Housing Benefit and Council Tax Benefit Circular s1

Housing Benefit and Council Tax Benefit Circular Department for Work and Pensions 1st Floor, Caxton House, Tothill Street, London SW1H 9NA HB/CTB S4/2010

SUBSIDY CIRCULAR

WHO SHOULD READ All Housing Benefit (HB) and Council Tax Benefit (CTB) staff. All temporary accommodation managers. Officers preparing subsidy claims and estimates.

ACTION For attention

SUBJECT Section 1: Referring registered housing association rents to a Rent Officer

Section 2: Applying for an exemption from the top-level subsidy caps in local authority-run short-term leased accommodation

Guidance Manual

The information in this circular does not affect the content of the HB/CTB Guidance Manual.

Queries

If you  want extra copies of this circular/copies of previous circulars, they can be found on the website at www.dwp.gov.uk/local-authority-staff/housing-benefit/user- communications/  have any queries about the - technical content of this circular, contact Dave Marley Tel: 0207 449 5397 Joe Stacey Tel: 0207 449 5346 Email: [email protected] - distribution of this circular, contact Corporate Document Services Ltd Orderline Email: [email protected]

Recipients may freely reproduce this circular. HB/CTB Circular S4/2010

Contents

Status of the guidance ………………………………………………………...1

Section 1: Referring registered housing association rents to a Rent Officer Introduction...... 3 What is a registered housing association?...... 7 Referring HAL rents to a Rent Officer...... 9 What is reasonable?...... 13

Section 2: Applying for an exemption from the top-level subsidy caps in LA-run short-term leased accommodation Introduction of the caps...... 20 The discretion element...... 22 Application conditions...... 24 Evidence required...... 29 Making the application...... 30 Top-level cap exemption template...... Appendix A

Subsidy circular May 2010 HB/CTB Circular S4/2010

Status of the guidance

1 This guidance is accurate at the time of publication (May 2010). Please check the Department for Work and Pensions (DWP) website for further updates. This guidance is for use by local authority (LA) staff and for anyone responsible for dealing with Housing Benefit (HB) subsidy for customers living in temporary accommodation. This document is available to view on the DWP website, see http://www.dwp.gov.uk/local-authority-staff/housing-benefit/.

2 Guidance to LAs on referral of Housing Association Leasing (HAL) properties was last issued in 2002 in HB/CTB Circular A28/2002. The guidance in Section 1 of this circular supersedes that advice. It should also be read in conjunction with the main guidance on subsidy for people in temporary accommodation (HB/CTB Circular S7/2009 issued in December 2009 and HB/CTB Circular S3/2010 issued in April). The guidance in Section 2 of this circular follows on directly from HB/CTB Circular S3/2010. HB/CTB Circular S7/2009 is also relevant to Section 2.

Section 1: Referring registered housing association rents to a Rent Officer

Introduction

3 A new HB subsidy scheme for people in temporary accommodation, where the LA is the landlord, was introduced on 1 April 2010, details of which are set out in HB/CTB Circulars S7/2009 and S3/2010.

4 LAs also place people into leased accommodation, either for use as temporary accommodation or, for example, to support a homelessness prevention strategy, where the landlord is a registered housing association. This type of arrangement is commonly known as a Housing Association Leasing (HAL) scheme and for the purposes of HB subsidy is treated differently to other similar schemes.

5 This guidance is also relevant to Housing Association Leasing Direct (HALD) schemes but, for ease, will refer only to HALs.

6 Given the changes to LA leasing there may still be some uncertainty regarding when HAL rents need to be referred to a Rent Officer for a determination.

What is a registered housing association?

7 The definition of a registered housing association has been updated. The term ‘registered housing association’ has the same meaning as in regulation 2(1) of the Housing Benefit Regulations 2006. ‘Registered housing association’ means a  private registered provider of social housing, as defined by the Housing and Regeneration Act 2008. These bodies (formerly known as Registered Social Landlords) are registered with the Tenant Services Authority, the regulator of social housing in England  housing association which is registered in a register maintained by Welsh Ministers under Chapter 1 of Part 1 of the Housing Act 1996, or  housing association which is registered by Scottish Ministers by virtue of section 57(3)(b) of the Housing (Scotland) Act 2001

8 Instead of having Registered Social Landlords (RSLs) there are now two types of Registered Providers (RPs) of social housing: those that are non profit-making RPs (effectively the same as previous RSLs); and those that are profit-making RPs (effectively private sector landlords that have some social housing stock).

Referring HAL rents to a Rent Officer

9 Under Schedule 2 paragraph 3 of the HB Regulations 2006, the relevant LA is not required to apply to a Rent Officer for a determination in relation to a registered housing association tenancy except in a situation where the LA consider that a the claimant occupies a dwelling larger than is reasonably required by the claimant and any others who occupy that dwelling (including any non-dependents of the claimant and any person paying rent to the claimant), or b the rent payable for that dwelling is unreasonably high

See: http://www.opsi.gov.uk/si/si2006/20060213.htm#sch2

The Housing Benefit Regulations 2006 (SI 2006/213)

10 This means that a tenancy of a registered provider’s social HAL scheme does not necessarily have to be referred simply because it is high, or higher than for similar properties. It must be unreasonably high before a referral needs to be made.

11 A referral is also required if the authority considers that the accommodation is larger than is reasonably required by the claimant and any others who may occupy the dwelling. In such circumstances the authority should have regard to the circumstances and housing options available to the individual household.

12 In relation to a profit-making registered provider of social housing, the above provision exempting tenancies from Rent Officer referral only applies to the provider’s social housing.

What is reasonable?

13 As every authority is given discretion under the regulations, you should not have a blanket policy of either referral or non-referral of registered housing association cases. However, set, uniform procedures for assessment of each case should be put in place for staff to follow, backed up by training and written guidance in order to achieve consistency and fairness.

14 The DWP believes that the subsidy formula set for accommodation leased by an LA (see HB/CTB Circular S7/2009 for full details) provides sufficient resources to meet the reasonable costs of the leasing obligations to the landlord and any reasonable management costs. Therefore an LA, when deciding whether a registered housing association (HALs) rent is unreasonably high should consider carefully the leasing formula (LHA-10% +£40 or +£60) which was introduced from 1 April 2010 for LA leasing schemes as well as the recently introduced caps of £375 and £500 (see HB/CTB Circular S3/2010 for full details).

15 However, as per LA-run leasing schemes, this does not mean LAs would always be expected to agree HAL scheme rents whenever they are set at around the new LHA-based cap levels. The LA is still required to make an informed decision about what is a reasonable rent based on the specifics of each case.

16 If for a particular scheme, leasing and management costs are below the maximum subsidy payable under the new LHA-based formula for LA-run leasing for that area, the rent should be set to recover actual costs and not set at the maximum amount determined by the LHA-based formula, if this is higher than the rent that needs to be charged.

17 An LA should also consider whether a rent is unreasonably high if there has been a significant increase in the rent on an existing claim. Conversion of accommodation leased by an LA to HAL accompanied by an increase in rent above the new LHA-based subsidy limits applicable to LA leasing, would be particularly difficult to justify unless there is clear evidence that the market in that Broad Rental Market Area (BRMA) requires an increase in rents (and not the provider’s management charges). For example, a rent increase is necessary in order to retain sufficient units of accommodation in the area to meet LA requirements.

18 All this does not mean that any HAL scheme rent that is above the formula for LA leasing schemes must result in a rent referral. There may be individual circumstances where a property in a higher cost area must be leased under a HALs arrangement due to the individual needs of a particular homeless household. It may also be the case that a property has already been leased under HAL at a higher cost than the LA leasing formula and caps, and it would be disruptive to the household occupying the property to move them. It may also be the case that a large enough property to meet a particular household’s needs is not obtainable locally within the £375 or £500 cap. However, the LA leasing formula should be carefully considered by LAs in reaching a decision whether to refer.

19 An LA that routinely fails to apply for a Rent Officer determination where the rents are above the LA leasing formula should have clear evidence that they have properly considered whether a rent is unreasonably high. If not, the DWP could decide on behalf of the Secretary of State that nil subsidy is payable.

Section 2: Applying for an exemption from the top-level subsidy caps in LA-run short-term leased accommodation

Introduction of the caps

20 To safeguard against excessively high rents in temporary accommodation (TA), particularly in central London, the DWP has introduced two further weekly HB subsidy caps (top-level caps) for 2010/11. They apply to the BRMA in which the customer’s accommodation is located, and are  £500pw for Central and all Inner London BRMAs, and Outer South West London (Group A), and  £375pw for all other BRMAs (Group B)

21 These caps were announced on 31 March 2010. They apply from 1 April 2010 (see HB/CTB Circular S3/2010) alongside the new ‘LHA-based scheme’ for customers in TA that also commenced on that date (see HB/CTB Circular S7/2009).

The discretion element

22 Given the timing of the announcement and introduction of the new top-level caps, the Secretary of State asked officials to include an element of discretion in applying these caps. We expect that this discretion would be exercised only in exceptional cases.

23 Before 31 March 2010, some LAs may have already entered into leasing arrangements where their costs fall above the level of the top-level caps but within the maximum amounts determined by the LHA-based scheme. In some of these cases, a higher rent than £500/£375 may be justified.

Application conditions

24 On behalf of the Secretary of State, the DWP will consider applications from LAs for the new £500/£375 top-level caps to be waived in individual cases where all of the following conditions are met a the lease agreement for the property was entered into with the owner/landlord of that property1 on or after 11 September 2008 (the date the LHA-based subsidy scheme was set out to the temporary accommodation working group following ministerial approval) but before 1 April 2010 (when the top-level caps were announced), b the cost of the lease (in all cases the weekly payment actually made to the owner/landlord of the property2) is equal to or above, either - £460 (£500 less £40 for management costs) if the property is located in the BRMAs in Group A (as per HB/CTB Circular S3/2010), or - £335 (£375 less £40 management costs) if the property is located anywhere else and the placing authority is in London, or - £315 (£375 less £60 management costs) if the property is located anywhere else and the placing authority is from outside of London, and c the necessary supporting evidence (see below) can be provided

25 DWP will then decide whether to allow an exemption from the top-level cap based on evidence provided by the LA.

26 If an exemption is allowed, the amount of subsidy payable (assuming the HB entitlement is above the relevant top-level cap) will be the lower of either the  weekly lease payment plus £40 or £60 (for London or non-London authorities respectively),  HB entitlement, or  maximum amount determined by the LHA-based formulae

27 Any exemption from the top-level caps is likely only to apply in respect of relevant HB expenditure paid out between 1 April 2010 and 31 March 2011.

28 The exemption will apply to the property and any HB claims associated with that property attracting expenditure within the period for which the exemption is applied.

1 Either by the local authority entering into a lease directly with a private sector landlord or the local authority entering into a lease with a registered housing association or third party managing agent who in turn hold a head lease with a private sector landlord.

2 Whether the payment to that landlord is made by the local authority or made by a registered housing association or third party who hold the head lease and have sub-leased to the local authority. Subsidy circular May 2010 HB/CTB Circular S4/2010

Evidence required

29 The onus will be on the LA to provide sufficient evidence showing the leasing costs associated with each individual case for which an exemption is sought. A scanned copy of the primary lease agreement (ie with the main owner/landlord of the property) should be sufficient.

Making the application

30 LAs need to complete the initial application template attached to this circular and email it to the subsidy policy team [email protected] by 4 June 2010.

31 After receiving a completed template, the team will contact the LA to agree suitable timescales in which to complete a spreadsheet with details of each relevant case as well as submit their supporting evidence.

Subsidy circular May 2010 HB/CTB Circular S4/2010 Appendix A HB subsidy for local authority private sector leasing schemes

Initial application for an exemption from the top-level cap

Full guidance on HB subsidy for customers living in temporary accommodation leasing schemes run by LAs is available in HB/CTB Circular S7/2009. Use this template to apply for an exemption from the top-level caps (£500/£375) as described in HB/CTB Circular S3/2010.

Please check that any cases you wish to be considered for an exemption from the top-level caps meet the conditions described above in HB/CTB Circular S4/2010. Only include in the table cases that you wish an exemption to be applied to.

The only type of accommodation relevant is leased accommodation where  the authority holds the lease (either directly with individual owners or via intermediaries, such as housing associations) on accommodation secured from the private sector and the period of the lease does not exceed ten years, and  the LA is the landlord

Please return this template by 4 June 2010.

If an exemption is allowed, the amount of subsidy payable (assuming the HB entitlement is above the relevant top-level cap) will be the lower of either

 the weekly lease payment plus £40 or £60 (for London or non-London authorities respectively)  the HB entitlement (week or part-week), or  the maximum amount as determined by the LHA-based formulae (see HB/CTB Circular S7/2009 for details)

Any exemption from the top-level caps is likely only to apply in respect of relevant HB expenditure paid out between 1 April 2010 and 31 March 2011.

The exemption will apply to the property, and any HB claims associated with that property attracting expenditure within the period for which the exemption is applied. Once a decision has been made, the Department will provide details of the decision in writing, which can be used by the LA for audit purposes.

Please email the completed template to: [email protected] If you have any queries please email us at the same address or contact Dave Marley on 020 7449 5397, or Joe Stacey on 020 7449 5346.

Subsidy circular May 2010 Template for top-level cap exemptions

LONDON AUTHORITIES Name of authority:

Number of units in a BRMA in Group A (Central/Inner/Outer Sth West London) where the lease was agreed on or after 11 September 2008 and before 1 April 2010, AND the cost of the lease is equal to or above £460 per week

Number of units in a BRMA in Group B (any BRMA not in Group A) where the lease was agreed on or after 11 September 2008 and before 1 April 2010, AND the cost of the lease is equal to or above £335/week.

NON-LONDON AUTHORITIES Name of authority:

Number of units in a BRMA in Group A (Central/Inner/Outer Sth West London) where the lease was agreed on or after 11 September 2008 and before 1 April 2010, AND the cost of the lease is equal to or above £460 per week

Number of units in a BRMA in Group B (any BRMA not in Group A) where the lease was agreed on or after 11 September 2008 and before 1 April 2010, AND the cost of the lease is equal to or above £315/week.