It is appropriate that this debate on affordability follows one on retirement and pensions. It is also appropriate that it should be taking place tonight, of all nights. I believe that when we look back we shall see 1 April as a key date with regard to housing and the homelessness crisis. I make that point because it is the date of the introduction of community care. That may not seem immediately relevant to affordability, but I suggest that it is indirectly relevant. From 1 April, people already in private residential care will not have the full cost of their care met; unlike those who enter homes after 1 April. In this of all years—it is the European year for solidarity between the generations—elderly people will find that, as a result of that policy, they cannot afford places in residential homes. If their families are unable to match the costs, they will have to leave and look for accommodation elsewhere, turning back to local authorities. Why? Because the housing benefit system will not cover the full cost.

Similarly, in the case of community care, the discharge of people from hospitals will put pressure on housing. The Government take a good policy and, somehow, manage to turn it inside out and corrupt it. They have a knack almost of corrupting the language. The very words "community care" may well turn out to mean the opposite. It may well be that there is no care and that the community is not there for the provision of support. The document on community care contained the helpful words: Housing is the key to independent living. That is fine, provided that there is sufficient housing. But, without a door, what use is a key?

In the context of this debate, the primary concern of society must be the absolute shortage of housing to rent. The Audit Commission, the Institute of Housing and the Housing Corporation all come up with a figure of 100,000 when considering the number of units of accommodation that need to be provided each year. The Government's plans for this year may produce, at best, 53,000 new homes. There is a desperate shortage of housing to rent.

For another reason, tonight is an appropriate occasion for a debate on the affordability of housing. On 31 March the Government closed the severe weather shelters. I am glad that the Parliamentary Under-Secretary of State for the Environment is present, as he went on record in The Times, and elsewhere, in an attempt to assure us that the 400 people in the nine shelters provided as emergency accommodation throughout the winter would have places provided for them or would find spaces in the voluntary sector. On the very last day—31 March—we checked and found that 133 people in some of those nine shelters had to leave, without anywhere else to go. As we debate in this Chamber, those people are spending their night on the streets of London. That is a disgrace.

Of course, we accept that it is a good policy to have severe weather shelters, but why on earth could not the Government have made provision to ensure that people being turned out had somewhere else to go? They knew who the people were. What we have is a good policy corrupted.

The Government's housing policies are now effectively pricing people out of renting. They are making it impossible for many people to rent in the private sector, the local authority sector and the housing association sector. I remind the Minister that the housing association sector is only 3 per cent. of the stock, the private rented sector only 7 per cent. and the local authority sector 21 per cent. All in all, about a third of the population live in rented housing and they have a right to know whether their homes will be affordable in the years to come.

I suggest that there needs to be some joined-up thinking between the Department of the Environment and the Department of Social Security. The affordability crisis in housing is also a housing benefit crisis. The Government are pursuing a low-wage policy and there is a fundamental contradiction between low wages and high rents. The Minister may reply that high rents will be met by high housing benefit.

The problem is that, for some people, wages are dropping. The Government claim that the average wage is rising and that is true, but they do not seem to realise that the average rises because the highest wages go up while, at the same time, people at the bottom of the scale see their incomes declining. That is where people hit the poverty trap.

The poverty trap is not for those on benefit but for those who are literally trapped between benefit and work income. They are caught coming off benefit. The Government must tackle the issue of housing benefit and the Minister should not glibly assume that social security will pay the bill. He will learn the hard way. People have to take up work—and so they should—but when they are offered a low-paid, part-time or temporary job, they will find that the income from that job will float them out of housing benefit through the tapers. They will be caught in the poverty trap because they will have to decide whether they can afford to take the job. If they cannot afford to take the job because it would mean that they were unable to pay the rent, they will face the worst Double Jeopardy. They will face the choice of losing their home because they cannot pay the rent or not taking a job. In other words, a work disincentive is being built into the Government's high-rent, low-wage policy.

The Government also need to make it clear whether the Treasury is giving carte blanche to the housing benefit system. From some of the statements made by the Secretary of State for Social Security, I am not sure whether the benefit tapers will be changed in the next Budget in November. If the tapers are changed and the situation becomes harsher, people will receive less from the benefit system to support their rents and will be forced to pay a higher proportion of their incomes in housing costs.

My hon. Friend the Member for Greenwich (Mr. Raynsford) referred to the iniquitous system of local authorities effectively subsidising the income support system. When the Government ring-fenced the housing revenue accounts, that is how they insisted that the system worked. Local authority tenants not on housing benefit make up the cost of local authority tenants on housing benefit. Of course, the Government know that that is happening. That is why they have recently changed the rules for large-scale voluntary transfer. They know that the rent accounts of local councils are receiving a subsidy from tenants not on benefit to cover the deficits which the Government should be making up through housing benefit and income support.

Why should some council tenants be subsidising the housing benefit of others, who ought to get proper support through the social security system? In other words, other renters are being forced to subsidise the income support system rather than the housing system. That is iniquitous and unjust. The Government recognised that fact in connection with large-scale voluntary transfer, which is why they changed the rules for that and introduced the levy. They should scrap the system now and return to local authorities the money that is due for paying out full housing benefit.

The Government are still operating a policy of pricing people out of renting local authority properties unless they are on high or medium wages. There is almost a deliberate edge, to force people to buy by pricing them out of renting. The guidelines set by the Government for local authority rent increases this year assume a 9 per cent. increase. That is well above the rate of inflation, yet those are the costs that tenants are asked to pay; that is the money that local authorities have to raise to balance their housing revenue accounts.

On 24 March my hon. Friend the Member for Rother Valley (Mr. Barron) asked the Secretary of State what assessment he has made as to the likely effect on the building of houses by housing associations of the reduction of housing association grants. The Minister for Housing and Planning replied: Increasing the private finance input into housing association schemes enables us to produce significantly greater numbers of new homes with the available public resources. The reduction in the average housing association grant for rented schemes from 72 per cent. in 1992–93 to 67 per cent. in 1993–94 was achieved through lower costs without any significant impact on the affordability of rents implied."—[Official Report, 24 March 1993; Vol. 221, c. 625.] A lot of meaning must be attached to the little word "implied". It is not the view of housing associations or their tenants that there has been no significant impact on affordability. There has indeed been a significant impact and not only I but many other hon. Members, including Conservative Members, are receiving letters from tenants in housing associations saying that they are finding it difficult to meet their rents.

On 24 March the National Federation of Housing Associations launched its affordability campaign, because it believes that the affordability crisis is now undermining housing association provision of housing to rent. If the housing associations constitute the only social rented sector that the Government are prepared to support, where does the Minister expect people to go if he prices them out of housing association properties? Even the Government's 1988 deregulation of the private rented sector did not revive it; there has been no substantial increase in properties available for private renting. There is a massive shortage of properties in the public, council rented sector. If people cannot afford their housing association flats and houses, where are they to move to? Where else can they go?

The housing associations' campaign on affordability points out that since 1989 housing association grants, the Government subsidy to housing association development, had been fixed at an average level of 75 per cent. throughout the country, but that in 1992–93 it fell to 72 per cent. and that it is now scheduled to fall to 67 per cent. But in the Department of the Environment's public expenditure announcement following the autumn statement the Government set an objective of reducing the grant to 60 per cent. in 1994–95 and to 55 per cent. in 1995–96.

The Government have not previously set grant rates for subsequent years. In a parliamentary reply on 24 March to a question from me suggesting that grants were projected to drop to those rates, the Minister said that it was alarmist propaganda. If he believes that the public expenditure statements of the Department of the Environment are alarmist propaganda, he should eat his own words, because it is there in black and white. It says that that is the Government's objective. In a speech at the London School of Economics the Housing Minister confirmed that that reduction in grant rates was his objective.

The consequences of the reduction in grant rates will be higher rents, the growth of dependency of housing association tenants on housing benefit, housing association revenue streams increasingly dependent on housing benefit and difficulties faced by housing associations in sustaining levels of private finance. If the grant rate changes take place, it is estimated that housing associations will need to raise an extra £400 million in private finance in 1995–96 simply to maintain a stable programme. Have the Government done the arithmetic on that? Do they believe that they can raise that money? Will not the Minister concede that it is an unrealistic additional amount for housing associations to find?

What will happen? There will be a vicious circle of higher rents, housing benefit dependency and reduced loan security, all as a result of a reduction in grant rates in the Government's attempt to push the housing association movement further in the direction of raising private finance.

The National Federation of Housing Associations commissioned UBS Phillips and Drew to forecast the factors that are incorporated into the grant rate and the total cost indicator systems which govern the costs and rents of housing association production. The calculations based on those forecasts are that rents are likely to increase by a further 70 per cent. on average and dependency on housing benefit will increase to 85 per cent. of housing association tenants. It will be 90 per cent. for two-parent households.

Such percentages of incomes spent on housing costs are well beyond what is expected anywhere else in the world. The OECD suggested that if a person or a family spent more than 30 per cent. of income on housing costs, there would not be sufficient left to feed and clothe themselves, apart from the cost of travel to work.

The Government have not revealed their estimate of an acceptable percentage of income to spend on housing costs, but the Treasury has assumed a figure of 34·7 per cent. since 1989. Under the proposals for one parents and single people, that figure will be over 40 per cent. For pensioner households the position will be even worse. If grant rates drop to 55 per cent., according to the UBS Phillips and Drew survey, pensioner couples will spend 45 per cent. of their income on rent and single pensioners 52 per cent. Single people under 25 will pay 48 per cent. Those levels are unsustainable.

I hope that the Minister has seen the background briefing notes of the National Federation of Housing Associations which give figures based on the federation's continuous recording of lettings data on new tenants supplied by the associations that make up the federation. They show that 76 per cent. of new working tenants will spend more than one third of their income on rent. The question that must be asked is: in those circumstances, how could the new rents be considered affordable on any reasonable interpretation of the word? Working households becoming association tenants will face an average rent of £84·37 in 1996, compared with £48·11 in 1992. On average that group will be spending 39·3 per cent. of their income on rent in 1996, compared with 28·9 per cent. in 1992.

In other words, the percentage of new working tenants who spend more than a third of their incomes on rent will rise from 27 per cent. in 1992 to 76 per cent. in 1996. Is that the Government's intention? If so, the only conclusion is that they assume that the bill will be picked up by the Department of Social Security in housing benefit, because 89 per cent. of new tenants will be on full or partial benefit. I should be interested to know whether the Department of the Environment and the Housing Minister have clearance from the Secretary of State for Social Security to escalate housing benefit in such a way. If 89 per cent. of all new housing association tenants moving into new homes in 1966 are on housing benefit because of the change in grant rates—reducing them to 55 per cent.—they will qualify for weekly housing benefit of £30·72 in 1996, compared with £13·28 in 1992. In that case, the Government will have to pay drastically more in housing benefit.

When we look at the annual report of the Department of the Environment, we find that the increase in housing benefit for private tenants and housing association tenants in the past 12 months is incredible. I cannot see the Treasury allowing the Department of the Environment to get away with a policy of simply saying that it will jack up the rents and the Department of Social Security will pick up the bill. I suspect that the Government will start to claw it back.

If everyone is pushed into housing benefit, the question again arises: in those circumstances, is it worth new tenants having a job? In other words, if they are offered a job, they are put in the real dilemma of having to refuse it because they will not be able to make up the difference between the high rent and what they would have got on housing benefit.

Pensioners will face worse affordability problems. In 1991–92, pensioner households, except housing association lettings, paid an average of 38 per cent. of their net incomes in gross rent, compared with 25 per cent. for households under pensioner age. We all know that, because pensioners who visit our surgeries or write to us often set out their payments in detail. They can tell us their weekly milk Bills. They do the arithmetic because they must pay the price of increasing bills. Pensioners will be hard-pressed if rents increase in this way because not all of them are on full housing benefit: some get a modest supplementary pension which, effectively, eliminates them from access to housing benefit. They then have to find the rent. Pensioner households pay higher average weekly gross rents than non-pensioner ones—in 1991–92, the figure was £42·49 compared with £38·30.

Are the Government suggesting that housing associations will provide welfare housing with a vengeance only for those on housing benefit? The trend is already shifting in that direction because 70 per cent. of tenants in housing associations are on benefit, compared with about 66 per cent. of council tenants. If they are saying that, there is another twist because the housing will be available only for pensioners on housing benefit.

If unemployed people on benefit are offered a job, they must accept it, regardless of how low paid it is, or they will lose the benefit. That is the new trap under the social security rules. The double-jeopardy is that, if people accept a part-time, temporary, low-paid job, it may float them out of a benefit but not give them sufficient to make up the difference in rent and they will have to move out. Even for the elderly, a bit of supplementary pension from a partner could mean that housing association properties will need notes in the windows saying "DSS only apply", which we have seen previously. If people cannot guarantee that they are on full housing benefit, they will not be able to afford the rent.

So what is the future of housing associations? The Mail on Sunday on 21 February said: Private developers could be given Government cash to build low-cost homes for homeless and poor families. Ministers may allow builders to compete with housing associations for a slice of £2 billion of Whitehall funding. Tory MPs pushing for the change are concerned that housing associations are failing to give value for money. They believe that savings could be made by 'cutting out the middleman' and funding developers directly. They argue that private developers could build more homes with the money through greater expertise and lower costs. The hon. Member for Croydon, Central (Sir P. Beresford) said in the article: I understand from the private sector that value for money is not being given. Many of the builders concerned claim they could build more homes for the same costs. I should like the Minister to confirm whether that is Government policy. Does he see the housing association grant going directly to the builders when it drops to 55 per cent?

So the great honeymoon of the housing association world which the Government supported seems to be coming to a close. What are the Government's intentions for the housing association world? Do they see it having a future, providing what they would describe as "socially rented housing", or do they see the grant going direct to the builders to provide more housing at lower cost?

The race for market rents was set off by the Housing Act 1988, which was to free the private rented sector. I remember asking the Housing Minister during proceedings on that Bill whether he had persuaded the Department of Social Security to agree to underwrite the housing benefit bill if landlords decided simply to jack up the rents and charge what they wanted. I remember the Minister saying that of course landlords could not put the rent up to £100 or £150 a week and simply claim that the person was on housing benefit. What have we seen happen?

We were given another notion—market rents. What do we get now? Week after week, I receive scores of letters from people who went to the rent assessment committee because the landlord proposed to increase their rent and found that the committee agreed to increase the rent by even more. What is happening in the private rented sector is exactly what was predicted would happen. Rents are going through the roof. So far, the Government simply say that it is deregulation and that those who cannot afford rents can obtain housing benefit. How long will it be, I am worried to ask, before the Treasury cuts the housing benefit bill? Will it be in November, when the tapers are reduced, that people are told that they have to pay more rent?

I conclude with a remark that the Minister made to me when I put it to him in environment questions on 24 March that the housing association grant reduction would cause real hardship. He replied: I reject the alarmist propaganda that the hon. Gentleman has just revealed to the House."—[Official Report, 24 March 1993; Vol. 221, c. 906.] Is the UBS Phillips and Drew survey alarmist? Are the housing associations being alarmist? They tell the truth about the arithmetic and who will pay the price if the Government press ahead with their proposal.

When we talk about propaganda, the Minister should look at his Department's news releases, in particular the one of 18 March which committed the Government to spending £1·4 million on an advertising scheme to remind tenants of their right to buy. The news release which relaunched the campaign said: Many council tenants could find that the costs of buying compare very well with the costs of renting. In fact, an average Right to Buy mortgage repayment will be less than the average rent as from April. Of course it will if the rents are increased to price people out into taking on mortgages. I suggest to the Minister that that statement says a lot more about the increasing costs of renting than about the availability of cheap mortgages. That is the problem. When we have a Government abolishing wages councils and driving wages down, of course the rents will be beyond people's means and the equations start to look different.

The Minister says in page 3 of the press release: Rents however have risen and now average rents are £33·00 a week (expected figure for April 1993) or £145 per calendar month. So mortgage costs could in fact now be less than renting costs. I am tempted to add that it is almost like an advertisement for a timeshare. It is certainly not a commitment to a decent, affordable renting policy; it is simply suggesting that people should get out of renting and take themselves into mortgages as quickly as possible.

There we have it. That is the real propaganda, the real direction of Government policy. There is a fundamental contradiction between a Government's economic policy developing a low-wage economy and a Department of the Environment insisting on high rents. We need more rented housing; that has to be the primary position; but we also need to tackle affordability, or, in effect, people will be priced out of renting.

If the Government pursue the present policies in the public sector, the housing associations and the private sector, people will be priced out of renting. The only conclusion can be an increase in homelessness as people try to live with others, on sofas and floors, or take to the streets. What worries me is that this time it could mean homelessness among the elderly on a scale which, so far, our society fortunately has not had to face.

That might sound alarmist to the Minister, but I suggest that he does his homework on the figures. The Government could, and should, act now to pre-empt that potential scandal. The primary need is for homes to rent. The Government should ensure that people can afford to pay their rent according to their real income and means; if they do not, they will be culpably compounding the homelessness crisis and rendering the word affordability totally void of meaning.