What should housing benefit authorities consider when assessing whether eligible rent for 'exempt' housing is 'unreasonably high'? Jonathan Manning and Sarah Salmon report on a recent Court of Appeal ruling.
In Birmingham City Council v (1) SS and (2) Secretary of State for Work and Pensions; Birmingham City Council v SA and (2) Secretary of State for Work and Pensions (Roshni intervening)  EWCA Civ 1211 the Court of Appeal has held that, when assessing whether the eligible rent for “exempt” accommodation (supported housing) should be restricted on the basis that the rent payable is “unreasonably high” by comparison with that payable for suitable alternative accommodation elsewhere, a local housing benefit authority is only required to compare the level of rent payable for the accommodation in question with that for the suitable alternative. It is not necessary to consider the landlord’s circumstances, or the degree of public subsidy received by him or by the landlords of the comparator accommodation.
Regulation 13 of the Housing Benefit Regulations 2006 (S.I. 2006/213) as substituted by Sch.3, para.5, Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006 (S.I. 2006/217) (the “Consequential Provisions Regulations”) provides for the restriction of benefit for occupiers of “exempt” accommodation (i.e. accommodation provided by a housing association, a registered charity or voluntary organisation where that body or a person acting on its behalf also provides the claimant with care, support or supervision (Consequential Provisions Regulations, Sch.3, para.4(10)(b)). In such cases, as a result of the Consequential Provisions Regulations, the normal local housing allowance and “maximum rent” rules do not apply.
The restriction of rent under this form of reg.13 involves three stages: first, the authority must consider whether the rent payable for the accommodation in question is unreasonably high by comparison with that payable for suitable alternative accommodation elsewhere; secondly, if the authority concludes that it is, then they are obliged to restrict the rent; and, thirdly, in restricting the rent, the authority have a discretion as to how much to restrict the rent: see reg.13(3)(b).
In R v Coventry CC ex p Morgan, 7 July 1995, QBD (Crown Office list), unreported, Collins J. considered whether, under equivalent provisions of the Housing Benefit (General) Regulations 1987 (S.I. 1987/1971), it was appropriate to compare the rent charged by a private sector landlord with those payable for suitable alternative “public sector accommodation” let under a secure tenancy. Collins J. said that the housing benefit authority:
“…have to bear in mind that they are concerned with whether the rent being paid by someone in the private sector is an unreasonably high rent. It is no part of the scheme to try to compel private sector tenants to move to council accommodation. … If, in deciding whether a rent is unreasonably high for a tenant in the private sector it is appropriate for the Council to have regard to the levels of public sector rent, then there is a potential unfairness to the private sector tenants because the usual result of taking account of what I call public sector tenancies is to produce a lower figure than is appropriate for private sector lettings. … …[T]he element of subsidy does mean that, on the whole, such rents are at a lower level…the purpose of this is to compare like with like, and to answer the question whether this landlord was charging an unreasonable rent for this tenant…”.
SS and SA (the “HB Claimants”) occupied rooms in women’s refuges owned by an organisation known as Roshni. These rooms qualified as “exempt” accommodation. Although a registered charity, Roshni had decided not to become a private registered provider of social housing. In about 2010, Roshni lost its “Supporting People” funding and decided to increase its rents to cover the shortfall. In each case, Roshni charged the HB Claimants a contractual rent of £258.87 per week, for occupation and service charges, of which £242.17 was eligible, in principle, for housing benefit.
Birmingham CC (“Birmingham”), as housing benefit authority, restricted the housing benefit payable in respect of these rents to £179.20 per week, applying Reg.13(3)(b) Housing Benefit Regulations 2006, as substituted by the Consequential Provisions Regulations, on the grounds that they were unreasonably high by comparison with rents payable in respect of suitable alternative accommodation elsewhere. The comparators were all landlords providing similar accommodation in the locality; they ranged from smaller to larger charities and they were all private registered providers of social housing.
The HB Claimants appealed to the First-tier Tribunal which upheld Birmingham’s decisions. On appeal to the Upper Tribunal, they argued that Birmingham’s comparators were invalid as they were private registered providers of social housing and so eligible for public subsidies from which Roshni was, by its status, excluded. Accordingly, a comparison with these landlords was not on the like-with-like basis required by Morgan. The Upper Tribunal allowed the appeals.
The Upper Tribunal decision
The UT Judge held that there was no reason why, for the purposes of reg.13(3), the suitable alternative accommodation with which the claimants’ rent was compared, could not include subsidised and unsubsidised accommodation, as nothing in reg.13(3) prevented the words used from having their normal meaning. Nonetheless, Morgan was authority for the proposition the comparison must be on a like-with-like basis, so that where alternative accommodation was available from landlords constituted similarly to the landlord in question, the rent for that accommodation must normally be the principal point of reference. Where such a comparison was not possible because of the absence of appropriate comparators, as in the present case, it was permissible and necessary to look at the rent charged by “subsidised” landlords but in comparing the rents of such landlords with that of an “unsubsidised” landlord, an authority would not normally be able to show that the unsubsidised rent was unreasonably high in comparison with a subsidised rent unless the former exceeded what the latter would have been but for any element of subsidy. The authority should therefore look at the accounts of the landlord in question and the comparators and adjust the rents of the comparators so as to take account of the funding they received.
On conducting such an exercise, the judge concluded that Roshni’s rents, which were set at a level that was necessary to cover its costs, were not unreasonably high by comparison with the rents charged by the “subsidised” comparator landlords, once the subsidies received were stripped out. Birmingham appealed to the Court of Appeal.
The Court of Appeal
Birmingham’s appeal was allowed. The main question on the appeal was whether (and if so, to what extent), in assessing whether rent for accommodation is unreasonably high by comparison with other suitable alternative accommodation, it is appropriate to take into account the degree of public subsidy received by the owner of the accommodation occupied by the HB claimants and by the owner of any other accommodation said to be a suitable alternative; and in particular, how the Regulations should be applied for the purposes of comparison in relation to accommodation owned by a charity, by a private registered provider and by a private landlord.
The Upper Tribunal Judge had erred in his approach as his comparison between rent payable by the HB claimants in Roshni’s refuge and the rent payable for other accommodation of comparable type and tenure was not a true comparison. To adjust upwards the real rent being charged - attempting to take into account the amount of public funding or subsidy and assuming such subsidy allowed landlords to reduce their rent – to arrive at a set of hypothetical rents was not consistent with the requirements of reg.13(3).
The concept in reg.13(3)(b), of the rent payable in respect of suitable alternative accommodation elsewhere, envisages a simple comparison between rents. The intention underlying the provisions in reg.13 is the protection of the public purse from “unreasonable payments” of housing benefit and the protection of claimants from homelessness.
The comparative exercise in reg.13 is specifically limited to accommodation which is both “suitable” for the claimant and “alternative” to the accommodation he is occupying. Considering whether the rent is comparatively “unreasonably high” does not require an authority to enquire into the landlord’s circumstances. Reg.13(3) and (4) do not refer to landlords or their circumstances at all; the focus is on the claimant. To manipulate the comparison by excluding all but the levels of rent payable for suitable alternative accommodation which happens to be provided in the private sector without subsidy, or some other external source of funding, will render the exercise subjective, unrealistic and partial.
The like-with-like approach in Morgan was hard to reconcile with the true construction of reg.13(3)(b). In particular, it was correct that the legislation did not intend to force tenants in the private sector to move to the public sector, but that did not mean it was necessary to exclude public sector rents from the comparison under reg.13(3)(b). It could be avoided through the reg.13(3) discretion as to the amount of the reduction of an unreasonably high rent; the range of factors which could bear on the exercise of that discretion is wide.