Rent shortfalls & homelessness: David defeats council but not Goliath

Councils are often approached by people who are having difficulties in paying for their current accommodation.

Common issue

Unsurprisingly the numbers approaching councils for this reason has increased in recent years. Rents have risen, whilst a series of welfare reforms have significantly reduced benefit entitlements in real terms. More fundamentally, housing benefit (or the housing element of universal credit) is usually paid at rates that won't cover most private rents.

Quite apart from the serious hardship caused to tenants this presents a real headache for councils. Homeless units are left to pick up the pieces caused by a national welfare policy that requires many benefit claimants to use their non-housing benefits to meet housing costs.

When people in this situation apply for housing councils must decide whether they are homeless. Someone is legally homeless if (among other reasons) they have accommodation available to them but it is not reasonable for them to continue to occupy it (Housing Act 1996, s.175(3), s.177).

The affordability of accommodation must be taken into account when deciding if it is reasonable to continue to occupy. Affordable in this context (homelessness) means the person cannot afford the necessities of life once they've paid their housing costs (R v Brent LBC ex p Baruwa (1997) 29 HLR 915, CA).

The Suitability of Accommodation Order 1996 states that councils must take into account certain matters when deciding whether someone can afford their accommodation. This includes the person's 'other reasonable living expenses' (Article 2(d)).

Importantly, homeless people with a 'priority need' (e.g. those with dependent children and vulnerable persons) cannot be found intentionally homeless and thereby be denied the full housing duty if the accommodation they lost was not reasonable to continue to occupy.

Affordability is therefore an issue that must be considered by councils when deciding:

• Whether a housing applicant is homeless.
• Whether a homeless person became homeless intentionally (which disqualifies them from being owed the full duty when the initial 56-day homelessness 'relief' duty ends), and
• Whether accommodation they've secured for someone to meet a housing duty is suitable for them.

Facts

Which brings us to Samuels v Birmingham CC [2019] UKSC 28.

Ms Samuels applied to the council for help as a homeless person. She was a single parent with four dependent children, all aged under 16.

Ms Samuels rented a house from a private landlord. However there was a shortfall of £151.49 per month between her rent of £700 and housing benefit entitlement.

After falling into rent arrears Ms Samuels' landlord gave her notice to vacate.

Upon receiving her housing application the council considered Ms Samuels' income and expenditure. They decided that she could in fact have afforded both the rent and other essential expenses. They also concluded that Ms Samuels had deliberately failed to pay the rent. Consequently she was not owed the main homelessness duty because she had become homeless intentionally.

Ms Samuels' income (excluding housing benefit) was £1,349.33 per month, consisting of income support, child tax credit and child benefit. Or £1,197.84, after paying the rent shortfall.

By the time her case was considered by the council on review Ms Samuels' solicitors had forwarded a list of her essential expenditure, which totalled £1,234.99 per month. They asserted it was impossible for her to meet both the rent and her essential outgoings because her expenditure exceeded her income by £37.15 per month.

This type of problem is very common indeed. Faced with such situations - and the sheer numbers of tenants managing on very tight budgets - council officers will closely examine the applicant's stated expenditure. Sometimes decision-makers will argue that an amount allocated for a particular item (e.g. heating or travel) is excessive. Other items may be discounted on the grounds that they're not essential.

In Ms Samuel's case the reviewing officer concluded that the figure of £750 given for housekeeping (food and household items) was excessive for her household size. He stated:

The Supreme Court had to consider whether the council's approach to determining the affordability of Ms Samuel's private rental was lawful. The court found that it was not.

Unlawful

The court held that the decision-maker asked the wrong question when asking whether there was sufficient 'flexibility' that would allow her to cope with the rent shortfall of £151.

Rather, the correct approach was to decide what the applicant's reasonable living expenses (other than rent) were, having regard to the applicant's needs and the needs of her children, including the promotion of their welfare (para 36).

The court also held that when councils assess how much money an applicant needs to live on, this must be an objective assessment rather than merely the case officer's subjective view (para 34).

The 2006 version of the statutory guidance (in force at the time of the council's decision in 2013) recommended that councils consider accommodation to be unaffordable if the applicant's residual income, once they've paid the rent, is less than the level of income support or income-based jobseeker's allowance that is applicable in respect of the applicant, or would be applicable if they were entitled to claim benefit.

The court held that the lack of reference in the 2006 guidance to benefits provided in respect of children did not make the level of those benefits irrelevant. Benefit levels are generally designed to provide for subsistence needs. The reference in the guidance to a current tariff for benefits (plural) suggests that the tariff is, at least, a good starting point for assessing reasonable living expenses (para 35).

The court observed that the amount Ms Samuels had provided for expenditure (£1,234.99) was well within the amount regarded as appropriate via welfare benefits (£1,349.33). Whilst declining to substitute a decision that Ms Samuels was not intentionally homeless (preferring to merely quash the decision and remit it to the council for reconsideration), the court observed:

In addition, affordability has to judged on the basis that the accommodation will be occupied "indefinitely" (i.e. in the long term, or for as long as the applicant will have to occupy before the local authority takes action in respect of their homelessness, following Birmingham v Ali [2009] UKHL 36) (para 34).

In a postscript to the judgment the court notes that the current statutory guidance has changed. The current guidance does not replicate the aforementioned recommendation. Instead it states:

Implications

So what are the likely implications of this decision?

As before, homeless applicants and their advocates would be well advised to put information before councils in support of any contention that income is insufficient to meet housing costs and living expenses. Typically, this will be a list of income and expenditure, but unusual or particular expenses in light of the applicant's circumstances should be highlighted. In addition, outgoings arising because of disabilities and payments needed to safeguard the welfare of children should be specifically cited.

But applicants and their advisors will also now want to closely examine adverse decision letters to ensure the council took the relevant subsistence levels of benefits (or universal credit standard allowances) as a starting point when deciding the amount of money the applicant needs to meet basic needs and other reasonable expenses.

Samuels may also be used to support an argument that discretionary housing payments or other payments (e.g. from the homeless department's own budget) should be made, failing which a homelessness duty should be accepted.

On the other hand the court expressly acknowledged that councils may legitimately take into account all sources of income, including all social security benefits.

It appears that the court's requirement that affordability assessments must have an objective starting point is the most significant issue for decision-makers.

The case also has the potential to lead to further disputes in the courts about the adequacy of affordability assessments, and how the Supreme Court's guidance should be applied in practice.

I would expect the Ministry of Housing to issue additional guidance on living costs for different types of household, particularly given the court's reference to:

Council budgets may also be stretched further, as they're expected to meet rent shortfalls in more cases, whether to prevent a homelessness duty arising in the first place, or when securing accommodation to meet a housing duty.

What's certain is that this victory for homeless applicants exacerbates the tension between welfare law and homelessness law. Local authorities are being left to deal with the effects of national welfare policy.

And while decision-makers will have to adjust how they justify adverse affordability decisions, a much bigger issue remains: the urgent need for fundamental reform to address the (un)affordability of rents.