The Benefit Cap: the real cost to local authorities

Guest blog post by Romin Sutherland

The effect that the Benefit Cap will have on homelessness and the use of temporary accommodation is a complicated and confusing area, but as most of the current legislation remains unchanged, it is possible to envisage the likely outcomes for local authorities’ duties and resources.  With the Benefit Cap reducing larger families’ housing benefit to virtually nothing, it is not as simple as saying “get a job or move to cheaper accommodation”.  As local authorities will remain under an obligation to provide these households with affordable accommodation, they cannot simply move them out of their jurisdiction without keeping them in expensive temporary accommodation under a homelessness duty.  The reasons for this will be given below, but it suffices to say that had the government wanted this policy to work they should have changed the rules around homelessness and/or Discretionary Housing Payments (DHPs).

A local authority has an on-going duty to provide homeless families with temporary accommodation (TA) and this must be both suitable and affordable.  Homeless households affected by the Benefit Cap who are already in TA will remain on the authorities’ housing register no matter what happens, as long as they went into TA before the 8th Nov 2012. After that the household could be discharged into the private rented sector under the new powers included within the Localism Act, but again this must be affordable, so for larger families who would be left with no or virtually no housing benefit, local authorities will have to keep them in TA because they cannot rely on another authority making the property affordable for them through a DHP.  This is because a DHP can only be paid when the housing benefit claim and the DHP are within the same authority, and the only way for a local authority to do this is through the TA regime, which allows housing benefit to be paid to a household placed in another authority.

This is the key point that the government has failed to grasp.  How can a local authority discharge to another authority, when even that authority is not affordable?  The answer is that they cannot.  A local authority can place such a household anywhere (subject to suitability), but they need to use their own DHP money, and that requires an active housing benefit claim in their own authority, which can only be achieved through the provision of TA.

Furthermore, such a household would remain ‘homeless’ as any placement would still be TA, so they would have access to that local authorities’ social housing register.  Until the household is discharged they are still covered by that local authorities’ allocation policy, and unless that authority introduced a new policy to exclude them, they would be able to bid on social housing, even though they have had their housing benefit capped.  As the Localism Act left the ‘reasonable preference’ categories with the Housing Act, which include homelessness, intact, any such change of policy would be liable to legal challenge in the Courts.

An expensive local authority like Westminster might try to place a homeless household outside of London or in a cheaper borough, but obviously suitability still applies.   This means that if a household is engaged with local services or has another reason for needing to remain in the borough, perhaps because they have caring responsibilities, Westminster would not be able to place them outside of their area without acting unlawfully.

If an out of borough placement would not be suitable, Westminster would have to pay to keep them and could not force them out. It is when this group becomes too large that Westminster’s DHP money will not be sufficient and they will have to make use of their general funds.  Also note that most local authorities have leased their TA from private landlords so they have on-going financial liabilities that they cannot escape without following whatever arrangements they have agreed.  This makes out of borough placements even less likely, as an empty TA property would be a costly and inefficient use of a local authorities’ resources.

Similar problems will also arise for social services departments that are forced to house ineligible or intentionally homeless families under section 17 of the Children Act.  Although the numbers will be smaller, the consequences are starker.  Section 17 covers “children in need” and was never intended to cover housing costs.  However, if necessary social services can and do use it for this purpose.  But what happens when these households have been housed?  Does this go on indefinitely?  If it does there will be less money available for social services to meet their legal obligations to vulnerable children and families.  Another unintended and disastrous outcome for local authorities, not to mention the disadvantaged who rely most heavily on them for support.

Ultimately we have no idea what local authorities are going to do. It is likely that households in TA will be kept in their local areas if engaged with services, but when and under what circumstances local authorities will try to move them out, we simply do not know.  I doubt that most local authorities know either.  My understanding is that they are watching the 4 pilot boroughs and have only just started the policy work on this issue, with the first step being the transfer of the responsibility for DHPs from the Benefits Department to Housing, if this has not already taken place.

As much as some local authorities would like to, they cannot get rid of large workless families entirely.  Things will be slightly different outside of London where authorities can prevent homelessness through small DHPs and where PRS placements are viable, but with families with 6 plus children, the same problems will arise.  A lone parent with 6 children will be receiving £482 a week excluding housing costs, leaving only £18 per week to secure a 3 or 4 bedroom property, which as you will know is not going to be possible anywhere in the UK.

Early indications from Enfield show that they are looking to move people voluntarily, but what tactics they will employ to convince people to move will need to be monitored.  Oddly there is every reason, and perhaps no other choice, but for families to make homelessness applications and go into TA.  Yes, they might be moved out of their local area, but at least they would retain an important link to their sending authority, and would have been forced to move in any case.

For those families, including pregnant and nursing mothers, who are simply unable to find appropriate employment, this policy simply doesn’t make sense, and there are structural problems with it that cannot be resolved without changes to existing legislation.  If the Local Housing Allowance caps of 2012 made preventing homelessness difficult, the Benefit Cap will make it impossible.

Romin Sutherland is NextDoor Project Manager for the Zacchaeus 2000 Trust (Z2K)

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2 Responses to The Benefit Cap: the real cost to local authorities

  1. Pingback: Increasing my debt and losing Local Housing Allowance in one move. | nouniversalcredit

  2. A complicated issue superbly explained,the government is off it’s cake!

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