LHA Maxima Cap – Have sheltered landlords only themselves to blame?

Why are the housing management costs of sheltered 50% more than in general needs housing?

That I strongly suspect is the question some government policy wonk or bean counter asked when it was discovered that a 1 bed sheltered flat typically gets 50% more in housing benefit than a 1 bed general needs flat in social housing, which it does.

Perhaps another question could have been why do we give more in Housing Benefit for a 1 bed sheltered flat than we give for a 3 or even a 4 bed general needs social housing property … which also by and large is true!

These are just two of the probable questions asked and used as the rationale for the Conservatives LHA Maxima cap policy which is going ahead regardless despite being roundly and rightly rejected and dropped like a hot potato back in 2011.

In a high proportion of sheltered housing schemes the government suspects, and in many cases rightly, that ever since 2003/04 when the last Labour government made an horrific U-turn and cock up over the funding of sheltered housing, social landlords have been using Housing Benefit to pay for support costs and not housing management ones which is all that the Housing Benefit regulations actually allow.

Excuse the patronising historical argument but the cock up made by the ODPM under John Prescott with his team headed up by Terrie Alafat who is now Chief Executive of the Chartered Institute of Housing is very relevant to the argument.

During the Transitional Housing Benefit Scheme (THBS) the forerunner of the Supporting People programme from 2000 to 2003, all supported and sheltered housing providers filled in the SP3 forms and one very critical question there was is the service (a) uniform, (b) banded or (c) variable.

Uniform meant support in a sheltered housing scheme equalled 1 wardens cost (say £30k all found) to be spread across say 50 sheltered units which equalled £12 per property per week.

Banded meant some tenants had a low, medium or high support service eg 2 hours, 5 hours and 8 hours each per week

Variable meant individually decided subject to an assessed support plan.

Due to the fact that some sheltered housing tenants did not need support and the historical cross-subsidy that general needs tenants paid there was little transparency of precisely how sheltered housing wardens and services were funded, and to such an extent that local councils (but not housing associations) were also given an additional amount of funding for this – the ‘unpooled’ element or cross-subsidised amount to make all funding transparent.

As a result almost all sheltered housing services ticked the uniform box in the SP3 form.  However, shortly after Supporting People went live, the ODPM decided that ALL supported and sheltered housing services had to be variable – that is based on an individual assessment – which after the fact was too late to change the service type and caused pandemonium in sheltered housing.

This change resulted in many sheltered wardens losing their jobs and sheltered tenants losing their warden as the average support cost paid for a sheltered housing services was just over £12 per week or £600 per year – a pitifully low amount.  This £600 yearly support income also had to pay for at least 2 support needs assessments each year and the costs of those assessments was more than this alone – by comparison a community care assessment cost circa £3000 at the time.

Another critical point here is that the £12 per week support ‘cost’ means that the vast majority of sheltered housing has a de minimis level of support, that is less than 2 hours per person per week in simple terms, and thus it is not by definition supported housing.  The full ramification of which is that much of existing sheltered housing will close due to the LHA Maxima cap as I discussed here and you can decide whether the call today from Terrie Alafat and the CIH to exclude sheltered housing from the LHA Maxima Cap policy here is linked!

Supporting People also failed to take account for other issues such as stock transfer agreements which limited the amount of rent rises in any case even if social landlords would have been politically able to raise sheltered rents which they could not.  In short SP shafted the sheltered housing tenant and service.

By stealth and incrementally in order to keep as many wardens and sheltered housing services afloat had to (a) put up sheltered rents to the maximum, and (b) had to further cross-subsidise sheltered housing from general needs rents – which SP had sought to exclude them from doing with its key aim of transparent funding.  Sheltered housing funding became more opaque and even less transparent.

Additionally, while any increase in supported housing rents was scrutinised to death by local council HB departments, the opposite was true for increases in sheltered housing.  This made sense to local councils as taking away resident wardens and their preventative support rationale would mean higher care costs falling on local council budgets.  Further still the extra care sheltered provision type took off like a rocket as that too see a huge increase in HB costs and a cheaper option for local councils than the registered care model which didn’t any longer attract Housing Benefit due to Supporting People regulations.

In short sheltered housing HB levels were ‘maximised’ by social landlords and this often meant in essence that support costs were met by the HB budget when it was never permissible to do that.  This is the major reason why purported housing management costs for a sheltered 1 bed are 50% or more above the general needs 1 bed level in terms of HB payments.

A contributory factor is that social landlords expanded the eligible (HB) service charge boundaries too in sheltered housing and even raised their costs to very high levels that again failed to see LA scrutiny of because it was sheltered housing.  Try to get thruppence a year more in HB for a homeless hostel and scrutiny of estimated costs was down to the Nth degree by comparison.  Yet in sheltered housing increases of greater than 5% per year were regularly seen and with little if any scrutiny.

Note too the majority of stock transfer from council to LSVT housing association came before SP and I remind that these new housing associations did not get the rent unpooling funding which remaining council landlords got and the sums were considerable with some council housing departments getting over £1 million in unpooled funding while housing associations got zip.

None of the above is news to those in the housing sector or indeed to LA HB departments and this packing of the Housing Benefit to pay for support is not exposure and many will know it went on and still does, albeit to a lesser extent.

I am not blaming council or housing association landlords for this as it was all caused by the huge cock up made by the Labour government and specifically John Prescott’s team at the ODPM which is now DCLG.   Yet as this practice has become so normalised it has now led to the situation that the alleged housing management costs of a 1 bed sheltered housing unit is 50% more than a general needs 1 bed property.

Hence some policy wonk and/or bean counter at HM Treasury has said how has this come to pass that the public purse pays 50% more in alleged ‘housing management’ costs in sheltered than in general needs housing.

Sheltered housing has always been afforded privileged status when it came to the payment of Housing Benefit and its providers in social landlords have taken advantage of that privileged status and achieved ever higher HB for it.  The regulations have allowed for it so there is nothing unlawful about it, and the lax interpretation of them by every local authority has seen ever larger amounts of HB awarded to sheltered housing.

Now, with the LHA Maxima Cap, the very many subtle ways in which the HB bill has been taken advantage of by sheltered housing providers is at acute risk of both discovery and of no longer being permissible to be claimed.  If these events had been for any working-age client group then I have no doubt that the lawful workarounds of the HB system would be alluded to as fraudulent practices, yet because they concern older persons – and for that reason alone – they are not.

In summary, while the LHA Maxima Cap policy remains a blunt instrument of seeking to only cut HB through a theoretical nonsense of apparent fairness and a classic case of blame deflection and cost transfer from central to local government, it unearths some notable past mistakes and some less than good practice by sheltered landlords: Those who know all about these are now left with the extremely weak and shamefully ageist strategy of exclude older persons from the LHA Maxima and experiment on those of working age first as in today’ Terrie Alafat CIH piece.

The result is that existing sheltered housing is at high risk of closure and sheltered providers in social landlords will now see their past practices come back to haunt them as they severely weaken their negotiating hand.


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