Tuesday, 02 September 2014

Council to use HRA funds to limit bedroom tax

A council has got permission from the housing minister to use money from rental income to set up a £420,000 fund to support tenants affected by welfare cuts.

Swindon is planning to use money from its housing revenue account to set up an ‘emergency fund’ for tenants hit by the ‘bedroom tax’ social housing under-occupation penalty.

Normally HRA funds can only be spent on housing, so the council has had to get housing minister Mark Prisk to approve the proposal.

Under the ‘bedroom tax’, which came into force on 1 April, social housing tenants of working age who are on housing benefit are having their payments cut if they have one or more spare bedrooms. Swindon estimates 1,100 of its tenants will be affected.

The council has not yet finalised how its emergency fund will be used, but expects to support families including someone with disabilities who cannot be expected to move, people living in rural areas who cannot downsize, and ‘other people in exceptional circumstances’. Councils have also been allocated a share of £30 million of discretionary housing payments to help people hit by the penalty.

Russell Holland, Swindon Council’s cabinet member for housing, has been working with the government since October to obtain a specific provision for the council’s plan.

He said: ‘As a Swindon councillor it is my priority to do my best for council tenants. I understand why benefits reform is necessary, but I believe it is important that the council has the ability to provide assistance for people in exceptional circumstances.

‘A grant scheme funded by and for council tenants is fair and will help to avoid hardship. I’m really pleased that the government has been willing to support this proposal.’

Mr Prisk said: ‘[Mr] Holland made a compelling case to use a small percentage of HRA funds to create this local emergency fund. I am pleased we have given this special provision so that Swindon Council can help those tenants in greatest need.’

Readers' comments (7)

  • I suspect this will open up the floodgates for other councils to do the same. I'm assuming this additional financial assistance will only be available to Swindon Council tenants and not to other tenants that live in Swindon?

    Surely this is an acknowledgment by the Housing Minister that the DHP pot in't big enough??!!

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  • Joe Halewood

    CPB = The DHP budgets are set at 6% of the projected savings and are allocated to local councils who then can add 2.5 times the amount to them if they wish.

    This example merely details how Swindon has done that.

    Some other issues around the £150m 2013/2014 DHP budget:

    1) £60m or 40% is for private tenants shortfall in Local Housing Allowance (LHA)

    2) £65m or 43% is for private and social tenant shortfalls from the overall benefit cap (56% are private tenants and 44% social), leaving

    3) £25m or 17% for social tenant shortfalls from the bedroom tax.

    So we see in figures that £25m is the discretionary amount of funding available to make up the £475m bedroom tax reductions and means DHPs will on average be paid to just 5% of bedroom tax affected tenant households.

    Each local council is allowed to add its own funding to this but limited to 2.5 times their allocation of the DHPs and there is a table in the S1 of 2013 which gives figures for each council. Yet this maximum DHP even if all spent on bedroom tax claimants still only means that 13% will get a discretionary payment and 87% will not.

    In total almost 68% or £101.4m of the £150m DHP budget goes to private tenants who are not affected by the bedroom tax policy.

    More detail here: -
    http://speye.wordpress.com/2013/04/14/so-much-shte-is-talked-about-the-bedroom-tax/

    Swindon receives £280,944 in DHP from central government so is allowed to add £720,360 of its own resources to this which is 2.5 times the amount central government put in. Here we see Swindon putting in £420k or 1.5 times the amount

    A different and unglossed version of the reality here

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  • Thanks Joe this is very interesting. My council is exploring additional sources of funding to DHP in the short-term, and I suspect most others are doing so as well. We all know that the money will not start to cover the problem.

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  • patatwirra

    " only means that 13% will get a discretionary payment and 87% will not.""

    My god Joe, i have go no chance of getting help from my council then, Govt are kidding the under occupiers that such a vast amount of money has been put in to the pot to help pay the bedroom tax when in reality its penny's.

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  • Usual Suspect

    Foprgive my ignorance on were the HRA comes from but does this not mean that the money is being recycled form those without spare bedrooms to those with ?

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  • The HRA comes from rents and service charges. In Swindon about 59% of tenants receive some form of housing benefit. The total income is about £46million. My approach to this is while I recognise benefits reform is necessary I was concerned about the impact of this given the limited housing stock for people to transfer to. If a tenant cannot pay then as a Council we can either start to look eviction or not collect the arrears. I don't want to do either of those things from either a social or business perspective. Having a HRA funded grant for Council tenants I think is a good compromise because it is a back up to the existing DHP. It represents less than 1% of total income and will have a minimal impact on our capital programme. I think this proposal gives local Councils some flexibility. Tenants who are not on benefits have the benefit of rent that is significantly cheaper than market rent.

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  • This is a dangerous precedent. It's making tenants pay for an HB cut. Although a small sum, what's to stop the Council adding to this amount later? It's a breech of the 'ringfence' and is wrong in principle. See below for the response of Swindon Tenants Campaign Group.

    http://keepourcouncilhomes.wordpress.com/2013/04/17/backup-fund-makes-council-tenants-pay-for-cuts-through-reduced-service/

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