st HB/CTB S7/2009 - UK Government Web Archivewebarchive.nationalarchives.gov.uk/.../s7-2009.pdf ·...

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

HB/CTB S7/2009

SUBSIDY CIRCULAR

WHO SHOULD READ All Housing Benefit (HB) and Council Tax Benefit (CTB) staff.

Fraud managers and staff. Officers preparing subsidy claims

and estimates

ACTION For information

SUBJECT Housing Benefit subsidy arrangements for temporary

accommodation from April 2010

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 http://www.dwp.gov.uk/local-authority-staff/housing-benefit/user-communications/hbctb-circulars/

•

have any queries about the •

- technical content of this circular, contact either

Dave Marley Tel: 0207 449 5397 Email: [email protected]

Joe Stacey Tel: 0207 449 5346 Email: [email protected]

- distribution of this circular, contact Corporate Document Services Ltd Orderline

Email: [email protected]

Crown Copyright 2009

Recipients may freely reproduce this circular.

http://www.dwp.gov.uk/local-authority-staff/housing-benefit/user-communications/hbctb-circulars/

http://www.dwp.gov.uk/local-authority-staff/housing-benefit/user-communications/hbctb-circulars/

mailto:[email protected]



HB/CTB Circular S7/2009

Contents

para

Subsidy changes from April 2010 – HB payments for customers living in temporary accommodation

Section1 – The guidance - Status of the guidance ............................. 1

Introduction ......................................................................................... 2

Summary of the changes from 1 April 2010........................................ 3

Timing ................................................................................................. 6

Reasons for the change...................................................................... 7

Scope of the changes ......................................................................... 8 Housing Association Leasing (HAL) schemes ............................. 10

Basis of the new scheme.................................................................. 13

Legislation supporting the new scheme............................................ 17

Subsidy under the new scheme........................................................ 18

The type of accommodation......................................................... 19

Whether it is self-contained accommodation................................ 21

The LHA rate for the size of the property ..................................... 22

Bedrooms/living rooms................................................................. 25

The location of the property ......................................................... 29

Subsidy for board and lodging (B&B) and non self-contained (licensed) accommodation................................................................ 32

Subsidy for short-term leased and other self-contained (licensed) accommodation ................................................................................ 36

Management costs....................................................................... 39

Claiming subsidy............................................................................... 42

Other subsidy issues – reporting data on SHBE............................... 47

Treatment of backdated claims where payments cover two financial years................................................................................... 49

Subsidy circular December 2009


para

Handling adjustments to entitlement – overpayments and underpayments ................................................................................. 53

Overpayments.............................................................................. 53

Underpayments............................................................................ 56

Underpayments relating to 2009/10 or earlier but discovered after April 2010............................................................................. 58

Subsidy for underpayments identified in TA cases in 2011/12 onwards.......................................................................... 60

Definition of weekly HB entitlement and its effect where the claimant is in the accommodation for part of a week........................ 62

Treatment of cases where there is part-week entitlement in one property and part-week entitlement in another ................................. 63

Further queries ................................................................................. 65

Section 2 – Questions and answers



Subsidy changes from April 2010 – HB payments for customers living in temporary accommodation

Section1 – The guidance

Status of the guidance

1 This guidance is accurate at the time of publication (December 2009). Please check the DWP website for further updates. This guidance is for use by local authority staff and for anyone responsible for dealing with Housing Benefit (HB) subsidy for customers living in temporary accommodation. This document and the question and answer (Q&A) section are both available to view on the Department for Work and Pensions (DWP) website, see http://www.dwp.gov.uk/local-authority-staff/housing-benefit/

Introduction

2 The current system of limiting HB subsidy in respect of claims from customers living in temporary accommodation by a series of thresholds and caps will be replaced from April 2010. The following changes have been developed in consultation with the local authority associations and other key stakeholders. Subject to the usual parliamentary processes, the new arrangements will be introduced from 1 April 2010.

Summary of the changes from 1 April 2010

3 For customers placed into non self-contained accommodation (board and lodging or licensed), HB subsidy will be limited to the 1 bedroom self-contained Local Housing Allowance (LHA) rate based on the location of the property.

4 For those in self-contained licensed and short-term lease accommodation, the maximum HB subsidy will be determined by using 90% of the LHA rate for the size of the property plus an element for management costs (£60 per week for local authorities outside of London, £40 per week for authorities in London).

5 Full details of the new scheme are outlined below.

Timing

6 This guidance will apply to HB customers living in temporary accommodation (as specified at paragraph 8) from 1 April 2010 (the date that amendments to the subsidy legislation come into force). It is being circulated in advance of this date to help support an effective implementation of the new scheme, including raising staff awareness of what the new legislation will mean for LAs.


http://www.dwp.gov.uk/local-authority-staff/housing-benefit/

http://www.dwp.gov.uk/local-authority-staff/housing-benefit/


Reasons for the change

7 The current thresholds and caps do not reflect the actual costs of leasing properties of different sizes in the private sector in different localities. The significant increases in HB expenditure for customers living in temporary accommodation in recent years were unsustainable. This has largely been driven by some local authorities in London (with large caseloads) charging unnecessarily high rents, which as well as increasing expenditure, can be perceived by customers as a barrier to work.

Scope of the changes

8 The new subsidy arrangements will apply to all customers (existing and new) living in the types of temporary accommodation that are currently subject to the thresholds and caps arrangements. These are

board and lodging (including Bed and Breakfast) accommodation (provided by a local housing authority to discharge a homelessness function under Part 7 of the Housing Act 1996 or Housing (Scotland) Act 1987)

•

•

•

•

accommodation held by a local housing authority under licence (provided to discharge a homelessness function under Part 7 of the Housing Act 1996 or Housing (Scotland) Act 1987) accommodation held on a lease by a local housing authority for a period not exceeding ten years secured from a private landlord and accounted for outside the Housing Revenue Account (in England, Wales and Scotland), and accommodation held on lease by an authority for a period not exceeding ten years secured from a private landlord and accounted for in the Housing Revenue Account (in Wales)

9 From 1 April 2010 the current thresholds and caps will no longer apply. The new arrangements will apply to both new claims and existing claims where subsidy is currently subject to the thresholds and caps. LAs will need to plan how and when they will reassess existing cases to transfer them on to the new subsidy scheme.

Housing Association Leasing schemes

10 This subsidy scheme does not apply to customers living in housing association leasing schemes (HALs). These will continue to be treated as excluded Rent Allowance cases except where the local authority considers that the rent is unreasonably high or the claimant’s property is unreasonably large for the size of the claimant’s household (see HB Regs 2006 Schedule 2 (Reg 14) paragraph 3), see http://www.opsi.gov.uk/si/si2006/20060213.htm#sch2 Where that is the case, the local authority is required to seek a determination from a Rent Officer.

The Housing Benefit Regulations 2006 (SI 2006/213)

11 LA HB managers may, however, want to use the formulae in this scheme, which is linked to market level rents, as a guide for determining whether or not rents in HAL scheme cases are unreasonably high and should be referred to a Rent Officer.


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


12 However, as per local authority-run leasing schemes (see paragraphs 15 and16), this does not mean local authorities would always be expected to agree HAL scheme rents whenever they are set at around the new LHA-based cap levels. The local authority is still required to make an informed decision about what is a reasonable rent based on the specifics of each case.

Basis of the new scheme

13 The new scheme amends the way HB subsidy is calculated for claims from customers living in temporary accommodation. It does not alter how HB entitlement is calculated.

14 The new ‘caps’ determine the maximum amount of HB subsidy that can be paid in each case. The amount of subsidy paid will be the lower of either

the HB awarded to the customer, or •

• the new weekly cap (maximum amount) based on the criteria described in this guidance

15 LAs should not set rents at the new cap levels as a matter of course.

16 Where for a particular scheme, leasing and management costs are below the cap for that area, the rent should be set to recover actual costs and not set at the higher cap rate if this is higher than the rent that needs to be charged. Otherwise a local authority would be receiving more in subsidy than it needs to recover its genuine costs.

Legislation supporting the new scheme

17 The legislation for this new subsidy scheme was laid in Parliament on 29 September 2009 – The Income-Related Benefits (Subsidy to Authorities) (Temporary Accommodation) Amendment Order 2009 (SI 2009/2580). It comes into force from 1 April 2010 and replaces Article 17 of the Subsidy Order 1998. This legislation will be referred to hereinafter as the Subsidy Order Amendment.

The Income-Related Benefits (Subsidy to Authorities) Order 1998

Subsidy under the new scheme

18 How subsidy is calculated under the new scheme will be determined by the type of accommodation (leased/licensed/board and lodging (or B&B)) •

•

•

•

whether it is self-contained or non self-contained the size of the property (number of bedrooms), and the location (the Broad Rental Market Area) of the property


http://www.opsi.gov.uk/si/si200925


The type of accommodation

19 The scope of the scheme, as outlined above, includes temporary accommodation held on a short-term lease by a local housing authority (usually outside of the Housing Revenue Account (HRA) although it includes leases held within the HRA in Wales). It also includes licensed accommodation and B&B accommodation where households have been placed into these properties to discharge a homelessness function under Part 7 of the Housing Act 1996 or Housing (Scotland) Act 1987.

20 It is the responsibility of the LA to establish the legal basis (i.e. correct form of tenure) that applies in respect of any properties secured from a private landlord in which it holds an interest. Generally, accommodation will be held on licence (rather than a lease) in circumstances where the local housing authority has occupation rights in respect of homeless persons but does not have the right to exclusive occupation for a defined term on payment of rent. This is likely to be accommodation which the authority has agreement to use on a nightly, weekly or monthly basis to accommodate homeless people.

Whether it is self-contained accommodation

21 Accommodation is self-contained if the claimant’s household is not required to share one or more of the following with another household

a kitchen •

•

•

•

•

a bathroom a toilet

The Local Housing Allowance rate for the size of the property

22 Unlike mainstream LHA claims - where the LHA relates to the month in which the claim is made and to the household size - the LHA rate used to determine subsidy for claims in respect of customers living in temporary accommodation will be related to

the size of the property (number of bedrooms from one to five inclusive), and the rate that applied in the January immediately prior to the financial year in which subsidy is being claimed

23 Therefore, for these claims (leased/licensed/B&B) in 2010/11, the LHA rates for January 2010 should be used to determine maximum subsidy amounts. This subsidy scheme does not make use of the Shared Room Rate at all. The minimum LHA rate that can be used to determine maximum subsidy for temporary accommodation cases will be the one bedroom rate. The maximum LHA rate that can be used is the five bedroom rate.

24 Using the LHA rates that applied in the January prior to the relevant financial year allows LAs to have some certainty over temporary accommodation budgets before the start of the financial year, and throughout the year.



Bedrooms/living rooms

25 There should usually be a correlation between the number of bedrooms recorded for HB subsidy purposes and the number evidenced by the leasing agreement (see paragraph 46). This is established by Article 17A paragraph 3(a) of the Subsidy Order Amendment which refers to ‘the local housing allowance which applies to the accommodation’. So for example, where a lease has been agreed on the basis that a property has say three bedrooms, the three bedroom LHA rate would be used to determine the maximum subsidy amount. However, the Subsidy Order Amendment also includes a provision, see Article 17A paragraph 4 of the Subsidy Order Amendment, which limits the number of bedrooms that can be attributed to a property based on the total number of rooms including living/dining rooms (rooms suitable for living in).

26 It is often the case that, in practice, where there is more than one room suitable for living in, in a property, one of those rooms may also be treated (by the landlord and/or tenant) as an extra bedroom. So, for example, a property with three bedrooms and two living rooms might be treated as a four bedroom property (with one of the living rooms converted into a bedroom), and its rental or leasing value may have been agreed on that basis. In this case, it would be acceptable to use the four bedroom LHA rate to derive the maximum subsidy amount. However, if it was stated on the lease agreement that the property had three bedrooms (so the lease payment was agreed as a three bedroom property), then the three bedroom LHA rate should be used for subsidy purposes.

27 The provision in Article 17A paragraph 4 of the Subsidy Order Amendment means that, under this subsidy scheme

where there are at least two rooms in total (bedrooms or living rooms) in the property but no more than five rooms, at least one of these rooms must be counted as a living room, and

•

• where there are six rooms or more, at least two of these rooms must be treated as living rooms, for subsidy purposes

28 As a further example, a property with one bedroom and one living room (two rooms in total) could not be treated as a two bedroom property, only the one bedroom LHA rate could be used for subsidy purposes. In another example, a 4 bedroom property might have two living rooms. For subsidy purposes, where there are six rooms or more, at least two of those rooms must be treated as living rooms. So only up to the four bedroom LHA rate could be used to determine the maximum subsidy amount in this case, even if on the lease it is described as a five bedroom property. A property must have at least seven rooms in total for the five bedroom LHA rate to be used.

The location of the property

29 All LHA rates should be based on the location of the property, i.e. the Broad Rental Market Area (BRMA), in which the accommodation is located.



30 Local authorities are provided with the LHA rates for the BRMAs within their own authority boundary. However, where a person is housed temporarily in another local authority area, the placing authority will need to obtain the appropriate LHA rate. LHA rates for England, Wales and Scotland can be found by inputting the postcode of a property into the LHA-Direct website. LHA-Direct was developed by The Rent Service in conjunction with the Rent Officers Wales and the Rent Registration Service in Scotland. Functions of the Rent Service were transferred to the Valuation Office Agency on 1 April 2009, see: https://lha-direct.voa.gov.uk/ The website includes the option to select the rates for a particular month, which for these purposes will be the preceding January (i.e. January 2010 for the year 2010/11).

BRMA reviews

31 As the preceding January’s LHA rates will apply throughout each financial year, where BRMA reviews have taken place and boundaries are changed in-year, any new boundaries will only affect rates for subsidy purposes in subsequent years. Any changes to boundaries as a result of BRMA reviews do not apply retrospectively. So the BRMA and rates corresponding to a postcode in January 2010 will remain unchanged regardless of the outcome of any potential changes to BRMA boundaries brought in at a later date.

Subsidy for board and lodging (B&B) and non self-contained (licensed) accommodation

32 This includes any private sector accommodation where the facilities are shared which is held by the LA under licence (provided to discharge a homelessness function).

Article 17 of the Subsidy Order Amendment refers

33 The maximum subsidy available per claim is determined by: the one bedroom (self-contained) LHA rate, based on the location of the property.

34 There is no additional amount for management costs for board and lodgings (B&B) and non self-contained licensed accommodation.

35 Also, no extra subsidy is payable in cases where more than one room is occupied by the claimant’s household in this type of accommodation.

Subsidy for short-term leased and other self-contained (licensed) accommodation

Article 17A of the Subsidy Order Amendment refers

36 The formula determining maximum subsidy for these cases will be a combination of a weekly rental element and an additional amount for management costs, as follows. The January LHA rate (based on property size and location), less 10% (i.e. 90% of the relevant LHA rate) plus either

£60pw for management costs for LAs outside of London, or •

• £40pw for management costs for LAs in London


https://lha-direct.voa.gov.uk/Secure/Default.aspx


37 As LHA rates already include notional management charges (because they are derived from market rents), the rental element for short-term leased/self-contained licensed accommodation under the new scheme has been set at 90% of the LHA rate for the property.

38 The above rates apply to all properties that are held by a LA on a short-term lease (including non self-contained accommodation) and to self-contained licensed accommodation. If a property is leased but not self-contained, the one bedroom LHA rate should be used in the above formula (i.e. one bed LHA rate less 10% plus the additional amount for management costs).

Management costs

39 The Department acknowledges there are legitimate management costs that may be incurred by local housing authorities in securing and maintaining properties for use as temporary accommodation.

40 The management costs element is fixed according to the location of the placing authority, regardless of the location of the property to which the claim applies.

41 A lower amount for management costs for London authorities has been agreed by Ministers as, once combined with the LHA rental element, London boroughs should be able to meet the reasonable costs of leasing schemes at this rate of subsidy.

Claiming subsidy

42 Local housing authorities will not be required to specify how much is claimed for management costs in the subsidy claim form. Simply combine the two elements to determine the maximum amount (the subsidy cap) and compare the HB entitlement to this.

43 The level of subsidy payable is the lower of the weekly (or part-weekly) HB entitlement, or •

•

•

•

•

maximum amount as determined by the formulae described above

44 Any expenditure above these limits will not attract subsidy.

45 LAs will need to be able to provide their external auditor with evidence which supports the LHA rate they have used in the calculation of the subsidy cap. To do this authorities will need to be able to demonstrate the correct BRMA information has been used and be able to provide (where requested) independent evidence of the number of bedrooms/rooms suitable for living in, in the accommodation.

46 Evidence of the number of rooms in a property could be in the form of, for example a copy of the leasing or licensing agreement with the owner of the property or managing agent a letter from the owner or managing agent a copy of the leasing agreement from the RSL where the RSL have taken the lease from a private sector landlord and sub-leased the property to the local authority, or



a copy of the leasing agreement from the RSL where the RSL have taken the lease from a private sector landlord under a HALs arrangement and the local authority need to determine if the rent is unreasonably high or over accommodated

•

Examples of subsidy under the new scheme

General example 1

An authority houses a person in board and lodging accommodation, the rent is above the cap but HB entitlement is below the cap.

The appropriate one bedroom (self-contained) LHA rate for January 2010 is £95/week. The eligible rent is £150/week. The HB entitlement is £90/week (as in this example the customer is working).

As the HB entitlement (£90) is less than the one bedroom LHA rate (£95) all of the HB paid (£90) will attract subsidy. The eligible rent is irrelevant to the calculation.

General example 2

An authority houses a person in board and lodging accommodation and HB is above the cap.

The one bedroom LHA rate for January 2010 is £105/week. The eligible rent is £110/week. The HB entitlement is £110/week.

Subsidy may be claimed up to £105/week. Any HB above £105/week attracts nil subsidy; in this case, £5.

General example 3

An authority outside London houses a family in a self-contained three bedroom house it has leased which is held outside the HRA.

The LHA rate for the property is £200/week.

The management costs element for an authority outside London is £60/week. The eligible rent is £235/week. The HB entitlement is £235/week.

90% of the LHA rate = £180.

The management element = £60



Total of 90% of LHA rate + £60 = £240

In this case, subsidy of £235/week may be claimed (HB entitlement is less than (90% LHA+£60)).

General example 4

A London borough houses a family in a self-contained two bedroom house it has leased and holds outside the HRA.


The additional management costs element for a London authority is £40/week. The eligible rent is £280/week. The HB entitlement is £260/week.

90% of the LHA = £198 The management element = £40

Total of 90% of LHA +£40 = £238.

Subsidy may be claimed up to £238/week (90% LHA + £40 is less than the HB entitlement). Any HB paid above £238/week attracts nil subsidy; in this case £22.

General example 5

A London borough houses a family in a leased self-contained 2 bedroom house, held outside the HRA, and located in the district of an authority outside London.


The additional management costs element for a London authority is £40/week. Note the £40/week management cost element applies even though the accommodation is outside London (it is the location of the placing authority that matters).

The HB entitlement is £260/week.

90% of the LHA = £162 The management element = £40

Total of 90% of LHA +£40 = £202.

Subsidy may be claimed up to £202/week (90% LHA + £40 is less than the HB entitlement). Any HB paid above £202/week attracts nil subsidy; in this case £58.



Other subsidy issues – reporting data on SHBE

47 As well as a requirement to record on SHBE the number of bedrooms a property has for subsidy purposes, there will also be a new set of tenure types replacing the previously used categories in SHBE, covering

Self-contained licensed accommodation •

•

•

•

•

Short lease accommodation Board and lodging accommodation Non self-contained licensed accommodation Other

48 These correlate with the tenure types in the new scheme as defined by the Subsidy Order Amendment.

Treatment of backdated claims where payments cover two financial years

49 Subsidy is claimed in the year in which the benefit payment is made and therefore reflects the subsidy rules in force in that year – the ‘relevant year’.

50 In Part 1 of the Income-related Benefits (Subsidy to Authorities) Order 1998 it defines ‘relevant year’ as, ‘the year commencing on 1st April 1997 or on the 1st April in any year thereafter, in respect of which a subsidy claim is made.’

51 This is supported by guidance on the completion of the subsidy claim (see ‘general notes’ which states, ‘where a payment is made for a period which bridges two financial years, subsidy should be claimed in the year in which the payment was made’).

52 Therefore, for any claims processed in 2010/11, including backdated payments relating to a period of entitlement in 2009/10, the new scheme subsidy rules will apply. This would include cases where processing of the payment has been delayed due to, for example, a lack of information.

Backdating example 1

A claim is made in May 2010 and the claimant asked for it to be backdated to February 2010. The authority accepts continuous good cause has been established and backdates the claim.

The subsidy for any HB paid in 2010/11 in respect of a period in 2009/10 is calculated according to the new rules in force from 1 April 2010.



Backdating example 2

A claim is made in March 2010. The subsidy for HB paid in 2009/10 is claimed under the threshold and cap arrangements. The claimant asked for the claim to be backdated by a week, but this is refused.

The claimant appeals against the decision not to backdate and is successful in their appeal. In May 2010 the claim is backdated. When the backdated amount is paid the subsidy is claimed under the new rules.

Handling adjustments to entitlement – overpayments and underpayments

Overpayments

53 Overpayments are dealt with in the year in which they are discovered. To allow this to happen, the subsidy claim form includes cells to record prior year overpayments (i.e. discovered in one year, but relating to a payment made in an earlier year).

54 Subsidy for overpayments depends on the classification of the overpayment and not upon the level of subsidy paid on the initial expenditure. The amount of the overpayment should be recorded in the appropriate cell on the relevant year’s subsidy claim form.

55 The treatment of overpayments in temporary accommodation cases is identical to the treatment of HB overpayments for claimants living in other types of accommodation. There is no change to the treatment of overpayments for claimants living in temporary accommodation. (See the Q&A section for an illustration of how overpayments should be claimed for on the subsidy claim.)

Underpayments

56 An underpayment may occur where an award has been revised or superseded to increase entitlement. Where an underpayment covers a period in a previous year and in the current year, then the underpayment should be split into previous year and current year underpayment.

57 The part of underpayment relating to current year would be treated as part of the normal payment to the claimant and attract subsidy under the new rules.

Underpayments relating to 2009/10 or earlier but discovered after April 2010

58 The following arrangement covers only underpayments that span a period from the current subsidy arrangement (i.e. thresholds and caps) to the new rules coming into force in April 2010.

59 The part of the underpayment relating to the previous year (2009/10 or before, only) will simply attract full subsidy.



Underpayment example 1

In 2010/11 an underpayment is discovered in a temporary accommodation claim that is subject to the new subsidy rules. The total underpayment is £90, £60 of which relates to the 09/10 year and £30 to 10/11.

The £60 attracts full subsidy and is recorded in the appropriate cell on the 2010/11 subsidy claim.

The £30 is treated as part of the normal payment in 2010/11 and is subject to the new temporary accommodation rules.

Subsidy for underpayments identified in TA cases in 2011/12 onwards

60. The following looks at underpayments of HB discovered in, or after, 2011/12 and which relate to an earlier year, but not earlier than the year 2010/11.

61. For the calculation of HB subsidy in relation to any of these underpayments it is necessary to look at

the revised weekly HB entitlement •

•

•

work out what level of subsidy the revised weekly HB entitlement would attract under the current year’s caps (e.g. 2011/12), and offset this against the amount of subsidy already claimed for the period of the underpayment (e.g. during 2010/11)

Where extra subsidy is due, the difference should be claimed.


2010/11

HB entitlement = £150 Appropriate LHA based cap = £170 Subsidy = (the lower of entitlement or LHA based cap) £150

2011/12


An underpayment of £6/week for 5 weeks of the 2010/11 year is discovered and paid in 2011/12.

The underpayment shows the correct entitlement for the 5 weeks of 2010/11 should have been £156/week.

This is lower than the current, 2011/12, LHA based cap, therefore all of the £30 underpayment will attract subsidy.




2010/11

HB entitlement = £150 Appropriate LHA based cap = £152

Subsidy = (the lower of entitlement or LHA based cap) £150

2011/12


An underpayment of £6/week for 5 weeks in the 2010/11 year is discovered and is paid in 2011/12.

The underpayment shows the correct entitlement for the 5 weeks of 10/11 should have been £156/week.

This is higher than the current, 2011/12, LHA based cap, therefore not all of the underpayment will attract subsidy.

Of the £156/week only £155 (the current LHA based cap) attracts subsidy

Amount of underpayment that attracts subsidy = (current year LHA based cap – subsidy already claimed in 2010) = (£155 - £150) = £5

Therefore £5/week of the £6/week underpayment attracts subsidy.

Of the total £30 underpayment, £25 will attract 100% and £5 will be unsubsidised.

If (current year LHA based cap – subsidy already claimed in 2010) is less than zero, then none of the underpayment attracts subsidy.

Definition of weekly HB entitlement and its effect where the claimant is in the accommodation for part of a week

62 In the case of a part-week entitlement, the caps with which the entitlement is compared should not be pro-rated. In line with existing arrangements, the amount of HB entitlement should be compared against the full weekly cap, even where the HB entitlement only relates to a proportion of the week.



Partial HB example 1

A customer’s normal weekly HB entitlement is £140 but at the end of their claim they receive just £40 for the last Monday and Tuesday that they are resident at the property.

If subsidy cap is £120, the amount of subsidy that should be claimed is based on the lower of either £40 (the weekly entitlement) or £120 (the cap).

In other words, £40 attracts 100% subsidy. There is no requirement to calculate the subsidy cap on a pro-rata basis and compare the amount of entitlement with that.

Treatment of cases where there is part-week entitlement in one property and part-week entitlement in another

63 This may occur where, for example, a customer is placed into B&B for a few days before moving into a self-contained leased property.

64 The customer would receive HB in respect of their time spent in the B&B as well as HB in respect of their new rent liability in the new property. For subsidy purposes, there would be two part-week entitlements that need to be measured against two separate caps (which are not pro-rated).


In one week a customer moves from a B&B to a two bed self-contained leased property.

The customer receives a HB payment of £60 to meet three days rent in the B&B followed by £120 HB to meet four days rent in the new property. The respective LHA-based subsidy caps in this example are £100 for the B&B and £210 for the leased property.

For subsidy purposes, there are two part-week entitlements, to be measured against two separate caps. In both cases, since the HB entitlement is below the weekly cap, the authority can receive full subsidy of £180 for that week.




A customer moves from one B&B to another in one week, attracting two separate HB payments in that week in respect of each property. The subsidy cap is the same for both properties.

So in the week of the move, the customer receives a HB payment of £60 to meet three days rent in B&B1 followed by £120 HB to meet four days in B&B2.

The LHA-based subsidy cap in this example is £100 for both B&Bs.

For subsidy purposes, there are two part-week entitlements, to be measured against two separate caps. In the first B&B the HB entitlement is below the weekly cap, so can receive £60 full subsidy and in the second B&B the authority can receive £100 subsidy up to the cap with Nil subsidy for the remaining £20. Total subsidy received for the week is £160.

Further queries

65 The Q&A section below lists some of the more commonly answered questions around these reforms. If there are still questions outstanding, please contact:

Dave Marley ([email protected]), or •

Joe Stacey ([email protected]) •





Section 2 – Questions and answers

Section 2(a) – Basic meaning and scope

1. What are these changes about?

The changes replace the ‘threshold and cap’ scheme that controlled how DWP reimburses local authorities for HB paid out to customers living in temporary accommodation (non-HRA rent rebate cases. Properties where the local housing authority is the tenant’s landlord and which are also held outside of the HRA. Includes leased properties held within the HRA in Wales. Does not include HRA-leased properties in Scotland although DWP intends to explore their inclusion at a later date).

They do not affect the HB award or the calculation of benefit, but they do affect how much of this HB paid out will be reimbursed by DWP.

2 What type of temporary accommodation will come under this new scheme?

The same as were subject to thresholds and caps, so customers placed into board and lodging (under homelessness legislation) •

•

•

accommodation held under licence arrangement (under homelessness legislation), and short-term lease accommodation (also known as private sector leased (PSL))

3 What date will the new subsidy rules apply from?

The new subsidy rules apply to HB payments made to these customers from 1 April 2010.

4 When was the legislation to support this laid in Parliament?

It was laid as statutory instrument number 2580, see http://www.opsi.gov.uk/si/si200925 on 29 September 2009, entitled: ‘The Income-related Benefits (Subsidy to Authorities) (Temporary Accommodation) Amendment Order 2009’.

5 Will local authorities be required to apply the new subsidy arrangements to existing cases in temporary accommodation (previously subject to thresholds and caps)?

Yes. The new scheme will affect subsidy for all existing customers as well as new, for all Housing Benefit payments made after 1 April 2010.

6 Will there be any transitional protection arrangements available for existing cases?

No. All cases will fall under the new subsidy rules from the beginning of April 2010.






7 Will subsidy for HB customers living in Housing Association Leasing schemes (HALs) be affected by these changes?

No. Customers living in HAL schemes are Rent Allowance cases treated as Excluded Tenancies and are therefore subject to a separate subsidy control. The legislation for this can be found at HB Regulation 14(2)(b), which takes you to Schedule 2(3)(1), see http://www.opsi.gov.uk/si/si2006/20060213.htm#sch2.

The Housing Benefit Regulations 2006 (SI 2006 / 213)

Whilst HALs are unaffected by the new scheme in the sense that the LA still has discretion to determine at what point housing association rents might be considered to be unreasonably high, local authorities may wish to consider the LHA rate minus 10% plus the management cost element in helping it to decide whether a referral to a Rent Officer would be appropriate.

However, as for local authority-run leasing schemes, this does not mean that local authorities 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.

8 Will local authorities still have discretion to set rent levels, which could be above or below the new caps?

Yes. This situation will not change. Any HB expenditure above the new caps will attract zero subsidy.

Given that the new subsidy caps will vary by property size, it may be in the local authority’s interest to vary rents by property size.

9 Is the percentage reduction to LHA (the 10%) and the additional management costs element liable to change over time?

Possibly. We will review these annually so they could be subject to change, as has been the case with the level of subsidy thresholds and caps in previous years.

The (January) LHA rates used in the calculation will also change year on year, of course, which means that there is already indexation to rents in the private rented sector built into the scheme.

10 Will the eligible rent still be calculated less any ineligible service charges?

Yes, the way HB is calculated does not change.

11 Do we need to write out to customers affected by the changes?

Not necessarily as these changes do not directly affect customers. However, LAs may decide to change their rent structures as a result of these changes, in which case customers would of course need to be informed of their new rent.


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


12 How should local authorities distinguish between self-contained and non self-contained accommodation?

The Subsidy Order Amendment defines this in Article 17(4). Accommodation is self-contained if the claimant’s household is not required to share any of the following with another household

a kitchen •

•

•

a toilet a bathroom

13 What is licensed accommodation?

The local authority has responsibility to establish the legal basis (i.e. correct form of tenure) that applies in respect of any properties secured from a private landlord in which it holds an interest. Generally, accommodation will be held on licence (rather than a lease) in circumstances where the local housing authority has occupation rights in respect of homeless persons but does not have the right to exclusive occupation for a defined term on payment of rent. This is likely to be accommodation which the authority has agreement to use on a nightly, weekly or monthly basis to accommodate homeless people.

14 What are management costs and what is the management costs element of the subsidy formula intended to cover or contribute towards?

This subsidy scheme has been developed based around the costs involved in procuring and managing PSL accommodation. It is recognised that whilst most local authorities should be able to lease accommodation at rates below market rents, there are often higher management costs associated with PSL schemes compared with managing properties in the mainstream private rented sector.

There is not one exhaustive list that would set out exactly what activities are involved in managing PSL schemes. The nature of these schemes and the demands placed on local authorities will vary, in terms of the type/level of activity and the cost. However, there are some common elements to running leasing schemes which have been taken into account (and which local authorities should be mindful of in terms of helping to minimise their costs when operating these schemes), which are

• staff costs

• maintenance, repairs, furniture and fittings

• voids (empty properties)

• bad debt (i.e. rent arrears)

• legal/hand-back costs, and

• gas safety certification



Section 2(b) – Getting the subsidy right

15 How will HB departments record the correct property size against each claim if it is not recorded accurately (or at all) by the customer on the HB claim form?

The LA should already know, or be able to find out, the sizes of the properties it uses to accommodate people. This information may currently be held in the homeless persons unit or a similar department within the local authority, rather than by the HB department.

16 What if the number of bedrooms in a property is unclear? (For example, a three bedroom property with two reception rooms could be used, in practice, as a four bedroom property or even, in some cases, a five bedroom property.)

The legislation makes it clear that the LHA rate to be used to determine the maximum subsidy for each claim must reflect the accommodation to which it applies. (See Article 17A paragraph 3(a) of the Subsidy Order Amendment.) So if a property has been leased by the local authority on the basis of it being a three bedroom property, then the three bedroom LHA rate should be used in the formula to determine the maximum amount for subsidy purposes.

Most properties include reception rooms, i.e. living rooms / dining rooms or ‘rooms suitable for living in’ and sometimes one or more of these are used as bedrooms. So, for example, a two bedroom property with both a living room and a dining room downstairs might be treated as a three bedroom property, with one of the downstairs rooms used as a bedroom. If the property in this example had been leased by the local authority on the basis of it having three bedrooms, then it is appropriate to use the three bedroom LHA rate in the subsidy formula. If on the lease agreement it is described as a two bedroom property then the two bedroom LHA rate must be used to calculate the maximum subsidy amount.

The Subsidy Order Amendment includes a provision to ensure that not all rooms suitable for living in, in any given property, are treated as bedrooms for subsidy purposes. So in the above example, the four bedroom LHA rate could not be used to derive the maximum subsidy amount even if, on the lease, it is described (however unlikely that may be) as a four bedroom property with no living room.

The provision is set out at Article 17A paragraph 4 of the Subsidy Order Amendment, and describes the minimum number of living rooms required (for subsidy purposes) per property, as follows

for a property with between two and five rooms in total, the local authority must allow for at least one of those rooms to be used as a living room, and

•

• for a property with six rooms or more in total, the authority must allow for at least two of those rooms to be used as living rooms, and not to count as bedrooms

Only for a property with seven rooms or more in total could the five bedroom LHA rate be used to calculate the maximum amount for subsidy purposes. For a property with four bedrooms and two living/dining rooms (six rooms in total) the maximum LHA rate that could be used in the subsidy formula would be the four bedroom rate.



17 What new documentation will be required for auditing purposes?

As the new scheme uses LHA rates in the subsidy formula based on property size local authorities need to be able to provide reasonable proof to their auditor that the property does have the number of bedrooms that are being claimed for.

This could be, for example a copy of the leasing or licensing agreement with the owner of the property or managing agent

•

•

•

•

a letter from the owner or managing agent a copy of the leasing agreement from the Registered Social Landlord (RSL) where the RSL have taken the lease from a private sector landlord and sub-leased the property to the local authority, or a copy of the leasing agreement from the Registered Social Landlord (RSL) where the RSL have taken the lease from a private sector landlord under a HALs arrangement and the local authority need to determine if the rent is unreasonably high or over accommodated

18 If a household is placed into a property outside of the borough, should I use the LHA rates for that BRMA?

Yes. The LHA rates should be those based on the BRMA in which the property in question is located.

19 Would the Valuation Office Agency (VOA) (or devolved administrations) email local authorities the rates for BRMAs outwith their usual boundaries?

This is possible, where requested (the local authority would need to discuss with their local Rent Officer). However, LHA rates can be obtained for any postcode in England, Wales and Scotland using the LHA-Direct website: https://lha-direct.voa.gov.uk/. Remember it is only the preceding year’s rates for January that you require for these purposes (i.e. January 2010 LHA rates for the year 2010/11).

20 What happens if the VOA (or one of the devolved administrations) changes a BRMA’s boundaries sometime during the year?

The VOA currently reviews BRMAs in England at a rate of 25 per cent per year, usually in batches of around 20. The Welsh Assembly expects to have completed a review of all its BRMAs by the end of December 2009.

As we plan to use the rates based on BRMAs from January of each year, any changes during the year should not cause a problem as they would only apply for subsidy purposes in the following year.

Historic rates remain available on the VOA’s LHA-Direct, see https://lha-direct.voa.gov.uk/ website using the BRMAs applicable at the time.


https://lha-direct.voa.gov.uk/Secure/Default.aspx

https://lha-direct.voa.gov.uk/Secure/LHASearchIntro.aspx


21 How should subsidy be calculated where there is a partial HB entitlement and the rent is above the cap?

The new subsidy scheme is simpler than thresholds and caps as it does away with the old, three-tier, top-down subsidy calculation. The old subsidy routine for partial HB claims (subsidy = HB less (rent minus cap)) that was invoked where rents were set above the cap no longer applies.

Subsidy will simply be the lower of either the HB entitlement or the weekly cap.

22 Will the shared room rate apply on cases where the applicant is under 25?

No. The shared room rate does not feature at all in this subsidy scheme. The scheme is based on the type, size and location of the property (so the person’s age is not relevant), and the 1 bed (self-contained) LHA rate will apply for non self-contained properties.

23 Would a claimant’s household placed into B&B accommodation attract more than the 1 bedroom LHA rate for subsidy purposes if they occupied more than one room.

No. The maximum subsidy for a claimant and his/her household placed into B&B by the local authority will be the 1 bedroom self-contained LHA rate (without the 90% adjustment), regardless of how many rooms they occupy. No additional payment for management costs is available either.

24 Which subsidy formula should apply to non self-contained accommodation that is held on a short-term lease from the private sector?

As long as a property has been leased from a private owner (and is not held under license) then Article 17A(b)(ii) (or (iii) in Welsh cases) applies. Non self-contained leased accommodation would attract subsidy up to 90 per cent of the one bedroom LHA rate plus the additional management costs element.

25 What subsidy rules apply to hostels?

Hostels owned by local authorities do not come under the current threshold and cap rules and therefore will not fall under the new subsidy rules.

Privately run Hostels (e.g. run by charities) are treated as Rent Allowance cases for HB purposes and are subject to Rent Officer determinations.

26 Will LAs need to specify the proportion of subsidy claimed for management costs?

No. The management costs element is only to be used as part of the formula for calculating the maximum HB subsidy payable (for leased and self-contained licensed accommodation). Once the subsidy cap for a property in a given location has been determined, the LA will simply need to specify expenditure up to the relevant cap (100% subsidy payable), and expenditure above the cap (0% subsidy payable).



27 What happens if a claim is backdated to before 1 April 2010, or even before January 2010?

Subsidy for HB payments made in 2010/11 must be calculated under the new rules even if the payment relates to a backdated entitlement period in 2009/10. (Thresholds and caps will cease to exist.)

28 How is subsidy claimed for over and underpayments from April 2010?

Overpayments

Overpayments in cases affected by the new subsidy scheme are treated in the same way as overpayments in other cases and should be recorded in the appropriate current or prior year overpayment cell on the subsidy claim form.

The following is how overpayments in TA cases should be treated.

Assume the accommodation is self-contained leased

Example 1

New LHA based subsidy cap = £120

HB entitlement = £150

How this would be recorded on the subsidy claim form

Cell 011 (total non HRA exp) = £150

Cell 014 (exp up to subsidy cap, ie lower of HB or LHA based cap) = £120

Cell 015 (exp above subsidy cap) = £ 30

An eligible overpayment (current year) is discovered = £ 20

How the claim form should be adjusted


Cell 014 (exp up to subsidy cap, ie lower of HB or LHA based cap ) = £120


Cell 028 (current year eligible overpayment) = £ 20



Example 2

New LHA based subsidy cap = £120

HB entitlement = £100

How this would be recorded on the subsidy claim form


Cell 014 (exp up to the subsidy cap; lower of HB or LHA based cap) = £100

Cell 015 (exp above the subsidy cap) = £ 0

An eligible overpayment (current year) is discovered = £ 20

How the claim form should be adjusted


Cell 014 (exp up to subsidy cap, ie lower of HB or LHA based cap ) = £ 80


Cell 028 (current year eligible overpayment) = £ 20

Underpayments

Full subsidy may be claimed for underpayments discovered in 2010/11 but covering a period in 2009/10, or earlier. This is a special arrangement that only affects this particular type of underpayment.

Subsidy for underpayments which cover a period in 2010/11 is claimed under the new rules.

Full details on the treatment of underpayments are available from paragraph 56 in the guidance section above.


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