Written evidence submitted by the Chartered Institute of Housing [EXA 122]

Introduction:

This background briefing has been prepared by the Chartered Institute of Housing (CIH) for the Levelling Up, Housing and Communities Committee to assist with its inquiry into exempt accommodation. Its purpose is to provide the Committee with the historical and legislative background to housing benefit for ‘exempt accommodation’ and how it fits within the systems for the regulation and enforcement of property standards for private and social rented housing. It is not intended to form part of CIH’s evidence to the inquiry.

This briefing comprises of three parts:

• Part 1: Sets out the legislative and policy timeline for housing benefit, the exempt accommodation rule, and treatment of service charges for housing-related general counselling within the housing benefit scheme (other developments within housing benefit are not included). This timeline also shows the development of the main regulatory systems for the enforcement of property standards within private and social rented housing (paras. 1-26).
• Part 2: Provides a brief description of how the exempt accommodation rule continues to operate following the roll out of universal credit full service (paras. 27-30).
• Part 3: Provides a brief description of the Supporting People scheme which superseded coverage of housing-related service charges within the housing benefit scheme. It sets out how the scheme was intended to work from its start in 2003 to its rapid decline and virtual demise following the end of direct grant funding. A short case study of an exempt accommodation scheme and former Supporting People funded scheme is provided (paras 31-39).

Part 1: Legislative and policy timeline

1. 1 April 1988: Start of current HB scheme.[1] HB covers rent and service charge payments provided those services relate to the fabric of the dwelling (para 9).[2] Service charges for general counselling and support are not covered unless the service provider spends most of their time delivering allowable services (the ‘50 percent rule’).[3] The authority can restrict the total amount covered where it considers it is unreasonably high (or the dwelling too large for household). But certain protections apply if a household member is a pensioner, incapable of work or a child. In these cases, the rent can only be restricted if the authority can show that suitable alternative accommodation is available, and it is reasonable to expect the claimant move.[4]
2. 15 January 1989: Deregulation of tenancies and rents for private and registered housing association tenants. Introduction of assured and assured shorthold tenancies.[5]
3. 1 April 1989: Rent officers given new duties in relation to housing benefit and must make certain rental valuations when the authority refers a rent allowance (i.e., non-council tenant) claim[6]. But the rent officer’s figures do not affect the authority’s HB subsidy.[7]
4. 1 April 1990: The authority must now refer all rent allowance claims.[8] The rent officer returns a value for a reasonable market rent or what would be for an appropriately sized property.[9] The rent officer’s figures now limit how much subsidy the authority receives.[10] But for registered housing association tenants the authority is only required to make a referral if it considers the rent is unreasonably high (or the dwelling is too large).[11] Therefore, most housing association tenants continue to get the full rent covered (minus any ineligible service charges).
5. 1 April 1994: In appropriate cases the rent officer also determines a value for highest rent that is not exceptionally high (to screen out rents in the sub-market for people with high incomes).[12]
6. 1 April 1996: For all new rent allowance claims the rent officer values a mid-market ‘local reference rent’ (alongside the other valuations s/he already makes).[13] The lowest of these figures now sets the ‘maximum rent’ HB can pay.[14] However, where the tenant is provided with ‘care, support or supervision’ by a not-for-profit landlord the previous HB rules continue to apply, including the protections for pensioners and people incapable of work (see para 1). This is the exempt accommodation rule.[15]
7. 1 October 1996: New system of registration and regulation of housing associations in England and Wales (‘registered social landlords’ (RSLs)).[16] Superseded in England (but not Wales) on 1 April 2010 (para 16).
8. 6 October 1996: For all new claims where the claimant is single and aged under 25 (with some exceptions) the rent officer provides a value for a mid-market rent for a room in a shared house – the ‘single room rent’ – instead of the local reference rent.[17]
9. 24 July 1997: The High Court confirms that service charges are only eligible if they relate to the ‘fabric of the dwelling’ (para 1).[18] Charges for services that help the tenant maintain their tenancy (other than those provided under the 50 percent rule) are not eligible for HB.
10. 18 August 1997: Government puts in place an interim scheme to stabilise the supported housing sector whilst it conducts a review of how supported housing is funded.[19] The scheme allows support charges (disallowed by the High Court) to be paid in exempt accommodation. The review results in the ‘Supporting People’ policy: a cash limited fund administered by local councils (covered by a government grant) to replace support charges previously covered by HB (see part 3).
11. 1 April 2000: The interim scheme is replaced by ‘transitional housing benefit scheme’ (THB) for a fixed period of three years. Certain support charges are allowed and separately identified so that the size of proposed Supporting People grant can be determined.[20]
12. 1 April 2003: Start of Supporting People. Councils have responsibility for funding housing-related support charges covered by a separate government grant to be used for that purpose. Service charges for general counselling and support (covered by the interim and THB schemes) are excluded from HB.[21]
13. 6 March 2006: Housing Benefit Regulations are consolidated (but the law remains unchanged).[22] New regulations split into ‘working age’ and ‘pension age’. The exempt accommodation rule is preserved in the ‘Consequential Provisions’ regulations (SI 2006, No. 217).[23]
14. 6 April 2006: Parts 1 to 3 of the Housing Act 2004 (Housing Health and Safety Rating System, HMO licensing and selective licensing) come fully into force in England. Lettings that are owned or managed by RSLs are exempt from HMO licensing.[24] Tenancies and licences granted by RSLs are also exempt from selective licensing.[25] Selective licensing can apply to non-HMO houses, but it can only be used to promote economic growth in low demand areas or to reduce anti-social behaviour in areas that have a persistent problem.[26] All selective licensing schemes require specific or general approval from the Secretary of State.[27]
15. 7 April 2008: The local housing allowance (LHA) is introduced for new claims.[28] It replaces the maximum rent rule (para 6) for most private tenants except for exempt accommodation.[29] The eligible rent rules for registered social landlords are unchanged.
16. 1 April 2010: Part 2 of the Housing and Regeneration Act comes into force bringing in a new system of regulation for social housing in England. It distinguishes between profit-making and non-profit registered providers.[30] In either case the regulators standards ‘as to the nature, extent and quality of accommodation, facilities or services provided by them’ only apply properties that are ‘social housing’[31] (i.e., let at below market rent[32]). The regulator can also set standards relating a registered provider’s ‘management and financial affairs’ and for a non-profit registered provider this relates to all properties it owns or manages.[33] Likewise all properties owned or managed by a non-profit registered provider continue to be exempt from HMO licensing[34] and from compulsory referral to the rent officer.[35]
17. 9 July 2011: The DWP publishes its public consultation on Housing Benefit Reform - Supported Housing with proposals about how rent and service charges should be treated (see part 2).
18. 1 April 2012: The Tenants Services Authority (the regulator) is abolished, and its regulatory functions transferred to the Homes and Communities Agency (HCA).[36] The HCA must apply the serious detriment test before it can exercise its powers to enforce the consumer standards.[37]
19. 15 March 2013: The benefit cap is introduced.[38] HB payments for exempt accommodation do not count towards the cap.[39]
20. 29 April 2013: The gradual roll-out of universal credit (UC)[40] starts. At first it is limited to new claims for certain groups in selected postcode areas[41]. The areas and client groups are gradually expanded but UC ‘full service’ for all new claims isn’t finally achieved until 12 December 2018.[42] UC replaces six income-related legacy benefits (including working-age HB) but existing awards continue for the time being. UC claimants receive help with their housing costs through the housing costs element (HCE) – which for private tenants is based on the LHA.[43] Social tenants get their rent and service charges covered on broadly the same basis as ordinary HB, but with the DWP having the power to refer unreasonable rents to the rent officer.[44] 
21. 3 November 2014: UC claimants in ‘specified accommodation’ (exempt accommodation and certain other types of supported housing)[45] now claim HB instead of the HCE to cover their housing costs.[46] HB paid for specified accommodation does not count towards the benefit cap.[47]
22. 27 March 2015: Further conditions now need to be met before a local authority can seek approval from the Secretary of State for a proposed selective licensing scheme. It must demonstrate that the area has either: a significant number of properties with category 1 or 2 hazards, has (or is) experiencing an influx of migration, or is suffering from high levels of deprivation or crime, and in each case that the proposals will lead to some improvement.[48]
23. 24 May 2016: Local authorities lose their powers to prosecute for social security offences.[49]
24. 21 November 2016: DCLG/DWP publish the Supported Accommodation Review which assesses the scale, scope and cost of supported housing.
25. 6 April 2018: Part 2 of the Housing and Planning Act 2016 comes into force. It introduces banning orders for ‘rogue landlords’ and letting agents who commit a ‘banning order offence’.[50] It applies to anyone letting or managing property in England.[51] Banning order offences include: unlawful eviction or harassment, failure to comply with an improvement notice or prohibition order, failure to licence an HMO or part 3 house or to comply with the licence conditions, fire and gas safety offences and certain other criminal offences (fraud, theft, misuse of drugs, immigration and sexual offences) but does not include social security offences.[52] The authority can apply for a rent repayment order against a landlord who fails to get a licence for an HMO or part 3 house,[53] or if the landlord lets or manages property in breach of a banning order.[54]
26. 9 August 2018: MHCLG/DWP publishes its response on the supported housing consultation Funding for Supported Housing. The exempt accommodation arrangements will continue for the time being.

Part 2: Housing benefit and universal credit

27. New working age claimants now claim universal credit (UC) for help with their general living expenses as well as their housing costs through the housing costs element (HCE). Although there are many similarities with HB as to how housing costs are treated within UC – there are a few important differences.

28. UC claimants living in ‘specified accommodation’ and/or temporary accommodation continue to have their housing costs met by HB (and get UC without the HCE). ‘Specified accommodation’ includes exempt accommodation plus local authority hostels, refuges and certain other kinds supported housing not covered by the exempt accommodation rule. HB paid for specified accommodation does not count towards the benefit cap (para 21).

29. All UC claims with a HCE made by private tenants are subject the local housing allowance (LHA). Social rented HCE claims can be referred to rent officer if the DWP decides the rent is too high.

30. HB rent allowance claims (made in conjunction with UC without a HCE) for exempt accommodation are referred to the rent officer. But claims by tenants of non-profit registered providers are only referred if the council considers the rent to be unreasonable and there is a strong financial incentive through the HB subsidy system for them not to do so. In practice, referrals of non-profit registered providers are rare and when they do occur it is often driven by the individual concerns of the local district auditor.

Part 3: A brief history of Supporting People and its demise

31. Supporting People grant from central government was paid to local authorities to be used for that purpose from 1 April 2003 until 31 March 2009. In the first year (2003/04) the total government grant was derived from payments made under the transitional housing benefit scheme (para. 11) and which was combined with a number of other cash limited grants paid by central government for similar services to (e.g. to the probation service). Local authorities could use the money to fund almost any kind of housing related support service. It was intended to cover both long-term and short-term service users across a wide variety of client groups including:

•         People who have been homeless or a rough sleeper

•         Ex-offenders and people at risk of offending and imprisonment

•         People with a physical or sensory disability

•         People at risk of domestic violence

•         People with alcohol and drug problems

•         Teenage parents

•         Elderly people

•         Young people at risk

•         People with HIV and AIDS

•         People with learning difficulties

•         Travellers

•         Homeless families with support need

32. The main purpose of housing related support was ‘to develop and sustain an individual’s capacity to live independently in their accommodation’, such as helping individuals acquire the skills to maintain a tenancy, providing welfare rights advice or accessing a community alarm service. Support services are usually designed to prevent users from falling into long-term care or their care needs from escalating. Good examples would include counselling and support for people recovering from substance misuse or helping elderly residents lead a healthy and active lifestyle to avoid the onset of dementia. A key feature of Supporting People was that the services would be tenure neutral, and access would not be tied to a specific type of housing provision.

33. Starting in the financial year 2009, the ‘ring fence’ was removed but local authorities continued to receive money as a named grant for that year. The total amount of central government grant for 2009/10 was £1.6 billion. From April 2010 the equivalent amount was included in the local authority area-based grant[55]. This is roughly equivalent to £28 per year per household or £5 million per local authority.

34. Following severe cuts to local authority funding after the 2010 Summer Budget many local authorities rapidly tapered away their funding of supporting people services (see case study) to plug any funding shortfall to their statutory care services.

35. The abandonment of support services was often carried out without a critical review. There is generally a poor appreciation what support is for. It is often considered as being ‘nice-to-have’ but non-essential low-level care. The role it plays in helping manage of demand for high-level care is often under appreciated.

36. Many local authorities in England no longer provide funding for support services and this bound to have an impact on the quality of care and support service users receive. In effect the only source of funding is the profit that housing providers make on rents that can be used to cross subsidise the cost of support.

37. HB for exempt accommodation is not limited to the LHA rate or the maximum rent rule and the market rent may also be slightly higher than the landlord would otherwise achieve. Rent officers are instructed to assess the rent according to its value[56] (i.e., what someone would be willing to pay) not the landlord’s costs. However, the rent officer is allowed to consider the ‘specialist nature’ of supported housing and ‘reflect any potential additional costs associated in providing the accommodation’. Any adjustment will ‘depend on the specific circumstances and nature’ of the client group and their support needs. If it is low level ‘then it is unlikely that the landlord will incur any greater repair/refurbishment liability […], so little if any adjustment will be appropriate’.

Case study: Supporting People and its demise

38. Worcester Citizens Advice manages a small number of shared houses for single people who have been homeless or at risk of homelessness. All are let according to the HMO standards and the organisation works closely with local district and county councils. Under the transitional HB scheme and Supporting People high quality floating support services were provided by a specialist housing support team many of whom were professionally qualified. The service achieved ‘Grade A’ under the national quality assurance framework. The service consistently achieved good outcomes for service users with the majority successfully moving on to full independent living with low rates of recurring need.

39. Service users had a variety of support needs (e.g., mental health issues, a previous history of substance misuse, etc) which put them at risk of homelessness and a number were former social services or probation service clients. In 2011/12 the project received £432,000 from Worcestershire County Council Supporting People. In the following years this was rapidly tapered away to a final grant of £14,700 in 2015/16. No further grants have been received since the start of financial year 2016/17. The housing support team has been disbanded some support services continue to be provided by the housing management team but inevitably there has been some reduction in the quality and quantity of support provided.

January 2022