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Local Authority claiming Housing Benefit back for Temporary Accommodation

Ruth Knox
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Vauxhall Law Centre

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Joined: 27 January 2014

Hi everyone, I think I have raised this issue before but it is still very puzzling.  Our local authority spends £20 million on “emergency accommodation” which I think all falls into the category of hostels or Temporary Accommodation.  It gets £2 million back in Housing Benefit.  Accepting that there will always be a shortfall because of how these costs are capped, where has this £18 million disappeared to?  is it because much of the Temporary Accommodation is so short-term - i.e. either moving from one hotel to another, or possibly getting permanent accommodation quickly.  Any ideas?
Ruth

Prisca
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benefits section (training & accuracy) Bristol city council

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Can’t imagine it because customers get offered perm accommodation quickly - we have customers in “temp” accommodation for several years.


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Tom B (WRAMAS)
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WRAMAS - Bristol City Council

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Presumably the other £18m is now in the hands of whichever organisations/individuals are providing the emergency accommodation to the council?

HB Anorak
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Benefits consultant/trainer - hbanorak.co.uk, East London

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The main way in which authorities lose money on T/A is in the difference between the cost of procuring and managing the accommodation on the one hand, and the amount of HB subsidy they can claim from central government on the other.

It is not unusual to see landlords charging between £50 and £70 a night for HMO rooms licensed to the authority, even in areas where market rents are low by national standards.  I think you are in Liverpool aren’t you, so I’d expect the Council is paying somewhere in that sort of range to book emergency space.

If that full cost is passed on as a charge to the person placed in the accommodation, they will be claiming HB of between £300 and £500 a week, but this only attracts central government subsidy at the January 2011 1B LHA rate, which was £98.08 a week in the Greater Liverpool BRMA at that time.  So the HB department can pay as much HB as they like, but the government will only reimburse £98.08 a week.

The alternative approach is not to pass on the procurement cost as an accommodation charge and only charge an amount that will attract 100% subsidy reimbursement - that will make it look as if Housing Options are absorbing the cost.

A third variation is to pass on the full charge but restrict HB to the amount that attracts full subsidy, leaving the claimant with a shortfall which is in practice uncollectable.

It’s all deck chairs on the Titanic really: bottom line is it costs a lot to procure T/A and the government will only contribute a small amount through HB subsidy.

That doesn’t quite account for the 90% loss in your figures, so perhaps procurement costs are even higher and of course there will be some admin overheads as well as the direct cost of licensing the space.

There are ways to minimise subsidy loss, but authorities have to navigate a way through various overlapping and conflicting regulatory regimes:

- whether the cost is met by HB or UC
- whether the accommodation is owned, leased or licensed
- whether it sits in the HRA or not
- whether a particular procurement model will mean the LA has to open or re-open an HRA
- whether the amount charged for the accommodation is permissible under the social housing regulator’s rules, where the LA is an RP
- whether it is “board and lodging accommodation” as defined for subsidy purposes
- whether the benefit cap applies
- whether the HB eligible rent is restricted

There is a sweet spot where they can charge as much as they like, award as much HB as they like, and send the bill to the government, especially for people with support needs.  For people without support needs it is more difficult to avoid falling foul of at least one of the issues listed above