of the local PRS contained 35.9 per cent (17.7 times 2.04) PRS households.

Similarly, in Coventry (one of the less concentrated areas), while the PRS represented some 10.2 per cent of the total stock, those wards with the greatest concentrations of the PRS, and that comprised half of the local PRS contained 15.5 per cent (10.2 times 1.52) PRS households.

On these measures Edinburgh and Leeds clearly had more concentrated PRS sectors, while Coventry, Lewisham and Teignbridge all clearly had more dispersed PRS sectors.

Conwy and Brighton & Hove were intermediate cases, with Conwy having a slightly higher proportion of HB claimants within the PRS, and Brighton & Hove having a slightly more concentrated PRS. Taking both these factors into account, together with the views of the sector arising from the interviews with local professionals and landlord representatives, Conwy was categorised as a concentrated market, and Brighton & Hove was classified as a dispersed market.

The project did not formally classify the Control areas, but their characteristics are such that they would have all have been categorised as Housing Benefit dispersed markets on the basis of the data shown in Table 3.2, albeit that the classification is rather more marginal in the case of Cardiff.

Similarly, no formal classification was made for the wider group of ‘comparator’ areas included in the analysis of the administrative data collected by the Department. However it should be noted that one of the comparator areas (Hartlepool) would qualify as HB dominant market, given that the HB caseload in the area in February 2004 represented some 67 per cent of the wider PRS (excluding dwellings let rent free) as reported in the 2001 Census.

This classification of market types was used in the analysis of both the claimant and landlord surveys, and is used here in the analysis of housing market impacts that draws primarily on the data sets on caseloads and rent levels compiled by the DWP.

A brief sketch of the substantive difference between each category of market type, and the possible market behaviours that they might be expected to give rise to, is set out in the following paragraphs. Whether or not those behavioural impacts could be discerned in practice is addressed in the following chapter.

Housing Benefit dominant markets

Within this kind of market, demand for rented property from households in receipt of HB dominates the PRS, and low demand for rented property is evident from other market segments, such as students or young professionals. The balance of power between tenant and landlord can depend on the nature of the local owner occupied market. Where owner occupied house prices are stagnant, tenants within the Housing Benefit Dominant markets might be more likely to be able to successfully negotiate over rent levels, since landlords can be less willing to sell their property on the owner occupied market.

45


However, ‘cartel-type’ behaviour from organised landlords and letting agents, including a general trend towards setting the rents at or above Housing Benefit levels, might prove to be an obstacle to tenants ‘shopping around’. Pathfinder areas in this category include Blackpool and North East Lincolnshire.

Housing Benefit Concentrated markets

Within the HB Concentrated markets, demand for properties from households reliant on benefit might be met by a group of landlords and letting agents whose business is largely oriented towards dealing with that sub-market. Other, sometimes very strong, markets do exist in the locality. The HB Concentrated sub-market is long standing, and is often concentrated geographically within a given locality in the town or city, that might include whole neighbourhoods or sometimes just one or two streets, and might also include certain property types, such as houses in multiple occupation.

The spatial concentration of property might restrict the ability of the landlord or letting agent to meet demand from other groups, since those areas may not be desirable to other demand groups. However, where other markets are particularly pressured and rents are increasing rapidly, the incursion of alternative demand groups into the HB areas may begin to happen to the detriment of property supply to tenants reliant on benefit. This type of market is evident in three of the case study areas: Conwy, Edinburgh, and Leeds.

Housing Benefit Dispersed markets

A further type of market is one in which demand for and supply of properties to households in receipt of HB is largely hidden within the PRS, having no evident spatial concentration, and being without a set of landlords and letting agents that either seeks to meet demand from that group or even routinely let to that group. Although the proportion of households in the PRS may be higher than average, the demand is dispersed throughout the local authority, with high levels of demand also evident from other groups of renters. Brighton & Hove, Coventry, Lewisham, and Teignbridge are included within this category.

Labour market characteristics and trends

There are also distinctive features of the labour markets in each of the Pathfinder and Control areas, and these are outlined below. These differences are important both in terms of their direct impact on the local housing market, but also because one of the dimensions of the LHA evaluation was to explore to what extent the LHA reforms might have any impact on the labour market behaviour of claimants.

Employment and unemployment

The economic activity rate measures the proportion of working age individuals that are available for employment. The rate thus includes both those that are employed and those that are unemployed but available for, and seeking, employment. Those available for work are then measured as a proportion of all working age people, including those not available for work, whether this is in connection with raising children, sickness or disability.


46

Economic activity rates varied quite widely between individual LHA areas, with the lowest economic activity rates in Blackpool and the highest in Teignbridge. They also tended to be somewhat higher in Brighton & Hove, Edinburgh and Leeds, and rather lower in Conwy, Coventry, Lewisham and North East Lincolnshire.

Changes in economic activity rates over the years varied from area to area. On average, there was only a limited change over the period of the LHA evaluation; but this involved a slight increase in the average economic activity rate between 2004/05 and 2005/06, from 78.3 per cent to 79.2 per cent (unweighted average).

Figure 3.12 Economic activity rates

Economic activity rates also tended to be lower in the Control areas, compared to the Pathfinder areas: the lowest economic activity rates for any of the areas was found in Wolverhampton. For the Control areas as a whole, economic activity rates improved slightly in 2004/05, but fell back again in 2005/06.

Over the period from 1999/00 to 2005/06 as a whole there was a significant reduction in unemployment rates across all the Pathfinder and Control areas, but that reduction essentially occurred in the early years of the decade, before the start of the LHA evaluation period. Between 2003/04 and 2005/06 there was no overall change in average unemployment rates across all the LHA areas, and only a marginal improvement in the Control areas.

47


Within that broad pattern there were significant differences between individual Pathfinder and Control areas. Unemployment rates throughout were highest in Lewisham, and lowest in Teignbridge. However both these areas experienced a slight reduction in unemployment rates between 2003/04 and 2005/06, while they increased over that period in Brighton & Hove and Leeds.

Figure 3.13 Unemployment rates

There were also some significant differences in the structure of the local labour markets in the Pathfinder and Control areas. While in all areas the majority of employees were in full-time, rather than part-time employment, 30 per cent or more were in part-time work in Conwy, North East Lincolnshire and Teignbridge. In contrast only just over 20 per cent were in part-time work in Blackpool.

These variations are important, as households with only one earner in part-time work are far less likely to be able to secure a sufficient level of earnings to pay a private sector rent without still needing to rely on HB. This point is discussed further in the chapter on the labour market impacts of the LHA.


48

Figure 3.14 Balance of full-time and part-time employees

Figure 3.15 Self-employment as a percentage of all in employment

49


Similarly, there were marked differences between the Pathfinder and Control areas in the proportion of those in work that were self-employed, as can be seen in Figure 3.15. Within the Pathfinder areas, self-employment was highest in Teignbridge, followed by Lewisham, Conwy and Brighton & Hove. It was lowest in Leeds, which had less than half the rate of self-employment found in Teignbridge.

Self-employment rates were also lower as a whole in the Control areas. There are particular issues around HB that relate to self-employment, particularly in terms of the basis on which their incomes are assessed, and their variability over time. This relates to the broader issue of the take-up rates of HB by households in employment, and this is also discussed further in the chapter on the labour market of the LHA.

Economic activity in the Private Rented Sector

The Census provides information on the distribution of economic activity rates by tenure in 2001. While in all areas the economic activity rate tends to be lower in the PRS – excluding accommodation where households are living rent free – than for the total local population, there are marked differences in the extent of the tenure variations in economic activity in different areas. The variation is shown in Figure 3.16 (which does not include Edinburgh as compatible Census data is not readily available).

Figure 3.16 Economic activity rates in the private rented sector compared to the total local population(*)


50

While economic activity rates in the PRS are only slightly lower than the local average in most areas, and especially those that tend to have higher overall economic activity rates, there are a number of areas where the economic activity rate in the PRS is far lower. These include Blackpool, Coventry, North East Lincolnshire and Cardiff.

In all cases, the figures relate to the PRS excluding dwellings that are let rent free. Many of those will be lettings provided linked to employment. However for the purposes of this evaluation it is appropriate to exclude them from consideration as by definition as they are rent free and so none of them will be occupied by households in receipt of HB.

Earnings

Earnings levels vary quite substantially across the Pathfinder and Control areas, and this has implications for the potential for households to secure jobs that would enable them to pay a private rent without needing to rely on HB. The relationship between earnings and rent levels is also discussed further in the later chapter examining the possible impact of the LHA on claimants’ employment behaviour.

Figure 3.17 Lower quartile full-time earnings

51


Figure 3.17 shows the levels of lower quartile full-time earnings in each of the Pathfinder and Control areas between 2002 and 2006. This is taken as a central measure as, by definition, working households claiming HB will tend to have earnings levels towards the lower end of the earnings distribution. However, tables also showing lowest decile, median and mean full-time earnings time are set out in Appendix A.

Figure 3.17 shows that earnings are significantly higher in Lewisham, Brighton & Hove and Edinburgh. However, while higher levels of earnings in general make it easier for working households to avoid HB dependency, it is also the case that these are areas with relatively high rent levels. The inter-relationship between earnings and rent levels, and their impact on the potential for working households to avoid HB dependency is discussed further ahead.

It is also clear from Figure 3.17 that earnings levels increased quite markedly in some areas between 2002 and 2006 (Brighton & Hove, Edinburgh, Leeds, Lewisham and North East Lincolnshire), and much less so in other areas.

It is also noticeable that the two areas with the ‘Housing Benefit dominant’ markets – Blackpool and North East Lincolnshire – were those with the lowest levels of earnings in 2002. Blackpool saw very little earnings growth in the years to 2006, and remained the area with the lowest earnings in 2006. While there was some increase in the earnings levels in North East Lincolnshire this was only sufficient to raise their earnings levels up to that of the ‘middle’ group of Pathfinder and Control areas with moderate levels of earnings (Conwy, Teignbridge, Wakefield and Wolverhampton).

Finally, it should be noted here that some caution should be exercised in looking for short-term trends in local earnings levels from one year to another. The sample sizes for the Annual Survey of Hours and Earnings are generally sufficient to provide robust local level data, and typically standard errors are less than five per cent. However, for some smaller areas the standard errors can be rather higher.

As indicated at various points previously, the evidence on the characteristics of the local labour markets in the Pathfinder and Control areas provide the context for exploring the issues around the potential impact of the LHA on claimants engagement with the labour market, which is discussed in Chapter 5.

Summary

The housing and labour markets in the Pathfinder and Control areas were subject to major changes over the LHA evaluation period.

House prices rose substantially in all areas, but most rapidly in areas with relatively low values, and less rapidly in the areas with high values. By the end of the LHA evaluation period there were housing market pressures in all areas, and it was more difficult to distinguish between areas in terms of concepts such as high and low demand although there were still some marked differences.

There were distinct differences in the characteristics of the local housing markets in each Pathfinder and control area, both in overall terms, and in terms of the PRS in particular. The PRS comprised from between ten per cent (Edinburgh) to 22 per cent (Brighton & Hove) of the local LHA housing markets, but less than ten per cent in two of the Control areas.


52

There were also marked differences in the size of dwellings, and the age of types of households in each area, while in each area the PRS had quite distinct characteristics both in terms of the type and size of dwellings, and the households residing in the sector. In particular, the PRS in each area tended to include a higher proportion of smaller dwellings, and to accommodate smaller and younger households.

Dwellings with three or less rooms comprised a half of all the PRS dwellings in Brighton & Hove, but less than a fifth of the sector in Coventry, North East Lincolnshire and Wakefield. Households with a household representative person aged below 35 occupied more than a half of all the PRS dwellings in Brighton & Hove, Coventry, Edinburgh, Leeds, Lewisham and Cardiff.

There were also marked differences in the size of the HB sub-sector within the PRS in each area. The Housing Benefit sub-sector in Blackpool and North East Lincolnshire comprised over 70 per cent of the total PRS (excluding dwellings provided rent free and based on 2001 Census stock figures). These were characterised as HB dominant markets.

In all other Pathfinder and Control areas the HB sub-sector represented less than a half of the total local PRS, but in some areas the PRS tended to be concentrated in specific localities within the wider local authority areas. This applied in the cases of Conwy, Edinburgh and Leeds and these were characterised as HB concentrated markets.

In the other Pathfinder areas the PRS was more dispersed across the local authority, and those areas (Brighton & Hove, Coventry, Lewisham and Teignbridge) were characterised as HB dispersed markets.

Economic activity rates varied quite widely between individual Pathfinder areas, with the lowest economic activity rates in Blackpool, and the highest in Teignbridge. Economic activity rates also tended to be rather lower in the Control areas, compared to the LHA areas.

While between 1999/00 and 2005/06 unemployment rates fell more or less substantially across all the Pathfinder and Control areas, there was no overall reduction in unemployment rates across the Pathfinder areas between 2003/04 and 2005/06, and only a marginal average fall in the Control areas. While unemployment rates did fall in some Pathfinder areas over that period, they rose in Brighton & Hove and Leeds.

Against the wider local labour market position, households in the PRS were less likely to be economically active. Economic activity rates were particularly lower in Blackpool, Coventry, North East Lincolnshire and Cardiff.

Earnings levels varied substantially between the Pathfinder and Control areas, and were significantly higher in Brighton & Hove, Edinburgh and Lewisham. Variations in earnings were, however, far less marked than the variations in house prices. Earnings were lowest in Blackpool and North East Lincolnshire – the two areas with dominant HB sub-sectors.

53


Chapter 4: The housing market impacts Of The Local Housing Allowance

This section of the market stream report presents the evidence on the overall housing market impacts of the Local Housing Allowance (LHA). The chapter draws on data collected directly by Department for Work and Pensions (DWP), the landlord and claimant surveys, the case study interviews with local professionals, and wider contextual data sets.

There are a number of dimensions to the analysis of housing market effects. This includes the impacts of the LHA on both private landlords and claimants, and on the wider housing market in each Pathfinder area. Central to the analysis is an exploration of the impact of the LHA on the supply and accessibility of private lettings to claimants, and on the level of private rents in the local market.

There are two critical features of the LHA, compared to the mainstream Housing Benefit (HB) scheme for private tenants, that could have an impact on the local market. The first feature is that the LHA is predominantly paid to claimants rather than to landlords and this consequently adds to the management task faced by landlords letting to claimants.

The second feature is that the LHA is based on ‘flat rate’ local allowances related to the size of the household, rather than either the rent of the dwelling or the full range of rent limits that apply to eligible rents under the main HB regime. The LHA allowances are set on the same basis as the ‘local reference rents’ under the mainstream scheme.

However, the LHA single room rate for young single people is set on a slightly more generous basis than applies for the single room rents set under the mainstream regime (see Glossary for full definitions). As a result of this, and the absence of other Rent Officer limits on eligible rents, the LHA regime as a whole is in many cases rather more generous than the mainstream regime.

This chapter begins by examining the evidence on the impact of the LHA of the supply of private sector lettings to claimants. It then turns to the impact of the LHA on local rent levels, and the net impact of the LHA for claimants, before turning to a brief consideration of wider housing market impacts.

The supply of private lettings to claimants

The evidence from the landlord surveys suggested that a substantial minority of landlords and lettings agents were ‘less likely’ to let to claimants under the LHA regime, and of those some three quarters cited the ending of routine direct payments to landlords as a reason for that stated preference (1). Those survey findings reflected widely expressed concerns that as a consequence of landlord preferences there could be a decline in the opportunities for claimants to access lettings in the Private Rented Sector (PRS) in the Pathfinder areas.


54

The evidence from the landlord surveys also suggested that the stated preferences of landlords and agents did impact on their decision making, with one in six landlords indicating that they had decided not to renew a tenancy following the introduction of the LHA regime. A quarter of landlords and agents further indicated that they had subsequently refused to let to a potential new tenant because they would be claiming HB/LHA.

However, the surveys only found only a very small reduction in the proportion of landlords and agents letting to claimants, from 82 per cent at the baseline to 80 per cent at the final survey. While the surveys also suggested that there was a ten per cent decline in the proportion of lettings to claimants in the portfolios of the landlords and agents that provided the required data at the baseline and final surveys, the net impact on claimants was partly offset by the seven per cent growth in the size of the portfolios of those landlords over the same period of time.

Taken together the surveys suggested that the impact on landlords and agents actions in lettings to LHA claimants was less marked than suggested by their stated preferences.

Direct evidence on HB claimant numbers in the PRS is available from the routine returns that the DWP collects quarterly from all local authorities on their HB caseloads. While local data are routinely published quarterly showing caseload numbers for rent rebates (local authority) and rent allowances (housing association and private landlords), the data collected also shows separate figures for housing association and private landlord cases.

These figures are set out in Table 4.1, for each of the nine Pathfinder areas, for the nine ‘comparator’ areas, and for Great Britain as a whole. The data shows the caseload numbers for November 2003, prior to the commencement of the LHA, and for February 2006, following the completion of the two-year evaluation period in all the nine LHA areas. The start dates for the individual Pathfinders were staggered between November 2003 and February 2004.

There are two points to note. The first is that over this period the numbers of HB claimants accessing the PRS grew nationally, after a run of years when numbers had been declining. As discussed in Chapter 2, this was predominantly related to the wider growth of the PRS in the years since 2001.

The second, and most critical, point is that PRS caseload numbers grew as least as much in the Pathfinder areas as in either the Pathfinder ‘comparator areas’, or across Great Britain as a whole. While there was substantial variation in the extent of the rise in caseload numbers between individual Pathfinder areas, there was not one Pathfinder area where the caseload numbers fell over the two-year evaluation period.

55


Table 4.1 Housing Benefit caseloads in the Private Rented Sector (thousands)

Areas November 2003 February 2006 Percentage change

Pathfinder areas

Blackpool 8.2 9.4 14.6

Brighton & Hove 8.6 10.2 18.6

Conwy 2.6 2.7 3.8

Coventry 4.5 5.4 20.0

Edinburgh 5.8 7.4 27.6

Leeds 6.8 7.8 14.7

Lewisham 4.5 5.8 28.9

North East Lincolnshire 4.5 5.1 13.3

Teignbridge 2.4 2.6 8.3

All Pathfinder areas 47.9 56.4 17.7

Comparator areas

Bristol 5.0 6.8 36.0

Cardiff 4.1 4.8 17.1

Haringey 5.9 7.9 33.9

Hartlepool 2.0 2.3 15.0

North Devon 2.3 2.6 13.0

Scarborough 3.0 3.1 3.3

Swansea 3.9 3.9 0.0

Wakefield 2.7 2.7 0.0

Wolverhampton 2.8 3.2 14.3

All comparator areas 31.7 37.3 17.7

Great Britain 722.9 839.0 16.1

Source: DWP. The data for Edinburgh should be treated with caution, due to the uncertain impact of IT changes at the commencement of the LHA period.


56

However, it should be noted that there are some doubts about the precision of the November 2003 figures for Edinburgh, related to the local introduction of a new IT system at that time. Nonetheless, even if the Edinburgh figures are discounted, the average increase in caseloads for the other eight Pathfinders, at 16.4 per cent, was still higher than for all authorities across Great Britain as a whole, albeit marginally lower than the average for the nine ‘comparator’ areas.

The variations between Pathfinders in the rate of growth in caseload numbers do not clearly relate to the market typology developed for this evaluation. While the caseload growth in the two HB dominant areas (Blackpool and North East Lincolnshire) was slightly below the average rate for Great Britain as a whole, there was no consistent pattern across or between the Housing Benefit concentrated and HB dispersed areas.

However, overall it is clear that the stated preference of some landlords and agents, that they are ‘less likely’ to let to LHA claimants, has not in practice had any discernable impact on the capacity of claimants to obtain and sustain tenancies in the PRS.

If this is a critical finding, it nonetheless raises questions about how this finding can be reconciled with the survey evidence that some landlords and agents were ‘less likely’ to let to LHA claimants. There are a number of ways in which these findings might be reconciled, and these have been examined through the further data collected by DWP from the LHA and comparator areas.

A first point to note is that the landlord survey only covered landlords and lettings agents in business at the commencement of the LHA period. In that context, one possibility is that new landlords have entered the sector so offsetting the reluctance of a minority of the ‘baseline’ landlords to let to LHA claimants.

It is also possible that the expressed preference by some baseline landlords and agents was not strong enough to have any significant impact on their lettings decisions in practice. That preference could, for example, be set aside in cases where LHA claimants were able to provide guarantors for the rent or for properties where there was limited demand from non-claimant households. More generally it is commonly found that expressed preferences do not always translate into behaviour.

A further possible explanation could be that the LHA, which is in many cases more generous than the mainstream HB regime for private tenants, has made it easier for claimants to sustain tenancies in the PRS. As a consequence, the growth in caseload numbers in the LHA is related to an increase in the duration of claims, rather than an increase in the numbers of claimants newly accessing the sector.

The extent of net gains to claimants from the more generous LHA regime depends, however, on whether and to what extent landlords have revised the rents for lettings to claimants in response to the LHA regime, and the explicit guidance it gives on the levels of rent that will be covered by local allowances. This issue is considered in detail ahead, however at this point it is sufficient to present evidence to show that claimants have gained under the LHA regime in practice, notwithstanding any landlord response when setting rents for lettings to claimants.

57


Table 4.2 shows that the proportion of claimants with a shortfall between their contractual rent and the level of rent eligible for HB was much lower following the introduction of the LHA in every Pathfinder area. By contrast, there was only a very small reduction in the incidence of shortfalls among claimants in the nine comparator areas over the same period.

Table 4.2 Proportion of tenants with a shortfall between their contractual and eligible rents

Percentages

Areas 2003/04 Baseline February 2006 Reduction

LHA Areas

Blackpool 75 53 22

Brighton & Hove 48 32 16

Conwy 72 59 13

Coventry 53 35 18

Edinburgh 49 28 21

Leeds 63 39 24

Lewisham 42 29 13

North East Lincolnshire 76 57 19

Teignbridge 55 37 18

All LHA Areas 59 40 19

All Comparators 62 57 5

Source: DWP. The data are weighted by the distribution of claimants at Wave 2 of the claimant survey interviews.

In addition to the marked reduction in the number of claimants facing shortfalls, under the LHA regime the level of the allowance may exceed the level of the contractual rent leaving the claimants with an ‘excess’. In fact this applied to a majority of claimants throughout the Pathfinder evaluation period, and at February 2006 56 per cent of all claimants in LHA areas qualified for an excess (weighted on the same basis as Table 4.2). In just three per cent of all cases was the rent exactly in line with the LHA.

Taken together, this evidence clearly shows that claimants gained under the LHA and so it should therefore have become easier for them financially to sustain their tenancies over time. In this context the claimant surveys found that movers in LHA areas were less likely to cite the level of the rent as a reason for moving, compared to movers in the three Control areas where claimants were surveyed (2). This issue has been


58

examined further here by analysing data on the flows of private sector claimants ‘on to’ and ‘off of’ HB in each of the LHA and nine comparator areas.

There has been a substantial decline nationally in the numbers of new cases in all tenures, due to the change in definition of ‘new cases’ introduced in the spring of 2004, following which claimant households taking up employment were no longer treated as new claims. Instead, the move into employment is now (with minor exceptions) treated as a change of circumstances with respect to an existing claim.

Data on new cases within the PRS for all Pathfinder and comparator areas are shown in Table 4.3. Edinburgh and Leeds are excluded from the analysis due to problems with the data at the beginning of the Pathfinder period. Table 4.3 compares the number of new cases within the first quarter of 2004, and the first quarter of 2006. This comparison is not entirely ideal as the Pathfinders were all underway by the first quarter of 2004.

Table 4.3 New cases in the Private Rented Sector in the quarters ending March 2004 and March 2006

Areas March 2004 March 2006 Percentage quarter quarter reduction

LHA areas

Blackpool 2,308 1,298 43.8

Brighton & Hove 2,564 1,262 50.8

Conwy 508 323 36.4

Coventry 848 735 13.3

Lewisham 751 691 8.0

North East Lincolnshire 1,373 569 58.6

Teignbridge 434 306 29.5

All LHA areas 8,786 5,184 41.0

All comparators 7,418 4,469 39.8

Source: DWP. Edinburgh and Leeds are excluded due to unreliable data.

The difference between the average reduction in the numbers of new cases between the Pathfinder areas and the comparator areas is very small. While there is a marginally greater reduction in the numbers of new private sector cases in the seven LHA areas for which data is available, this broadly corresponds with the marginally slower growth in overall claimant numbers in those seven areas (16.7 per cent) compared to the comparator areas (17.7 per cent) over the period shown in Table 4.1.

59


Another perspective on this issue is provided by the data, for Pathfinder areas only, on the flows of LHA claimants off of, as well as on to, HB. These data relate solely to the LHA cases, rather than to all private sector tenancies. They thus exclude the private tenants with secure tenancies and others exempted from the LHA provisions. They also exclude transitionally protected cases and some other cases.

Table 4.4 shows the data for the second year of the LHA – for the quarters ending from May 2005 to February 2006. These represent quarters after the (virtual) completion of the transitional phasing of existing claimants on to the LHA during the first year of the LHA. For those quarters the flows on to the LHA are thus virtually all flows of new claims.

Table 4.4 Flows of claimants on to, and off of, Local Housing Allowance in the Pathfinder areas in the quarters ending May 2005 to February 2006

Quarters Flows on Flows off Net flows

May 2005 6,328 5,155 1,173

August 2005 6,514 4,806 1,708

November 2005 5,890 5,263 627

February 2006 6,270 4,881 1,389

Total all quarters 25,002 20,105 4,897

Source: DWP.

First of all it can be seen that the rate at which new cases flowed on to the LHA over those four quarters substantially exceeded the rate at which they flowed off the LHA. There is, however, no unequivocal quarterly trend or pattern in the numbers of flows on or off the LHA between the four quarters.

Flows on to the LHA rose in the quarter to August 2005, fell quite substantially in the quarter to November 2005, and then recovered in the quarter to February 2006 more or less back to the level in the quarter to May 2005.

There were also quarterly variations in the levels of cases flowing off the LHA, with peak flows off in the quarter ending November 2005. Even so, the average number of cases flowing off the LHA in the last three quarters (4,980 per quarter for all LHA areas combined) was a little lower than the level in the first post transition quarter to May 2005 (5,155).

Given that the stock of LHA cases was growing quarter by quarter the rate at which cases were flowing off the LHA was lower still in the final quarters. Overall, the cases flowing off the LHA equated to just over ten per cent of the total LHA caseload at February 2006.

These figures illustrate the point that the growth in LHA caseload numbers was a result both of the difference between flows on and off of the LHA, and a declining rate at which cases were flowing off of the LHA towards the end of the two-year evaluation period. However, they do not permit any firm wider conclusions to be drawn, as equivalent data is not available for the comparator areas.


60

Overall, these data suggest that there is little difference between the LHA and comparator areas in the relationship between levels of new claims, the duration of claims, and overall caseload numbers. This in turn suggests that while the more generous LHA regime will have made it easier for claimants financially to sustain their tenancy over time, this has not so far been a significant factor in the growth of total caseload numbers in the LHA areas relative to other areas, albeit that there are some signs of what could be an emerging trend for cases to flow off of the LHA at a slower rate over time.

If, thus far, changes in the duration of claims has not been a discernable factor impacting on LHA caseloads this removes one potential explanation of the rise in LHA caseloads despite the stated preferences of minority of landlords against letting to claimants under the LHA regime. On the available evidence we can only conclude, very broadly, that to the extent those stated preferences led baseline landlords to limit the lettings they subsequently knowingly made to LHA claimants, that impact was offset by the lettings made by new landlords entering the sector after the commencement of the Pathfinder period.

The rents of private lettings supplied to Local Housing Allowance claimants

One of the critical issues for the operation of the LHA is the potential impact of the LHA regime on landlords’ policies in setting rent levels. As already seen in Table 4.2, the LHA regime is more generous and as a result this increases the effective demand from claimant households. Simple economic theory would suggest that this would be likely to place some upward pressure on rents, and consequently on the potential supply of lettings to claimants.

Another concern that has been expressed is that landlords would take the level of local housing allowances as a ‘going rate’ for lettings, and that there could be an upward movement in rents for ‘below average’ dwellings that would have been subject to property specific rent limits under the mainstream HB regime.

The two questions raised are: did the flat rate LHA allowances lead to higher rents in LHA areas, and were rents more likely to be set at or around LHA levels, than they are set relative to local reference and single room rent limits under the mainstream regime. These issues are examined both by comparing levels of rents in the LHA and comparator areas both before the commencement of the LHA pathfinders, and at the conclusion of the two-year evaluation period.

At the end of the two-year period, local landlords will have had more opportunity to both find out about the LHA regime and the levels at which the local allowances were set, and also to act on that information. One factor to be recognised in this context is that the legal framework for setting rents for private tenants only permits landlords to increase rents once a year. With no substantial evidence of landlords illegally increasing rents more frequently than permitted, it follows that any impact of the LHA on rent levels would not have begun to emerge until towards the conclusion of the two-year evaluation period.

Table 4.5 shows the average Local Reference Rent (LRR)/Single Room Rent (SRR) rents for the Pathfinder areas in 2003/04 (ie representing the baseline) and the equivalent LHA levels at February 2006 at the conclusion of the LHA evaluation period. Table 4.6 shows the baseline and February 2006 LRR/SRR figures for the comparator areas. Tables 4.7 and 4.8 then show the average contractual rents in 2003/04 and February 2006, for the Pathfinder and comparator areas respectively.

61


Table 4.5 Comparison between baseline Local Reference Rents and Single Room Rents and Local Housing Allowances at February 2006 – Baseline (2003/04) Local Reference Rents and Single Room Rent

Number of rooms

1 2 3 4 5 6(+) All

Blackpool £58 £68 £80 £90 £98 £104 £76

Brighton £92 £108 £142 £162 £182 £209 £117

Conwy £50 £63 £70 £76 £85 £91 £68

Coventry £56 £63 £80 £93 £98 £107 £82

Edinburgh £62 £87 £117 £135 £163 £162 £102

Leeds £56 £68 £82 £93 £97 £96 £77

Lewisham £108 £129 £170 £202 £243 £249 £148

NE Lincs £47 £55 £63 £71 £74 £79 £64

Teignbridge £58 £75 £90 £102 £110 £116 £86

All Pathfinder LAs £74 £84 £104 £105 £108 £116 £93

February 2006 LHAs

Blackpool £59 £78 £94 £104 £114 £133 £89

Brighton £89 £134 £169 £209 £238 £293 £137

Conwy £48 £70 £82 £92 £100 £115 £78

Coventry £56 £88 £97 £108 £117 £141 £98

Edinburgh £67 £108 £133 £167 £192 £217 £121

Leeds £54 £82 £94 £106 £117 £123 £89

Lewisham £95 £153 £198 £243 £278 £335 £166

NE Lincs £46 £66 £74 £79 £82 £91 £72

Teignbridge £70 £90 £104 £120 £124 £141 £101



62

Table 4.5 (Continued)

Number of rooms

1 2 3 4 5 6(+) All

Percentage change

Blackpool 3.0 15.7 18.1 15.9 15.9 28.1 15.8

Brighton -3.0 24.0 18.8 29.0 30.9 40.2 17.6

Conwy -2.6 12.0 15.9 20.8 18.6 26.3 14.6

Coventry 0.4 38.4 21.7 17.3 19.4 31.1 19.3

Edinburgh 8.1 24.2 14.2 23.8 17.6 33.9 18.4

Leeds -3.7 20.8 14.1 14.3 20.4 28.9 14.3

Lewisham -11.9 18.5 16.3 20.3 14.4 34.4 12.2

NE Lincs -1.6 19.1 16.7 10.7 10.7 16.3 13.5

Teignbridge 19.4 19.4 15.2 16.8 13.0 21.7 16.9

All Pathfinder LAs -2.4 20.9 16.7 18.5 17.2 29.2 16.1

Table 4.6 Comparison between baseline and February 2006 Local Reference Rents and Single Room Rents in comparator areas – Baseline (2003/04) Local Reference Rents and Single Room Rents

Number of rooms

1 2 3 4 5 6(+) All

Bristol £75 £84 £107 £119 £132 £142 £100

Cardiff £53 £66 £89 £103 £109 £133 £86

Haringey £125 £143 £204 £237 £256 £275 £166

Hartlepool £50 £57 £64 £72 £78 £87 £69

North Devon £55 £67 £79 £87 £95 £100 £78

Scarborough £53 £66 £74 £80 £84 £93 £72

Swansea £48 £58 £76 £83 £88 £100 £74

Wakefield £53 £57 £64 £68 £75 £73 £65

Wolverhampton £61 £68 £76 £88 £97 £111 £82

All Comparator LAs £90 £91 £101 £104 £114 £131 £99

63



Number of rooms

1 2 3 4 5 6(+) All

February 2006 LRRs & SRRs

Bristol £85 £99 £124 £142 £163 £180 £118

Cardiff £61 £80 £106 £122 £133 £148 £102

Haringey £126 £144 £200 £229 £262 £312 £167

Hartlepool £55 £69 £76 £81 £91 £107 £80

North Devon £62 £76 £92 £95 £104 £119 £88

Scarborough £56 £71 £82 £89 £99 £105 £79

Swansea £69 £72 £85 £94 £93 £108 £85

Wakefield £58 £67 £76 £81 £85 £101 £76

Wolverhampton £69 £78 £90 £103 £106 £119 £94


Percentage change

Bristol 13.9 18.5 15.9 18.6 23.4 26.3 18.3

Cardiff 14.0 20.8 19.3 18.6 22.7 11.3 19.2

Haringey 1.1 1.1 -1.9 -3.4 2.3 13.6 0.2

Hartlepool 9.7 20.0 18.9 13.3 16.0 23.5 17.2

North Devon 14.2 13.8 16.6 9.4 8.7 18.7 13.5

Scarborough 5.9 7.7 11.5 10.5 17.5 13.0 10.4

Swansea 42.0 24.4 11.7 13.1 5.6 8.0 14.4

Wakefield 10.9 18.2 17.9 18.4 14.7 38.2 18.0

Wolverhampton 13.4 15.1 19.0 17.4 9.5 7.6 14.4

All Comparator LAs 6.1 9.9 10.0 11.3 13.0 15.9 10.4


64

Table 4.7 Comparison between baseline and February 2006 contractual rents in comparator areas – Baseline (2003/04) contractual rents

Number of rooms

1 2 3 4 5 6(+) All

Bristol £67 £82 £105 £120 £140 £185 £99

Cardiff £60 £68 £96 £106 £125 £155 £92

Haringey £104 £130 £183 £233 £271 £317 £153

Hartlepool £51 £60 £69 £73 £77 £85 £71

North Devon £60 £69 £86 £94 £100 £114 £84

Scarborough £61 £68 £80 £86 £92 £96 £77

Swansea £53 £63 £78 £84 £88 £102 £77

Wakefield £64 £63 £71 £73 £80 £92 £71

Wolverhampton £52 £71 £86 £90 £93 £113 £84


February 2006 contractual rents

Bristol £77 £93 £116 £132 £147 £185 £110

Cardiff £69 £77 £107 £124 £139 £161 £103

Haringey £114 £141 £197 £244 £287 £342 £165

Hartlepool £56 £69 £76 £79 £86 £101 £79

North Devon £59 £77 £95 £106 £115 £126 £93

Scarborough £65 £72 £91 £98 £104 £111 £85

Swansea £68 £73 £86 £94 £97 £122 £86

Wakefield £66 £69 £78 £83 £87 £119 £79

Wolverhampton £62 £72 £91 £96 £102 £126 £90


65



Number of rooms

1 2 3 4 5 6(+) All

Percentage change

Bristol 15.2 12.9 10.2 10.6 5.1 -0.1 10.4

Cardiff 15.5 12.8 11.4 16.4 11.3 3.9 12.2

Haringey 10.0 8.4 7.7 4.4 5.8 7.7 7.7

Hartlepool 8.7 15.5 10.4 9.0 12.4 18.4 11.2

North Devon -2.7 11.4 11.0 12.6 14.2 10.4 11.0

Scarborough 6.8 6.2 14.2 13.2 12.5 16.5 10.9

Swansea 28.2 15.8 11.0 11.2 10.2 19.1 12.6

Wakefield 2.2 8.9 9.1 12.8 9.3 29.0 10.4

Wolverhampton 20.3 1.7 5.8 6.8 10.0 11.6 7.1

All Comparator LAs 11.1 9.9 9.8 10.0 8.9 8.1 9.8

Table 4.8 Comparison between baseline and February 2006 contractual rents in Local Housing Allowance area – Baseline contractual rents

Number of rooms

1 2 3 4 5 6(+) All

Blackpool £65 £75 £92 £104 £108 £115 £86

Brighton £84 £107 £146 £171 £198 £257 £116

Conwy £58 £67 £77 £85 £93 £101 £74

Coventry £54 £66 £80 £89 £93 £107 £81

Edinburgh £66 £84 £112 £134 £184 £234 £102

Leeds £55 £67 £82 £95 £112 £170 £80

Lewisham £95 £120 £154 £184 £222 £247 £135

NE Lincs £55 £61 £72 £77 £77 £83 £70

Teignbridge £66 £76 £94 £106 £116 £141 £90



66


Number of rooms

1 2 3 4 5 6(+) All

February contractrual rents

Blackpool £79 £80 £101 £110 £118 £135 £94

Brighton £85 £122 £159 £186 £209 £222 £127

Conwy £62 £74 £88 £98 £105 £122 £83

Coventry £59 £78 £92 £99 £105 £128 £91

Edinburgh £69 £97 £120 £139 £152 £166 £108

Leeds £58 £77 £91 £101 £106 £110 £85

Lewisham £92 £136 £172 £207 £243 £270 £147

NE Lincs £54 £69 £79 £82 £83 £92 £76

Teignbridge £62 £82 £100 £114 £124 £141 £95


Percentage change

Blackpool 22.9 6.9 9.9 6.3 9.1 17.4 9.6

Brighton 1.1 14.2 8.8 8.9 5.5 -13.8 9.0

Conwy 7.1 11.1 13.3 16.0 11.8 20.4 12.7

Coventry 9.0 18.1 14.4 11.4 13.2 20.5 13.1

Edinburgh 3.9 15.8 6.7 3.9 -17.4 -29.0 6.0

Leeds 6.0 16.1 10.6 5.6 -5.2 -35.2 6.3

Lewisham -3.2 13.6 11.8 12.6 9.4 9.3 9.4

NE Lincs -2.3 13.9 9.8 6.6 7.6 11.0 8.9

Teignbridge -6.9 6.8 6.7 7.8 7.1 0.3 5.6

All Pathfinder LAs 3.7 12.7 9.6 8.2 4.4 -3.7 8.7

67


The rent figures are shown separately for different sizes of dwellings. The LRR/SRR and LHA rent figures are based on the size of dwelling the households are deemed to require, while the contractual rents are shown based on the actual size of the dwellings occupied. However, in both cases the definitions are consistent as between the LHA and the comparator areas.

In both cases the average figures for all Pathfinders and all comparators are based on the size distribution of dwellings occupied by claimants at the Wave 2 claimant interviews (ie midway through the evaluation period).

The changes over the period between the baseline LRR/SRR levels, and the subsequent LHA and LRR/SRR show The Rent Service view on the changes in average rents in each area over the evaluation. The key finding is that the rents in the Pathfinder areas, as a whole, were judged by The Rent Service to have risen more rapidly than in the comparator areas. The overall average rise in LHA rates in the Pathfinder areas was 16.1 per cent over the period; compared to an average 10.4 per cent rise in LRR/SRR levels in the comparator areas.

However there were significant variations between individual areas, both within the Pathfinder and comparator groups of authorities. In particular it should be noted that there was a very small increase in LRR/SRR levels in Haringey – of just 0.2 per cent - that was completely atypical of all other comparator and Pathfinder areas (although not atypical within London). If Haringey is excluded then there was much less difference in the increase in rent levels between the Pathfinders and the other comparators areas.

Within the Pathfinder authorities the greatest overall increases in LHA rates were in Coventry (19.3 per cent), while within the comparator areas the greatest increases in LRR/SRR levels were in Cardiff (19.2 per cent). It is also notable that the increases in overall rents in Blackpool and North East Lincolnshire – the two HB dominant areas – were slightly below the average for all Pathfinder areas. In contrast the rent increases in Hartlepool – the sole HB dominant’ area within the comparators – were (at 17.1 per cent), which is substantially higher than the average for all comparator areas, albeit less than in a number of other individual comparator areas.

It is also notable that for both the Pathfinder and comparator areas as a whole the LHA and LRR/SRR increases over the period tended to be lower for smaller dwellings, and higher for larger dwellings. In particular the average rents for one room dwellings were judged by The Rent Service to have risen just 6.1 per cent for the comparator areas as a whole, and to have fallen by 2.4 per cent for the Pathfinder areas as a whole, notwithstanding the slightly more generous definition of the single room rate under the LHA regime.

These results suggest that while the more generous LHA regime may have contributed to some small uplift in overall rent levels in the Pathfinder areas over the two years to February 2006, there was no substantial impact.

Tables 4.7 and 4.8 show the changes in the contractual rents for claimants between the baseline and February 2006, but in this case it needs to be appreciated that these reflect the actions and choices of claimants, as well as those of landlords, in the LHA and comparator areas. The key finding is that while average LHA levels in the Pathfinder areas increased rather more rapidly than the LRR/SRR levels in the comparator areas, contractual rents in the Pathfinder areas rose a little less rapidly than those in the comparator areas.


68

Thus, for Pathfinder areas as a whole overall contractual rents rose by 8.7 per cent over the evaluation period, while for comparator areas as a whole overall contractual rents rose by 9.8 per cent. However, in both Pathfinder and comparator areas contractual rents rose rather less rapidly over the period than the LHA and LRR/SRR levels set by The Rent Service.

The greatest increases in contractual rents in the LHA areas were in Coventry (13.1 per cent), mirroring the views of The Rent Service on market changes as reflected in their decisions of LRR/SRR and LHA levels. In contrast the greatest increase in contractual rents in the comparator areas were experienced in Swansea (12.6 per cent), although in the view of the Rent Service there were four comparator areas where market rents were rising more rapidly over the period.

The increases in contractual rents in the two HB dominant markets were marginally above the average for all LHA areas, but well below those experienced in Conwy and Coventry. Similarly the increase in contractual rents in the one HB dominant area among the comparators was slightly above the average for all comparators, but lower than in both Cardiff and Swansea.

These results suggest that although the more generous LHA regime may have had a small upward impact on overall market rents, as reflected in the judgements of The Rent Service in their decisions on LRR/SRR and LHA levels, this did not lead to any increase in the levels of contractual rents being paid by claimants.

Indeed, on balance the data suggests that contractual rents in the LHA areas rose slightly less in the LHA areas than was the case in the comparator areas. This suggests that either LHA landlords were not increasing contractual rents to the extent of the wider market changes assessed by The Rent Service, or that claimants were selecting less expensive dwellings within the sector.

Either way it is notable that there was very little difference between the overall rate of contractual rent rises in the comparator areas, and the increase in the LRR/SRR levels set by The Rent Service for those areas (9.8 per cent and 10.4 per cent respectively). In contrast, there was a much greater difference between the overall rate of contractual rent rises in the LHA areas, and the increase in the LRR/SRR and LHA levels set by The Rent Service for those areas (8.7 per cent and 16.1 per cent respectively).

If it is difficult to disentangle the extent to which that divergence is a function of landlord or claimant behaviour in the LHA markets, further insights can be obtained by examining the distribution of contractual rents in the LHA and comparator areas, and their relationship to the LRR/SRR and LHA levels in each area.

Excesses and shortfalls

The changing financial position for claimants can be seen in the different levels and profiles of the differences between their contractual rents, and the levels of the LHA allowances, or the levels of the maximum eligible rents under the mainstream HB regime.

The most significant feature of the LHA regime in this context is the abolition of the provisions for rent limits based on the ‘property specific rent’, which represented the Rent Officers view of the reasonable market rent for the specific property.

69


The LHA allowances have been set on the same principles, and localities, as applied in making local reference rent and single room rent determinations under the mainstream, HB regime although, as seen above, the definition applied for single rooms in the LHA areas is slightly more generous than for the mainstream single room rent determinations. The main difference between the regimes in this respect is that the LHA allowances are set explicitly on a monthly basis for all dwellings in a given locality, and the clear boundaries of those localities are placed in the public domain.

Common to both regimes are provisions that reflect the size of accommodation households are deemed to require, as opposed to the size of the dwelling they choose to occupy. Under the LHA regime, the allowances are directly set on the basis of the household size and composition. Under the mainstream regime, the maximum limits on eligible rents are also set taking into account the size of accommodation the household is deemed to require, rather than the size of the dwelling they occupy.

Where contractual rents are higher than either the LHA allowances or the maximum eligible rent, claimants face a ‘shortfall’ which they must meet from their incomes net of HB. While under the mainstream HB regime contractual rents may be lower than local reference rents (or even single room rents) the amount of rent eligible for HB is capped at the level of the contractual rent.

In contrast, under the LHA regime if a contractual rent is below the level of the local allowances then the claimant benefits from an ‘excess’ of income from the allowance over the amount they need to pay to the landlord in rent. The contrast to be made between the LHA and mainstream HB regimes in this context is between the incidence of ‘notional excesses’ under the mainstream regime and ‘actual excesses’ under the LHA regime.

It has already been seen in Table 4.2 that there was a marked reduction in the incidence of rent shortfalls in the LHA areas between the baseline and February 2006. This reduction primarily reflected the removal of the property specific rent restrictions in those areas, which in a proportion of cases would have otherwise resulted in a lower level of eligible HB being made available to the claimant.

Figure 4.1 compares the profile of notional excesses and shortfalls based solely on the relationship between contractual rents and LRR/SRRs, for Pathfinder and comparator authorities taken together, at the pre-Pathfinder baseline. In the figure (and those that follow) the notional excesses are expressed as negative figures, and the notional shortfalls are expressed as positive figures.

The differences between the contractual and LRR/SRR rent levels are also expressed as percentages of the contractual rent. This approach permits a more ready comparison of the excesses and shortfalls between areas with higher and lower rent levels.

The key point to note is the very similar overall pattern of shortfalls and excesses in the Pathfinder and comparator areas at the baseline period. In both cases 48 per cent of all claimants had a notional surplus, in that their contractual rent was below the level of the LRR/SRR. There were also very similar degrees of concentration of the contractual rents around the LRR/SRR levels.


70

In 62.3 per cent of all cases in the Pathfinder areas, contractual rents were within 20 per cent (plus or minus) of LRR/SRR levels, and 36.1 per cent of all cases were within ten per cent. Similarly in 63.2 per cent of all cases in the comparator areas contractual rents were within 20 per cent (plus or minus) of LRR/SRR levels, and 36.7 per cent of all cases were within ten per cent.

Figure 4.1 Distribution of excesses and shortfalls in Local Housing Allowance and comparator areas at the baseline

There were, however, some marked variations between areas in the dispersion of rents relative to LRR/SRR levels, reflecting the diversity of the local housing markets. Rents were particularly concentrated around the LRR/SRR levels in North East Lincolnshire, one of the three areas classified as HB dominant. There was also a slightly above average degree of concentration in Blackpool and Hartlepool, the two other HB dominant areas.

Even in the areas with the widest distribution of rents (Haringey and Leeds) more than a quarter of all cases had rents within ten per cent (plus or minus) of LRR/SRR levels, and just over a half had rents within 20 per cent. In contrast in North East Lincolnshire almost a half had rents within ten per cent, and just over three quarters had rents within 20 per cent of the LRR/SRR levels.

71


Changes in excesses and shortfalls

As seen previously, the LHA/LRR levels rose a little more rapidly than contractual rents in both the Pathfinder and comparator areas. In consequence there was a small increase in the proportion of cases where the LRR/LHA rates exceeded contractual rents by February 2006. In the case of the Pathfinder areas the proportion of cases with an excess rose from 48.5 per cent at the baseline to 56.4 per cent at February 2006. For the comparator areas the proportion of cases with an excess relative to LRR levels rose from 48.4 per cent at the baseline to 56.1 per cent in February 2006.

However, while this market-related change was common to both the Pathfinder and comparator areas, there was in addition an appreciable increase in the degree of convergence of rents around the LRR/LHA levels in the Pathfinder areas by the close of the two-year evaluation period in February 2006, as shown in Figure 4.2.

Figure 4.2 Distribution of excesses and shortfalls in Local Housing Allowance at the baseline and February 2006


72

For the Pathfinder areas as a whole the proportion of rents within 10 per cent of the LRR/LHA levels rose from 36.1 per cent at the baseline to 40.1 per cent in February 2006, while the proportion within 20 per cent rose from 62.3 per cent to 66.1 per cent over the same period.

However, this pattern did not hold universally across all Pathfinder areas, as can be seen in Figure 4.3 which shows the changes over the evaluation period in the proportion of cases where contractual rents were within ten per cent (plus or minus) of the LRR/LHA levels.

There was a marked increase in the degree of convergence of contractual rents around the LRR/LHA levels in Blackpool and North East Lincolnshire, the two Housing Benefit dominant markets, a slightly smaller degree of increased convergence in Brighton & Hove and Conwy, and a barely noticeable increase in Coventry and Teignbridge.

In the other three Pathfinder areas, however, there was a greater dispersion of rents relative to LRR/LHA levels over the evaluation period.

Figure 4.3 Change in percentage of cases with contractual rents within ten per cent of Local Reference Rents/Single Room Rents

73


In contrast, Figure 4.4 shows that while there was a movement towards a greater proportion of excesses in the comparator areas, there was no tendency for contractual rents to converge around the LRR/SRR levels. Indeed there was a small tendency for contractual rents to increasing diverge from LRR/SRR levels. While at the baseline contractual rents were within ten per cent of LRR/SRR levels in 36.7 per cent of all cases, by February 2006 the proportion had fallen to 34.6 per cent.

Figure 4.4 Distribution of excesses and shortfalls in comparator areas at the baseline and in 2005/06

The impact on claimants

As noted previously the modest tendency for contractual rents to converge towards the LHA levels over the evaluation period is a result of actions by both landlords and tenants. In this context it should be noted that there was a growth both in the proportion of cases where the contractual rent was less than ten per cent above the LHA level, and in the proportion of cases where the contractual rent was less than ten per cent below the LHA level.

In the context of an overall reduction in the cases involving shortfalls, the rise in the proportion of cases with small shortfalls involves an even greater fall in the proportion of cases with large shortfalls. Indeed while at the baseline 33.1 per cent of all cases in the Pathfinder areas involved a shortfall in excess of ten per cent relative to level of LRR/SRRs, by February 2006 the proportion of cases with shortfalls in excess of ten per cent relative to LHA levels had fallen to just 24.3 per cent.


74

In contrast, the rise in the proportion of cases involving excesses of less than ten per cent was simply in line with the overall rise in the proportion of cases with excesses rather than shortfalls. There was no convergence towards LHA levels in terms of the proportion of cases with smaller rather than larger excesses. There is thus no statistical evidence of landlord action to specifically increase rents towards LHA levels in order to reduce levels of excesses.

The most significant convergence of rents around LHA levels thus relates to the rise in the proportion of cases involving small shortfalls between the LHA levels and the contractual rents. While this may in part be the result of landlord behaviour, as seen above there was no statistical evidence of that in relation to cases with small excesses, where the theoretical motivation for landlord action is more transparent.

In that context the more plausible explanation is that the growth in the proportion of cases involving small shortfalls is primarily the result of search or negotiating behaviour by a proportion of tenants forewarned with information about LHA levels, and seeking to avoid large shortfalls when taking up tenancies.

Conclusions: contractual rents and the Local Housing Allowance

From these results we can conclude that while – over a two year period – there was a modest tendency for contractual rents to converge towards the LHA levels, and that this tendency was strongest in the HB dominant markets, that tendency was not sufficient to outweigh the impact of broader market changes in three of the Pathfinder areas.

However, if these results show only a modest degree of rental convergence towards LHA levels in the Pathfinder areas, it must be noted that the wider market changes over the evaluation period were at the same time leading to a small increase in the distribution of contractual rents relative to LRR/SRR levels in the comparator areas. This would suggest that the underlying tendency for the LHA regime to result in rental convergence around LHA levels is slightly greater than shown in Figure 4.3.

The contrast between the growth in the proportion of cases with small shortfalls, as opposed to small excesses, can also be more plausibly explained by modest levels of change in claimant, rather than landlord, behaviour.

Finally, in this context it should be noted that the evaluation only covered a two year period, and over a longer period the LHA regime could potentially have a rather greater impact on both claimant and landlord housing market behaviour.

Summary

The numbers of claimants in the PRS in the LHA areas grew over the evaluation period, in line with a similar level of growth in PRS claimant numbers across the rest of the country under the mainstream HB regime.

75


Thus, while the landlord surveys showed a small proportion of baseline landlords suggesting that they would be less likely to let to LHA claimants, largely because of the arrangements for the LHA to be paid to the claimant, this did not have any overall impact on the ability of claimants to access accommodation in the PRS in the LHA areas.

While the landlord survey did suggest that a very small proportion of the baseline landlords did reduce their lettings to LHA claimants, the available evidence suggests that any such impact was primarily offset by the availability of lettings from landlords entering the sector following the introduction of the LHA.

There were also signs of an emerging trend for cases to flow off of the LHA at a slower rate, which might be expected given the greater generosity of the LHA regime, but is not sufficient to suggest that this could have had a discernable impact on caseload numbers by the end of the two-year evaluation period.

Over the two-year evaluation period there was a modest tendency for contractual rents to converge towards the LHA levels, and this tendency was strongest in the HB dominant markets. However, that tendency was not sufficient to outweigh the impact of broader market changes in three of the Pathfinder areas.

However, while there was only a modest degree of rental convergence towards LHA levels in the Pathfinder areas, there is evidence from the comparator areas that wider market changes over the evaluation period were at the same time leading to a small increase in the distribution of contractual rents relative to LRR/SRR levels. This would suggest that the underlying tendency for the LHA regime to result in rental convergence around LHA levels is slightly greater than seen over the evaluation period.

Reflecting wider market changes, LHA/LRR levels rose relative to contractual rents in both LHA and comparator areas.

The contrast between the growth in the proportion of cases with small shortfalls, as opposed to small excesses, can also be more plausibly explained by modest changes in claimant, rather than landlord, behaviour.

Finally, it should be noted that the evaluation only covered a two-year period, and over a longer period the LHA regime could potentially have a rather greater impact on both claimant and landlord housing market behaviour.

76

77


Chapter 5: The labour market impact of the Local Housing Allowance

Housing Benefit (HB) is available to households both in and out of work and is designed to ensure that in almost all circumstances households will be better off in, rather than out of, employment. Only where households face exceptionally high travel, or other unavoidable work related expenditures, might a household not be better off in work.

However, the HB scheme is complex, and there is evidence that many households are not aware that HB is available as an in work benefit, and that even where they are aware that assistance is available, they are unlikely to take this into account when considering the financial viability of a possible move into employment.

In this context the Local Housing Allowance (LHA) evaluation has considered the possible impact of the LHA on claimants’ attitudes towards employment, and on the likelihood of their moving into employment. There are a number of reasons to consider why the LHA might have such an impact, based on the relative transparency and simplicity of the LHA, and the additional responsibilities that the LHA passes to claimants.

HB is particularly important in supporting work incentives for tenants in the Private Rented Sector (PRS), where market rent levels make it far more likely that a claimant moving into a relatively low-paid job will continue to be eligible for HB. In contrast in the social rented sector, with rents at sub-market levels (particularly in high value areas), households in low-paid employment will still often have incomes that are sufficient to cover their rent without needing to rely on HB. This situation has increasingly been the case with the improved generosity of the Tax Credit regime.

Private rents and Housing Benefit

The position also varies significantly between the various Pathfinder and Control areas, with much higher rents in Brighton & Hove and Lewisham compared to other areas, and with the lowest rent levels in North East Lincolnshire. Figure 5.1 shows the average local reference rents by size of dwelling in each area in 2003/04, which was the baseline year for the beginning of the LHA evaluation.

It is in the Pathfinder areas with higher rent levels that HB has a more extensive potential role in ensuring that working households are better off in work. The detailed position is however complex, and also varies as between different household types and sizes. A critical factor in this context is how far households understand the potential availability of in-work benefits to supplement their earnings.

This concern applies to Tax Credits, but particularly to HB. Research has shown that the take up of Working Families Tax Credits by tenant households in 2000 was 75 per cent of those eligible (3). The Inland Revenue evaluation of the new Tax Credit regime introduced in 2003/04 has shown that there was a substantial improvement in take up levels to 89 per cent for families in 2003/04 and 90 per cent in 2004/05 (4). At the same time the evaluation found a much lower take-up rate for working Tax Credits by households without children.


78

While the Inland Revenue analyses do not distinguish between tenant and home owner households, all earlier studies of Tax Credits (in its various forms) had found a higher take-up rate for tenant compared to home owner households.

Figure 5.1 Baseline Local Reference Rents levels in Local Housing Allowance and Control areas

The Department for Work and Pensions (DWP) analysis of HB take-up rates in 2005/06 examined the differences in take-up rates for households in and out of work, and found that only about a half of all eligible working households actually claimed HB. It also found that households with at least one adult working full-time were much less likely to claim benefit than households with only one adult working part-time (5).

This finding is consistent with earlier studies that examined the attitude of tenant households to HB and the possible contribution it might make to their in-work incomes. The key findings were that only a limited proportion of tenant households were aware that they might be eligible for HB when they took up employment. Just as significantly, even if they were aware they might be eligible for HB if they moved into a job they had little or no idea how much this might be, and consequently did not take it into account when assessing whether or not they would be better off in work (6).

A more recent study for the DWP found that out-of-work claimants had very limited knowledge of the availability of HB as an in-work benefit. It also found that most working tenants not claiming HB were not aware that it was potentially available to them (7).

79


Rent levels, Housing Benefit and work incentives

In this context, Table 5.1 shows the minimum earnings levels that different households need in order to be better off in work, and off of Income Support (IS) or Jobseeker’s Allowance (JSA), on two scenarios. The first shows the earnings required to be better off in full-time work without claiming HB. The second shows the earnings required to be better off if they do claim HB, whether they are working full or part-time.

The table is based on the 2003/04 tax and benefit rates in operation at the beginning of the LHA evaluation, and shows the position for a young single person (i.e. aged under 25 in a one-room dwelling), a couple without children (in a two-room dwelling), a lone parent with one child (in a three-room dwelling), a couple with two children (in a four-room dwelling), and a couple with four children (in a five-room dwelling). Given the very high take-up rate for Tax Credits the calculations all take into account Tax Credit entitlements, but without making any allowance for any entitlement based on eligible child care costs.

The table shows the position for Lewisham and North East Lincolnshire, which had the highest and lowest rent levels of the Pathfinder areas respectively; Edinburgh which has rents roughly mid way between the two; and Blackpool, which is one of the group of authorities with rents higher than in North East Lincolnshire, but that are still relatively low. The table is based on the 2003/04 Local Reference Rents/Single Room Rents levels (see Table 4.5), and typical local levels of council tax in 2003/04.

In each case Table 5.1 shows the level of gross earnings that would have been required to have a net disposable income after housing costs equal to the level of their basic IS entitlement plus the small level of earnings ‘disregarded’ in the HB calculation. This amount is £5 per week for single people, £10 per week for couples (with or without children) and £20 per week for lone parents.

The levels of earnings required to be better off in work are significantly reduced by entitlement to Tax Credits, although single people aged under 25 are not eligible, and older single people are only eligible if they work more than 30 hours a week.


80

Table 5.1 Gross earnings required to be ‘better off’ in work with and without Housing Benefit

Area and work status Size of dwelling

1 room 2 rooms 3 rooms 4 rooms 5 rooms

Without HB (F/T work)

Blackpool £129 £127 £147 £208 £234

Edinburgh £134 £196 £206 £330 £423

Lewisham £207 £373 £338 £489 £629

North East Lincs £116 £99 £78 £119 £126

With HB

All areas (F/T work) £49 £26 Any £26 £26

All areas (P/T work) £49 £98 £22 £38 £38

Notes: Bases on a single person aged under 25 in 1 room, a childless couple in two rooms, a lone parent with one child in three rooms, a couple with two children in four rooms, and a couple with four children in 5 rooms. Full-time work is defined as more than 30 hours per week; part-time work as between 16 and 30 hours per week. See Table 4.5 for rent levels.

The table makes three key points. The first is that if the claimant was not aware that they were entitled to HB when working, or were not sure of how much they might get and therefore do not take it into account, their view of the earnings they require in order to be better off in work would be significantly higher.

The second point is that for claimants not aware of, or taking account of, any entitlement to HB when working, the earnings they view as being required to be better off in work varies according to household size and rent levels, and are higher for larger households, and for households in areas with higher rents.

In this context it should be noted that the local variations in incomes required to be better off in work (without HB) are far greater than the variations in local earnings (see Figure 3.17, in chapter 3). This is partly because private sector rents, like house prices, vary more from area to area than gross earnings, but also because of the way in which Tax Credits further reduce the extent of variations in disposable incomes.

The third point is that, in contrast, the higher levels of the LHA in higher value areas effectively ‘neutralizes’ the differences in rent levels, and the same low level of earnings are required in all areas in order for the claimant to be better off in work if and when entitlement to HB is taken into account.

Put another way, Table 5.1 shows that the potential for an improved awareness in claimants understanding of their potential entitlement to HB to impact on their attitudes to work is much greater for larger households, and for households in higher rent areas. In these cases an awareness of potential in- work HB entitlement most significantly reduces the level of earnings understood to be needed to be better off in work.

81


More generally the table shows just how little claimants need to earn in order to be just a little better off in work if they do claim HB. Even allowing for the slightly less generous HB and Tax Credit provisions for households working part-time (ie 16 to 30 hours per week), the required earnings are well below the level that would be received from 16 hours employment at the minimum wage (other than in the case of a childless couple).

Housing Benefit and marginal increases in disposable incomes

A further consideration, however, is that working households with incomes at only slightly higher levels only see a very small increase in their disposable income, and the difference between incomes in and out of work. That is because as earnings rise households see their entitlement to Tax Credits and housing and council tax benefits reduced. It is only when earnings rise to levels that claimants cease to be eligible for one or other of those benefits (and the ‘benefit tapers’ cease to operate) that they begin to see a more rapid increase in their net disposable incomes.

This point is illustrated in Figure 5.2, which shows the position for a couple with two children, at 2003/04 tax and benefit rates. This shows that with a rent of £50 per week a couple ceases to qualify for HB once gross earnings exceed £160 per week, and that above that level they begin to see a far more rapid rise in their disposable income. With a rent of £100 per week it is only when gross earnings exceed £410 per week that the household sees such a rapid rise in their income.

Figure 5.2 Net disposable incomes above Income Support levels


82

There has been much discussion over the years about the work disincentive effects of the HB tapers, and the limited gains in disposable incomes households see from increased earnings. However while it is easy to show the potential disincentives of what is referred to as the ‘Housing Benefit poverty trap’ in formal terms, as for example in Figure 5.2, there is little evidence to suggest that many claimants have a clear understanding of the marginal net financial gains they might achieve through increased earnings while still claiming Housing Benefit (6).

The potential impact of the Local Housing Allowance on labour market participation

In this context there are a number of ways in which it was considered that the introduction of the LHA could have a possible impact on claimants’ attitudes to work, and decisions about participation in the labour market.

One of the key objectives of the LHA regime is to make all payments of HB to the claimant, aside from cases where the claimant is in arrears or has been deemed vulnerable. In this respect the LHA has been relatively successful, with a little over four fifths of all claimants receiving payments themselves by the end of the LHA evaluation period. Underlying this objective is the intention to pass greater financial responsibility to claimants, and this cultural shift is seen as potentially supportive of claimants willingness to take on the ‘responsibility’ of working.

A related aspect of this change is the encouragement given to claimants to open bank accounts. Again the introduction of the LHA, in this case linked to similar encouragement being given in respect of payments of Jobseeker’s Allowance (JSA), was largely successful, and very few claimants receiving LHA payments at the end of the evaluation period did so without having a bank account. Again, claimants having an operating bank account is taken as one of the dimensions of claimants taking responsibility for their financial affairs, and in that sense as an indication of ‘work readiness’.

A further key feature of the LHA regime is the ‘transparency’ of the flat rate allowances. The standardisation of the allowances significantly reduces one of the uncertainties about the level of payment the claimant will receive. The LHA rate is set down in a clear schedule, and there are none of the uncertainties surrounding the process through which The Rent Service sets the maximum eligible rent, on a number of criteria, in respect of each individual tenancy.

However, the LHA does nothing directly to reduce the complexities involved in calculating a household’s net income in employment, and the extent to which this will almost always result in a payment of an amount lower than the full LHA.

Nonetheless both HB and Jobcentre Plus officers have welcomed the relative transparency of the LHA regime, and in the latter case have expressed the view that it does make it easier for them to explain the potential gains from working to claimants.

83


If all the above characteristics are seen as being potentially helpful in terms of claimants’ likeliness to consider taking up employment, there is one way in which it might be considered that the LHA could potentially have some negative as well as positive impacts on claimants’ labour market participation. This relates to the payment of the LHA as a flat rate element that can be both higher or lower than the claimants contractual rent. Under the mainstream HB scheme the contractual rent is one of the maxima set that limits the amount the claimant can receive, and while they may receive less than the rent, they cannot receive more than the rent.

While the ‘excesses’ or ‘shortfalls’ of the LHA compared to the contractual rent will be the same whether the claimant is in or out of work, they nonetheless have a potentially significant impact on the disposable incomes of out of work claimants. While on the one hand any shortfalls will make it more difficult for claimants to subsist on a benefit level income, any surpluses will make it that much easier, and this could potentially reduce the pressures on claimants to seek employment in order to improve their financial position and standard of living.

Detailed administrative data is not available on the employment position of claimants in the Pathfinder and Control areas at the commencement and conclusion of the evaluation period. The questions about attitudes to work, and labour market participation were, however, addressed in the claimant surveys undertaken as part of the evaluation, and the findings from those surveys are set out further ahead.

The evidence from the claimant surveys

The claimant surveys conducted during the course of, and at the conclusion, of the LHA evaluation provide evidence on a number of the issues discussed above in relation to claimant attitudes and behaviour towards labour market participation. The claimant surveys covered the three Control areas, and the Pathfinder areas, but not the additional ‘comparator’ areas.

Transparency

While there was a broad consensus among the professionals that the LHA was more transparent, and made it easier to make claimants aware of the benefit levels they would receive in and out of work, the claimant surveys clearly showed that there were limitations to the extent of that transparency, even in respect of the narrow issue of the maximum level of the LHA, and how that related to their contractual rent.

The claimant interviews for the LHA study also found that most claimants either thought that they would get no HB if they took up a job, or knew they might get a lower level of benefit but had no idea how much. There was no change in this finding from the claimant surveys over the course of the LHA evaluation (2,8).


84

Work behaviour

The proportions of working claimant households varied substantially from one Pathfinder area to another, as can be seen in Figure 5.3 (data not available for Edinburgh). In particular the proportion of working claimants is highest in the two areas with the highest rents (Brighton & Hove and Lewisham), together with Teignbridge, which has only moderately high rents but very low local levels of earnings.

Figure 5.3 Work status of claimants at Wave 1

There were changes in the employment profile of claimants over the evaluation period, in both the Pathfinder and the Control areas (see Figures 5.4 and 5.5). However, in large part these reflected the changes in the composition of the claimant sample over time, as the remaining interviewees at Wave 3 by definition included a higher proportion of longer term claimants and more ‘settled’ households.

The increase in the proportions of working households in the claimant sample between Wave 1 and Wave 3 was very similar across the Pathfinder and Control areas, and thus provides no obvious evidence of the LHA having had a positive impact on the likelihood that claimants will take up, or continue, employment.

Moreover, as seen in Figure 5.1, none of the Control areas had very high rents, in contrast to the high rents in three of the LHA areas (Lewisham, Brighton & Hove and – to a lesser extent – Edinburgh). Claimants moving into employment in the Control areas would thus have a better chance of being better off without claiming HB, and would thus not be included in the claimant sample at Wave 3 (or Wave 2 if they moved into employment at an earlier stage).

85


Figure 5.4 Work status in Local Housing Allowance areas

Figure 5.5 Work status in Control areas


86

While there was an increase in the proportion of working claimants earning more than £6.50 per hour between Wave 1 and Wave 3 in both Pathfinder and Control areas, even at Wave 3 only a third of those in work were earning above that level. Even at Wave 3 over a half of all claimants in the Pathfinder and Control areas had earnings between £4.50 per hour and £6.50 per hour, and in most cases those earnings would be sufficient for them to be better off in (full-time) work even without claiming HB.

The exceptions would be couples with children in larger dwellings (in all areas), and lone parents and couples without children in the two LHA areas with the highest rent levels (Lewisham and Brighton & Hove). It is in these cases that claimants moving into employment would be most likely to need to continue relying on HB to be better off in work, and thus still feature in the claimant sample.

This point can be illustrated by the data from the Wave 2 survey, where interviews were also conducted with households from the Wave 1 survey that were no longer claiming benefit. It thus included the households that had moved into employment and were consequently no longer claiming benefit. While Figure 5.4 shows that those in work and claiming HB represented 18 per cent of the Wave 2 claimant sample for all LHA areas; those in work including those that were no longer claimants represented just over 22 per cent of the total survey sample.

The differences between the proportion of working households in the Wave 2 among all households surveyed (and that had been claimants at Wave 1), as compared to just the households that were still claimants at Wave 2, is shown in Figure 5.6. This shows the results disaggregated by LHA areas grouped by the relative levels of rent.

The high rent areas are Brighton & Hove and Lewisham, and the low rent areas are Blackpool, Conwy, Coventry Leeds and North East Lincolnshire. The figure omits the two areas with intermediate rents, Edinburgh and Teignbridge, due to data limitations.

87


Figure 5.6 Working households at Wave 2 – including and excluding those that were no longer claimants

While Figure 5.6 shows that the proportions in work are higher in both the high rent and low rent areas if the households that are no longer claimants at Wave 2 are included, it also shows the very substantial difference in the proportion of working claimants between the high rent and low rent areas. On both measures there are more than twice as many working households in the high rent areas, compared to the low rent areas.

However, it is notable that there is a much bigger proportionate difference between the proportion of working households that are still claimants at Wave 2, and the proportion in work among all those that were claimants at Wave 1, in the low rent areas, compared to the high rent areas. The difference between the two measures in the low rent areas is 31 per cent; while in the high rent areas it is just 20 per cent. This can best be seen as another indication of the greater ease with which working households can meet rental payments without support from HB in low rent areas. The differences between high and low rent areas are discussed further ahead.

The ‘flows sample’ of new claimants was drawn up to compensate for the tendency for the main sample to drift towards longer term and more settled claimants. While the proportions of claimants unemployed and looking for work were higher in both the Pathfinder and Control areas, especially compared to the Wave 3 claimants, the proportion of retired households was much higher in the LHA areas.


88

The proportion in work in the flows sample was very similar in the Pathfinder and Control areas, but for the LHA areas as a whole this was a little lower than in the Wave 3 sample, while in the Control areas it was at a similar level to that in Wave 3, and much higher than in the Wave 1 sample. The reasons for this difference are not entirely clear, but again these data not provide evidence of any positive LHA impact on claimant employment behaviour.

Working and claiming Housing Benefit in high and low rent areas

Figure 5.6 has already shown the sharp difference between high and low rent areas in terms of the proportions of claimants in work. Figure 5.7 shows that this differential was found consistently at all stages of the evaluation. In Figure 5.7, the Wave 2 and Wave 3 data is based solely on households that continued to be claimants at all stages and so therefore excludes the Wave 1 claimants who moved into work and off of HB before the later survey waves.

Figure 5.7 Working claimants in high and low rent Local Housing Allowance areas

Despite this omission, the Wave 3 figures show a sharp rise in the proportion of working claimants, compared to the Baseline and Wave 1 & 2 surveys. However, as seen previously, some part of that increase could be a result of the greater ‘stability’ of the households still remaining at the time of the Wave 3 survey.

89


However, it is also notable that a higher proportion of the ‘flow’ survey of new claimants were in work when compared to the Wave 1 and Wave 2 surveys, and that in the high rent areas the proportion in work was considerably higher than at the Baseline as well as at Wave 1 and Wave 2. In contrast in the low rent areas the proportion of working claimants working households in the flows survey was broadly in line with the levels found at the Baseline and Wave 1. The proportion of working claimants in the flows sample for the high rent areas was also significantly higher than for the Control areas, which all had relatively low rents.

While some of the change in the composition of the claimant households over the three Waves of interviews reflect differences in the stability and mobility of different sub groups of households, further insights about behavioural changes over the evaluation period can be derived by comparing the employment status over time of the households who were in the samples at both Wave 1 and Wave 3. These are referred to ahead as the ‘long-term claimants’.

Table 5.2 Proportions of working claimants at Waves 1 and Wave 3

In work at Wave 1: In work at Wave 3: percentage in work at Wave 3 percentage in work at Wave 1

High rent areas 87 per cent 69 per cent

Low rent areas 69 per cent 42 per cent

This shows that in the higher rent areas a much higher proportion of claimants in work at Wave 1 remained in work at Wave 3, while at the same time a higher proportion of those in work at Wave 3 were already in work at Wave 1. The net impact of those movements in and out of work was a 27 per cent net increase in the numbers of long-term claimants in work in the high rent areas between Waves 1 and 3.

Conversely, in the low rent areas a much lower proportion of claimants in work at Wave 1 remained in work and claiming HB at Wave 3, while at the same time a lower proportion of those in work at Wave 3 were already in work at Wave 1. This comparison clearly shows that claimants were far more likely to have moved into work with the support of HB in the low rent areas between Waves 1 and 3.

However, the lower levels of households in work and claiming HB at Wave 1 that remained in that position at Wave 3 in the low rent areas could be the result of a move off of HB, rather than a move out of employment. As seen above the opportunity to earn sufficient to move off of HB is far greater in the low rent areas.

The net impact of those movements in and out of work was a 67 per cent net increase in the numbers of long-term claimants in work in the low rent areas between Waves 1 and 3; with the growth in employment by previously out of work claimants by far outstripping the numbers leaving employment over the period.

The rather lower rate of growth (50 per cent) in the proportion of working claimants in low rent areas shown in Figure 5.7, based on the full sample of claimants at Wave 1, implies a substantial proportion of the claimants in work in the low rent areas at Wave 1 were no longer claimants at Wave 3. This is consistent with the results in Figure 5.6, showing that a higher proportion of working households moved off of Housing


90

Benefit in the low rent areas (31 per cent) compared to the high rent areas (20 per cent). Reflecting this lower rate of movement of working households off of HB in the high rent areas, the net level of growth in employment among the long-term claimants in those areas more closely matches the overall rate of growth shown in Figure 5.7.

The available data – which is not tenure specific – on trends in the local labour markets do not suggest that there were any marked differences between the high and low rent areas, and that would have contributed to the changes in the extent of labour market participation by claimants over the evaluation period.

If wider labour market factors are discounted, the reasons for the different profiles of labour market participation by LHA claimants in the high and low rent areas over time must be explained in other terms. While there are too many unknown variables, and the data is too limited to provide definitive answers, it is possible to construct a cogent hypothesis for the results.

The overall low level in numbers of working claimants in the low rent areas reflects the capacity of even relatively low-paid households to pay a rent in those areas without support from HB. The proportionately higher rise in the movement of longer term claimants into work, and the proportionately higher rate at which they move into work and at the same time off of HB, can also be seen in that light.

Conversely, the overall higher level in numbers of working claimants in the high rent areas reflects the greater requirement for relatively low paid households to continue to rely on HB to help them pay their rent. While other factors may also be involved the higher proportion of working claimants in the flows sample in the high rent areas would be consistent with a measure of improved understanding of the availability of HB as an in work benefit in those areas.

While the complexities of the HB scheme remain, especially in relation to the income and taper calculations, the introduction of the LHA could be argued to have been indirectly beneficial in reducing the complexities relating to the rent levels to be covered in the PRS.

Deficits and surpluses

Finally, the claimant survey found that claimants in employment were far less likely to receive an LHA payment that provided a ‘surplus’ over their contractual rent. However, for working claimants the level of payment would typically be commuted to take into account their earned incomes (and income from Tax Credits), and they may not therefore receive a surplus in practice even if the standard LHA rate was in excess of the level of their rent.

Thus, the survey finding that claimants without a surplus were slightly more likely to expect to be working in the future is as likely to be a reflection of their current work status, as the possible ‘push factor’ of a shortfall between their LHA payment and their contractual rent.

91


Attitudes to work

The first wave claimant survey found that almost three fifths of all claimants expected to be working within a few years; in most cases for more than 16 hours a week, although only just over one in five were working at the time of the survey.

Figure 5.8 shows the results for each LHA where data was available (this does not include Edinburgh). The survey also found that about a half of claimants not working had family responsibilities, and this was for them the primary barrier to working. Very few households indicated that they did not expect to work because they would be worse off, and none suggested that their housing circumstances were a barrier to work.

Figure 5.8 Work intentions in the Local Housing Allowance areas at Wave 1

It is also notable from Figure 5.8 that the highest level of future work expectations were found in Lewisham and Brighton & Hove, and the lowest work intentions were found in Blackpool and Conwy. These were also areas with relatively high and low levels of current employment amongst HB claimants respectively.

This finding does not provide any obvious support for the proposition that higher levels of rents, and the limited understanding of HB as an in-work benefit, might inhibit attitudes to working.


92

Indeed the main conclusion drawn from the claimant surveys was that future work intentions were most strongly associated with current work behaviour, and this was far more significant than either the local labour or housing markets (8).

However, as seen in the previous section, the basis for this finding is in turn linked to rent levels. Households in low paid jobs in high rent areas are more likely to qualify for HB; and therefore be likely to have been included in the claimant survey. Conversely, working households in the low rent areas are less likely to qualify for HB, and would as a consequence be outside the scope of the claimant survey.

Summary

The factors influencing claimants’ decisions about labour market participation are complex, and the HB scheme has a very limited role in those decisions. There is a low take-up rate of HB by working households, and even when households are aware of its availability as an in-work benefit, the uncertainties about the amount of benefit they might receive limits the extent to which they can take it into account when making decisions about whether or not they would be better off in work.

One aspect of the LHA regime is the encouragement given to claimants to open bank accounts. The introduction of the LHA, in this case linked to similar encouragement being given in respect of payments of JSA, was largely successful in this respect, and very few claimants receiving LHA payments at the end of the evaluation period did so without having a bank account. Claimants having an operating bank is taken as one of the dimensions of claimants taking responsibility for their financial affairs, and in that sense as an indication of ‘work readiness’.

While there was a broad consensus among the professionals that the LHA was more transparent, and made it easier to make claimants aware of the benefit levels they would receive in and out of work, the claimant surveys clearly showed that there were limitations to the extent of that transparency, even in respect of the narrow issue of the maximum level of the LHA, and how that related to their contractual rent.

The claimant interviews for the LHA study also found that most claimants either thought that they would get no HB if they took up a job, or knew they might get a lower level of benefit but had no idea how much. There was no change in this finding from the claimant surveys over the course of the LHA evaluation.

In broad terms the claimant surveys found no indication of trend towards higher levels of labour market participation in the LHA areas relative to the Control areas. The higher levels of employment at Wave 3 of the survey interviews in both the Pathfinder and Control areas was seen primarily as a reflection of the changing composition of the interview samples over time, as they increasingly comprised more ‘stable’ longer term claimants.

93


There was, however, a significantly higher proportion of working claimants in the high rent LHA areas (Brighton & Hove and Lewisham), compared both to the low rent LHA areas and the Control areas (which all had relatively low rents). In large part this simply reflected the greater likelihood that a low income household in a high rent area would still need to rely on HB to help them with their rent, and the Wave 2 claimant survey showed that a higher proportion of claimants moving into work in low rent areas also moved off of HB.

While the data is limited, and there are too many unknown factors to reach any definitive conclusions, the higher level of new working claimants in the high rent areas found by the ‘flows’ survey undertaken towards the end of the LHA evaluation, would be consistent with the LHA having had a positive impact on claimants working in those areas.

However, while wider labour market trends over the evaluation period do not appear to have had a differential impact across high and low rent areas, nor do the claimant surveys provide any indication that claimants understanding of the availability of HB as an in-work benefit improved over the course of the evaluation, or that there was any change in their attitudes to labour market participation.

94

95


Appendix A

Local house prices and earnings data

Local earnings in Pathfinder and Control areas

Areas Gross weekly pay for full-time workers

2002 Mean Lowest decile Lowest quartile Median £pw £pw £pw £pw

Blackpool 357.8 181.4 235.0 324.4

Brighton and Hove 481.9 239.9 294.2 410.5

Cardiff 449.6 215.0 271.9 381.7

Conwy 394.7 200.2 253.0 344.5

Coventry 431.0 212.4 278.3 374.9

Edinburgh, City of 484.3 220.6 292.1 412.4

Leeds 420.6 217.8 272.8 364.7

Lewisham 533.5 248.6 325.4 454.8

North East Lincolnshire 372.6 188.5 230.5 342.3

Teignbridge 381.0 195.9 245.7 340.6

Wakefield 404.5 201.5 259.3 349.8

Wolverhampton 387.9 206.3 271.9 346.9


Blackpool 353.9 195.2 248.8 327.3


Cardiff 455.1 222.0 272.5 386.4

Conwy 426.7 205.3 249.4 372.9

Coventry 444.6 227.5 287.9 383.8


Leeds 443.2 218.0 283.7 386.3

Lewisham 551.4 255.7 345.8 492.1


Teignbridge 392.9 204.8 260.0 346.7

Wakefield 425.2 212.1 270.8 360.5

Wolverhampton 380.9 202.6 265.2 345.2


96



Blackpool 380.0 199.6 230.3 324.5


Cardiff 485.3 232.4 290.5 410.5

Conwy 449.6 231.1 276.9 387.3

Coventry 461.5 235.3 301.7 403.6


Leeds 459.1 225.0 291.9 400.2

Lewisham 549.7 257.7 337.9 507.1


Teignbridge 405.5 198.2 255.2 346.2

Wakefield 441.7 225.6 280.5 380.1

Wolverhampton 389.5 216.6 272.7 352.3


Blackpool 398.7 220.1 259.9 333.0


Cardiff 510.5 240.1 299.5 423.0

Conwy 466.3 227.3 268.3 381.5

Coventry 477.0 239.2 305.0 406.2


Leeds 482.2 232.9 301.6 410.3

Lewisham 557.5 282.0 356.8 507.9


Teignbridge 422.7 213.6 265.1 367.3

Wakefield 447.9 223.9 278.3 388.4

Wolverhampton 419.2 219.4 285.1 373.4

97




Blackpool 391.3 205.8 248.3 344.2


Cardiff 513.4 249.5 302.4 419.4

Conwy 455.6 229.8 284.5 370.4

Coventry 471.2 242.9 299.0 424.6


Leeds 493.7 239.3 308.9 417.2

Lewisham 570.8 273.1 366.7 521.8


Teignbridge 445.8 216.4 280.3 393.5

Wakefield 469.8 230.7 288.8 404.8

Wolverhampton 435.0 227.7 286.3 388.1

Source: Annual Survey of Hours and Earnings. Note: Earnings are based on place of residence.


98

Ho

use

pri

ces

in t

he P

ath

fin

der

an

d C

on

tro

l are

as

1 b

edro

om

2 b

edro

om

s

Purc

has

e p

rice

(£)

Pu

rch

ase

pri

ce (£

)

Loca

l Au

tho

rity

LH

A o

r C

ou

nt

Mea

n

Perc

enti

le 2

5 Pe

rcen

tile

10

Co

un

t M

ean

Pe

rcen

tile

25

Perc

enti

le 1

0

con

tro

l

2003

Blac

kpoo

l LH

A

18

48,7

24

36,1

75

21,7

24

140

69,7

70

54,6

87

46,5

45

Brig

hton

and

Hov

e LH

A

197

117,

487

105,

500

89,7

60

408

172,

858

144,

963

122,

812

Con

wy

LHA

12

54

,996

45

,250

42

,450

93

85

,523

62

,750

49

,970

Cov

entr

y LH

A

15

57,9

97

42,0

00

34,2

00

182

79,0

83

65,5

63

54,0

00

Edin

burg

h LH

A

385

88,7

92

70,0

00

60,0

00

821

122,

477

85,0

00

65,0

00

Leed

s LH

A

56

86,0

01

65,0

00

47,1

00

602

93,4

17

64,0

00

47,5

00

Lew

isha

m

LHA

19

2 11

4,31

4 96

,250

78

,300

40

8 15

0,85

7 12

5,00

0 10

0,00

0

Nor

th E

ast L

inco

lnsh

ire

LHA

. .

. 71

59

,425

42

,042

33

,400

Teig

nbrid

ge

LHA

. .

. 13

0 12

5,25

2 99

,750

89

,100

Car

diff

C

ontr

ol

58

88,8

86

68,8

75

43,8

00

346

108,

581

81,9

88

68,1

40

Wak

efiel

d C

ontr

ol

5 62

,480

48

,475

.

236

72,3

40

53,0

00

39,7

00

Wol

verh

ampt

on

Con

trol

27

48

,575

21

,840

16

,004

13

4 69

,636

47

,875

32

,275

99


3 b

edro

om

4+ b

edro

om

s

Purc

has

e p

rice

(£)

Pu

rch

ase

pri

ce (£

)

Loca

l Au

tho

rity

LH

A o

r C

ou

nt

Mea

n

Perc

enti

le 2

5 Pe

rcen

tile

10

Co

un

t M

ean

Pe

rcen

tile

25

Perc

enti

le 1

0

con

tro

l

2003

Blac

kpoo

l LH

A

361

87,4

52

70,5

00

55,0

00

78

117,

482

70,0

00

47,0

00

Brig

hton

and

Hov

e LH

A

341

215,

273

174,

125

150,

000

130

348,

324

250,

000

199,

100

Con

wy

LHA

18

8 11

1,01

7 77

,500

59

,800

10

1 18

4,08

6 11

7,50

0 87

,600

Cov

entr

y LH

A

428

109,

128

85,0

00

66,9

00

84

253,

660

150,

500

120,

750

Edin

burg

h LH

A

512

167,

356

110,

000

75,0

00

211

304,

430

200,

000

140,

000

Leed

s LH

A

972

120,

069

85,0

00

62,5

00

371

242,

534

160,

000

96,0

00

Lew

isha

m

LHA

33

9 19

8,94

9 15

5,00

0 12

5,00

0 86

31

1,38

1 22

6,05

0 18

7,00

0

Nor

th E

ast L

inco

lnsh

ire

LHA

23

8 85

,192

60

,000

40

,000

10

0 14

5,45

9 11

9,96

3 81

,400

Teig

nbrid

ge

LHA

19

2 16

9,12

1 12

3,25

0 10

5,45

0 12

7 25

0,25

0 17

9,00

0 14

6,80

0

Car

diff

C

ontr

ol

616

129,

349

93,0

00

70,0

00

296

237,

645

160,

249

130,

000

Wak

efiel

d C

ontr

ol

480

95,2

52

60,0

00

45,0

00

163

178,

757

139,

000

91,0

00

Wol

verh

ampt

on

Con

trol

35

5 95

,044

62

,000

49

,400

59

17

8,69

0 13

0,00

0 59

,995


100

1 b

edro

om

2 b

edro

om

s

Purc

has

e p

rice

(£)

Pu

rch

ase

pri

ce (£

)

Loca

l Au

tho

rity

LH

A o

r C

ou

nt

Mea

n

Perc

enti

le 2

5 Pe

rcen

tile

10

Co

un

t M

ean

Pe

rcen

tile

25

Perc

enti

le 1

0

con

tro

l

2004

Blac

kpoo

l LH

A

26

63,7

75

56,4

63

44,0

00

189

82,6

02

67,0

00

60,0

00

Brig

hton

and

Hov

e LH

A

312

128,

794

114,

963

97,9

50

570

190,

718

156,

875

135,

000

Con

wy

LHA

15

71

,500

40

,000

24

,600

15

8 10

9,45

5 85

,000

67

,700

Cov

entr

y LH

A

21

79,4

23

52,5

00

37,2

00

346

97,0

90

80,0

00

68,3

50

Edin

burg

h LH

A

560

101,

386

80,0

00

70,0

00

1236

13

9,30

6 97

,625

77

,850

Leed

s LH

A

113

91,8

31

61,5

00

45,9

00

1041

10

7,57

5 79

,181

60

,000

Lew

isha

m

LHA

35

8 13

1,29

1 11

5,00

0 94

,800

60

4 17

3,66

9 14

7,00

0 11

9,00

0

Nor

th E

ast L

inco

lnsh

ire

LHA

10

47

,690

39

,625

32

,650

13

7 80

,876

53

,000

39

,400

Teig

nbrid

ge

LHA

32

81

,105

72

,400

58

,250

18

6 14

3,92

0 11

6,75

0 95

,000

Car

diff

C

ontr

ol

108

95,6

09

75,3

75

51,8

95

498

130,

472

104,

988

84,8

55

Wak

efiel

d C

ontr

ol

14

73,7

85

46,7

50

42,7

48

421

84,4

90

67,0

00

53,0

00

Wol

verh

ampt

on

Con

trol

58

48

,569

30

,000

21

,450

19

6 82

,597

59

,000

40

,976

101


3 b

edro

om

s

4+ b

edro

om

s

Purc

has

e p

rice

(£)

Pu

rch

ase

pri

ce (£

)

Loca

l Au

tho

rity

LH

A o

r C

ou

nt

Mea

n

Perc

enti

le 2

5 Pe

rcen

tile

10

Co

un

t M

ean

Pe

rcen

tile

25

Perc

enti

le 1

0

con

tro

l

2004

Blac

kpoo

l LH

A

505

110,

257

84,0

00

68,8

00

116

171,

450

120,

529

76,4

00

Brig

hton

and

Hov

e LH

A

456

243,

324

190,

000

167,

100

186

382,

591

275,

000

225,

000

Con

wy

LHA

26

2 14

3,18

2 10

0,00

0 78

,650

14

4 22

6,54

8 16

5,25

0 12

5,00

0

Cov

entr

y LH

A

628

126,

866

97,0

00

83,0

00

123

249,

837

165,

000

130,

000

Edin

burg

h LH

A

730

192,

497

126,

750

94,1

00

312

345,

567

220,

000

160,

000

Leed

s LH

A

1522

13

6,50

2 99

,900

70

,000

57

9 24

5,21

5 17

3,50

0 97

,000

Lew

isha

m

LHA

50

6 22

5,23

6 18

2,37

5 15

0,00

0 14

7 38

7,37

5 24

7,00

0 19

2,80

0

Nor

th E

ast L

inco

lnsh

ire

LHA

42

0 89

,616

60

,000

45

,000

13

0 17

0,86

3 13

4,25

0 95

,000

Teig

nbrid

ge

LHA

27

2 18

7,48

9 14

4,00

0 12

3,30

0 18

0 30

5,58

1 22

7,73

8 19

0,50

0

Car

diff

C

ontr

ol

786

153,

758

120,

000

90,0

00

324

260,

619

190,

000

150,

000

Wak

efiel

d C

ontr

ol

782

109,

071

75,7

46

60,0

00

254

214,

943

164,

750

128,

500

Wol

verh

ampt

on

Con

trol

58

5 10

5,24

0 72

,000

52

,000

87

20

4,06

1 12

5,00

0 73

,700


102

1 b

edro

om

2 b

edro

om

s

Purc

has

e p

rice

(£)

Pu

rch

ase

pri

ce (£

)

Loca

l Au

tho

rity

LH

A o

r C

ou

nt

Mea

n

Perc

enti

le 2

5 Pe

rcen

tile

10

Co

un

t M

ean

Pe

rcen

tile

25

Perc

enti

le 1

0

con

tro

l

2005

Blac

kpoo

l LH

A

19

71,8

04

55,0

00

47,5

00

144

104,

136

84,0

00

70,0

00

Brig

hton

and

Hov

e LH

A

298

138,

820

123,

750

109,

750

540

197,

766

163,

125

147,

500

Con

wy

LHA

16

80

,000

59

,250

54

,800

12

4 11

6,03

6 94

,238

75

,000

Cov

entr

y LH

A

38

84,3

89

61,5

00

49,5

00

312

102,

627

86,0

00

74,2

85

Edin

burg

h LH

A

342

115,

074

90,0

00

80,6

79

874

156,

100

116,

750

90,5

63

Leed

s LH

A

94

101,

122

67,8

75

51,5

00

794

117,

960

89,0

00

68,0

00

Lew

isha

m

LHA

27

2 14

3,01

3 12

2,25

0 95

,600

47

9 18

3,48

1 15

5,00

0 13

7,00

0

Nor

th E

ast L

inco

lnsh

ire

LHA

6

56,9

08

41,2

50

30,0

00

78

93,7

28

68,2

50

51,8

00

Teig

nbrid

ge

LHA

11

98

,100

90

,000

81

,050

15

0 14

8,81

4 12

3,50

0 10

4,40

0

Car

diff

C

ontr

ol

92

112,

870

85,6

25

75,0

00

346

145,

185

118,

688

101,

000

Wak

efiel

d C

ontr

ol

9 94

,055

69

,500

60

,000

25

9 10

1,42

6 85

,000

67

,500

Wol

verh

ampt

on

Con

trol

35

63

,077

40

,000

28

,000

22

1 99

,860

78

,475

50

,000

103


3 b

edro

om

s

4+ b

edro

om

s

Purc

has

e p

rice

(£)

Pu

rch

ase

pri

ce (£

)

Loca

l Au

tho

rity

LH

A o

r C

ou

nt

Mea

n

Perc

enti

le 2

5 Pe

rcen

tile

10

Co

un

t M

ean

Pe

rcen

tile

25

Perc

enti

le 1

0

con

tro

l

2005

Blac

kpoo

l LH

A

263

124,

310

97,0

00

85,0

00

71

196,

564

125,

000

94,2

00

Brig

hton

and

Hov

e LH

A

479

256,

434

210,

000

175,

500

200

374,

479

277,

625

220,

200

Con

wy

LHA

18

4 16

0,31

5 11

5,50

0 90

,000

84

25

7,97

5 19

0,00

0 15

8,50

0

Cov

entr

y LH

A

551

139,

445

117,

000

96,1

90

114

254,

991

181,

500

150,

000

Edin

burg

h LH

A

530

215,

203

159,

500

118,

290

273

373,

391

250,

000

189,

700

Leed

s LH

A

1,19

8 15

1,39

1 11

5,00

0 85

,000

44

5 28

5,81

3 19

0,50

0 12

4,60

0

Lew

isha

m

LHA

43

8 23

4,47

0 19

7,75

0 16

8,45

0 12

9 39

1,49

0 26

1,50

0 21

5,00

0

Nor

th E

ast L

inco

lnsh

ire

LHA

25

8 11

2,60

4 73

,000

52

,950

92

18

4,96

8 15

5,00

0 11

1,80

0

Teig

nbrid

ge

LHA

22

1 19

9,74

4 16

0,00

0 14

1,40

0 13

5 33

3,03

8 23

0,00

0 18

5,58

0

Car

diff

C

ontr

ol

534

171,

459

132,

000

110,

000

229

310,

684

220,

000

165,

000

Wak

efiel

d C

ontr

ol

486

128,

476

90,0

00

73,8

50

207

243,

933

177,

000

159,

560

Wol

verh

ampt

on

Con

trol

41

4 12

4,35

5 90

,000

70

,000

76

23

8,14

0 16

0,68

8 92

,800


104

1 b

edro

om

2 b

edro

om

s

Purc

has

e p

rice

(£)

Pu

rch

ase

pri

ce (£

)

Loca

l Au

tho

rity

LH

A o

r C

ou

nt

Mea

n

Perc

enti

le 2

5 Pe

rcen

tile

10

Co

un

t M

ean

Pe

rcen

tile

25

Perc

enti

le 1

0

con

tro

l

2006

Blac

kpoo

l LH

A

36

86,9

77

72,3

13

61,7

50

228

107,

987

87,0

00

75,4

50

Brig

hton

and

Hov

e LH

A

534

148,

743

132,

000

116,

250

993

208,

056

170,

888

153,

040

Con

wy

LHA

15

93

,257

76

,950

44

,980

21

0 13

0,62

5 10

8,00

0 87

,550

Cov

entr

y LH

A

50

83,6

56

67,0

00

57,5

50

533

109,

427

89,0

43

78,0

00

Edin

burg

h LH

A

658

123,

193

98,6

88

90,0

00

1,39

3 16

9,72

4 12

5,00

0 10

0,00

0

Leed

s LH

A

267

104,

887

84,0

00

71,8

00

1,51

3 12

8,79

0 10

3,00

0 83

,100

Lew

isha

m

LHA

38

2 15

3,02

4 12

8,00

0 11

5,30

0 89

4 19

9,24

6 16

7,00

0 15

0,00

0

Nor

th E

ast L

inco

lnsh

ire

LHA

14

88

,139

54

,500

37

,000

12

6 10

0,38

2 72

,988

60

,000

Teig

nbrid

ge

LHA

39

11

7,08

8 90

,000

74

,000

27

5 16

0,60

0 13

2,00

0 12

2,80

0

Car

diff

C

ontr

ol

184

109,

296

89,0

00

76,1

50

766

140,

990

118,

500

103,

000

Wak

efiel

d C

ontr

ol

31

89,2

72

80,0

00

56,0

00

491

109,

103

90,0

00

79,9

50

Wol

verh

ampt

on

Con

trol

52

76

,439

56

,750

34

,000

25

7 10

4,26

9 79

,975

57

,500

105


3 b

edro

om

s

4+ b

edro

om

s

Purc

has

e p

rice

(£)

Pu

rch

ase

pri

ce (£

)

Loca

l Au

tho

rity

LH

A o

r C

ou

nt

Mea

n

Perc

enti

le 2

5 Pe

rcen

tile

10

Co

un

t M

ean

Pe

rcen

tile

25

Perc

enti

le 1

0

con

tro

l

Blac

kpoo

l LH

A

455

127,

340

107,

000

92,0

00

138

202,

514

136,

488

112,

896

Brig

hton

and

Hov

e LH

A

811

268,

714

215,

000

184,

000

400

427,

237

310,

750

249,

950

Con

wy

LHA

30

7 16

2,78

8 12

4,75

0 11

0,00

0 16

9 26

2,02

2 18

0,50

0 14

9,00

0

Cov

entr

y LH

A

1,10

3 14

9,65

1 12

0,00

0 10

6,70

0 26

0 28

6,51

4 20

5,62

5 15

5,00

0

Edin

burg

h LH

A

818

235,

137

167,

500

126,

000

387

411,

938

290,

000

220,

000

Leed

s LH

A

2,48

0 16

0,93

2 12

3,96

3 99

,500

97

7 29

3,33

1 20

2,25

0 14

2,80

0

Lew

isha

m

LHA

80

7 24

7,43

2 20

5,00

0 18

0,00

0 27

3 38

8,89

4 27

8,50

0 23

9,40

0

Nor

th E

ast L

inco

lnsh

ire

LHA

54

6 11

6,29

6 84

,500

67

,665

18

3 19

8,23

3 15

5,30

0 11

6,00

0

Teig

nbrid

ge

LHA

44

9 21

0,09

0 16

4,47

5 14

3,00

0 29

0 34

8,09

4 24

7,50

0 20

0,40

0

Car

diff

C

ontr

ol

1,26

2 17

6,08

0 13

7,98

8 11

6,96

5 52

4 29

4,78

8 21

0,00

0 16

5,00

0

Wak

efiel

d C

ontr

ol

952

134,

904

105,

000

83,0

00

352

255,

703

189,

963

160,

000

Wol

verh

ampt

on

Con

trol

66

9 13

5,14

0 10

8,00

0 84

,000

15

4 25

5,91

2 16

2,62

5 11

9,97

5

Sour

ce: S

urve

y of

Mor

tgag

e Le

nder

s/Re

gula

ted

Mor

tgag

e Su

rvey

. N

ote:

The

hou

se p

rices

for 1

bed

room

dw

ellin

gs s

houl

d be

trea

ted

with

cau

tion

in th

ose

area

s w

here

the

sam

ple

is v

ery

smal

l.

106

107


Appendix B: Local Housing Allowance market stream vignettes

Local Housing Allowance Pathfinder Area Vignettes

Short summaries of the key housing market characteristics of the nine Local Housing Allowance (LHA) pathfinder areas are set out ahead, grouped under their classification of Housing Benefit (HB) ‘dominant’, ‘concentrated’ and ‘dispersed’ markets.

Housing Benefit dominant markets

This cluster of Pathfinders – containing Blackpool and North-East Lincolnshire – has been classified as ‘HB dominant’ since there is a much higher than average proportion of households within the PRS that are reliant wholly or partially on state help to pay the rent. In both these Pathfinders, there is little in the way of alternative demand for rented property from groups such as students or young professionals and theoretically tenants may have relatively open choice in the rental market. Neither of the HB dominant Pathfinders showed any shift from this position over the evaluation period.

Blackpool

Population 142,000 2001 Census

PRS as a proportion of households 18 per cent 2001 Census

Number of wards with more than 20 per cent PRS 6/21 2001 Census

HB claimants in the PRS, February 2005 9,100 DWP data

Proportion PRS households on HB in the PRS in February 2005 81 per cent Census/DWP data (1)

Proportion of claimants with payment to landlord/agent, Baseline 50 per cent LHAE 10, Walker, 2006 (2) Proportion of claimants with payment to landlord/agent, 2006 22 per cent

Blackpool is one of the smaller unitary authorities, but the seasonal influx of visitors can introduce periods of high demand for holiday and other temporary lettings in the Private Rented Sector (PRS). The working age employment rate in the city was similar to the national average, although the JSA working age claimant rate was 3.4 per cent compared with the national average of 2.5 per cent.

According to the 2001 Census, the proportion of households in owner occupation in Blackpool was 70 per cent; in social housing the figure was a below-national average of 9.6 per cent. Eighteen per cent of households were in the PRS, but distribution was uneven across the local authority. Six of the 21 wards in Blackpool had in excess of 25 per cent of households living in the PRS. Two wards – Bloomfield and Talbot – had over 40 per cent of residents renting privately.


108

The PRS in Blackpool was heavily dominated by lettings to people reliant on HB. Demand was high, since much of the employment is transient and incomes subsequently fluctuate. At the time of the Baseline report, the number of HB claimants in the PRS was 8,200: around 58 per cent of all the HB caseload. The percentage of households on HB in the PRS in Blackpool was 81 per cent in February 2005. Around 22 per cent of payments were made to the landlord rather than the claimant by February 2006.

As was the case in many Pathfinders, landlord and letting agent initial response to the LHA was to threaten withdrawal from the LHA sector, and by the second round there was further anecdotal reporting that some smaller landlords were indeed selling properties, which were bought to enlarge the portfolios of larger landlords. By the end of the evaluation period, it was acknowledged that withdrawal from the sector was reflected in single anecdotes rather than any ‘massed’ action, and that landlords and agents in the sector simply had to continue taking LHA tenants. However, care was being taken to ensure that the maximum gain would be made in matching household and property sizes. In addition, landlords exercised greater discretion about the types of tenant taken: for example, taking only older tenants and those who already have or can open bank accounts.

It was noted that moves towards licensing (earlier voluntary, and now mandatory) were having a greater impact on the market. However, it was claimed that the PRS has expanded in Blackpool since 2001 partly because of the interest of buy to let investors including some from outside the region. Outside the direct purview of LHA administration and the LHA market, it is possible that few investors have noticed the introduction of the LHA.

At the Baseline stage, Blackpool could be described as being a ‘Housing Benefit dominated’ market, in which lettings to people reliant on HB to cover all or part of their rent dominated the PRS. The market did not change over the course of the evaluation period, and the LHA appears to have had little impact apart from demonstrating the close relationship between landlord management practices and LHA regulations in this area.

North East Lincolnshire


PRS as a proportion of households Ten per cent 2001 Census


HB claimants in the PRS, February 2005 4,900 DWP Data

Proportion of PRS households on HB in February 2005 73 per cent Census/DWP data (1)

Proportion of claimants with payment to landlord/agent, 2004

80 per cent

LHAE 10, Walker, 2006 (2)Proportion of claimants with payment to landlord/agent, 2006

29 per cent

109


North East Lincolnshire is a unitary authority dominated by the three urban centres of Grimsby, Immingham and Cleethorpes. To the west and north of these lie smaller rural settlements. In 2004, working-age employment rate for the authority was 71 per cent, which is slightly below the national average. The ILO unemployment rate was 7.9 per cent, higher than the national average, and the JSA claimant rate was four per cent: again higher than the national average of 2.5 per cent.

In terms of tenure, owner occupation was 72 per cent at the 2001 census, and social housing accommodated 15 per cent. Ten per cent of households were in the PRS. Two wards – West Marsh and Sidney Sussex – had 20 and 21 per cent respectively of households living in the PRS. The PRS in North East Lincolnshire is not spread evenly throughout the area: it tends to be concentrated in terraced properties located in the hinterland of the two ports of Grimsby and Cleethorpes.

At the Baseline stage there was little investment interest in the PRS. Early interest in buy to let sales had declined because of low rental values in the area, and some landlords were selling in preference to continuing to let. Low rental income had also contributed to the generally poor quality of properties in the sector. Low demand for property meant that many households could easily move between the PRS and social housing, and a lot of migration between the rental tenures was reported.

As was the case in other Pathfinders, landlords and letting agents in North East Lincolnshire expressed strong reservations about the introduction of the LHA and in particular a cessation of routine direct payment to landlords. At the Baseline stage there was anecdotal evidence of landlords selling properties, and fears relating to increased administrative costs accruing to changes in rent collection methods.

At Wave One of the evaluation, landlords were still hostile to the new changes, but few reported overwhelming difficulties with rent arrears although it should be noted that the LHA was introduced in a phased manner in the borough, and many tenants had not yet transferred away from direct payment to landlord. By the Final Wave of the evaluation, again anecdotal evidence indicated some landlords selling properties in the ‘worst’ areas of the borough, and buying better quality properties elsewhere. The majority of new advertisements for properties indicated ‘No DSS’, although there was some scepticism about the ability of landlords to find non-benefit tenants for their properties.

North East Lincolnshire has remained a HB dominated market through the course of the LHA period, and the LHA appeared to have had little impact in that regard.

Housing Benefit concentrated markets

In the second grouping of Pathfinders, the HB market has been classified as ‘concentrated’. In these markets, lettings to HB tenants comprise a distinctive sector within the PRS, but do not dominate the sector. A number of other competing demand groups exist within the market place, such as students, young low-income professionals (such as hospital staff), holiday and luxury ‘executive’ lets. The HB sub-market is spatially concentrated within given wards within the Pathfinder, and these locations may be so located as to create difficulties for a landlord with properties in those locations to find a non-benefit tenant. In these circumstances, HB tenants within a concentrated HB market may find that their only competition for property comes from other tenants reliant on benefit. This group included Leeds, Edinburgh and Conwy.


110

Edinburgh





Proportion PRS households on HB in the PRS in February 2005

29 per cent Census/DWP data (1)


50 per centLHAE 10, Walker, 2006 (2)Proportion of claimants with payment to landlord/agent,

200612 per cent

The population of Edinburgh according to the 2001 Census was just over 448,000, which was an increase of 7.1 per cent since 1991. The city has in recent years been subject to substantial development, as the financial and business sectors have grown. The location of the Scottish Parliament in the city has had a strong impact, and increased investment in property in Leith. The labour market in the city was, at the Baseline, reasonably buoyant. The unemployment rate in 2004 was 3.2 per cent, which was slightly lower than the Scottish average of 3.6 per cent. The working age employment rate was above the national average, at 77.3 per cent.

In 2004, the housing market was reported to have been subject to change. There had been shifts in tenure proportion between the two census dates. There had been slight growth in owner occupation (66.4 per cent in 1991, increasing to 68.6 per cent in 2001) but a decrease in the proportion of households renting in the social sector, from 23.9 per cent to 16.5 per cent. The PRS had increased from 8.6 per cent to 12.6 per cent. The PRS was unevenly spread through the borough, being heavily concentrated in fifteen of the fifty-eight wards. In three wards – Marchmont, Tollcross and Southside – the proportion of privately renting households was at or above 40 per cent.

The PRS in Edinburgh was reported as being diverse, with various demand groups being evident. Just under a quarter of PRS tenants were in receipt of HB, a proportion which was slightly below the national average. At the Baseline stage, most respondents identified a ‘HB sub-market’ in Edinburgh, generally associated with the lower end of the private sector market and poorer quality housing. People living in this sub-market included those who had been excluded from social housing and/or suffered periods of homelessness. Yet most HB recipients aspired to work and were characterised as the most ‘stable’ tenants across the PRS: they lived in properties for some time. Where movement took place, it was often with the same landlord and within a circumscribed area. In terms of location, the HB sub-market was associated with Leith and City Centre districts although it was observed that most parts of the city had pockets of Housing Benefit tenants. Its stability meant that rents in the HB sub-market had not been affected by the heat of the wider rental market: many landlords dealing with the sector tended to prefer keeping their long-standing tenants, and had pegged their rents low as a consequence.

111


The benefit sub-market did not change its essential characteristics over the course of the evaluation, but some movement was evident. Overall, the number of LHA recipients increased over the course of the evaluation, and research completed by the Revenue and Benefits Department indicated that much of the increase came from tenants previously resident in social housing. It was thought that some landlords were moving into the sector in order to take up the more generous LHA rate, and also because processing times for the LHA had improved substantially. At the margins of the market, some landlords were withdrawing from letting to LHA recipients, but overall property oversupply in the non-LHA sectors may have made it difficult for such landlords to find an alternative demand group.

Leeds




HB claimants in the PRS, February 2005 November 7,500 DWP data





2006 16 per cent

Leeds City Council, covering 562 square kilometres, is the second-largest metropolitan district in England in geographic extent. According to the 2001 census, Leeds had a population of 715,402. Both housing and labour markets are characterised by diversity, with high-earning employment and high value properties concentrated in the city centre, a ‘doughnut’ of lower value properties, and a further circle of high value property in the less urbanised areas of the district. In 2004, the working age employment rate was similar to the national average, at 73.9 per cent compared with 74.2 per cent; the JSA claimant rate was also similar to the national average, at 2.6 per cent. The ILO unemployment rate was slightly lower than the national average, at 4.9 per cent.

The local housing market showed some change between the two last census dates. As in Edinburgh, the proportion of families in social housing dropped from 32 per cent to 27 per cent, and use of the PRS increased. In 2001, twelve per cent of households were private renters, compared with seven per cent ten years previously. The proportion of households in owner occupation has remained about the same, and is slightly below the national average.

The PRS was unevenly distributed around the city, with six of the twenty-one wards having over twenty per cent of households in private renting. In some areas, the sector was substantial, including Headingly (57.8 per cent of households in the PRS) which is known for its high student population. At the Baseline stage, key demand groups for privately rented property in Leeds included students, high-income professionals and key workers.


112

At the time of the initial Baseline research, Leeds could be characterised as having a concentrated HB sub-market, in that lettings to people on HB tended to be spatially concentrated in parts of Leeds – particularly in the intensely-occupied back-to-back terraces of South Leeds. Overall, lettings in the city were buoyant, and a number of competing demand groups for rental property were evident. By the end of the evaluation period, the market had started to change. Demand for rental property had continued to expand, and was making inroads into those localities that had previously been dominated by HB lettings: for example, Beeston and Harehills. Demand from East European immigrant workers had also started to become evident, particularly in the low-rent areas of the city. Some areas of concentrated HB lets still remained, including St Hilda’s, but increased competition for properties at the bottom end of the market – from benefit recipients, immigrant workers and asylum seekers – was cause for concern.

Landlords and letting agents were largely resistant to the introduction of the LHA, and there was anecdotal evidence of landlords substantially reducing the lets they had previously made available to HB claimants. Some landlords had sold lower-value properties in poor locations in order to reduce their HB letting, but it was uncertain where those properties now stood in terms of tenure or use.

Conwy








53 per centLHAE 10, Walker, 2006 (2)Proportion of claimants with payment to landlord/

agent, 200617 per cent

Conwy is a Unitary authority on the north Wales coast. The authority includes the towns of Rhyl and Colwyn Bay situated in an extended settlement strip on the coast itself, and an extended and sparsely populated rural hinterland.

Owner-occupation in Conwy is quite high, at 72 per cent of households, with social housing being slightly lower than the national average at 12 per cent. The proportion of households in private renting is 13 per cent. There were reports that the housing market has become quite buoyant in recent years, and a rapid increase in house prices has boosted demand for rental properties from households who would otherwise have been able to buy. There is no demand for properties from students in the area, and it was said that vacancies were commonplace in the HMO sub-sector.

113


Respondents recognised the existence of a HB market within the local authority, distinguished by low property standards and management. The market was concentrated in the shared properties located in the larger seaside settlements. It was thought that the size of the market may have diminished over the course of the evaluation, although its essential nature had remained unchanged. During the course of the evaluation there was some anecdotal evidence of landlords reducing lets to LHA claimants, but also some landlords showing uncertainty as to which tenants might be available as an alternative.

Housing Benefit Dispersed Markets

A further and perhaps more problematic type of market that is distinguishable is one in which the demand for and supply of properties to households in receipt of HB is largely hidden within the PRS, having no evident spatial concentration, and being without a set of landlords and letting agents that either seeks to meet demand from that group or even routinely let to that group. Although the proportion of households in the PRS may be higher than average, the demand is dispersed throughout the local authority, with high levels of demand also evident from other groups of renters. Coventry, Brighton & Hove, Lewisham and Teignbridge are included within this category.

Coventry


PRS as a proportion of households Ten per cent 2001 Census







2006Six per cent

Coventry’s population in 2001 was 300,848, which was a slight decrease on the count in 1991. However, the city is currently experiencing substantial inward migration including a growing student population, and an influx of asylum seekers and refugees. The city has a slightly higher rate of unemployment than the national average.

The city’s tenure mix is close to the national average, with 69 per cent owner-occupied, 18 per cent in social housing and ten per cent in private renting. Just one of the city’s wards has more than twenty per cent of households in private rented accommodation. For the most part, the tenure is relatively well spread through the borough: all wards have at least four per cent of households in private renting.


114

At the Baseline stage, demand for rented property had begun to expand, with a growing number of higher income groups, asylum seekers and refugees, students and HB claimants seeking to rent. However, as the Evaluation period progressed, there was some reduction in demand: private sector halls of residence had been built, and the flow of asylum seekers and refugees had slowed down substantially. Throughout the period there was uncertainty as to whether the National Asylum Seeker Service would renew its accommodation contracts in the city. At the end of the evaluation period, the market was still in flux. There remained a possibility that, if other demand groups declined in number and proportion, then the market may become HB dominated. It is unlikely that the LHA will have had a substantial impact on change in the sector.

Brighton & Hove




HB claimants in the PRS, February 2005 9,900 LA data, 2004


40 per cent Own calculation (1)



200613 per cent

Brighton & Hove showed some slight growth between the two census dates, and in 2001 had a population of 247,817. Brighton is densely populated, with a much higher than average proportion of residents in flats, maisonettes and apartments. The city had around 15,000 houses in multiple occupation.

In terms of tenure mix, the city has a slightly lower than average proportion of owner occupiers (61 per cent) and a smaller-than-average proportion in social housing. Private renting is the tenure of nearly twice the national average of households, at 22 per cent. Nine of the city’s wards had more than a fifth of their households in private renting, and in only one ward is the proportion of renters below five per cent. Private renting is particularly concentrated in the central parts of Brighton (Brunswick & Adelaide and Regency wards) and Hove (Central Hove ward).

The PRS is extremely diverse, and ranges from small bedsits in poor condition through to luxury flats. There was some disagreement as to whether the city had a distinctive HB sub-market. Certainly a student market for rental property was in evidence, but there was no clear indication that there were particular localities or landlords or letting agents that were targeting the HB market. It was felt that the market had been broadly stable throughout the period of the LHA evaluation.

115


Lewisham








55 per cent

LHAE 10, Walker, 2006 (2)Proportion of claimants with payment to landlord/agent, 2006

14 per cent

Lewisham is a large south London borough with population centres at Deptford, Lewisham, Catford and Forest Hill. The economic performance of the borough is below that of Greater London generally: in 2004, the working-age employment rate was 66 per cent compared with 70 per cent for London. Many residents travel outside the borough to work, and often commute further into the capital. The extension of the Docklands Light Railway has improved commuting links.

The tenure mix in Lewisham is very different from the other Pathfinders, and from the national averages. Around 50 per cent of households is in owner occupation, with 36 per cent in social housing. Fourteen per cent of households were in the PRS. In none of the eighteen wards did the sector exceed 20 per cent of households, although in thirteen the percentage exceeded ten per cent. Thus renting is spread relatively widely across the borough.

Teignbridge







Proportion of claimants with payment to landlord/agent, Baseline


2006 Eight per cent


116

Teignbridge is a district council located in South Devon, centred on the market town of Newton Abbott. Much of the district is rural, although it also has a coastal strip including the towns of Dawlish and Teignmouth, with the associated seasonal pressures that brings. A third of the population of the district lives in Newton Abbott.

The area has seen rapid population growth, with high levels of net inward migration over the past few years. There is also a high level of self-employment, and local earnings are low relative to local house prices as a result of the additional pressures from second and holiday homes, and the inward migration of retired or near retired households.

The level of owner occupation is high in the district, at 77 per cent; social housing is correspondingly low, with just ten per cent of households in that tenure. Private renting accounts for thirteen per cent of households. Just one of the wards in the district has more than twenty per cent of households in private renting, although just over fifteen have ten per cent or more of households in that tenure.

Notes and references

(1) This is the number of HB claimants in the PRS in February 2005 as a percentage of the number of PRS dwellings, excluding those let rent free, at the time of the 2001 Census.

(2) Walker, B. (2006) Local Housing Allowance Final Evaluation: Implementation and Delivery in the Nine Pathfinder Areas, Local Housing Allowance Evaluation Report 10, Department for Work and Pensions, 2006.

117


References

Rhodes, D. and Rugg, J. (2007), Local Housing Allowance Final Evaluation: The Survey evidence of Landlords and Agents Experience in the Nine Pathfinder Areas, Local Housing Allowance Evaluation 11, Department for Work and Pensions.

Roberts, S., Beckhelling, J., Phung, V-H., Boreham, R., Anderson, T. and Li, N. (2006), Living with the LHA: Claimants Experiences after Fifteen Months of the LHA in the Nine Pathfinder Areas, Local Housing Allowance Evaluation 9, Department for Work and Pensions; DWP (2007, forthcoming), Local Housing Allowance Wave 3 Claimants’ Quantitative Report, Local Housing Allowance Evaluation X, Department for Work and Pensions.

Marsh, A., McKay, S., Smith, A. and Stephenson, A (2001), Low Income Families in Britain, Department of Social Security.

Inland Revenue (2007), Child and Working Tax Credit Take-up Rates in 2004/05, Inland Revenue.

DWP (2007), Income Related Benefits Estimates of Take Up in 2005-06, Department for Work and Pensions.

Ford, J. and Wilcox, S. (1994), Affordable Housing, Low Incomes and the Flexible Labour Market, National Federation of Housing Associations; Ford, J., Kempson, E. and England, J. (1995), Into Work? The Impact of Housing Costs and the Benefit System on People’s Decision to Work, Joseph Rowntree Foundation.

Turley, C. and Thomas, A (2006), Housing Benefit and Council Tax Benefit as In-work benefits: Claimants’ and Advisors’ knowledge, Attitudes and Experiences, Department for Work and Pensions.

Roberts, S., Beckhelling, J., Hill, K., Phung, V-H., Stafford, B., Stratford, N. and Anderson, T. (2005), Receiving the LHA: Claimants Early Experiences of the LHA in the Nine Pathfinder Areas, Local Housing Allowance Evaluation 6, Department for Work and Pensions.

Local Housing Allowance Evaluation

Local HousingAllowance FinalEvaluation:

The housing and labour market impacts of the Local Housing Allowance

16

ISBN 978 1 84712 321 3

Published by CDSCorporate Document Services 7 EastgateLeeds LS2 7LY United KingdomTel: 0113 399 4040 Fax: 0113 399 4205E-mail: [email protected]: www.cds.co.uk

16

Loca

l Ho

usin

g A

llow

an

ce Fin

al E

valu

atio

n: Th

e h

ou

sing

an

d la

bo

ur m

ark

et im

pacts o

f the Lo

cal H

ou

sing

Allo

wan

ce501965_DWP_LHA16_cover.qxp 20/12/2007 14:13 Page 1

Documents

The housing and labour Local Housing Allowance...3 Local Housing Allowance Final Evaluation: The housing and labour market impacts of the Local Housing Allowance Glossary of terms