Neil Merrick 18 September 2018

What are councils spending on discretionary housing payments?

Local authorities are spending record sums on emergency payments to households that otherwise face eviction by private or social landlords.

Last year, councils across the UK paid £223m in discretionary housing payments (DHPs) - up from £183m the previous year - with payments helping to cover rent when households lose benefit due to the bedroom tax or benefit cap.

Individual councils also dipped into their own budgets more, spending £6.3m on top of allocations they received from the Department for Work and Pensions, according to an analysis by the consultancy group Landlord Information Network.

This compares with £4.4m that councils contributed from their budgets in 2016/17. In Liverpool, the city council awarded DHPs totalling just over £3m last year (up from £2.2m), with the council contributing £930,000 (up from £277,000).

Liverpool mayor Joe Anderson says the council is responding to people in desperate need. Last year, it awarded 11,270 DHPs compared with 8,331 the year before.

If the council did not help people cover their rent, many would end up homeless. 'Behind the doors in Liverpool, people are struggling to make ends meet,' he says. 'They are more reliant on us than ever.'

Eighty-five English councils and 16 in Wales spent over and above the money they were allocated for DHPs in 2017/18. In London, Croydon topped up its allocation by £986,000, spending a total of £2.75m.

Deputy leader and cabinet member for housing Alison Butler says: 'We are stopping people ending up on the streets and being caught up in the terrible cycle of having to come to the council and be placed in emergency accommodation.'

Councils in London are particularly affected by the freezing, since 2016, of local housing allowance (LHA) rates. These determine how much private renters can claim in housing benefit.

Last year, Croydon covered more than a third of the borough’s DHP bill, compared with about a quarter in 2016/17, when it paid £500,000 out of £1.97m. Councils, says Butler, are used to tackling the effects of welfare cuts but adds: 'It’s alarming for the local authority and the taxpayer and shows the system is broken.'

Elsewhere, Westminster spent an additional £533,000 on DHPs in 2017/18. It was the first time the council had spent its own money on DHPs, after its allocation from the DWP was cut from £2.6m to £1.9m. Greenwich and Kensington and Chelsea both paid out more than £400,000 on top of what they claimed from the DWP.

The largest spender on DHPs in England was Birmingham, which spent its entire allocation of £5.3m, but no more. Meanwhile, Leeds (£414,000) and Manchester (£384,000) both topped up their allocations considerably.

Sam Lister, policy officer at the Chartered Institute of Housing, says it is surprising councils struggling to afford services such as adult social care can afford to fund so many DHPs from their budgets. 'It used to be unheard of for councils to put in their own money,' he says.

On the other hand, adds Lister, if councils did not help households to avoid eviction, they might face an even heftier bill, with some people destitute and sleeping rough. 'If people become homeless because they can’t pay their rent, councils will end up picking up the bill anyway,' he says.

Tenants renting from social or private landlords can apply for a DHP, but they cannot be used to cover rent arrears. To qualify, households must receive housing benefit or universal credit and show they face short-term financial hardship. It is up to councils to decide how much a household receives and the length of time DHPs are paid.

DWP figures show that, in England and Wales, the household benefit cap accounted for 28% of DHP spending (£38.6m) in 2017/18, compared with 27% (£37.5m) due to the bedroom tax and 13% (£17.5m) due to LHA limits. Since the cap was reduced in 2016, families cannot receive more than £385 per week in benefits (£442 in London) and single adults may not receive more than £258 per week (£296 in London).

In Scotland, which began administering its own DHP programme last year, £47.6m out of the £59.2m spent on DHPs resulted from the bedroom tax. The Scottish government covers virtually the entire cost of DHPs awarded by councils and, after initially setting aside £48.5m in 2017/18, added a further £10m.

The largest spending councils on DHPs in Scotland last year were Glasgow (which spent just under £11m) and Edinburgh (which spent £5.1m).

After cutting the total sum available for DHPs in 2015/16, the DWP has increased allocations for the past two years. In 2016/17 it provided councils (including those in Scotland) with £150m, while last year it offered £166.5m to councils in England and Wales alone.

Prior to last year, the most that had been spent on DHPs in one year was £199m, in 2014/15. As in previous years, many local authorities failed to spend all the money they were allocated in 2017/18.

For the second year running, the largest ‘under-spender’ was Sunderland, which failed to spend £640,000 of the £1.05m it was entitled to claim from the DWP. In 2016/17, Sunderland failed to spend £520,000 from an allocation of £897,000.

The discretionary nature of DHPs means some councils are more likely to award payments than others and not all councils fully advertise their availability. This is of concern to the CIH, which is undertaking a review of the scheme, especially as the rollout of universal credit means demand is likely to increase. 'We want to see if it does what it’s meant to do,' says Sam Lister.

Back in Liverpool, Joe Anderson says the city has in effect become a welfare state on its own, funding hardship payments for food, fuel and clothing as well as pointing people towards benefits available from the DWP.

But how much longer can cash-strapped councils such as Liverpool afford to cover part of the cost of a household’s rent via DHPs? 'We are a lifeline to people,' says Anderson. 'I don’t know how long we will continue to be able to do it, but we will do it for as long as we can.'

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