The myths of the discretionary housing payment, the DHP, has never been fully considered yet it needs to have far more consideration by the tenant, the landlord (social and private) and local councils. To not look at DHPs is a huge mistake for all of these actors or stakeholders.
The coalition have been saying to every charge against any of the welfare reforms a standard stock phrase…we have increased the DHPs to £150m…. is the mantra from every coalition MP and minister. Yet £150m is in aggregate terms a drop in the ocean as this paper discusses and I maintain that very little consideration has been given to this area which I address below.
Last week Paxman on Newsnight grilled a government spokeswoman on the bedroom tax and let her off the hook with the ‘we have set aside £150m in DHPs’ issue – she recited this oft-heard coalition mantra. Yet the truth is that only £25m has been ‘allocated’ by central government and given to local authorities for the estimated £500m bedroom tax clawback of HB which means that just 5% of the bedroom tax clawback has been allocated to deal with through a DHP.
Only 1 in 20 statistically will get a bedroom tax DHP and 19 in every 20 will not get one.
Yet there are many reports out there from reliable sources which say only one in ten are getting a bedroom tax DHP which means that local councils have spent out double what they were supposed to pay out on bedroom tax DHPs – a point nobody has considered or discussed, and one with huge consequences as I discuss here.
The same spokeswoman on Newsnight also slipped in that the coalition has set aside £350m in DHPs for this and the following two years. So as we know the DHP budget is £150m this financial year it means that just £200m has been allocated over the next two financial years – or 33% less in each of the next two years in DHPs at £100m per year and that excludes inflation or rent increases as well.
The general point is that DHP levels are not enough anyway and will quickly run out this year and that has consequences for the tenant, for landlords and for local council costs. Below I discuss this in more detail using my home city of Liverpool as an example and only because Liverpool has issued some information on how much it has already spent from its DHP budget of £1.6m. The same issue will apply to all local councils.
The HB circular S1 of 2013 sees central government give an aggregate breakdown of the allocation of DHPs which sees £25m for the bedroom tax, with £65m allocated for the benefit cap and a further £40m for private tenants added to the original £20m allocated for this purpose. So £60m for private tenant DHPs, £65m for benefit cap DHPs and £25m ‘allocated’ for bedroom tax DHPs is the breakdown which the S1 of 2013 then itemises for each local authority giving Liverpool the £1.6m mentioned above.
Liverpool’s £1.6m is therefore proportionally ‘allocated’ as:
- Bedroom Tax DHP – £267k (16.67%)
- Benefit Cap DHP – £688k (43.33%)
- Private Tenant DHP – £645k (40%)
Note however that each local council has absolute discretion how to spend its DHP money and so if it so wished Liverpool could send 100% of its DHP budget on bedroom tax DHP claimants or all on private tenant claimants, and this is why I have put inverted commas around ‘allocated’ in this paper.
More importantly it is very useful indeed to split these three DHP claimants groups as each has different issues and especially very different consequences for the Liverpool City Council.
The bedroom tax tenant is accruing arrears at £13 or so per week if they do not or can’t pay the average bedroom tax deduction. At the end of October we will be 31 weeks into the bedroom tax and so the tenant may have £403 arrears. Yet we will also be 11 weeks into the benefit cap with its average £93 per week shortfall or arrears of over £1000 (£1023 on average).
In simple terms the benefit cap tenant who doesn’t receive a DHP will be evicted and then LCC has to decide is they are intentionally homeless and LCC then incurs huge cost of temporary accommodation. The same will happen with the private tenant if refused a DHP as the PRS landlord will rush to evict to mitigate losses.
In simple terms the benefit cap claimant and the private tenant claimant will create far greater and far quicker need for a homeless assessment and duty by the council before the bedroom tax DHP claimant.
HOWEVER – On May 17th LCC issued a news release to say it had already spend well over £400k in DHPs with the majority being given to bedroom tax cases. So (a) LCC spent more than 25% of its yearly budget in 5 weeks and, (b) at least 75% of its yearly bedroom tax DHP budget allocated in the first 5 weeks!!
It is that latter point (b) that requires serious consideration. LCC said the majority of its £400k + spend was on bedroom tax DHPs. A majority of over £400k per year which is at least £201k and yearly LCC has been allocated £267k. By today I would imagine that LCC has spent far more than its allocated £267k per annum DHPs on bedroom tax cases.
This obviously means that LCC has less DHP budget to spend on the benefit cap claimant and the private tenant claimant – the two highest and most likely claimant groups that will become homeless and thus an additional cost to the council.
It also means that as soon as it dawns on LCC that it will have less money to pay out to the benefit cap and private tenant cases and thus incur higher costs, it like all other councils will stop paying out on new bedroom tax DHPs and not pay out on new bedroom tax DHPs. The impact on the social tenant and social landlord will be a further increase in debt and arrears.
Also no council will make the same mistakes twice and so in the next two financial years, when I remind you DHP funds will reduce by 33% anyway, every local council will spend a far lower proportion of its budget on bedroom tax DHPs and more on benefit cap and private tenant cases so as to reduce its own financial liabilities through increased homeless costs.
It is reasonable to assume that about a third of the entire DHP budget councils have has already been spent on bedroom tax DHP cases and if only because of the huge attention on the bedroom tax in the media and because the bedroom tax came online first and bedroom tax claimants had first call on it. Yet this is double what was allocated to local councils and the other two main client groups in benefit cap and private tenant cases are a bigger financial risk to councils.
What does this mean?
(a) Bedroom Tax Social tenants – those that currently have a DHP for bedroom tax will not see it renewed and new bedroom tax DHP claimants are less likely to get a DHP. Hence social tenant arrears and debt (and probably Wonga debt too) will increase as will the chances of being evicted for non-payment of the bedroom tax
(b) Private tenants – as less DHP money is available then a much greater chance of eviction follows as PRS landlords will have to evict and private landlords will become even more risk averse to accommodating any benefit claimant.
(c) Liverpool City Council – will see more private tenants presenting as homeless because of the lack of DHP money. Will see the benefit cap cases presenting as homeless after they have been evicted by both private and social landlords due to the average £93 per week shortfall of the cap. Will likely have to source and use B&B accommodation for the first time for the DWP estimated 490 benefit cap households affected with all the additional costs that bring to their budgets. Additionally the rate of bedroom tax cases evicted for arrears speeds up as less DHP money is spent there and all of the above will increase next year as rents rises, benefit increase by less than inflation and DHP funding reduces from £1.6m per year to £1.07m per year a fall of well over half a million pound
(d) Private landlords – that’s easy as the benefit tenant becomes far too high a risk and PRS landlords refuse to take (outside of cramming single people into dangerous HMOs) benefit claimants.
(e) Social landlord – Now they bemoan the extremely and unexpectedly high levels of arrears due to non and part-payments of the bedroom tax. They hope these arrears levels will reduce but hope is all they have and it is very misguided hope as arrears levels will not reduce at all but will increase at a faster rate and the DHP issues discussed above are just one reason why. The additional tenant expenditure of school uniforms through to the cost of Christmas are practical and obvious commonsense reasons why bedroom tax payments will reduce and these add to direct payment of HB from October and monthly payment of benefit too on top of the benefit cap and from next year Liverpool will likely have to increase its council tax replacement scheme from its low 8% to match the 20% and 22% charged in the neighbouring boroughs of Sefton and Wirral leaving the benefit claiming social tenant with less income still.
In summary the social tenant, private tenant, social landlord and private landlord and every local council cannot rely upon the current inadequate DHP levels as they appear to be doing. The principle has always been a nonsense in any case, yet in monetary terms they are even more of a nonsense and a dangerous nonsense if you believe for one second that they are even a temporary sticking plaster on a huge gaping wound.
NB – Every council is free to decide whether a tenant is intentionally homeless or not. A potentially very worrying argument here is that councils will decide that as the private tenant knew there was going to be shortfall between LHA they receive the the PRS rent charged – and whether or not the private tenant asked for a pre-tenancy determination – then the private tenant has made themselves intentionally homeless and therefore the council does not owe a full duty to them! I am sure that councils will (as they will have to) try to make more homeless cases intentionality cases to save their added costs. Just another reason why councils over spending their allocated bedroom tax DHP money is financially inept and very worrying.
Thought I would just throw that argument out there as intentionally homeless decisions are going to be a huge area of contention very shortly due to the welfare reforms as will visibly more rough sleepers…yet both issue deserve more than a footnote here