Future funding of supported housing

Ahead of the introduction of Universal Credit, the Government is looking at how supported housing is funded.

Following the Prime Minister's announcement on 25 October that the Local Housing Allowance cap would not be applied to supported housing nor to the social housing sector as a whole, the Government published full details of the new proposed funding model on 31 October.

We submitted a response to the Government's consultation on funding models for short-term services and sheltered housing services.

Local Housing Allowance cap for supported housing 

At the Comprehensive Spending Review in November 2015, the Government announced that the Local Housing Allowance (LHA) cap would apply to all new tenants living in social housing from April 2018 (applicable to all new tenancies signed from 1 April 2016).

Following this, in March 2016 in a written statement to Parliament, the Government confirmed that people living in supported and sheltered housing would be exempt from the LHA cap for a year in order to allow the Government to carry out a proper strategic review of how supported housing is funded.

Social housing sector response

In consultation with more than 200 organisations, we submitted our recommendations, which were underpinned by three clear principles.

As a result of reforms to the funding of supported housing:

  1. No-one with support needs will become homeless or end up in unsuitable accommodation.
  2. The actual housing and support cost of delivering a quality service will be fully met, and will be flexible enough to meet changing levels of demand.
  3. The taxpayer and those living in supported and sheltered housing will have evidence of the quality and value for money of the services being funded.

Government proposal and consultation

In September 2016, the Government announced details of its proposed direction of travel for how supported housing will be funded in the future. The key elements of the new proposal are:

  • the Local Housing Allowance cap will apply to all tenants in supported and sheltered housing from April 2019.
  • housing costs will continue to be paid through the benefit system up to LHA level
  • no Shared Accommodation Rate - one-bedroom LHA rate for under 35s in supported housing.
  • local authority top-up, with ring-fenced funds transferred across from the Department for Work and Pensions and allocated by the Department for Communities and Local Government.
  • the Government believes a different system needs to be worked out for short-term transitional services and it will consult on this.
  • the 1% rent cut will apply to supported and sheltered from April 2017 for the next three years – except refuges, alms houses and co-ops.

We welcomed the promise that funding will be ring-fenced as well as the commitment not to use the Shared Accommodation rate of LHA for people under 35. However, there remains a great deal of uncertainty for vulnerable people including:

  • How local authorities will prioritise how they spend their devolved funding – there is a risk that local authorities will prioritise people with social care needs over for example single homeless people. What will happen to people will limited local connections and little local political support? 
  • How the Government will ensure that local authorities get the right amount of money and that this funding can grow in line with future need.
  • How long the ring-fence around the money will last.
  • How we ensure that services requiring a relatively small amount of additional funding, for example sheltered housing, are not caught up in complicated administration.
  • How existing tenants will be protected in the transition from one system to another.
  • How we ensure that vulnerable tenants in areas where private sector rents are low are not disadvantaged by these changes and can still afford decent appropriate supported housing.
  • The three year rent cut will impact on services.

These concerns formed the basis of our response to the Government's formal consultation. A supported housing white paper was due to be published in spring 2017, but the snap General Election and the fire at Grenfell Tower delayed this.

Keeping supported housing on the political agenda

MPs set up a joint Department for Work and Pensions/Communities and Local Government select committee inquiry which the Federation’s public affairs team assisted in its evidence gathering, and worked to win support for. The findings of the committee supported our recommendations.

The Federation and members in his Waveney constituency have been working with Peter Aldous MP to keep the issue of the future funding of supported housing high on the political agenda, which resulted in securing two parliamentary debates. Thanks to the work of members, these debates had a great turnout from MPs from across the political spectrum.

To raise the profile of the vital services provided by supported housing we also launched the Starts at Home campaign. You can read more about this on the Starts at Home website.

Latest developments – LHA cap dropped

On 25 October in response to a question at PMQs, the Prime Minister announced that the LHA cap would not apply to supported housing nor the wider social housing sector. This news is enormously welcome, providing housing associations and their tenants much needed security. It's testament to the hard work of the whole sector, united behind one message.

The Government has now published further details of its proposed new model, which it will be consulting on until January 2018. The new funding model will come in from 2020 with the following elements being proposed:

  • a funding system that leaves funding for housing costs in long-term and sheltered housing services in the benefits system
  • a ‘sheltered rent’ for sheltered and extra care housing to keep rent and service charges at an appropriate level
  • housing costs for short-term services to be paid through local councils

The decision to move away from the previously proposed LHA plus top-up model is welcome, but the proposal for short-term services signals a big change for the sector.

Short-term services offer support and a home to some of the most vulnerable and marginalised people in our society.  These services need funding security in the long term. However the monthly structure of Universal Credit causes problems for very short stay residents so we need to look for another solution.

We need to properly understand where Universal Credit is a problem, looking again at the definition of short-term and transitional services, and design a system that is able to fill the gap. The consultation period offers the opportunity to get this balance right and we are taking this forward with the Government as a priority. We held a number of discussions with members in late 2017 to help us contribute to this consultation process. A summary of this feedback can be read here.