Supported Housing: the new North South Divide

Carol Matthews, Riverside’s Chief Executive, examines the regional disparities of Local Housing Allowance rates.

Supported housing is high cost and low margin social housing provision, it provides homes and services for the most vulnerable people in society. The Government has acknowledged its importance in the recent consultation document, but the decision to change the way supported housing is funded puts its very existence at risk.

Supported housing faces a twin peril: the 3 year 1% rent reduction from April 2017; and the imposition of Local Housing Allowance (LHA) caps from 2019, applying to the benefits of existing as well as future supported housing tenants, with any rents and service charges above the cap, being met by newly created local top-up funds. At Riverside, we estimate that our tenants will lose around £10m in benefit each year, relying on local discretionary funding to cover basic rent and service charges – which is hardly a reliable form of income!

The trouble with using Local Housing Allowance rates as a cap is that they are based on private sector rents, dictated by the local housing market which does not reflect the nature of supported housing costs, which are based on national rates of pay, utility costs etc. In opting for this funding model for supported housing, there will be a huge regional disparity in what the top-up funding is needed for.

Riverside, along with four other supported housing providers, has modelled supported housing rents and service charges against the LHA rates across England. The results show a staggering regional difference, creating, as Peter Aldous MP recently said in a Westminster Hall debate on these proposals, a ‘postcode lottery’. Our model shows that in the North East, over 40% of rent and service charge income exceeds LHA caps, whereas in London, only 6% are in breach. Local top-up funding allocations will therefore need to perform very different roles in different parts in the country. Councils in many parts of the North and the Midlands will have to use their top-up funding to meet core rents and services to compensate for such low LHA rates, whereas top-up funding in London and parts of the South will be available to fund new services. Many will point out that the Government has committed to ring-fenced top-up funding, which will cover the shortfall until the end of the Parliament. But the reality is that there is such a difference in the shortfall that the likelihood of the Government allocating the majority of the ‘top-up’ fund to the North and the Midlands seems remote, especially over a sustained period of time. This is a fundamental flaw in the model, and we fear that the rationale for regional redistribution will be eroded over time.

A much better solution would be for the Department of Work and Pensions to pay for a greater share of core rent and service charge through the benefit system in those areas with very low PRS rents, rather than relying on the ‘top-up’ funding and the good will of fund administrators to use the funds to compensate for a stagnant regional private rental market. There would be a number of ways of achieving this, but regional enhancements to LHA rates would be a good start.

The Government has now published its formal consultation looking at funding for supported housing, which runs until 13th February 2017. I urge you to stand with us and call for these huge regional disparities to be addressed in a system that works for the whole country and the people who need these services….

This blog was first published by Inside Housing on 31 January 2017