Consultation reveals regional inequality of supported housing LHA caps

The Government consultation on the funding of supported housing closed on 13 February and we must now await the Green Paper in the spring which will set out further detailed information.

The Boundaries

Riverside advocates the need for supported housing funding reform as the current system is unsustainable, and there is much to welcome in the Government’s proposals. However, we remain very concerned about some of the weaknesses in the proposals that will threaten the viability of large parts of the supported housing sector and it could discourage investment in new schemes and services.

The crux of the proposal is to cap the amount of housing benefit paid to tenants to the Local Housing Allowance (LHA), which is the current rate paid in the private rented sector. This rate is based on local rental demand and set at the lowest third of rented properties – though it is currently frozen. LHA does not reflect the nature of supported housing costs, which are based on national rates of pay, utility costs, etc. In many parts of the country, the LHA level is drastically lower than the rent charged for supported and sheltered housing, varying between £69pw in Hull to £260pw in Westminster.

If the proposals go ahead unchanged, almost four in every five of our tenants (who claim housing benefit) living in sheltered and supported housing will have their benefit capped. This means that around a third of our rent and service charge income from supported housing is ‘at risk’ and will need to be met through local ‘top-up’ funding.

This represents an excessive and worrying shift in the proportion of support for rent and service charge which are currently met in their entirety from the welfare budget, to new discretionary, cash-limited, local top-up funding. This is in sharp contrast to the position of other Riverside tenants, where benefit will cover practically all housing costs where the property is fully occupied. This is unfair. 

There is also a huge regional inequality in the impact of the proposals, with the effect of LHA caps in lower value areas (often in the North of England) being far more severe. In London we project that just 3% of Riverside tenants will be affected. However, in the East Midlands and North East practically all tenants will be affected, with 58% of rent and service charge income above the level of the caps in the North East. In lower value areas this will put a strain on local top-up funding resources, which will need to be sized and allocated to support basic core rents and service charges, rather than being used to commission genuine housing support services.

The impact on tenants living in supported and sheltered housing is very different too. The number of people living in sheltered housing who will be affected is higher, because it represents a larger part of our stock. Yet for Riverside, the extent which rents and services breach LHA caps is over two and a half times lower.

Riverside is calling on the government to work with the sector and DCLG/DWP to find a way to increase LHA caps which:

  • Eliminate the regional inequality that the current proposals create
  • Ensure the caps are higher than the rents and service charges for the majority of tenants living in sheltered housing so that sheltered housing is lifted out of the cap

The best way of doing this would be to apply LHA caps to core rents alone, with accommodation based service charges met in full by benefits – subject to the more rigorous service charge eligibility rules already built into Universal Credit. Non-accommodation related staffing costs in supported housing should be met from appropriately sized local top-up funds.

We are hopeful that the Government will listen to the concerns raised by the sector and make the necessary changes to their proposals to prevent this ‘postcode lottery’.

You can read our submission to the consultation here.