Housing benefit is “a means tested benefit provided under section 130 of the Social Security Contributions and Benefits Act 1992 and subordinate regulations”. Its “purpose is to help claimants with their rental costs”. There is “a prescribed mechanism for determining in each case the appropriate maximum housing benefit”.
The two conjoined appeals in Birmingham City Council v SoS for Work and Pensions and Birmingham City Council v SA (2016) EWCA Civ 1211 about entitlement to housing benefit were concerned with the power of a housing authority such as the City Council to determine that the net eligible rent payable in respect of accommodation, and thus the amount of housing benefit payable in respect of that accommodation, be restricted. The City Council contended that the Upper Tribunal (Administrative Appeals Chamber) adopted an incorrect approach under Regulation 13(3) of the Housing Benefit Regulations 2006 (S.I. 2006/213) (“the 2006 regulations”), in the form substituted by paragraph 5 of Schedule 3 to the Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006 (S.I. 2006/217) (“the consequential provisions regulations 2006”), when considering, in the case of claimants in “exempt” accommodation, whether their rent was “unreasonably high by comparison with the rent payable in respect of suitable alternative accommodation elsewhere”. In particular, the City Council submitted that the Upper Tribunal erred in effectively applying, as criteria of comparability, the availability and amount of public funding which would have enabled the landlords in question to reduce the rents they charged.
When granting permission to appeal, Sales L.J. observed that the appeal raises this issue: whether, under Regulation 13(3)(b) it was “appropriate to take into account the degree of public subsidy received by the owner of the accommodation occupied and by the owner of any other accommodation said to be a suitable alternative; and in particular, how the [2006 Regulations] should be applied for the purposes of comparison in relation to accommodation owned by a charity, by a registered social landlord and by a private landlord”. A “registered social landlord” would include, for example, a housing association.
The Court of Appeal allowed the City Council’s appeals in both cases. There was, said Lindblom LJ, with whom Black and Beatson LJ agreed, a danger of overcomplication. He said (para 30):-
“The concept whose meaning is in dispute in this appeal – the concept, in regulation 13(3)(b), of the rent payable for the claimant’s dwelling being “unreasonably high by comparison with the rent payable in respect of suitable alternative accommodation elsewhere” – envisages, I think, a relatively straightforward procedure which is neither unduly burdensome nor unduly complex. On its face, it requires a simple comparison between rents.”
Lindblom LJ continued:-
“40. It seems to me therefore that the concept of a rent being “unreasonably” high in regulation 13(3) is that the rent is unreasonably high for the claimant to have to pay, rather than unreasonably high for a particular landlord to charge. An “unreasonably high” rent under regulation 13(3) will be a rent higher than the rent one could reasonably be expected to pay in what Evans L.J. in ex parte Gibson described as the “relevant active market in property of the relevant description, type or class” – the “ascertainable market rent”. I see no justification for reading into this concept artificial constraints on the relevant market in which that other accommodation exists, or on the market rent for such accommodation. If there is a “relevant active market” and an “ascertainable market rent” for suitable, alternative accommodation – supported by evidence of the range of rents being paid for accommodation of the appropriate type, occupied with the appropriate security of tenure, in the appropriate general location – the comparison between rents must be objective, realistic and complete.
- To manipulate the comparison of rents by excluding, for example, all but the levels of rent payable for suitable alternative accommodation which happens to be provided by a landlord in the private sector without the benefit of subsidy, or some other external source of funding, will render the exercise subjective, unrealistic and partial. It shifts the comparison from one between rental levels for accommodation of sufficiently similar type and tenure in the relevant area to one between rents only in one part of the market, and then, within that part of the market, to rents charged by landlords who happen to be funded in a particular way. This is to distort the market, and to produce a false and unreliable comparison. The same may be said of an approach that modifies the comparison of rents by making hypothetical adjustments for the individual circumstances of a particular landlord. Again, this is liable to produce a flawed comparison by reducing or eliminating real disparities between rents for relevant accommodation in the relevant market. Discovering the reasons why a particular landlord came to lose or to forego public funding, exploring the possibility of its being able to charge a lower rent if it were to operate in a different way, or speculating about its circumstances changing in the future, may not always be an impossible or even a difficult task. Such questions may not, in every case, require detailed scrutiny of a landlord’s accounts, or close investigation of the way it runs its business. Here, in the Upper Tribunal’s view, they did not. But they bring to the exercise of comparing rents under regulation 13(3)(b) a degree of artificiality which, in my view, is not merely unnecessary but also inappropriate.
- I think this understanding of regulation 13(3) sits well with the legislative intent. It recognizes the aim of protecting the public purse from excessive payments of housing benefit in cases where rents are, comparatively, “unreasonably high”. And it does not offend the purpose of protecting claimants from homelessness.
- In a case where a claimant was paying a rent that was, comparatively, “unreasonably high” – except where paragraph (4) applied and suitable alternative accommodation was not available to him – the authority would be able to reduce his eligible rent by an “appropriate” amount. Claimants within one of the special categories in paragraph (4), as SA and SS were, would be protected against any deduction in their eligible rent, in two ways: first, by the requirement that suitable “cheaper” alternative accommodation is, in fact, “available”; second, that it is reasonable to expect him to move from the accommodation he is in. In exercising the discretion in paragraph (3), the authority is not obliged to reduce the eligible rent by the full amount of the difference between the rent the claimant was paying for the accommodation he was in and the rent he would pay for suitable alternative accommodation elsewhere. The requirement is simply that, in judging what an “appropriate” reduction would be, it must have regard, in particular, to the cost of the suitable alternative accommodation. In Mehanne the House of Lords emphasized the breadth of the authority’s discretion (see paragraphs 8 to 13 in the speech of Lord Bingham, at p.544C to p.546C; and paragraphs 19 to 27 in the speech of Lord Hope of Craighead, at p.547B to p.549F). Relevant considerations could include any personal or financial circumstances of the claimant bearing on his “housing situation” (paragraph 13 in Lord Bingham’s speech).
- It follows, in my view, that the Upper Tribunal fell into error in the approach it took in the appeals of SA and SS. Its comparison of rental levels under regulation 13(3)(b) was not a true and full comparison between the rent payable by SA and SS for their accommodation in Roshni’s refuge and the rent payable for other accommodation of comparable type and tenure in the “relevant active market”. It effectively applied as criteria of comparability the availability and amount of public funding, or subsidy, which would enable the landlords in question to reduce the rents they charged. In undertaking the comparison, it adjusted upwards the real rent being charged by the only landlord whose accommodation it ultimately relied upon as comparable – “comparator 3” – to arrive at a range of hypothetical rents, on different assumptions of its own as to the percentage proportion of the landlord’s “accommodation costs” recouped from, respectively, subsidy and rent. This was not, in my view, an exercise consistent with the requirements of regulation 13(3).
- The Upper Tribunal was clearly anxious to reflect in its decision the fact that Roshni was a charity, providing – without the benefit of public funding – accommodation for women who had suffered domestic violence, and that, without subsidy, charities of this kind could not afford to operate refuges, leaving “victims of violence either homeless or at risk at the homes they wished to leave” (paragraph 33 of the interim decision and paragraph 3 of the final decision). It was aware of the very high demand for Roshni’s accommodation. It found that Roshni was meeting a need which “funded charities” were not able to meet or meet in full. And it was satisfied that Roshni had lost public funding as “the result of cutbacks and not of any failings on its part” (paragraph 35 of the interim decision and paragraph 13 of the final decision). All of these considerations it saw as relevant to the comparison of rents under regulation 13(3)(b). I do not think it was right to do so. Where concerns such as these go to the risk of vulnerable claimants finding themselves without accommodation suitable for them, the legislative scheme allows for them – in the discretion given to the authority under regulation 13(3), and in the provisions in regulation 13(4) and (9)(b). Where they go to the difficulties of private sector landlords – charities among them – providing accommodation in refuges without the advantage of public subsidy, the legislature has not identified them as relevant to the comparison of rents under regulation 13(3)(b). And in my view they do not bear on that exercise.”