The LHA Cap and Social Housing: ‘It’s in no one’s interests to set people up to fail’

Posted On: 
3rd March 2017

Increased data sharing between registered providers and local authorities will be critical in tackling social housing issues, suggests housing association, Moat.

Both local authorities and housing associations at the event were sceptical of the ability of discretionary housing payments to cover the expected shortfall.
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On 22 February Moat and Peabody ran a joint roundtable event, examining the impact of extending the Local Housing Allowance (LHA) cap to social tenants. The roundtable discussed possible solutions and found opportunities for collaboration between housing providers, local authorities and other stakeholders.

From April 2019, the cap, set at the 30th percentile of market rents in the local area, will be extended to social housing tenants. For those who are under 35, single and benefit dependant, the situation will be much more serious, with these people capped at the far less generous Shared Accommodation Rate (SAR); this adds more pressure to the demographic most frequently targeted in welfare reform – young people.

Carli Harper-Penman, Moat’s Executive Director of Strategy, Communications and Business Intelligence outlined the extent to which the SAR is expected to impact on Moat’s customers. She said:

“Across Moat’s operating area the SAR is an average of 46% lower than the one bedroom rate. So, ultimately, some tenants will be left with a shortfall between rent and service charges and benefit received.

“We’ve never really questioned the affordability of social rents before, but with rent and service charges exceeding the SAR across almost 90% of one bed units, we have to ask whether rents will remain affordable for these tenants in the future.

“Current estimates suggest that the average shortfall would be around £25 per week from April 2019. Given that we’re talking about people on very low incomes, this is a significant issue. No housing provider would want to turn away tenants, but equally, it’s in no-one’s interest to set people up to fail.”

Some providers are still accepting all tenants, and are focussing on intensive back-to-work support and financial advice to shield against the expected impact in 2019. Others are discussing the prospect of reluctantly refusing to accept SAR-capped tenants, to avoid the unacceptable risk of failed tenancies and increased bad debt.

One area of common ground among providers was the aspiration to better understand their tenants and improve knowledge of data areas including household composition, employment status, and benefits received.

Moat suggested that “There must be greater data sharing between registered providers and local authorities if we are to tackle our knowledge gaps.”

The roundtable heard from local authorities who suggested they would undoubtedly take a big hit if social landlords were unable to provide homes for people subject to the SAR. Amongst both local authorities and housing associations, there was scepticism about the ability of discretionary housing payments (DHPs) to fully and consistently cover the shortfalls.

At a time when providers are being encouraged by government policy to build more homes, there was near unanimous agreement that a more stable income source would be needed to attract investment in homes suitable for people under 35. One provider suggested “DHPs may act in some cases as a temporary stop-gap solution, but investment decisions require more stable sources of income.”

The roundtable discussed the potential solution of building more shared accommodation for people under 35. But higher management costs, coupled with the customer group housed by the social sector, which is very different to that housed by the private sector, would make this a difficult task.

One provider contributed that “About two-thirds of our current intake of customers under 35 have mental health issues. Significant numbers are considered vulnerable adults. The management implications of this are massive.”

It was clear from the roundtable that the sector and its partners are searching for solutions to the LHA cap problem. It is also clear that this is the beginning of the process and will only succeed if local authorities and housing associations work together.