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Supported housing excepted from rent reduction 05/02/2016

Ministers have announced the intention to except all supported housing from the one per cent rent reduction required under the provisions of the Welfare Reform and Work Bill for a period of one year.


During the debate on the Welfare Reform and Work Bill in the Report Stage in the House of Lords on 27 January 2016 the government announced a one year exception to the one per cent rent reduction for all supported housing pending completion of a review into the funding of supported housing due to be completed and published later this year.


Speaking in the debate in the House of Lords, Lord Freud (Minister for Welfare Reform) announced the one year exception saying:


"I can announce today that the Government will put in place a year-long exception for all supported accommodation from the 1% reduction. That gives us the time to study the evidence from the review. We will start to get findings in the spring, as I said. We will work with the supported housing sector to ensure that the essential services they deliver continue to be provided after the year-long exception-also making sure, of course, that the taxpayer is protected and the Government's fiscal commitments are met, and that we make the best use of the money available. We will look urgently at this to provide certainty for the sector. While the exception is in place, those providers will be able to continue to apply the CPI plus 1% rent increase to any supported accommodation that they own.

My noble friend Lord Young asked what we include in the sector. As I said, it is a wide definition and it includes housing such as domestic violence refuges, hostels for the homeless, sheltered accommodation for older people, extra care housing, and accommodation for people with mental health or drug/alcohol problems, ex-offenders, people at risk of offending, women at risk of domestic violence-a large number of groups. I have spelt out some, but there will be others. I can also confirm that the one-year exception will extend to housing co-operatives, almshouses and community land trusts. The detail will be set out in the regulations we will bring forward very soon, following Royal Assent. The intention is that these regulations will be in place for the start of the new financial year." (Source Hansard 27 Jan 2016 : Column 1378)


The government came under pressure in the debate to exempt supported housing from the related policy of capping the Local Housing Allowance (LHA) which limits the maximum housing benefit entitlement for supported housing tenants at the LHA level, however the government would not commit to do so.


Following the Ministerial announcement that all supported housing would be excluded from the one per cent rent cut for 2016/17 lots of questions have been raised about the definition of supported housing and whether the exception includes supported housing provided by stock retained councils as well as housing associations. All the exceptions will be confirmed in regulations and we expect these to be available in the next few weeks, however in the meantime DCLG has provided the following statement of clarification:


"Our intention is that this be a wide definition. All supported housing as currently set out in the rent standard guidance will be excepted from the rent reduction for a period of 1 year and providers should use this as a guide as they set rents for 2016-17. The exact definition will be defined in regulations. For the purposes of clarity we intend that the exception will include though not necessarily be limited to:


  • domestic violence refuges and other specialist accommodation based support for domestic violence victims
  • hostels and other accommodation for the homeless
  • sheltered accommodation for older people
  • supported accommodation for young people
  • extra care housing,
  • accommodation for people with mental health or drug/alcohol problems,
  • accommodation for people with disabilities
  • accommodation for ex-offenders and people at risk of offending.


Ministers have confirmed that alms houses, cooperative housing associations and community land trusts will also benefit from the yearlong exception.


As we draft the regulations we will be reviewing the definition in the rent standard, together with other definitions to ensure that the regulations provide comprehensive coverage and are clear about what is included. For sheltered and extra care housing, we would look to refer to the definitions contained in the Housing our Ageing Population: Panel for Innovation report.


Increases in the level of rent for supported housing will be limited to CPI +1%. This is in addition to an exception for specialised supported housing, also covered in the rent standard guidance which will be excepted from the rent reductions completely and for the entire four year period.


During the course of the Bill, Ministers have announced that providers of supported housing would be able to  set rents for new and relet supported housing at 10% above the social rent rate (i.e. formula less the appropriate reduction). During the exception period the intention is that providers will be able to set new rents at 10% above the 2015/16 formula rate uprated by CPI+1%.  


We are of course aware that providers have raised concerns about bringing housing benefit for social tenants into line with housing benefit for people in private housing which will start to take effect from April 2018. We will put in place the appropriate protections for those in supported housing. As we work towards implementation, DWP and DCLG will be working closely together with the sector to make sure the right protections are in place."


Since the announcement ARCH has been in contact with DCLG officials and it is understood that the regulations exempting supported housing from the one per cent rent decrease will apply equally to housing associations and to stock retained councils and that the definition of supported housing in the regulations is likely to be based on the existing definition in the HCA Rent Standard 2015  (paragraphs2.13 - 2.15) and the existing Guidance on Social Rents 2014. 


Subject to the Bill receiving Royal Assent and publication of the associated regulations specifying the exceptions, stock retained councils may wish to consider the option of applying the CPI plus one rent increase to their supported housing stock (including sheltered housing for the elderly) for one year from April 2016 or as an alternative consider freezing supported housing rents at the current level.


This late announcement may cause some difficulties for those local authorities who have already taken (or are about to take) rent setting reports for 2016/17 to their Council or Cabinet/Executive Boards - not least because the exceptions are yet to be formally confirmed by regulations following Royal Assent.  


For stock retained councils, whose' stock of sheltered housing and supported housing form a relatively small percentage of their overall housing stock, the proposed exception may also give rise to questions from tenants and the local media as to why rents for supported housing tenants are increasing while the majority of rents for other tenants are being reduced. Nevertheless the exception to mandatory rent cuts for supported housing may give stock retained councils some relief from the significant impact on their rental income and their HRA Business Plans of the one per cent per annum mandatory rent cut over the next four years and the imposition of the RTB levy to be funded by sale of high value stock and the associated loss of rental income from any stock required to be sold.


We've received a number of queries from ARCH members about the exception of supported housing from the mandatory one per cent rent reduction and how this will be applied in practice. DCLG officials are considering putting together a response to Frequently Asked Questions to help registered providers. If you have any questions or queries about these proposals as they stand and would like these to be put to DCLG please email ARCH CEO, John Bibby with your questions.


The Welfare Reform and Work Bill is scheduled for its Third Reading in the Lords on 9 February 2016 following which the Bill will pass back to the Commons for consideration of amendments prior to receiving Royal Assent.


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