DHPs – universal panacea or a huge transfer of cost to local councils and even more landlord heat?

This post began about the inadequacy of DHPs and the early experiences and reports of what is happening.  It then began to discuss what this means for councils and uses Liverpool City Council figures to explain. The inadequate DHPs do transfer financial risk from central to local government and gives local councils huge added costs – and these public purse costs central government ignores and very conveniently so.

The bedroom tax has correctly been seen as central government passing a £480m per year risk to landlord and tenant. Yet there is scant discussion anywhere of the transfer of financial cost and risk to local government which of course is part of the public purse.  This post aims to correct that and raises some alarming issues

It then goes on to discuss why Liverpool and all other councils will need to take a much harder public line with social landlords as landlords evicting because of the bedroom tax or far more likely with the benefit cap which begins in Liverpool in 5 weeks time see a huge transfer of cost from landlords to Councils.  Doubtless some landlords will spit out their dummies and believe I am orchestrating some anti landlord crusade but they would be wrong.  I passionately believe in social housing and particularly the economic benefits it gives to tenants and the country and the fact I criticise landlords in part over their reactions to the welfare reforms and generally is constructive and not for the sake of it and frankly social landlords do need the proverbial rocket up their backsides at how the welfare reforms are attacking social housing as a model – something they appear to be blase about when it is their business!!

Yesterday I posted that tenants SHOULD put some more heat or pressure on social landlords and this is seeing some very healthy debate as it should.  Today I am arguing that Councils will HAVE TO put more heat and pressure on social landlords too and especially the 60% of councils that do not have council housing.  The two are not linked out of design but out of necessity as it is what will happen in both cases and landlords will feel the heat turned up by both tenant and Council.  The former is in response to landlord actions and inactions and the latter is out of necessity for Council finances and Council budgets – all of course brought on by the ill-conceived and back of a fag packet coalition welfare reforms.

IDS and Freed must be smirking at this infighting they have set in train and much of this is still unrecognised but all part of the welfare reforms being a fundamental attack on social housing itself.

One very interesting dimension is in the bedroom tax the Councils simply believing the landlords view on what a bedroom is and how many each property has or had.  This was mutually and financially beneficial for Council and landlord.  Yet the benefit cap with its £93pw average cut sees landlords and Councils having vastly different and non-mutual aims. Landlords will want and need to reduce their financial exposure by evicting benefit cap cases yet all this does is transfer an even greater cost onto local Councils in homelessness terms.  That is is very significant difference indeed and one that needs a huge amount of consideration by landlord and Council.

Housing lawyers will be swotting up on eviction by oppression too and that phrase I wager we will hear a lot more over the coming year than we have ever heard before!

All of the above is being exacerbated by the inadequacy of DHP budgets in the first place and then further added to by Councils overspending on bedroom tax DHPs leaving much less for their other purposes such as the benefit cap and PRS tenant top ups.  And DHPs is where to begin this long post:


Discretionary Housing Payments (DHP) are cited by the coalition at every turn.  The minute an objection is raised to the bedroom tax as being unfair, say for a disabled person in a fully adapted property or other ‘human interest’ story the media is so fond of, the stock response from coalition MPs is we have put £155m into DHPs for that purpose.  It is in fact £150m as when foster carers became exempt on March 12 2013 the government reduced the DHP amount to £150m

Yet DHPs are set at a level of less than 6% of the benefit or money being taken away and it is time to look at what this means – a massive transfer of financial risk to local government from central government.

The bedroom tax is often correctly acknowledged as a £480m per year financial risk and financial transfer to tenants and landlords from central government yet the transfer of cost and financial risk to local government from the welfare reforms has rarely been discussed and it needs to be. But before I outline that just a little on DHPs in general and how they are allocated and the HB circular S1 of 2013 outlines this in detail.

The bedroom tax accounts for just £25m of the overall £150m DHP budget – a mere one-sixth of the total.  DHPs or housing top-ups used to be £20m per year and then the government put in £25m for bedroom tax and £40m for LHA reforms such as the 30th percentile and then £65m for the benefit cap and these make up the £150m overall budget. Government divides this now£150m between all LAs and then expects LAs to add a further 150% to these sums which was never going to happen after central government reduced LA funding overall by 10%.

DHPs and Liverpool City Council

Liverpool was allocated £1,606,233 in overall DHP funding and was ‘expected’ by DWP to put in a further £2.41m to this making a total of £4.16m yet this did not happen – just as it hasn’t happened elsewhere.

This £1.606m was an increase of £636,000 on the previous year yet this is to deal with £8.5m reduction in bedroom tax, a £2.4m reduction in benefit cap in just two NEW issues alone we see £636k set against an £11m reduction and this is less than 6% of the reduction alone.  Factor in the rising numbers of PRS tenants claiming LHA housing benefit and this figure has risen 3.4% over the last two years and the fact that LHA rates have been frozen for 2 and 3 bed properties and fallen for single rooms, 1 bed and 4 bed properties while rents have increased and you see the scale of th problem.

Rationing the DHP budget is one thing yet when it means at least 16 out of every 17 won’t get a DHP from just the bedroom tax and benefit cap alone then Liverpool City Council has a huge problem.  The DHP budget will soon run out leaving nothing in the ‘pot’ for the benefit cap affected tenant or the private tenant.

Two weeks ago on 17th May LCC put out a statement to say over £400k in DHPs had already been paid out and over half of this was for bedroom tax DHPs. Work those numbers and it means:

  1. LCC has paid out one-quarter of its yearly allocation in 5 weeks
  2. LCC has paid out at least £200k in bedroom tax DHPs
  3. LCC allocation for bedroom tax DHPs was one-sixth of £1.606m or £268k for the whole year – yet it has spent over £200k in the first 5 weeks – 75% of the bedroom tax DHP budget gone already!

Point 1 suggests all DHPs will have been paid out by end of July / early August and nothing left in the LCC ‘pot.’ Point 2 and 3 suggest the bedroom tax DHP budget has already run out!!

LCC can do two things.  They can spend more of the DHP budget on bedroom tax cases which means less for benefit cap cases and private tenants, or it can stop paying out bedroom tax DHPs.

I strongly suspect it will be the former as DHP cases are taking weeks and weeks to decide in Liverpool – as they are elsewhere across the country – and Liverpool will have a backlog of cases now under consideration.  Yet the more they spend on bedroom tax DHPs the less there is for the benefit cap and private tenant DHPs and these two categories present the biggest cost or financial risk to Liverpool City Council.

Benefit cap national shortfall or deductions are £93 per week and almost 7 times higher than bedroom tax deductions.  A benefit cap tenant is a cast-iron certainty for an arrears eviction whether they live in social housing as 46% of them do and especially in privately rented housing.  These become additional homeless cases to the City Council.

The private landlord in Liverpool, as anywhere, will not hesitate to evict a tenant who no longer gets a DHP to top up their rent and they can do so very quickly.  Again these become a huge financial cost risk in terms of homelessness and Liverpool has 21,495 PRS tenants claiming LHA on those numbers are on an upward trend.

In short, Liverpool, like all Councils is facing a huge financial risk and transfer of financial risk from the coalition directly through the welfare reforms.  Thankfully the Council does not yet need to use squalid B&B for its temporary housing provision as other Councils have to, though that day may well come soon.

Liverpool like all local Councils must also be very wary of the pronouncements of Steve Webb on the relationship between welfare reforms and homeless provision and duties of local Councils.  In Hansard on 27th February (Column 345) Steve Webb said this in the parliamentary debate on the bedroom tax:

Steve Webb: If I may, I shall respond to the Chairman of the Select Committee, who made an important point about those who are “intentionally homeless”. Although it is for local authorities to make decisions on homelessness applications as they do now, under current statutory homelessness legislation, if the only reason for the person’s homelessness is a reduction in benefit that is outside their control they should not be considered intentionally homeless by the local authority. I can put that on the record and hope it is helpful.

“If the only reason…is a reduction in benefit  that is outside their control…” is a telling phrase.  Both the bedroom tax and benefit cap are reductions in benefit which are outside the tenant’s control and this is a huge steer (while admitting it is local government who decide) that Councils should decide that such tenants are NOT intentionally homeless and so the local Council has a full legal duty toward them.

Lets also not forget that Legal Aid is still available where a person is homeless, or at immediate risk of losing their home and so if Liverpool or any other Council seek to go against this huge steer from Steve Webb and the coalition government then doubtless legal cases will be taken and Liverpool will also incur legal costs as well as the costs of accommodating until these cases are decided by the courts.  This will be a huge cost to local government.

Yet the real huge cost to Liverpool, a low rent area, will be the cost of benefit cap cost of permanent temporary accommodation! Eh?

The Benefit Cap sees a couple with 6 children certain to be evicted for arrears in social housing.  They will get £zero in housing benefit and a further £34 per week cut in welfare benefits.  They will be placed in temporary homeless provision and Liverpool will need to move these families on to new and ‘suitable’ accommodation from the costly temporary provision.  Yet they have been evicted as the cannot afford the rent because of the welfare reforms which are outside their control these ‘large families’ cannot afford the cheapest rented accommodation so they will have to stay permanently in costly temporary accommodation or split up into two households

While these ‘large’ families may not be numerous they block up temporary accommodation meaning the City Council has to source new temporary (and costly) provision.  The social housing couple with 5 children will get just £41pw in HB and will soon follow the 2 parent 6 child household there.  The privately housed 2 parent 4 child family in a 4 bed PRS property will see their LHA reduce by £71pw and become homeless too. The lone parent with 4 children in the PRS will see their LHA fall by £31pw too – and all of them will not have recourse to DHPs which will have been spent.

Liverpool – again I restate a low rent area and the benefit cap is NOT limited to bizarre London PRS rent levels – will have a huge increase in homeless families because of the benefit cap and they will stay there longer too giving the Council more cost. This situation will get worse year on year as rents rise faster than the cap figure – a theory I proposed last year called the systemic flaw which nobody has argued against.   The DHP budget will be subject to more pressures year on year too and who knows what level it will be next year?

Also Liverpool City Council has cushioned the blow of council tax payments this year for tenants at 8% yet will it be as high as 20% next year as it is now in neighbouring Sefton or as higher a 22% in neighbouring Wirral or as high as 27% in Blackpool. Yet if they do rise next year this further impacts on a tenant’s ability to pay rent and so it is likely more homeless presentations will be made and more homeless cost to Liverpool and all other LOW RENT areas.

Then throw into the mix that welfare benefits rising below inflation when food and gas and electric rising at twice inflation, travel costs whether that be petrol or fares going up and an explosive mix of higher tenant expenditure cost and falling income and then the direct payment of HB and monthly payment of benefits to factor in and the risk of homelessness and increased council costs begins to see its reality.

Yet the coalition keep saying we have increased DHPs and thereby attempt to pass the blame for their ill-conceived and pernicious welfare reforms onto local Councils who must have failed to manage this less than 6% DHP budget unwisely and inefficiently! Wonder how many of the multitude of tenants applying for a bedroom tax DHP realise that 16 out of 17 of them wont get one and then blame their local Council?

More than 25,000 people applied for discretionary housing payments (DHP) to help cover their rent in April, compared with 5,700 in the same month last year, according to an analysis of 51 councils by The Independent.

The DWP impact assessment on the bedroom tax from June 2012 had this to say about DHPs at paragraph 53: –

As an illustration, it is estimated that if 40,000 of the householders that experienced a reduction at the point of transition were to make an application for a Discretionary Housing Payment, the total cost across all Local Authorities of administering these additional applications would be approximately £1m. This is the estimated cost of administration, regardless of whether the outcome of the application for a Discretionary Housing Payment is successful or not.

Let me translate – The DWP expected 40,000 to apply for a DHP in the whole year and yet in the first month we have seen 25,000 applications which is a yearly figure of 300,000 and way above the DWP estimate of 40,000 – In fact it is 7.5 times as much as the DWP estimated!

The DWP also disingenuously estimated the cost of each DHP application to the local Councils was £25 each.  This process has to involve the time of:

  • handing out a DHP form,
  • accepting a DHP form and checking all needed documentation is supplied an enclosed (Bank statements, utility bills etc, etc),
  • photocopying the same bills, statements and documentation,
  • giving the applicant a receipt for this;
  • then assessing each individual case on its merits,
  • then informing the applicant of its decision.
  • It also needs to include Council time for reviewing their decision as well (A DHP carries no appeal right but you can ask the Council to look again at it) and a very  low figure of time and cost for such a process will be at least 2.5 hours or about £75 for each case.
  • And of course the original time in designing the new forms and the cost of paper and all other normal admin costs associated with this including the individual Council’s policy on how it allocates DHPs and to whom in light of the new guidance DWP issued on this in April 2013 including the highly controversial issue of leaving it up to local Councils to choose to include DLA payments as income in assessing each DHP claim – DLA is never classed as income in any other calculation or process yet it can be for a DHP.

On that basis alone local Councils have seen a cost of about £1.875m in the first month alone or 88% above what the DWP estimated for the whole year!

Alternatively, you may wish to believe that DHPs are the universal panacea the coalition maintain!

DHPs become a classic divide-and-rule tactic in one dimension.  To date we have seen social landlord and local Council collude with the bedroom tax as it was in both their financial interests to merely believe the landlord’s view of what a bedroom is and how many a property has.  Yet when bedroom tax arrears reach eviction proportions in the medium-term and when benefit cap reach them in the very short term we see a huge tension between landlord and Council.  The landlord in evicting and protecting its financial interest is in part merely transferring financial risk and cost of the welfare reforms to the Councils and especially in homelessness.

This will be a really interesting change as it pits social landlord against local Council and it remains to be seen what power and influence local Councils such as Liverpool, who have no housing stock, can exert against social landlords in the city.  Note about 60% of Councils no longer have housing stock and so this situation is less nuanced than the 40% of Councils that do.

Activists are calling upon Councils to adopt a ‘No Evictions’ policy and many Councils had an initial dash to be named the first to have such a policy with Brighton, Darlington, Dundee and many others vying to be first.  Yet in reality what does this mean?  The fact that Brighton Council tried to make huge PR capital out of this and then became one of the first Councils to issue a Notice of eviction speaks volumes for me – they are not worth the paper they are written on and frankly what can any Council do in legal terms to prevent an eviction.? Such ‘No Eviction’ policies only have a symbolic value in other words and as Brighton has proved the old saying of actions speaking louder than words is true.

Liverpool City Council is expecting a motion for its next full Council meeting on this issue and it will undoubtedly receive one.  A call for a “No Eviction” policy is for me a wasted exercise as it means nothing in practical terms.  Yet a motion stating the Council considers an arrears eviction based on welfare reform arrears alone being disproportionate is more practical and sends out a stronger message from the Council to landlords than a symbolic “No Evictions” statement.

Local councils such as Liverpool need to send a strong message to social landlords that they will not tolerate social landlords merely passing financial risk and cost onto the Council with the inference being that next time the social landlord wants Council support for a development plan or anything else then such support may not be forthcoming.  Or in simple terms you try to shaft us and you will regret it!

If Liverpool City Council (and all others) do not send out such a strong message then those city councillors who are also board members of social landlords will inevitably see a huge surge in pressure on them.  A councillor’s first and primary obligation is to the electorate and not to the social landlords board where they also sit.  A Council’s primary obligation is the same to its people and not to social landlords despite the Council’s needing good relationship with social landlords.

To avoid any Council treating arrears eviction households as intentionally homeless cases then Liverpool City Council also needs to make a statement on that and accord with the Steve Webb steer mentioned above as welfare reforms ARE out of the tenant’s control.  If a Council fails to do this in such a position statement or motion then such Councils are showing intent to make intentionally homeless decisions and then they will deserve huge increases in pressure and scrutiny.  A Council cannot simply say we will treat every case on its merits as a huge caveat, it must come out and say, all things being equal, that any bedroom tax or benefit cap arrears alone evictions are both disproportionate and will be treated as unintentionally homeless cases.

Liverpool City Council should consider any evictions that are solely based on bedroom tax and/or benefit cap arrears alone as an eviction by oppression by social landlords, and they should say so in a position statement.  This is a legal can of worms that Steve Webb has opened and widened the definition of oppression with his statement of purported reassurance to the House of Commons above.

That view will open up huge debate in legal circles but it is one any Council has to consider.  The Steve Webb statement is ‘guidance’ to local Councils and local Councils have to interpret government policy and intent.  Just as Councils interpreted the heavily prescribed bedroom tax guidance of the DWP in the A4 of 2012 for bedroom tax purposes, Councils can and should interpret the non-intentionality guidance from Steve Webb as meaning (a) social landlords should NOT evict based on welfare reforms cuts alone and (b) it does transfer a huge financial cost to Councils in making them adopt a full homeless duty to the households affected.  Hence Councils should be stating this to social landlords and to the judiciary and, if necessary, Councils should and will see how they can intervene in such cases.

You begin to see how the bedroom tax has seen landlord and Council in cahoots yet the benefit cap will see Council and landlord diametrically opposed to the others plans and wishes.  For those councillors that are already feeling pressure over the potential for a conflict of interest by being board members of social landlords, this new tension the benefit cap will create makes that fine balancing act almost impossible as the ends of the landlord and the Council become very much opposed to one another.

The benefit cap makes a councillor as a landlord board member untenable and too much of a conflict of interest.  That is just as big a threat and change to the social landlord as to the Council.

This is where I suggest those tenants and activists who are calling for largely symbolic “No Evictions” statements have it wrong.  Such statements are like Chamberlain waving his white piece of paper for me and frankly worthless.  The real issue – which is part of the massive transfer of financial risk and cost of the welfare reforms to Councils – is the tension or divide and rule the benefit cap creates between Council and social landlord.  Many already see a councillor being a social landlord board member as too high a conflict if interest with the bedroom tax welfare reform policy.  Once the benefit cap comes in then we see this potential conflict become a massive and significant one and no doubt councillor’s activities will be scrutinised in much more depth and reported across social media like wildfire.

The fact that Liverpool like most if not all other Councils will have spent a huge proportion of its DHP budget by the time the real financial risk to Councils rolls out – the benefit cap – means that Councils will have much reduced financial resources to mitigate the average £93 per week cuts it makes to Housing Benefit.  The Council’s only resource is then political pressure on the social landlord, and it needs to wield that pressure and ahead of the benefit cap starting in Liverpool in 5 weeks time.

3 thoughts on “DHPs – universal panacea or a huge transfer of cost to local councils and even more landlord heat?

  1. DHP’s are a joke. And a complete diversion by this government. A sticking plaster on a huge open wound!! And with every council having their own DHP Policy. Makes it even harder for tenants.
    I’m Disabled. My house is adapted. I was refused a DHP. And a re-consideration.
    Reason: I can afford to pay from my DLA.
    Which councils up and down the country are doing. Totally disgusting! And they are getting away with it.
    DLA is awarded for care and mobility. NOT for paying rent (Housing Benefit shortfall). Or/and council tax!
    And could have devastating consequences for Disabled people.
    It could mean you could lose your mobility car or not afford to pay your carers.
    BECAUSE, you instead, have to pay the Bedroom Tax!!

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