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Paying for supported housing

Published Sunday, April 8, 2018

This briefing paper explains the Government's proposals for the future funding of supported housing. It has been updated following the announcement on 31 October 2017. It also covers the requirement to reduce rents up to 2019/20. The short-term supported housing sector has argued that the Government's proposals threaten its viability.

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What is supported housing?

Supported housing covers a range of different housing types, including group homes, hostels, refuges, supported living complexes and sheltered housing. Rent levels in supported housing tend to be higher than those charged for similar accommodation in the private sector.

Housing Benefit for supported housing residents

For those residents who are eligible to receive Housing Benefit, it can help with all or part of their rent payments. Supported housing that meets certain criteria is treated as ‘exempt accommodation’ for Housing Benefit purposes. As such, the Housing Benefit Regulations, which limit rents to defined local levels have not applied to accommodation where the landlord (housing association or voluntary organisation) provides “care, support or supervision.” In 2014 the DWP introduced a new category of “specified accommodation” in response to concerns in the sector about the impact of certain Housing Benefit reforms.

2011 proposals

In July 2011 the Coalition Government published Housing Benefit Reform – Supported Housing in which it set out proposals to reform the way in which Housing Benefit is treated for claimants living in certain types of supported housing.  The Government argued that reform was necessary because of: the complexity of the current system; rising expenditure; and also the introduction of Universal Credit. Consultation closed on 9 October 2011. In September 2012 the Government said that help toward housing costs for those living in supported ‘exempt’ accommodation would be provided outside of Universal Credit. No other changes to Housing Benefit entitlement were made at that time.

Annual 1% rent reductions up to 2019

The Summer Budget 2015 saw the announcement of rent reductions for social housing landlords.  Measures included in the Welfare Reform and Work Act 2016 require these landlords to reduce their rents by 1% in each year for four years from April 2016.  The 2015 Government subsequently announced a one-year exemption for the supported housing sector from the 1% rent reduction. On 15 September 2016 the Secretary of State announced that the deferral of the 1% rent reductions would end. Annual rent reductions are being applied from April 2017 to supported housing schemes so that rents for these properties will decrease by 1% a year for 3 years, up to and including 2019/20. The exemption for specialised supported housing remains in place over the period and has been extended to include fully mutuals/co-operatives, alms houses and Community Land Trusts and refuges.

Local Housing Allowance caps

During the Spending Review and Autumn Statement 2015 the Chancellor announced an intention to cap, with effect from 2018, the amount of rent that Housing Benefit would cover in the social rented sector to the relevant Local Housing Allowance (LHA) level, which is the rate applied to most private renters on Housing Benefit. Providers of supported housing argued that, given their higher rent levels and slim operating margins, the measures would have a particularly detrimental impact on revenue streams and would threaten the viability of existing and future schemes. The sector called for an exemption for supported housing from both the LHA caps and rent reductions, arguing that supported housing delivers average net savings to the public purse of around £940 per resident per year and that demand for this type of accommodation is growing.

The application of LHA caps in the supported housing sector was delayed for one year. The DWP and DCLG jointly commissioned an evidence review to look at the size and scope of the supported housing sector.

On 15 September 2016 the Secretary of State announced a further delay in applying LHA rates in the supported housing sector to 2019/20. This announcement included a commitment to introduce a new funding model under which local authorities in England would receive ring-fenced funding to meet the shortfall between the LHA rates and the cost of provision. There was reference to developing a separate funding model for short-term accommodation such as refuges and hostels.

The report arising from the evidence review was published on 21 November 2016 together with a consultation document, Funding for supported housing. The consultation process took 592 submissions up to 13 February 2017. Views were sought on how the new funding model should work in England.

Funding announcement 31 October 2017

During Prime Minister’s Questions on 25 October 2017, Theresa May announced that LHA rates would not be applied to supported housing, nor would they be applied to general needs social housing. This was confirmed in a further consultation paper published on 31 October 2017. The Minister, Marcus Jones, announced that a “flexible funding model” would be brought forward for the sector. In summary, the Government intends that all long-term supported housing will remain within the welfare system. There will be three broad funding groups:

  • A ‘sheltered rent’ for sheltered and extra care housing will be devised and will act as an overall limit on the amount that providers can charge, including service charges, for each unit. Annual increases will be limited. This model will be introduced in 2020.
  • Supported housing for those with learning or physical disabilities or mental ill health. 100% of housing costs will be funded through the welfare system subject to the application of existing Housing Benefit/Universal Credit rules). The Government intends to work with the sector to develop and deliver improvements to cost control, quality and outcomes.
  • Short-term and transitional supported housing – typically homeless hostels, refuges for those at risk of domestic violence and those receiving support for drug/alcohol abuse. The proposal is that, from 2020, 100% of this provision will be commissioned at the local level and funded through a ring-fenced grant administered by local authorities. The funding previously applied to Housing Benefit will be allocated to authorities to fund services to meet local needs. Thus short-term accommodation will be taken out of the welfare system, although an individual’s entitlement to assistance with housing costs will remain unchanged.

The Government’s announcement was widely welcomed within the sector in relation to long-term supported housing. However, the proposals for short-term supported housing are viewed as a threat to the long-term security of funding and, therefore, provision.

Responses to the proposals in the consultation paper were accepted up to 23 January 2018.

An interim response 1 April 2018

The Ministry of Housing, Communities and Local Government (MHCLG, previously DCLG) published an interim response to the consultation exercise on 1 April 2018. A total of 738 repsonses were received - the paper summarises the key points made by respondents. Responses are under consideration and a full formal response will be published by the Government "in the summer".

 

Commons Briefing papers SN06080

Author: Wendy Wilson

Topics: Benefits policy, Housing, Housing benefits, Social rented housing, Supported housing

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