It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate the hon. Member for Bermondsey and Old Southwark (Neil Coyle) on securing this debate.
It is fair to say that there was a significant policy vacuum earlier this year, which was causing much concern for those involved in the sector. Credit is due to the Government for coming forward with proposals to fill that void. I particularly commend the ministerial team at the Department for Work and Pensions for the speed with which it responded with its statement on 15 September. It should be acknowledged that, back in July, it was a brand new team. This is not a straightforward matter, and it moved quickly to address the sector’s worries.
I believe that the framework within which the Government are working up their proposals is sensible. They carried out an evidence review, and they have acknowledged that the proposals cannot be worked up just within the confines of the Department for Work and Pensions and the Department for Communities and Local Government. There is a need to work with other Departments and providers.
The Government are also right not to be rushing to put the new system in straight away. As they move into the consultation and detailed design stages, I have six specific concerns that I want them to address in their work with those involved in the sector day to day. First, there is a widespread concern that the 1% cut in rents to commence from next March will impact on the viability of schemes, in particular those of small providers, and will lead to either a reduction in much-needed services or the closure of schemes altogether. Another worry is that the cut will lead to housing associations drawing back into cheaper, general needs housing.
I acknowledge that the Welfare Reform and Work Act 2016 provides that social landlords can be exempted from the requirement to reduce rents if that would result in serious financial difficulty or jeopardise their financial viability. The feedback that I am receiving, however, is that so many providers will be adversely affected and the measure is casting such a shadow of uncertainty over the sector that it would be simpler to exempt all supported housing from the provision.
Secondly, there is concern among providers that the Government’s proposed model from 2019-20—in which core rent and service charges will be funded through housing benefit or universal credit, and costs above the local housing allowance rate will be paid from devolved funding—could lead to a postcode lottery. The National Housing Federation expressed that opinion, and Riverside has provided regional maps to illustrate it. Emmaus, which serves my constituency, has similar worries, as has the Salvation Army, which is concerned that the housing support entitlement of vulnerable men and women will be substantially reduced everywhere except certain parts of London and the south-east. I acknowledge that London has serious homelessness challenges, but so do other cities, towns and coastal communities such as the one that I represent. We need a one nation solution.
Thirdly, it is important that any funding mechanism has the ability to maximise the amount of finance that can be leveraged in from external sources, whether banks or pension funds. Bear in mind that new developments are invariably funded over long periods of between, say, 10 and 30 years, because lenders are looking for certainty that their investments are secure over the lending period. Rents eligible for housing benefit provide that comfort, because that is Government-backed income. The worry, however, is that the local discretionary top-up funding does not provide the secure, long-term solution that investors seek—it is too risky. As the NHF has pointed out, we need to ensure that the ring fence for funding is iron-clad into the long term.
My fourth point concerns mental health. Rethink Mental Illness has expressed serious concerns that the position of those with mental health challenges could be seriously compromised. Housing is the foundation stone for those facing mental health challenges to get their lives back on track, so we need to look very closely at the proposals as they affect that. Fifthly, the sector is very diverse. It has a number of different parts and, although we should have a core system, we need add-ons to address particular worries and concerns. Finally, as has been mentioned, this is complicated and not straight forward, so I ask the Government for a pilot project, which is necessary before the scheme is rolled out across the country.
In conclusion, the Government are to be commended for providing a framework within which a sustainable system of funding for supported housing can be delivered. Our challenge is to address the devil in the detail. This is very complicated and we need to work with the sector during the consultation period and beyond to deliver a system that fairly and properly provides for many vulnerable residents.