Supporting supported housing
Funding for accommodation has long been one of the most awkward parts of the social security system. From Beveridge onwards, the question of how to provide a mechanism that ensures adequate protection for individuals while retaining control of costs and offering a general sense of fairness has been a challenge. For people who require financial support, the cost of rented accommodation is primarily currently met through Housing Benefit (HB) or Local Housing Allowance (LHA) or, more recently and for a limited but growing number of claimants, Universal Credit (UC).
Since 2010 there have been a number of changes to LHA and HB in particular, but two changes announced in the last 12 months have caused a great deal of concern among providers of supported housing. In the 2015 Autumn Statement, the Government announced the imposition of a 1% reduction in all social rents for four years, starting in April 2018 and affecting all tenancies signed after April 2016. Changes announced earlier this year mean that the this that reduction will be softened by pushing the affected tenancy date back to April 2017.
More seriously for supported housing, the Government also proposed capping social rents at the maximum payable to tenants of private rented accommodation. Unlike the 1% rent reduction, where supported housing looked rather like an innocent bystander, the ‘LHA maxima’ reform appeared to be aimed squarely at it. Again earlier this year, that reform was pushed back 12 months, to take effect from April 2017 rather than 2016. The impact of this change alone, never mind in combination with the 1% reduction, would have been little short of catastrophic.
Taking both changes together, the charity Women’s Aid estimated that almost two thirds of domestic violence refuges would shut. Homeless Link calculated that homelessness projects would, on average, lose almost 70% of their rental income. While the 1% rent reduction, compounded for 4 years, would result in a loss of around 12% against expectations, the LHA cap would have accounted for the larger part of the shortfall and would have instantly rendered much of the supported housing sector – which accommodates well over 400,000 people, many of them elderly, or with multiple and complex needs, or vulnerable for other reasons – completely financially unviable.
Today, the Government has provided the sector with outline proposals via a statement from Work and Pensions Secretary Damian Green that should go a fair way to removing much of the uncertainty, and the instability that has caused. These include:
- The 1% reduction will be applied as per the early 2016 announcement, up to and including 2019-20
- The LHA maxima rule will not be applied, as oriignally planned
- From 2019-20, a new mechanism will be introduced, where core rent up to the local LHA level is met via HB or UC, and the additional costs associated with supported housing will be met by local authorities. Government will introduce a ring-fenced grant calculated using current funding levels and projections of future need. This always seemed to be a likely solution, although the provision of a ring-fence is surprising and welcome.
- The shared accommodation rate will not apply to supported housing. This is welcome, but does raise the question of move-on
- Very short term projects face distinct challenges; Government will consult on options shortly, but has given a general commitment that very short term accommodation “will benefit from the same protection as supported housing in general”
All of this is welcome. Ploughing on regardless would have had terrible consequences for hundreds of thousands of people living in supported housing and would have jeopardised the viability of the entire sector. But proposing these changes in the first place, particularly the LHA maxima change, uninformed by evidence and with apparent limited initial concern for to the consequences, has had consequences; developments have been put on hold, some cancelled, and providers have faced worrying uncertainty. Still, today’s announcement shows that current ministers appear willing to listen. Credit is due for that, and also in particular to the organisations from the voluntary and community sector that have been working hard to ensure that the potential implications were understood by key Government decision makers.
Of the remaining reduction, while the effect of the 1% reduction is the milder of the two originally proposed, it may still come at a significant cost. Measured against rent increase expectations of CPI plus 1% and compounded, there is still the possibility of the viability of some services being called into question. Supported housing services run by charities frequently have a paper thin margin, and a reduction in income of a few percent may be enough to put a project into the red, or force a restructuring of the provision of support. There is very limited protection available, in that organisations whose financial stability is threatened can apply for an exemption – although my understanding is that this is intended only for the most extreme cases of financial vulnerability.
The Government will shortly launch a consultation on the future funding of supported housing, alongside a review carried out by Imogen Blood & Associates and IPSOS Mori. If you are a provider or have an interest in supported housing, this may be worth looking out for.
