The ever confusing tale of the bedroom tax

Sam Madge-Wyld tries to make sense of the bedroom tax.

 

January has been a very quiet month for the courts and housing law. Happily, and not just because it gives me something to write about, the Court of Appeal handed down its second decision on the bedroom tax (spare room subsidy if anyone from the Government is reading) in the case of R (Rutherford and A) v Secretary of State for Work and Pensions [2016] EWCA Civ 29. Before considering Rutherford it is first necessary, however, to delve back into history and consider two earlier cases

Burnip v Birmingham City Council and other appeals [2012] EWCA Civ 629

The cases of Burnip and Gory pre-date the bedroom tax, but are relevant because they concern reg,13D, Housing Benefit Regulations 2006 as it is what the bedroom tax was modelled on. Under reg.13D, a private sector tenant’s local housing allowance (i.e. the maximum amount of housing benefit they are entitled to) is calculated, in part, on the number of bedrooms to which the tenant is entitled.

Mr Burnip was the tenant of a two-bedroom property. He had spinal and muscular dystrophy and required an overnight carer. He claimed that he therefore needed the extra bedroom for his overnight carer. He applied for housing benefit, but, as he was only entitled to one bedroom under reg.13D, his housing benefit was not sufficient to cover his rent. He received some discretionary housing payments from the local housing authority, but these were not sufficient to cover his rent. He was therefore required to use additional money that he received in the form of a student loan, incapacity benefit and disability living allowance to pay his rent.

Likewise, Ms Trengrove was the tenant of a two-bedroom property. Owing to her disability, she required an overnight carer and she claimed that she needed the extra bedroom for her carer. Her housing benefit was also limited by reg.13D and her rent was not sufficient to pay all of her rent. The local authority made some discretionary housing payments which met the shortfall but the payments were not continuous.

Mr Gorry was the tenant of a four-bedroom house. He lived in it with his wife and their three children. His two daughters were disabled. One had Down’s Syndrome, the other had Spina Bifida. Owing to their disabilities, the daughters could not share a bedroom. Regulation 13D provided that he was only entitled to three bedrooms, on the basis that his two daughters were required to share a bedroom. The authority made some discretionary housing payments but these did not always meet the shortfall and were not continuous. The family were therefore required to use Mr Gorry’s incapacity benefit and disability living allowance to cover the shortfall.

All three argued that reg.13D discriminated, in contravention of Article 14, ECHR, against people who were disabled. The Court of Appeal found that the statutory criteria, namely reg.13D, was prima facie discriminatory. It would therefore be unlawful unless it could be justified. Henderson J, giving the second part of the judgment, posed the question in this way:

“Can it be said that the wider benefits context provides an objective and reasonable justification for the discrimination against Mr Burnip which we have found to be established in relation to the amount of his HB?”

His answer to that question was no. First, other benefits, which were provided for other reasons (e.g. to meet ordinary living expenses) were not intended to be used for paying a tenant’s rent. Secondly, discretionary housing payments were in principle available as a possible way of bridging this gap, but they could not be regarded as a complete or satisfactory answer to the problem. This was because, according to Henderson J

“The payments were purely discretionary in nature; their duration was unpredictable; they were payable from a capped fund; and their amount, if they were paid at all, could not be relied upon to cover even the difference between the one and two bedroom rates of LHA, and still less the full amount of the shortfall. To recognise these shortcomings is not in any way to belittle the valuable assistance that discretionary housing payments are able to provide, but is merely to make the point that, taken by themselves, they cannot come anywhere near providing an adequate justification for the discrimination in cases of the present type.”

Henderson J also held that it was also relevant that the exception sought was for only a very limited category of claimants, namely those whose disability is so severe that an extra bedroom is needed for a carer to sleep in or, where separate bedrooms are needed for children who, in the absence of disability, could reasonably be expected to share a single room. Such cases are by their very nature likely to be relatively few in number, easy to recognise, not open to abuse, and unlikely to undergo change or need regular monitoring. The cost and human resource implications of accommodating them should therefore be modest, quite apart from the point that in some cases the effect of refusing the claim could well be to force the claimant into full-time residential care at much greater expense to the public purse.

It followed that in all three cases the discrimination could not be justified. It was manifestly without reasonable foundation.

R (MA) v Secretary of State for Work and Pensions [2014] EWCA Civ 13

The effect of the bedroom tax (or reg.B13) was similar to the bedroom entitlement covered by reg.13D. Under reg.B13, tenants of social housing’s entitlement to housing benefit is reduced by 14% or 25% if they are deemed to have one or two “spare” bedrooms.

As with reg.13D, there are certain exceptions, but, as everyone reading this will know, there are a large number of disabled adult and other tenants who have been greatly affected by the cut in housing benefit. The claimants in R (MA) v Secretary of State for Work and Pensions [2014] EWCA Civ 13 serve as examples of the types of claimant who have been affected. Jacqueline Carmichael has spina bifida, hydrocephalus, is doubly incontinent, is unable to weight bear, and has recurring pressure sores. As a result she needed a special hospital-type bed in her bedroom with an electronic pressure mattress. She was unable to share this bed with her husband and there was insufficient room in her bedroom for an additional bed. Like, Mr Burnip she therefore needed an additional bedroom.

Likewise, JD lived with her disabled 26-year-old daughter, AD. AD has severe physical disabilities, learning disabilities and visual impairment. She has cerebral palsy with quadriplegia and she is registered blind. She has been assessed as having the approximate mental age of a three-year-old and is reliant on others to make decisions for her. She is doubly incontinent, and needs 24-hour care and support with every aspect of her life. To meet AD’s needs the property she and JD lived in was specially adapted. Her brother had previously lived with them, but had since moved out. This meant that the property was deemed to have a spare bedroom.

Richard Rourke was a wheelchair user. He has spinal arthritis, sciatica, sleep apnoea, diabetes and hereditary progressive deafness. For the most part, he lived in a three bedroom bungalow on his own, but, outside of term time, with his step-daughter Rebecca, who is herself a wheelchair user. Mr Rourke was deemed to have two spare bedrooms.

They, along with a number of other applicants, contended that reg.B13 was discriminatory for the precisely the same reasons that had caused the Court of Appeal to have found reg.13D to be discriminatory in Burnip. Like in Burnip, the Court of Appeal found that reg.B13 was, if considered in isolation and without regard to the separate provision of discretionary housing payments, prima facie discriminatory. Unlike in Burnip, however, the Court of Appeal found that the discrimination was justified, because the Secretary of State had also made available the provision of discretionary housing payments.

At this point you may be forgiven for wondering how the Court of Appeal could make, what appear to be, two decisions that conflict with each other. Isn’t the Court of Appeal bound by precedent? If you are thinking that you are likely to be even more confused when you learn that the Court of Appeal did not say that Burnip had been wrongly decided or that the law on justification had in anyway changed.

So, how did the Court of Appeal reach a different result? The cases of Burnip, Trengrove and Gory were all found to be different to the present set of cases. Henderson J had acknowledged that these two types of cases would be very limited and were likely to be “relatively few in number, easy to recognise, not open to abuse and unlikely to undergo change or need regular monitoring”. That was not the case in MA where the complainants did not fall within a tightly defined narrow class of claimant; the proposal in MA, to add an imprecise class of persons (those who need extra bedroom space by reason of disability) to whom the bedroom criteria would not apply, was simply not practicable to implement. Accordingly, for these types of case, in which no bright line existed, it was preferable for a flexible DHP fund to be used to meet the need of claimants. Moreover, since Burnip, the DHP fund had been topped up, was supplemented by guidance and kept under review. The problems identified by Henderson J did not apply.

Finally, the Secretary of State had been entitled to treat the needs of children who require an overnight carer (i.e. Mr Gorry) more favourably than the case of adults who require an overnight carer (i.e Ms Carmichael). This was because the Secretary of State was obliged to treat the rights of the child as a primary consideration as per Art.3.1, UN Convention on the rights of the child.

Rutherford and A

MA, as you would expect, was appealed to the Supreme Court. The Supreme Court, however, opted not to hear it until it decided the benefit cap case, i.e. R (SG) v Secretary of State for Work and Pensions [2015] UKSC 16. That decision took a long time to be handed down.

In the meantime, a couple of other cases, with different facts, challenged the lawfulness of the bedroom tax: Rutherford and A. Mrs Rutherford was the grandparent of W. They lived in a three bedroom house. W suffered from profound mental and physical disability caused by a very serious and rare genetic disorder (Potocki-Shaffer syndrome). He required round the clock care from at least two people. Mrs Rutherford and her husband provided the majority of that care with the assistance of an overnight carer who required a bedroom in which to sleep. Under reg.B13, they were deemed to have a spare bedroom and their entitlement to housing benefit was reduced by 14%. The shortfall had always, however, been met by the provision of DHPs.

A lived in a three bedroom house. In 1993-4 she had a brief, casual relationship with a man, X, who was subsequently convicted of attempted murder; he had, overtime, been exceptionally violent to her. Whilst in prison he started to harass her and in 2002 he sought her out. A child was conceived as a result of his rape of her and was born in 2003. The child lives with A. In 2012, as a result of X subsequently trying to find her, A’s property was adapted under the Sanctuary Scheme. This made the property more secure and made provision for it to be monitored. One such adaption was to adapt the third bedroom into a safe room. There are around 5,800 households whose properties that have been adapted under the scheme, of which around 280 have had their housing benefit reduced by 14% or more by the bedroom tax.

Both claimants argued that reg.B13 unlawfully discriminated against them. As in both Burnip and MA, the Court of Appeal held that reg.B13 was prima facie discriminatory. The question was therefore whether the discrimination was justified. To answer that question the court had to decide whether the cases were Burnip type cases (i.e. of a narrowly defined class) or an MA type cases (i.e. a broad class). The problem for the Secretary of State was that A was plainly a narrow defined class, i.e. persons who had been the subject of extreme violence and whose properties had been adapted under the Sanctuary Scheme and there were only 280 housing benefit applicants under this class. The reasoning of the Court of Appeal in MA that explained why the provision of DHPs justified the discrimination, and which distinguished Burnip, could not apply to the facts of A. Unless Burnip was overturned the Court of Appeal was bound to follow it. It is of note, however, that the Court of Appeal appeared uncomfortable with this finding and indicated that they had seen “great force” in the Secretary of State’s argument that DHPs were available for such applicants and, provided authorities followed the Secretary of State’s guidance, they would be provided to cover any shortfall in housing benefit.

The Court of Appeal also found that the discrimination in Rutherford could not be justified, albeit for different reasons. In Rutherford, the Court of Appeal could find no rational reason for why disabled adults, who required an overnight carer, were entitled to a spare bedroom and yet disabled children, who also required an overnight carer, were not. This was especially so where the Secretary of State was obliged to treat the rights of the child as a primary consideration (and indeed had argued this as a reason for treating Ms Carmichale differently to Mr Gorry’s children).

The Supreme Court

This is almost certainly not the last word on the matter. The Court of Appeal in Rutherford implicitly recognised within its reasoning that the law on this area is a mess. As so often happens when cases are distinguished on their facts, but the reasoning is left untouched, anomalies and absurdities result. It has to be said, however, that such anomalies are also likely result from badly written, ill thought out and politically motived policy. It would have been far easier for the Secretary of State to have instructed his department to define narrow classes of case that plainly justified the provision of full housing benefit, if it was the Secretary of State’s intention to require local authorities, through guidance, to provide an equivalent sum in DHPs. Unless of course, the true motive was to make it harder for such people to claim full housing benefit. No court, however, is every going to entertain the latter argument.

The first question for the Supreme Court will be whether the bedroom tax survives. It will be very surprising if it does not as it has recently decided that the even more discriminatory benefit cap policy, which did not even have benefit of DHPs and that breached Art.3.1, UN Convention on the Rights of the Child, was justifiable. The second question, will then be whether the Burnip and MA distinctions survive and, if so, what other classes, if any, fit within the Burnip class. As the Supreme Court was split on the benefit cap it is impossible to make a sound prediction, but it will probably turn on the evidence of the Secretary of State concerning the provision of DHPs and the robustness of its guidance.

Hopefully, we will not have as long to wait for their decision as we did for their decision on the benefit cap.

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Something wicked this way comes

Sam Madge-Wyld considers the housing law agenda for 2016

Housing and Planning Bill

Since our last post on the Right to Buy (detailing the requirement for local authorities to sell their highest value homes to fund the extended right to buy for housing associations) and the Housing and Planning Bill there have been three further important amendments to the Housing and Planning Bill. First, the Bill will provide that all new secure tenancies will be fixed-term tenancies of between two and five years. Authorities will therefore be prohibited from granting life-time periodic tenancies to new tenants. Secondly, the rules on succession will be changed to prevent anyone, other than a deceased tenant’s partner, from succeeding to a secure tenancy. Moreover, the deceased partner will only succeed to a five year fixed term secure tenancy.

The implication of these late amendments are stark: under the Localism Act 2011 the then Government was keen to give authorities a choice in what tenure it allocated and how to set its succession policies. Those days are gone and it will no longer be possible for local authorities to grant life-time tenancies, save for in a limited number of circumstances that the Secretary of State may specify in regulations. Moreover, the life-time tenancies that do remain will, on a tenant’s death, convert into five year fixed-term secure tenancies and may only be passed onto the deceased tenant’s partner meaning that it will not be long until, like the Rent Act tenant, the life-time secure tenant will be rare. The change will also mean that all other family members, who are presently qualified to succeed, would no longer be able to succeed to a secure tenancy even if they had lived with the former tenant for a period of 12 months before the deceased tenant’s death.

Thirdly, the Government, perhaps aware of the concern, which we expressed in our own post (X-REF), that the forced sale of council homes will mean the end of council owned housing in London, has also moved an amendment which will allow local authorities in Greater London to enter into agreements with the Secretary of State that will enable local authorities to retain some of the money generated by the sale of high value council housing. However, it is unclear how authorities will be able to afford to build two new homes from the sale of one, especially if it isn’t even entitled to keep all of the proceeds. Moreover, many authorities require the capital proceeds from sales to pay down the debt they received when the housing revenue account subsidy was abolished four years ago.

In any event, there are only going to be a limited number of sites within an authority’s borough that it owns and that are capable of being developed. Once those sites are exhausted, the cost of converting brown field sites into homes or of acquiring empty land so as to enable the building of two homes may dwarf the proceeds of any sale.

The Bill is still to go to the House of Lords, and so may be amended further, but it is likely to be passed at some point later this year.

Immigration Bill

The Immigration Bill, as presently drafted, intends to amend the Immigration Act 2014 to provide that a landlord will be guilty of a criminal offence, as opposed to simply being liable to pay a civil penalty, if his premises are occupied under a residential tenancy agreement by a person without a right to rent and the landlord knows or ought to know that they person occupying the premises is disqualified from doing so. A landlord that commits this offence is liable to a sentence of up to five years of imprisonment, an unlimited fine or both. Incredibly, as presently drafted, there is no reasonable excuse defence, which means that a landlord becomes liable to prosecution as soon as he is deemed to be aware of the fact that someone is occupying his premises without a right to rent.

To mitigate the effects of this, the Government also proposes to make it far easier for landlords to remove tenants without a right to rent. Unlike under the Immigration Act 2014, the landlord may determine any tenancy by giving the tenant a notice to quit the premises within 28 days wherever the Secretary of State has notified him that the occupier does not have a right to rent. On its expiry the landlord can either recover possession without a court order (as such tenancies are excluded from the Protection From Eviction Act 1977), issue a warrant of possession in the High Court or issue a claim for possession in the county court under a new mandatory ground for possession. It remains to be seen whether landlords will, with the threat of a possible prosecution, resort to evicting tenants themselves or if they continue to instruct bailiffs to do so.

Curiously, there is no right of appeal against the service of a notice by the Secretary of State on the landlord, which must mean that it is potentially challengeable in the High Court by way of judicial review. Presumably, if the Secretary of State’s notice is quashed, for example because the tenant does have a right to rent, then the subsequent notice served by the landlord will also be invalid and potentially open the landlord to damages for trespass or breach of the covenant for quiet enjoyment.

The Bill has already passed its committee stage in the Lords and so is likely to be passed into law in the first few months of the year. It should also not be forgotten that the Immigration Act 2014, in its current guise, will itself come into force across England on 1 February 2016.

Cases in the Supreme Court

In addition to the main legislative changes, we can also expect judgment in McDonald v McDonald at some point after it is heard in March. The Supreme Court will tell us whether, and if so in what circumstances, an occupier of land owned by a private individual can raise an Article 8 defence to a claim for possession. In the same month, the Supreme Court will also hear MA & Others v Secretary of State for Work and Pensions, and determine whether the bedroom tax is, like the benefit cap, lawful.

Then in May, the Supreme Court will consider, in Edwards v Kumarsamy, whether a landlord can be found liable under a residential tenancy agreement for the existence of disrepair that exists in a part of the building that is not located within the tenant’s dwelling, and which is not within his control, in circumstances where he has no knowledge of the disrepair.

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Money, money, money

Sam Madge-Wyld considers the Autumn Statement and its implications for housing.

On 25 November 2015, the Chancellor published, and presented to Parliament, the Autumn Statement and 2015 spending review. The headline grabbing announcement was the Chancellor’s promise not to cut tax credits (or at least until universal credit abolishes them). As part of the way to pay for this, the Chancellor promised two important amendments to the Housing Benefit regulations, i.e. stopping housing benefit for claimants who have been away from the UK for more than four weeks and imposing the local housing allowance limits to tenants of local authorities and housing associations. It is unclear at the moment, however, what impact either of these changes will have, as the Autumn Statement is silent as to the amount that will be saved and does not cite any evidence for the number of tenants who will be affected.

Presently, tenants who leave the UK are only entitled to the payment of housing benefit for a period of 13 weeks. This change is therefore only going to affect the limited number of tenants in receipt of housing benefit who spend between 4 and 13 weeks out of the country. No evidence has been provided detailing how many of these tenants exist each year. One imagines that it is not very many.

Nor is it clear what the sums the Treasury expects to save by imposing the local housing allowance limits to tenants in the social rented sector. The local housing allowance is the deemed eligible rent (i.e. the maximum amount of housing benefit that a tenant can receive) for tenants of private landlords. The local housing allowance is determined by the rent officer of the authority responsible for administering housing benefit within its area. This determination is made by taking into account the range of rents which a landlord would be likely to obtain for letting an assured-shorthold tenancy, for a property with a particular number of bedrooms, which is in a good state of repair. There are various categories:

  • one bedroom shared accommodation;
  • one bedroom self-contained accommodation;
  • two, three or four bedroom self-contained accommodation (Schedule 3B, para.1 of the Rent Officers (Housing Benefit Functions) Order 1997).

The local housing allowance is then set at the amount of the 30th percentile, i.e. out of 100 potential rents the 30th highest or the local housing allowance as determined on 30 January 2015, whatever is lower (Schedule 3B, para.2(3), 1997 Order). On 30 January 2015, the 1997 Order, as then in force, provided that the local housing allowance could not exceed:

  • £260.64 per week for one bedroom accommodation (shared or self-contained);
  • £302.33 per week for two bedroom accommodation;
  • £354.46 per week for three bedroom accommodation;
  • £417.02 per week for four bedroom accommodation (Sch.3B, para.2(12) of the Rent Officers (Housing Benefit Functions) Order 1997 before its amendment on 2 November 2015).

In practice, in areas where there are generally higher rents, such as London, the local housing allowance is set at these capped limits.

According to the Chancellor, the imposition of the local housing allowance cap to the social rented sector will “ensure that Housing Benefit costs are better controlled and will help prevent social landlords from charging inflated rent for their properties.” This suggests that local authorities and housing associations have until now had free reign to set rents at whatever artificially high rates they deem fit and that it is the housing benefit paid to tenants in social housing that has caused the housing benefit bill to reach £21.4 billion in 2010/11.

Nothing could be further from the truth; anyone familiar with the sector will know rents set by local authorities and housing associations are often set far below those limits other than in two specific cases: affordable rent tenancies and tenancies let to homeless applicants under Part 7, Housing Act 1996 (although it is unclear whether the local housing allowance will apply to these tenancies as the rules governing housing benefit for these tenants is different to other local authority tenants and as yet there is insufficient detail in the autumn statement).

Moreover, both sectors are already required to have regard to detailed guidance issued by the Secretary of State or the Homes and Communities Agency in its Rent Standard as to the setting of rents. It is disingenuous in the extreme to suggest that it is the fault of local housing authorities and housing associations for the increased housing benefit bill; it is the spiralling cost of rent in the private rented sector that has resulted in the housing benefit bill increasing by 46% over a ten year period.

The Autumn Statement also fails to mention that it was only in the last Parliament, and a policy implemented by the same Government, that social landlords were encouraged to charge “affordable rents”, i.e 80% of the market rent, in respect of new properties. The rationale being that if the taxpayer was going to spend such a large sum of money on housing benefit it made sense if it could be directed to the sector that was actually going to build new homes to rent, i.e. the social housing sector. In practice, it is likely that it is going to be these very same properties, let at affordable rents that will be caught by the new caps. This is because, as mentioned previously, in the vast majority of cases, save for accommodation let by local authorities to homeless applicants, the application of the local housing allowance will not affect the rent charged by housing associations or local authorities.

Outside of London, the local housing allowance can be less than the caps imposed by the 1997 Order and it has been reported that in some areas the standard of accommodation in the private sector is so poor that rents in the social rented sector are actually higher than the local housing allowance. This is still, however, likely to be the exception rather than the norm, but where it does apply, as has been seen with the benefit cap and the bedroom tax, in the majority of cases tenants will struggle to pay the amount of their rent that is not covered by housing benefit.

Nor should it be forgotten that the Chancellor had already announced in the July budget that rents in the social rented sector will be cut by 1% every year in this Parliament. Nick Billingham, the current chair of the Social Housing Landlords Association, in his recent article for Journal Housing of Law, has already indicated that this cut will be likely to result in smaller associations being forced to merge or be consumed by other associations and result in less homes, certainly for rent, being built by all associations (J.H.L. 2015, 18(6)). Even some of the larger associations are likely to have find substantial savings. In such a climate, it therefore seems unlikely that housing associations will voluntarily reduce their rents and will instead look for more tenants who are able to pay the rent without housing benefit meaning that some families are priced out of social housing and forced to move into less secure private sector accommodation.

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Housing and Planning Bill

Sam Madge-Wyld considers the Housing and Planning Bill as at second reading stage.

The Housing and Planning Bill, according to Brandon Lewis MP – the current housing minister – ”marks the start of a national crusade to transform generation rent into generation buy”. Whether the Bill will achieve its principal objective is open to debate, especially as the Bill defines a starter home as being one that costs up to £450,000 in London and up to £250,000 in the rest of the country, being around 10 times the size of the UK average salary. The underlying question therefore is whether this Bill will make a difference to those who can’t afford to buy a starter home or who are not tenants of housing associations and are therefore not eligible for the extended right to buy and who therefore have no choice but to continue renting in the private sector.

Unsurprisingly, the Bill is not particularly radical in this regard; there is no rent control or extended security of tenure, the two changes which would make renting in the private sector far more attractive and affordable to most. That is not, however, to say that the Bill, when considered alongside the new measures contained within the Deregulation Act 2015, such as retaliatory eviction, does nothing. If the new proposals are enacted and then, as importantly, enforced, there is a chance that they will at least drive some of the criminal and downright incompetent landlords away from the sector. That can only be a good thing for all concerned, be they landlords or tenants.

Banning orders

Perhaps the most eye catching proposal is set out within Chapter 2 of Part 2 of the Bill. Chapter 2 gives the First-tier Tribunal, on an application made by a local housing authority, the power to make an order banning a person from letting housing in England and / or engaging in letting agency or property management work in England for a period of not less than six months where that person has been convicted of a banning order offence.

The Bill, so far, is silent on the all important details, i.e. what constitutes a banning order offence. That will be specified by regulations made by the Secretary of State. Some idea of what they might include can be found in the discussion paper that preceded the Bill, where it was proposed that a banning order offence would be likely to include convictions for fraud, violence, drugs or sexual assault which were committed at any residential premises which the offender (or a person associated with him) owned or was involved in managing and otherwise where the offender had been convicted of two or more relevant housing offences. A relevant housing offence is also not defined, but is almost certain to involve the letting of premises to persons without a right to rent under Part 3, Immigration Act 2014 (as every piece of legislation passed by this Government seemingly needs to include a new measure to combat the problem of unlawful migration). Presumably, a relevant housing offence will also include landlords who have been convicted of unlawfully evict their tenants, but it will be interesting to see if it also extends to housing offences under the Housing Act 2004, e.g. letting accommodation without a licence or failing to comply with an improvement notice, or even if it extends to landlords who have been found to have breached housing legislation that does not attract a criminal sanction.

Of course, banning orders will be completely ineffective unless they are enforced. Responsibility for enforcement will rest with local housing authorities. Importantly, however, the Bill provides that a person who breaches such an order will not be to a prosecution, but rather to pay a financial penalty of up to £5,000. The imposition of a penalty, which the authority may be able to keep, as opposed to a conviction is aimed at encouraging authorities to use their enforcement powers. This is certainly o be welcomed, because at a time where authorities’ budgets continue to be slashed, the will to bring prosecutions for no financial reward, which was already close to non-existent in the case of certain authorities, is only likely to wane further.

The ineffectiveness of prosecutions is also recognised by clause 86 of the Bill, which provides that authorities will also be entitled to impose to financial penalties, as opposed to bringing prosecutions, against landlords who commit offences under the Housing Act 2004. Presumably, this could also apply to offences under Protection From Eviction Act 1977 and it might be something that tenant’s representative groups, such as the Housing Law Practitioner’s Association, may wish to make representations on.

While the Bill provides that the Secretary of State will decide how much of the penalty authorities will be able to keep, the discussion paper, mentioned above, envisaged authorities being able to keep the penalty. It will be interesting to see if this intention is reflected in the subsequent regulations as if it isn’t the good intentions behind move to levying penalties will be worthless.

Register of rogue landlords

Authorities will also be required to enter persons made subject to a banning order onto the Secretary of State’s database of rogue landlords and letting agents. They will also have the power to enter the names of landlords who are convicted of banning order offences, but not made subject to a banning order. The idea behind this is to ensure that a landlord or letting agent, who is made subject to a banning order, cannot simply up sticks and move their business to another part of the country where they will be unknown and able to operate under the radar. Whether this will be effective remains to be seen as such landlords will undoubtedly set-up completely new companies in attempts to avoid detection.

One of the Bill’s proposals to combat this problem is to, controversially, require tenancy deposit schemes to provide local housing authorities with any information that they request, presumably so that authorities can maintain a record of every landlord that is active in their area. This will not only interest authorities seeking banned landlords flaunting their banning order, but also those operating selective or additional licensing schemes. Whether banned landlords will be conscientious enough to have protected their tenant’s deposits is perhaps another matter.

Rent repayment orders

Presently either tenants or local housing authorities can apply to the First-tier Tribunal for a rent repayment order, i.e. an order that the landlord pay back rent he has received in housing benefit, where a landlord has let accommodation in circumstances where he required a licence to do so, e.g. where the accommodation is within a licensable HMO. Chapter 4 of the Bill proposes to extend the availability of rent-repayment orders to circumstances where the landlord has breached a banning order or committed an offence by failing to comply with an improvement notice, unlawfully evicted a tenant or used violence to enter property occupied by the tenant. As with existing rent-repayment orders the Bill does not require that the landlord has in fact been convicted of the specified offence, although the amounts that are recoverable are likely to be higher where a conviction has been obtained.

These proposals will certainly be welcomed by authorities and tenants and should, if authorities use the powers, act as a further deterrent against those landlords who refuse to take action to remedy hazards present in let accommodation and those who choose to illegally evict their tenants. It may also result in authorities bringing more prosecutions against landlords where they stand to gain a financial reward for doing so.

Retaliatory eviction

The Deregulation Act 2015 has already made provision in England for the banning of the “retaliatory eviction”, albeit it is not as straightforward as originally intended and, so far, it only applies to tenancies in England granted after 1 October 2015. In respect of those tenancies, a s.21 notice that is served on a tenant becomes invalid if it is served after a tenant has complained in writing about the condition of the property and the local housing authority, in response to a complaint to it by the tenant about substantially the same issues arising from the condition of the property, serves the landlord with an improvement notice under Housing Act 2004: s.33(2),(3), 2015 Act. This even applies where the tenant doesn’t even complain to the landlord, because he was unable to make contact with the landlord, and so complains to the authority first: s.33(5), 2015 Act.

Likewise, the 2015 Act also prohibits landlords from serving s.21 notices for a period of six months from when the local housing authority served the landlord with an improvement notice, irrespective of whether a tenant has complained: s.33(1).

Conclusion

These proposals are undoubtedly welcome, because, frankly, any additional regulation of what has been until very recently an area free from almost any regulation is bound to be of benefit to some tenants. The real test will be whether the proposals are enforced by authorities and undoubtedly this vary across England. However, in practice, it is does no more than to scratch round the edges of the real elephant in the room: the lack of good quality affordable housing for those who cannot afford to buy their own home. The 2015 Act and the Bill, which if enacted will also introduce the extended right to buy which was discussed in last month’s post, will not solve, but exacerbate, that problem.

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Wrong to Buy?

Sam Madge-Wyld considers the recent RTB “offer” from the NHF.

Those who have even a passing interest in housing law will be familiar with the current Government’s proposal to give tenants of housing associations the right to buy their homes (or more accurately the right to the same discounts presently available to secure tenants). The proposal, as originally drafted, was to introduce new legislation that would compel associations to sell a tenant his home at a discount. In return, the Government would provide the association with a sum equivalent to the amount of the discount. This was to be funded by the introduction of additional legislation that would compel local housing authorities to sell their most valuable homes as and when they became vacant.

These proposals have been controversial and resulted in opposition from associations, local housing authorities and even, allegedly, the Treasury. At first associations were concerned that the introduction of the extended right to buy would remove their independence and charitable status. It had also been said that the proposed change in the law would lead to associations being defined as public bodies, which was the cause of the alleged concern within the Treasury as if that were to happen it would potentially add billions of pounds to the national debt. Obviously, local housing authorities were also concerned about the loss of their own stock. Even some commentators on the right questioned why sections of society who were already adequately housed should get a subsidy from the state to purchase a home they already lived in.

Notwithstanding these concerns, both the Government and the National Housing Federation (NHF), the body that represents housing associations, have been working towards agreeing a deal which would see associations retain their independence, but would also result in tenants acquiring the right to buy their homes.

The proposal suggests that it is an offer from the National Housing Federation to the Government. It is, however, plainly the result of proposals from both sides. Indeed, the deal was put to associations, at the NHF’s conference, by both David Orr, the Chief Executive of NHF and Greg Clark MP, Secretary of State for Communities and Local Government, with Greg Clark threatening associations that while he wanted to work with them to “find a way for every tenant to buy a stake in their home … there are some who say that to achieve the transformation we need requires a fresh start – that the housing association sector has taken us so far but might not be the right partner for the future.”

It is therefore not altogether surprising that 86% of all member associations, representing 93% of the sector’s rented homes, responded by indicating that they agreed to the deal. When one considers the deal in detail and the way that it will be funded it would also appear to be a no-brainer for the sector as a whole. The deal, if it is to be funded by the ongoing sale of council homes, will lead to housing associations becoming larger and stronger at the expense of local housing authorities. Effectively, the deal will result in local housing authorities funding the building of social housing owned by housing associations at the expense of existing council owned stock.

The offer

The detailed offer promises that all associations will extend “to all 2.3 million housing association tenants the right to purchase a home, at the level of discount to which they would be entitled if they had the Right to Buy … “ and that there would be a presumption that that housing associations would sell the tenant the property in which they live other than prescribed circumstances, i.e.

  • Supported housing within the meaning of Part 5, Housing Act 1985.
  • Properties in rural locations as defined by Section 17 of the Housing Act 1996.
  • Properties provided through charitable or public-benefit resources or bequeathed   for   charitable or public-benefit   purposes, and in the possession of the housing association before it became registered under the Housing Act 1974
  • Certain   specialist   properties   of   historic   interest   that   have   special significance to the community, such as almshouses.
  • Where there are clear restrictive covenants in existing resident contracts around the protection of rural homes.
  • Properties held in a Community Land Trust
  • Other categories that apply to the existing Right to Buy:
    • Properties   where   the   landlord   is   a   co-operative   housing association
    • Properties where the landlord does not have sufficient legal interest to be able to grant a lease exceeding 21 years for a house or 50 years for a flat
    • Tied accommodation occupied because the tenant is employed by a social landlord

Even then, associations would still be required, as part of the agreement, to offer alternative accommodation to tenants to purchase at the discount they would otherwise have been entitled to if purchasing their own home. Tenants would have rights of appeal to the Regulator of Social Housing in circumstances where they were denied the right to buy their own home and were unhappy with the alternative being offered or if they believed that the sales process was taking too long to complete. In either case, the Regulator would have the power to compel the association to provide an alternative property and to compel the association to complete the sale within a specified period. To ensure the speedy sale of homes, associations would no longer require the consent of the Regulator in circumstances where the right to buy applied.

Associations have also agreed that all properties that are sold will generally be replaced within two, but at the very latest within three years. To that end, the Government will provide associations with 70% of the discount on completion of the sale and the remaining 30% once there is evidence of a start on site or the acquisition of land to build on.

There would also be a presumption that each association would, so far as they are able to, replace each property on a one for one basis through building a new home, Associations would, however, have a wide discretion as to the types of homes they build, e.g. an assured tenancy could be replaced with a property to be let at an affordable rent, sold under shared ownership or even to be sold on the open market. Those associations that are not set-up to develop new homes would be able to enter into agreements with larger associations that could.

The Government has, for its part, promised, in addition to amending the circumstances in which a Regulator’s consent would be required before the disposal of any of an association’s assets, to allow associations to let and sell more properties at the market rate and to amend legislation so as to remove local housing authorities’ control over the allocation of an associations stock.

What will this mean?

One doesn’t need to be an expert in housing to see where this is going. If the Housing Bill is passed, the days of local housing authorities building new council homes will be over. No sane authority will choose to build homes, at its own expense, when they can be sold effectively for nothing. Likewise, local housing authorities who inherited a debt when the subsidy for the housing revenue account was abolished will also be concerned about how they will be able to finance that debt in the absence of capital receipts from sale of their own stock.

Secondly, in the long term, local housing authorities will cease to own any, or a very small proportion, of their own stock. While the current proposal is only for the sale of an authority’s most valuable homes, once those are sold those that remain will also need to be sold to fund the discounts available to future association tenants. It has been predicted that the cost to local housing authorities will be £6 billion of the next four years if all assured tenants who are able to purchase their own homes choose to do so.

Finally, there will be less available social housing in the classic sense, i.e. housing available at below the market rent with security of tenure, as associations are given greater flexibility in how they use or dispose of their existing and future stock.

The driver behind this proposal is to allow more people to own their own homes and for more homes to be built. A consequence of this approach, however, will inevitably mean less affordable housing for those who are unable to purchase their own homes. This will not solve the so called “housing crisis”.

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A Mixed Bag

Sam Madge-Wyld and Justin Bates consider the recent announcements on housing law reform, immigration and “rogue landlords”.

On 3 August 2015, the Department for Communities and Local Government released a technical discussion paper named “Tackling rogue landlords and improving the private rental sector”. This paper covered three areas for discussion: the extension of rent repayment orders and civil penalties, the banning and blacklisting of “rogue landlords” and new rules allowing landlords to recover properties that have been abandoned.

The paper, as is invariably the case, was accompanied by a press release. This press release also contained additional proposals designed at making it harder for anyone who is present in England unlawfully to rent residential accommodation by allowing private landlords to summarily evict tenants, without a court order, who have been served with a notice by the Home Office notifying them that they have no right to remain in the UK. Those who only read the press release would have probably presumed that further detail on these new immigration reforms would also be contained in the discussion paper. Indeed, anyone who read the press release would be forgiven for thinking that the discussion paper was principally concerned with immigration.

Yet the discussion paper did not contain any detail, or indeed a mention, of the immigration reforms. Some may think that odd or maybe that the Government had chosen to use the DCLG’s pre-planned launch of its discussion paper it had been writing since its new minister took office, as a means to show that the Government had, contrary to what anyone else might have thought, been working hard and since May on as yet unannounced new tough immigration reforms to show that, again contrary to what people might think, it had a “grip” on the immigration “crisis” best evidenced by what had been playing out in Calais and had been beamed into the electorates homes for the previous two weeks.

Thus, while this blog post, will consider all four proposals, our analysis into the new immigration proposals is somewhat more constrained by way of the fact that even the Government doesn’t yet know how it will implement the proposals.

Ending the tenancies of people present in the UK unlawfully

The press release reports that:

“Measures in the forthcoming Immigration Bill will go further, and will enable landlords to evict illegal immigrant tenants more easily, by giving them the means to end a tenancy when a person’s leave to remain in the UK ends – in some circumstances without a court order.

This will be triggered by a notice issued by the Home Office confirming that the tenant no longer has the right to rent in the UK. The landlord would then be expected to take action to ensure that the illegal immigrant tenant or occupant leaves the property.”

Even with such little detail, it is easy to foresee some obvious difficulties. First, most reputable landlords don’t want to evict people without a court order. This is not a controversial statement, nor one made by lawyers keen to protect their own work. Richard Lambert of the National Landlord’s Association told the Today programme on 3 August 2015 that it is for a court to decide whether an occupier of residential accommodation should be evicted or not.

Secondly, it is very difficult to see how a scheme which requires the arbitrary removal of residential occupiers from their homes without giving a court the opportunity to consider the proportionality of their eviction, would be compatible with Article 8 and/or Article 1 of Protocol No.1 of the ECHR.

Thirdly, while it is clear that the proposal is designed to deter people coming to the UK, it is unclear how forcing overstayers to leave their residential accommodation will actually result in them leaving the country. The press-release suggests that the process would start with notification from the Home Office. That assumes, therefore, that the Home Office is aware of where the overstaying tenant is living. Accordingly, it will know where to find him when they want to remove him back to his country of origin. By forcing him to leave his accommodation, the Government will no longer have any idea where the overstayer has gone and will therefore be unable to remove them. This was a point that that the Communities Secretary Greg Clark found difficult to answer on the same Today programme.

Fourthly, what happens when the UKBA get the notice wrong? While it would be nice to devise a system on the basis that it will always work and be operated properly, everyone knows that this cannot be the case. That is why almost all administrative decisions have some sort of right of appeal even if not to a court. Will there be a right of appeal against a notice? If so, to whom? A more senior immigration officer? A tribunal? The Government will be wise to recall the recent quashing by the High Court and Court of Appeal of the fast-track asylum appeals process on the grounds that the process was unfair, in part because of its speed (Detention Action v First-tier Tribunal (Immigration and Asylum Chamber) [2015] EWHC 1689 (Admin)). If there is going to be a proper and fair appeal’s process, by the time it has been concluded a landlord could, in all likelihood, have simply served a s.21 notice and used the accelerated procedure under Part 55.

Finally, the Government often conveniently neglects to mention that there are a number of foreign people in the UK who work, many for large multi-national companies. Lots of these people have no intention of settling in the UK and rent their homes. Sometimes, through an oversight or error, their leave to remain comes to an end while they are still working for their employer. Are these people really going to be made homeless as a result? Is this really necessary? Does anyone really imagine that this will be applied even-handedly to, e.g. seconded employees of big banks and failed asylum seekers (both of whom have, in our hypothetical scenario, no right to remain in the UK).

Banning of rogue landlords / extension of civil penalties and rent repayment orders

The main thrust of the paper is to increase the fines levied by the courts for repeat offenders of housing related offences (i.e. any contravention of Housing Act 2004, illegally evicting a tenant, letting to an illegal immigrant, permitting overcrowding or misleading local authorities) and to ban landlords, in particularly serious cases, from being allowed to manage or let property in England. Any banned landlord who continued to rent property could face imprisonment and a rent repayment order.

It has always been the view of this blog that the private rented sector is in need of greater regulation and so these are welcomed proposals. To that end, we also welcome the proposals to strengthen the fit and proper person test for landlords that are required to hold a licence (i.e. of HMOs or where an area is subjected to selective licensing under Housing Act 2004). In particular, the requirement that landlords are required to disclose their criminal convictions is very much welcomed. Ultimately, however, the enforcement of “rogue” landlords falls on local authorities and, at times of tightened budgets, fewer and fewer prosecutions are brought.

Abandonment

Presently, save for a limited number exceptions, a landlord who wishes to recover possession of residential premises must obtain a court order. This involves serving a notice, issuing proceedings and then applying for a bailiff to evict the tenant. If everything runs to plan, and the tenant does not defend the claim, this will often take around four months. A landlord can short circuit this process, however, if he is satisfied that a tenant has surrendered their tenancy, i.e. committed an unequivocal act which is inconsistent with the tenancy continuing (often clearing the property of all his belongings and returning the keys or notifying him that he has left and will not be coming back). Merely leaving a property is, however, without something more, not enough.

Perhaps as a sweetener to the proposals for increased regulation and harsher penalties, the DCLG is now proposing to legislate to allow landlords to recover possession of properties when tenants appear to have left, but have not committed an unequivocal act so that there has been a surrender. This is something that landlords understandably bemoan, as it can seem a huge waste of time and resources recovering possession of an empty property. However, there is a good reason for the law as it currently stands.

The proposal from DCLG is that once a landlord believes that a property has become empty he can serve the tenant with a notice. If the tenant does not respond within four weeks to say that the property has not been abandoned then the landlord can recover the property. This is a ludicrously short period of time. There are a whole number of reasons why tenants suddenly disappear and most of them are entirely legitimate and understandable. Moreover, they are often for far longer than four weeks. While some tenants may well have taken a long holiday, it is more likely that they will have left home because of illness, death of a relative abroad, job away from home, caring for a relative etc etc. At such a stressful time, returning home to find all of your possessions have been disposed of and you have nowhere to live is not going to make things any better.

There is no evidence to support the need for this proposal. Indeed, the discussion paper mainly refers to circumstances where a landlord has taken back possession and then been hit with a claim for unlawful eviction. The answer to that is to issue a claim for possession. This cure is completely disproportionate to the problem this proposal is designed to meet. Most responsible landlords (who let us not forget this paper says it is aimed at supporting) make provision for fallow periods and accept it as part of being a landlord. Does a few months of not receiving any rent outweigh the prejudice suffered by an absentee tenant losing his home and possessions? The only protection for the tenant is that if they return within six months they may be entitled to damages if they can prove that the landlord’s acted unfairly. That is going to be hard to prove and hardly any real recompense.

We would both strongly urge the Government to reconsider this proposal.

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On the agenda: Part 2

In the last post, Sam and Justin considered the new Government’s proposals concerning the right to buy, the benefit cap and the roll out of the Immigration Act 2014 in England and Wales. This post considers the effect of the budget and the announcements it made in respect of housing law in England and Wales.

Housing benefit and the benefit cap

As we noted previously, the Government had already announced that it would reduce the benefit cap to £23,000. In the budget, however, the Chancellor announced that the benefit cap would be even lower for people outside of Greater London. While it would be lowered to £23,000 for persons living in Greater London, it would be set at £20,000 for everyone else. The Government proposes to legislate for this change by clause 7 of the Welfare Reform and Work Bill 2015. In the last Parliament, the cap was largely seen as a problem for families living in London (although in practice it actually affected just as many families living outside London as in). The reduction of the cap by £6,000 for those out of London will, however, now ensure that a far greater number of families will be impacted by the cap than had previously been the case.

The same Bill also proposes to amend the Welfare Reform Act 2012 so as to require the Secretary of State to review the operation of the benefit cap and to consider whether the cap should be increased or decreased having regard to the general economic situation and any other factor that the Secretary of State considers relevant: clause 8, 2015 Bill. While this is an eminently sensible amendment, the cynics in us see this a useful defence to any potential future legal challenge than as a real intention to increase the cap should the impact on families prove to be worse than anticipated.

The Chancellor also announced that from April 2016 those aged between 18 to 21 will no longer be automatically entitled to the housing element of universal credit. It is unclear if this will also apply to housing benefit, but one would have thought that it would and it may be that the Chancellor simply presumed that universal credit will have finally been rolled out nationally by April 2016. It is not proposed that the exemption will apply to those aged between 18 to 21 who are vulnerable, have children living with them or who are “living independently and working continuously for the preceding 6 months.” While the last exception is plainly designed to ensure that young people are not deterred from leaving the family home to get a job, the fact that housing benefit only applies after a young person has been working for six months is likely to make some people from thinking twice about moving away to obtain employment.

Finally, the Chancellor also intends to make further savings by limiting the backdating in housing benefit claims to a maximum of four weeks as opposed to the current six months. On the one hand this change merely reflects what will happen with the housing costs element of universal credit once it is finally rolled out nationally. However, this is a big change that effectively shifts a further cost from the Treasury onto housing associations and local authorities. This will therefore be a yet further factor, in addition to the bedroom tax and benefit cap, to drive up the level of rent arrears.

Social rents

Another piece of good news for tenants of housing associations, in addition to the extended right to buy, comes in the form of clause 19(1) of the 2015 Bill. Save for a limited number of exceptions, all registered providers of social housing must secure that the amount of rent payable by a tenant of their social housing in England is 1% less than the amount that was payable by the tenant in the preceding 12 months. The amount that was payable in the preceding 12 months is whatever the rent was on 8 July 2015. This will also apply to tenants of local authorities.

For some secure tenants, however, the reverse will be true. From April 2017, it is proposed that tenants of local housing authorities earning more than £30,000, or £40,000 in London, referred to as “high income social tenants”, will be forced to “pay to stay”, i.e. pay the market rent for their secure tenancy. The Treasury estimates that this accounts for around 9% of all secure or introductory tenants. This latest proposal is not altogether surprising; the previous Government openly considered bringing in such a change in the last Parliament and conducted a consultation on the subject. Unsurprisingly, the responses to that consultation from local housing authorities were almost universally positive. At that time, however, it was proposed that a high income social tenant would be someone who earned more than £60,000 per annum.

Those local housing authorities, who had presumably assumed that the additional rent would simply be credited to the housing revenue account, will, however, be disappointed to learn that the additional rent will be recovered by the Treasury and will not be made available to local housing authorities.

The end of lifetime tenancies?

That is not the end of the bad news for local housing authorities. The Localism Act 2011 gave local housing authorities the choice of whether or not to use fixed-term (often referred to as flexible) tenancies as opposed to the default “life-time” secure tenancy. The Government statistics for 2013/14 do not record the number of fixed-term tenancies that were granted by local housing authorities (although such data is now apparently being collected). It appears to be the case, however, that the majority of authorities have generally opted to continue granting secure tenancies to their new tenants. The Government now appears to want to remove the choice for authorities and intends to carry out a further review with the aim of limiting the use of life-time tenancies to ensure “households are offered tenancies that match their needs and make best use of the social housing stock.”

As we highlighted last time, under the new right to buy proposals local housing authorities will be obliged to sell high value properties that become vacant. One way of delaying properties becoming vacant is to ensure that they are all let on secure tenancies. One ulterior motive for this review might therefore be to ensure that there is a regular and constant supply of vacant properties that are available to sell to ensure that the extended right to buy for housing associations remains affordable to the Treasury.

Conclusion

This Government is still young and there will undoubtedly be further changes to housing law as the Parliament progresses. One feature that is quickly emerging, and not just in housing, is a retrenchment from the rhetoric of “localism” and a return to more centralised control over housing.

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