Social Welfare Update: Affordability of accommodation and intentional homelessness

Tuesday 16 July 2019

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Ms Samuels, the appellant, was an assured shorthold tenant. She lived together with four children and her income consisted of housing benefit, child tax credit, child benefit and income support. However – like many occupiers in the private rented sector her housing benefit award was not sufficient to cover her rent in full leaving her with a short fall of £151.49 per month which she had to meet from her other benefits.

Ms Samuels was unable to pay the shortfall consistently and over time rent arrears accrued and she was given notice to leave her accommodation. She then applied to Birmingham City Council, the respondent, as homeless. However, Birmingham concluded that she was not owed the main housing duty as she had become homeless intentionally. This decision was upheld on review with Birmingham reasoning that there was sufficient ‘flexibility’ in the amount of benefits Ms Samuels received for her to cover the shortfall. That decision was upheld on appeal to the county court and on a second appeal to the Court of Appeal.

Ms Samuels appealed to the Supreme Court. Her grounds of appeal raised three issues:

  • The correct interpretation of paragraph 17.40 of the Homelessness Code of Guidance for Local Authorities (DCLG, 2006).
  • Whether accommodation can be regarded as affordable, and therefore reasonable to continue to occupy, where an applicant, after meeting their housing costs, would be left with a residual income less than the level of subsistence benefits (e.g. income support, child tax credit and housing benefit) to which he or she was entitled.
  • The quality of the reasons given in the decision.

Paragraph 17.40 of the code (which has since been superseded by the paragraph 17.46 of the 2018 code, which refers to Universal Credit) provided that:

‘In considering an applicant’s residual income after meeting the costs of the accommodation, the Secretary of State recommends that housing authorities regard accommodation as not being affordable if the applicant would be left with a residual income which would be less than the level of income support or income-based jobseekers allowance that is applicable in respect of the applicant, or would be applicable if he or she was entitled to claim such benefit.’

Ms Samuels argued that this section of the code needed to be interpreted in the context of the rules on welfare benefits as they had existed at the time the guidance had first been drafted. Specifically, the guidance had been drafted at a time when income support included an award in respect of children, which had since been replaced by child tax credit. Child benefit also used to be factored into the calculation of an applicant’s entitlement in a different manner to the modern regime. Therefore the benchmark provided by the code – the level of income support – should be understood as referring to income support and child tax credit and child benefit. On a true interpretation of the code Ms Samuel’s argued, accommodation should not be regarded as affordable, if an applicant would be left with a residual income less than this after meeting housing costs.

In a unanimous judgment, the Supreme Court allowed the appeal. In relation to the interpretation of the code, Lord Carnwath (giving a judgment with which the other justices agreed) remarked [33] that:

‘There is an attraction in the argument that references to “income support” in paragraph 17.40 should be understood in the sense in which that expression was apparently used at the time of the earlier versions of the Code. It seems surprising, even nonsensical, that the level of income support should be maintained as a guide to affordability, but without regard to the changes which excluded from income support any allowance for the children of the family.’

However, it was not necessary of the court to determine this issue. Instead, the appropriate starting point was article 2 of the Homelessness (Suitability of Accommodation) Order 1996 which requires all sources of income which an applicant has, including welfare benefits, to be taken into account. The applicant’s income should then be compared with his or her reasonable living expenses. The assessment of ‘reasonable living expenses’ was to be carried out objectively, and not based on the reviewing offer’s subjective views of what was or was not reasonable, and on the basis that the applicant’s accommodation would be available indefinitely. See [34].

Whatever the correct interpretation of the code, the reference to income support by way of a benchmark did not preclude the taking into account of child-related benefits in the assessment of affordability. Benefit levels were not ‘generally designed to provide a surplus above subsistence needs for the family’. As such, benefit levels were ‘at least a good starting point for assessing reasonable living expenses’. See [35].

The court held that the reviewing officer dealing with Ms Samuels’ case had asked himself the wrong question: ‘The question was not whether, faced with… [the shortfall of £151.49], she could somehow manage her finances to bridge the gap; but what were her reasonable living expenses (other than rent), that being determined having regard to both her needs and those of the children, including the promotion of their welfare.’ Ms Samuels’ living expenses, Lord Carnwath observed, were ‘well within the amount regarded as appropriate by way of welfare benefits’. As such, ‘in the absence of any other source of objective guidance on this issue it is difficult to see by what standard that level of expenses could be regarded as other than reasonable’. See [36].

The matter was remitted for reconsideration by Birmingham, but with the indication that it was ‘hard to see on what basis the finding of intentional homelessness could be properly upheld’, on the basis of the law as the court had explained it. See [37].

In view of the court’s finding on the subsistence benefits issue, there was no need to consider the reasons challenge.

Click here for the judgment: Samuels v Birmingham City Council [2019] UKSC 28

Shu Shin Luh and Connor Johnston were instructed on behalf of the interveners, CPAG and Shelter, led by Martin Westgate QC of Doughty Street Chambers.

Comment:

The effect of the judgment, in practical terms is that – in the absence of any other source of objective guidance – local authorities should use the level of welfare benefits to which an applicant is entitled as a benchmark for his or her reasonable expenditure, in assessing affordability. This is just a starting point however and any particular needs of children necessitating additional expense would still need to be factored in. For example, additional travel costs arising from a child’s disability. On the other hand, although the court did not say so expressly, we can probably assume that there may also be exceptional cases going in the other direction, in which an applicant has additional expenses which are de minimis and/or very short term, where he or she could reasonably be expected to adjust his or her expenditure to accommodate. That is, an applicant who is required to spend a couple of pounds extra for a few weeks to repay a small amount of rent arrears, might reasonably be expected to reduce expenditure elsewhere. His or her accommodation should not necessarily automatically be regarded as unaffordable simply because this temporary expense has push his or her normal expenditure over and above the welfare benefits benchmark.

This court’s approach, as Lord Carnwath observed, reflects the fact welfare benefits are set at a fairly austere level in order to meet a household’s subsistence needs and no-more and are not intended to be sufficiently generous to cover other costs, such as housing, for which housing benefit is provided.

In addition, in basing their decision on this general principle, rather than on the interpretation of the 2006 code, the court has provided some general guidance on the approach to affordability which will continue to be of use now that that 2006 code has been superseded by the 2018 code.In relation to the 2018 code, in a post-script, the court noted that there was some ambiguity as to how the analogous paragraph (17.46) dealing with universal credit should be interpreted. See [40]. However, in view of the court’s more generally guidance, it may be that this ambiguity is academic.

In view of the ambiguity, together with the evidence of the interveners (CPAG and Shelter) as to the significant degree of variation in the assessment of affordability across the country which has existed to date, the court finished by urging the government to consider the issues raised by the judgment ‘so that steps can be taken to address it and to give clearer guidance to authorities undertaking this very difficult task’. See [41]. But unless and until such guidance is produced the use of welfare benefits as a proxy for reasonable expenditure provides a consistent, workable, and objectively justifiable measure.

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