For a full month I have been ‘banging on’ about the LHA maxima policy and how it WILL close homeless hostels and DV refuges as well as sheltered housing.
In speaking with scores of people the first reaction is this can’t be true Joe, no government in their right minds would implement a policy that they know closes housing for vulnerable older persons or those fleeing violence and abuse. Yet that is what this policy will do as well as housing with support and/or care for every other vulnerable client group.
Friday’s Inside Housing has this on their front cover and major story and attempted to state the impact yet their efforts still chronically understated what it means and chronically underestimated the level of HB cuts and chronically under considered the impacts.
Here is the Inside Housing article below from behind the firewall.
What follows is not meant as an attack on Inside Housing per se or any journalists there individually. IH is the leading housing trade journal and if they understate and undersell the issue – which they do significantly – then the response and challenge from ‘housing’ will reflect that in its level and in timing.
Timing – The article says “…government was formulating plans to cap social rents at the Local Housing Allowance (LHA) level for all new tenants from April 2018.”
No! No! No! – The LHA maxima cap applies to all new tenants from April 2016 not April 2018. The HB cut the LHA maxima gives will not be applied until April 2018 – a two-year deferment – but it applies to all new tenants from April 2016.
That subtle point is of critical significance as it means for every homeless hostel and DV refuge that it will hit EVERY tenant there on day one – Monday 4th April – as every resident will have taken up their tenancy / licence AFTER April 2016 as these are short stay services and so every one of them will have the LHA maxima applied.
- That makes hostel and refuge financially non-viable and very specifically its major revenue funding (HB) non-viable.
- That further means that no capital funding will ever go into them as they have no viable revenue funding.
- This also means that no form of supported housing, supported living or sheltered housing will ever be built again from TODAY because any new build service coming on stream after April 2016 will see ALL of its tenants hit by the LHA maxima cut from April 2018
- In lay terms they will close, they will not be built and they will never reopen due to the LHA maxima cuts application to revenue funding.
The policy hitting in 2016 but deferred until 2018 is also a major issue in all homes for life in supported and sheltered housing too and here is why using sheltered housing to explain the average length of stay factor which is critical in order to understand the impact and let’s look at a simple illustration.
Sheltered housing has a churn, a percentage of residents who leave each year and a 50 bedded sheltered scheme with a 10% churn will see 5 tenants leave each year and 5 new ones replace them. The 5 new sheltered tenants from 2016/17 and the 5 new tenants from 2017/18 making 10% in all will be hit on day one in April 2018.
In previous posts I have revealed actual rent figures from Merseyside of non-resident warden sheltered housing averaging £140 in HB eligible rent for the 1 bed properties there yet the 1 bed LHA rate is £90 per week and that is all that will be paid.
So in figures on Monday 4 April 2018 this 50 bed sheltered scheme will see:
- 40 lots of £140 HB paid to existing pre 2016 tenants and 10 lots of £90 HB paid – a reduction per week of £500 and £26,000 per year to the entire scheme making that scheme non-financially viable. This £10 per week average rent cut (£500 pw cut and 50 tenants in scheme) on the £140 rent level is a 7.14% rent cut. Social landlords are up in arms over a 1% imposed rent cut in general needs rents yet this is seven times that in sheltered housing
- In April 2019 this becomes 35 lots of £140 and 15 lots of £90 as there will be 5 more new tenants in 2018/19 and this is a £750 per week reduction and a £39,000 HB shortfall. – A £15 per tenant per week rent cut or a 10.71% rent cut!
- In April 2020 this becomes 30 lots of £140 and 20 lots of £90 HB paid giving a £1000 per week reduction in HB and £52,000 per year. – A £20 per week rent cut on £140 is a 14.29% rent cut
- That is a cumulative cut of £115,000 this parliament which equates to a rent cut per tenant of £44.23 per week on the £140 rent level or a cumulative rent cut of 31.6%.
The above assumes 100% of sheltered tenants in receipt of it and is also is based on a 10% churn and is a simplistic illustration.
I was reading the Older Persons Housing Strategy for Sefton (1 of 5 Merseyside Councils) and it said (a) that average sheltered housing churn was 16% in Sefton and way above my 10% example used; and (b) recommended that the council get as much new extra care sheltered provision as possible.
This 16% churn with a more realistic 75% of sheltered tenants in receipt of HB is a 12% overall average cut, which is 20% above the figures in my illustration above which therefore is a cautiously low illustration
This Older Persons Housing Strategy has been agreed and is going to cabinet on 4th February to be ratified. Yet any new extra care sheltered approved will not see its first tenants until after April 2016 as the provision has to be built. This means in April 2018 when the LHA maxima cut begins that every resident there will be hit by the cut – all 100%.
A typical extra care HB eligible rent in the region is £158 per week and the viability of all such extra care schemes (and two are already in the pipeline) will have been based on receipt of this £158 per week level in housing benefit, even if only 50% of tenants were expected to receive it. One of these schemes is a 90 bed unit and that is 90 lots of £68 per week less income – a weekly HB shortfall of up to £6,120 and up to a yearly HB shortfall of £318,240 at 100% receiving HB.
YES that in-development new 90 bed extra care scheme in MBC Sefton is non-financially viable even before it is built! I also hear another extra care scheme is in the pipeline in Sefton and that too becomes non financially viable as does ANY extra care scheme in the future with the LHA maxima policy.
That is what the LHA maxima policy means and that also explains why Inside Housing and the housing sector has so understated and underestimated what the LHA maxima policy means. It also explains why the LHA maxima in making revenue funding non-financially viable means that no extra care provision (or hostel or refuge or supported living model provision) will ever be built again!
It also explains why I get so bloody angry and ranty in my blogs over this and why I always berate the NHF and others over their inactivity over this issue and goad them to challenge this policy publicly.
If Joe Public knew the LHA maxima policy means no more older persons housing and no more DV refuges then perhaps the policy would be as quickly abandoned as it was when first raised in July 2011 by the government.
How do we challenge?
The prospects for challenge are limited and limited ONLY to political challenge and utilising public opinion for two reasons.
Firstly, the LHA maxima is a housing benefit therefore welfare benefit policy and comes under the DWP and not under the CLG where housing sits. IDS and the DWP and we must assume the Treasury want the saving and Greg Clark and Brandon Lewis do not as it buggers up their housing plans.
The likelihood is IDS and Osborne will prevail and the policy with no exemptions and with the DHP budgets taking the strain was confirmed in parliamentary written answers back in December to John Healey, Emily Thornberry and others.
Linked, the love-in between the NHF and central government over the voluntary RTB deal is between NHF and CLG and so ‘housing’ has no pulling power on this issue as it is not a housing policy but a welfare benefit policy.
Secondly, the LHA maxima policy will be introduced by SI and therefore have had no discussion or scrutiny; it will need to be introduced by end of February to give the mandatory 4 weeks notice of taking effect; AND once in, the only hope of challenging this is a ‘prayer!’
That is another reason why the IH piece saying April 2018 is critically misleading in saying this is a 2018 issue and 27 months away when it is an issue to be responded to and successfully challenged in 27 days and any longer is too late!
Let me take you back to MBC Sefton’s Older Persons Housing Strategy I mentioned above and we can begin, but only begin, to look at the impacts of the LHA maxima – and note well and I restate this was written and presented and agreed BEFORE the LHA maxima policy was announced.
The strategy is good and recommends more sheltered housing as I stated and that will also help with hospital discharges and so many other issues and nicely dovetails with CCG strategies and a whole host of other health and wellbeing and adult social care ones.
YET the LHA maxima cap means there will be less and less sheltered housing and no new sheltered housing so that is going to lead to less hospital discharges and higher bed-blocking costs to the NHS and so we see the LHA maxima policy means all health and social care and older persons strategies as well as the new Care Act provisions that have and are to be put in place in need of a total re-write!!
The same bed-blocking issues will apply to those tenants who live in the supported living model (SLM) and that’s mental health, learning, physical and sensory disabled tenants and many more specialised vulnerable tenants such as those with acquired brain injuries and any other vulnerability and care or support need in the SLM. That also means the new adults with learning disability framework to come in from April is also up the khyber too – and all down to the LHA maxima policy.
This means (outside of tenants) the biggest losers and biggest headaches and biggest transfer of costs go to local government – and that means local councils even if they are Conservative controlled ones. The LHA maxima policy is therefore apolitical and not a party political issue and it is a huge transfer of cost from central to local government.
Costs – and IH underestimate
The IH article says the estimate losses are between £56 and £126 and says no more about the source of those figures. Those ranges are way off and as I said weeks ago using official current figures from Liverpool homeless hostel rents are as high as £382 with the 1 bed LHA maxima being £90 and so we are looking at a £290 or so per week shortfall which is more than double Inside Housing’s range, and in a low rent area.
The unsourced IH figures will come presumably from housing providers yet very few housing associations are the main support provider in homelessness or domestic violence and abuse refuges or in many other forms of supported housing, the support deliverers are often managing agents , which can have rent levels way in excess of £300 per week.
The national average 1 bed LHA rate even including the perversely high London LHA rates is £111 per week and so the upper band of weekly HB cut will be well over £200 per week and will be double the IH unsourced estimate and again, presumably, because IH only sourced figures from social landlords and not from support providers (plus ca change!)
More importantly, I have used £50 to £68 per week figures above in actual examples and demonstrated that this lower band figure means both inevitable closure and such services never reopening because the LHA maxima prevents financially viable revenue funding.
DHP as shortfall stopgap?
The IH article completely omits this part of the Government’s strategy yet it was again admitted in parliamentary written answers – and notably from DWP with regard to discussion above re challenge – in December which further included an announcement of an additional £70 million of DHP over the two years 2018/19 and 2019/20 to meet these LHA maxima cuts.
As I have also demonstrated previously the LHA maxima cut just to single homeless services in Liverpool is in excess of £3 million per year and to sheltered around a £1.2 million per year cut and then however much all other supported housing is cut. Liverpool’s current £1.7 m DHP allocation may increase to £2 million by 2018 yet will still have to pay out against a £6.78 million per year bedroom tax HB cut and all other current purposes as well as an additional £12 million per year HB cut from the reduced overall benefit cap from this April.
The same benefit cap reducing will increase homelessness dramatically too as it hits over 30 times as many households as it does now and therefore dramatically demand for homeless provision and especially homeless families provision. Yet such provision becomes non financially viable and the left hand clearly has no clue what the right is doing and local government is left with substantial additional costs. The LHA maxima is a further transfer of cost (and blame) from central to local government on top of the benefit cap reduction by £500 per calendar month (£26k down to £20k pa)
The DHP to make up the shortfall of the LHA maxima HB cuts simply cannot work.
Firstly a quick rebuttal to some social media comments and one said the LHA maxima issue has been overstated as it only concerns HB income and fails to include other supported housing income. That has some validity in theory but in practice it has none and again to explain we can wear the shoes of the local council.
If the provision is housing and support funded such as HB and SP then the level of the HB cuts make the service non-financially viable immediately if hostel or refuge and very quickly for longer term provision such as sheltered.
If the provision is the SLM model or extra care sheltered model is has 3 funding streams and a typical example in a low rent area such as Merseyside is:
- HB eligible income £140 – paid by central government
- HB ineligible income £12 – paid by tenant
- Support funding £12 – paid by LA
- Care funding £286 – paid by LA
This is a total of £450 per week and the only alternate provision is the registered care model which costs £750 per week and all borne by the local council.
After LHA maxima hits the HB eligible income falls to £90 and a £50 per week cut which leaves the service non financially viable. Provider informs council who then has two options – (a) increase the care package by £50 so paying £336 in care funding, or (b) let the service fold and then have to pay £750 per week for registered care.
Yet even that assumes that the registered care model is available which it is not and the same Autumn Statement that saw Osborne announce the LHA maxima also saw Osborne allow a 2% precept on council tax for local councils to pay (some) of the increasing costs in the adult social care crisis.
Together this means councils will have to find the money (same principle as additional DHP) and further cost and blame shift from central to local government.
Is it inevitable that local councils will have to ration their funding to meet the additional HP demands and then does it become likely that local councils will only fund the supported housing services which would give them higher costs if they did not? In short, LAs may meet some of the shortfalls for older persons and disabled persons that they currently provide care funding and have mandatory duties towards BUT not fund supported housing services where they do not have mandatory duties which would be all sheltered (excluding extra care) and no funding for hostels or DV refuges?
These same non mandatory duty provisions will also quickly lose support funding too as this is discretionary and secondly the LA will need it back to mitigate its own higher costs of supplementing housing with care services.
Also housing should note well as I have again said before that DHP funding at local councils will switch markedly from bedroom tax DHP to benefit cap DHP and then LHA maxima cap DHP meaning social landlords who now have some tenants bedroom tax arrears mitigated by DHP soon will not have any as DHP ceases to be given for bedroom tax purposes. – Another reason IH is chronically underestimating the impact of the LHA maxima policy.
When services close, which is not just inevitable but a racing certainty, they cannot reopen due to the revenue funding aspect of the LHA maxima so just as night follows day, alternate provisions will rapidly increase in cost due to far greater demand.
Taking the IH article as reflective of the knowledge of the LHA maxima policy impact gives huge cause for concern.
The timing is immediate even yesterday and not sometime before April 2018 and social landlords with any form of supported, sheltered and SLM provision need to clear their desks and act now and decisively.
The income risk is far greater than IH report in its estimated bands yet even at the lowest bands this means inevitable closure of existing services AND rules out any future provision because there is inadequate revenue funding*
Social landlords and the majority being HA’s need to build bridges with LA’s and work with them to prevent the LHA maxima policy from being introduced – the same LA’s that the NHF shafted in the RTB voluntary deal and the same LA’s who resent housing associations for this.
The numbers affected has been chronically underestimated and even the earlier Placeshapers report on this gave a 400,000 figure for sheltered housing affected and up to 130,000 in supported housing on an informed best guess basis. Both those figures are very low indeed and separately I will detail why these will be no lower than 500,000 for sheltered and no lower than 190,000 for supported or 25% more sheltered tenant affected and around 50% more supported affected.
* The LHA maxima cut will apply as I have illustrated above and make closure inevitable EXCEPT in those areas with freakishly perverse high LHA levels which by and large means London. This is an important exception as it does help explain why it has taken so long for housing to wake up to the cataclysmic impacts of the LHA maxima policy. It’s the same old London, London, Bloody London only focus of the housing sector playing a part in the if it doesn’t affect London then it won’t impact elsewhere therefore nothing is done about it….. but hey I’ve ranted about that so many times the reader will be sick and tired of such argument by now, despite the above further proving how much it impacts across all housing policy and social landlord (in)actions in response.
Sheltered Housing & LHA maxima explained – In Merseyside which is NOT a high rent area a typical HB eligible rent level is £140 per week which HB now covers. Yet from 2018 the 1 bed LHA rate will apply and below is the 1 bed LHA rate across the country.
The rightmost column – reading down from £1,090.31 in Ashford Kent – shows how much per year the pensioner will need to find out of their state pension or savings just to pay the rent or be evicted for arrears (all based on a low £140 HB eligible charge for a 1 bed sheltered flat)
Of course if the HB eligible rent is higher than £140 and for example quite common to see £160 per week in extra care even in low rent ‘oop’ North then you can add a further £1000 per year to the shortfall.
Note well how the LHA maxima does not impact in high rent areas such as London and you can see why I use the London, London, Bloody London posit as being just another example of non public challenge to this policy because it doesn’t affect London and the usual housing great an good can’t see past the capital – including the commentariat such as Inside Housing and others.
Anyone still think I am over-egging the LHA maxima and its impacts? !